1 00:00:10,760 --> 00:00:14,760 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:14,800 --> 00:00:19,120 Speaker 1: I'm Joe Wasn't, and I'm Tracy Alloway. Tracy, I, I 3 00:00:19,160 --> 00:00:23,120 Speaker 1: flew recently on my first flight without a mask mandate. 4 00:00:23,840 --> 00:00:27,720 Speaker 1: How was it? Was it a totally different experience. I 5 00:00:27,840 --> 00:00:30,440 Speaker 1: actually it was more different than I would have expected. 6 00:00:30,560 --> 00:00:32,600 Speaker 1: Like I got on the plane and I was like, oh, 7 00:00:32,640 --> 00:00:35,479 Speaker 1: this is so like something just felt like it was 8 00:00:35,520 --> 00:00:37,519 Speaker 1: like I knew the different thing, which is that no 9 00:00:37,560 --> 00:00:40,400 Speaker 1: one was wearing masks, but also like it just felt 10 00:00:40,760 --> 00:00:43,120 Speaker 1: everything just felt like a little bit freer and different. 11 00:00:43,159 --> 00:00:45,280 Speaker 1: It was very like it was. It was noticed. It 12 00:00:45,360 --> 00:00:47,280 Speaker 1: was very noticeable in a way that's a really hard 13 00:00:47,320 --> 00:00:51,879 Speaker 1: door to look. I grew up in Tokyo and wearing 14 00:00:52,000 --> 00:00:55,440 Speaker 1: masks was not a massive issue. It was just something 15 00:00:55,440 --> 00:00:58,360 Speaker 1: that people did when they were sick on public transport 16 00:00:58,560 --> 00:01:01,080 Speaker 1: or in an office or place with lots of people. 17 00:01:01,200 --> 00:01:03,240 Speaker 1: So I don't know, I have mixed feelings about it, 18 00:01:03,240 --> 00:01:06,960 Speaker 1: but I'm glad you enjoyed the maskless feeling. It makes 19 00:01:07,000 --> 00:01:09,160 Speaker 1: traveling with kids a lot easier to not have to 20 00:01:09,200 --> 00:01:11,960 Speaker 1: like always be adjusting their their ear strap on their 21 00:01:12,000 --> 00:01:14,200 Speaker 1: mask or something. I can see that, and obviously you 22 00:01:14,240 --> 00:01:18,800 Speaker 1: can drink and eat as much as you want, exactly right. So, UH, 23 00:01:19,000 --> 00:01:21,160 Speaker 1: lots going on though in air travel, because we know 24 00:01:21,240 --> 00:01:24,360 Speaker 1: that it's booming. We know that things are picking up, 25 00:01:24,400 --> 00:01:27,480 Speaker 1: although I don't know about business class or sorry business travel, 26 00:01:27,520 --> 00:01:30,120 Speaker 1: but we know travel is picking up. We know that 27 00:01:30,200 --> 00:01:33,920 Speaker 1: the mask mandate is gone. Um. We also know that 28 00:01:34,000 --> 00:01:37,280 Speaker 1: oil prices like jet fuel costs have gone up a lot, 29 00:01:37,440 --> 00:01:39,960 Speaker 1: and actually in some places there's even a shortage. There 30 00:01:40,000 --> 00:01:43,679 Speaker 1: was a story recently that the airport in Austin actually 31 00:01:43,959 --> 00:01:46,440 Speaker 1: had to cancel some flights because there literally wasn't a 32 00:01:46,560 --> 00:01:49,360 Speaker 1: jet fuel available. And it sort of speaks to one 33 00:01:49,400 --> 00:01:51,560 Speaker 1: of our themes that we have about, you know, the 34 00:01:51,880 --> 00:01:53,840 Speaker 1: revenge of the real Like it doesn't matter what the 35 00:01:53,880 --> 00:01:56,320 Speaker 1: price of jet fuel is if there's simply not enough 36 00:01:56,320 --> 00:01:58,920 Speaker 1: of it in a specific location. Yeah, it's also sort 37 00:01:58,960 --> 00:02:02,240 Speaker 1: of like a list of times, worst of time scenario 38 00:02:02,400 --> 00:02:06,000 Speaker 1: for the airline industry. So lockdowns are ending, at least 39 00:02:06,040 --> 00:02:09,720 Speaker 1: in the West. The mass mandates are being lifted. People 40 00:02:09,800 --> 00:02:11,919 Speaker 1: are getting out and traveling again. But at the same 41 00:02:11,960 --> 00:02:15,040 Speaker 1: time you might have higher costs. Well, you do have 42 00:02:15,120 --> 00:02:19,120 Speaker 1: higher costs with his UH air fuel, right, air fuel 43 00:02:19,160 --> 00:02:22,000 Speaker 1: is high and inflation is high, and that you know, 44 00:02:22,040 --> 00:02:24,880 Speaker 1: obviously burdened people. But it feels like after two years, 45 00:02:25,320 --> 00:02:29,959 Speaker 1: even with inflation, even with economic uncertainty of various sorts, 46 00:02:29,960 --> 00:02:32,200 Speaker 1: like people really want to travel at least for leisure. 47 00:02:32,400 --> 00:02:35,560 Speaker 1: I would like to travel. That is true, I recommend it. 48 00:02:35,680 --> 00:02:39,520 Speaker 1: So today we're gonna be speaking. So we actually had 49 00:02:39,560 --> 00:02:43,720 Speaker 1: this guest on recently, I think in February, but we 50 00:02:43,800 --> 00:02:49,359 Speaker 1: recorded the episode about a week before the war, before 51 00:02:49,400 --> 00:02:53,320 Speaker 1: the invasion. We had to change up our schedule due 52 00:02:53,360 --> 00:02:55,800 Speaker 1: to news, and then so much happened that we're like, 53 00:02:55,840 --> 00:02:58,720 Speaker 1: you know what, rather than trying to find just like 54 00:02:58,800 --> 00:03:01,480 Speaker 1: the right time to publish it, so much is going on, 55 00:03:01,560 --> 00:03:03,640 Speaker 1: all the things we talked about, why don't we just 56 00:03:03,680 --> 00:03:06,440 Speaker 1: have them back on for a fresh episode, a take 57 00:03:06,520 --> 00:03:10,880 Speaker 1: to the episode, the public episode of the of the 58 00:03:10,919 --> 00:03:13,560 Speaker 1: conversation that never got out there. So this is either 59 00:03:13,639 --> 00:03:17,760 Speaker 1: a signal of a return to normality or something major 60 00:03:17,800 --> 00:03:19,280 Speaker 1: is going to happen in the next week again and 61 00:03:19,280 --> 00:03:22,000 Speaker 1: we're going to have to re record well hopefully this 62 00:03:22,520 --> 00:03:25,959 Speaker 1: hopefully the public here's this conversation. I'm very excited we're 63 00:03:25,960 --> 00:03:29,000 Speaker 1: going to bring back to the show. H Scott Kays 64 00:03:29,120 --> 00:03:32,240 Speaker 1: He is the founder of the website Scott's Cheap Flights, 65 00:03:32,320 --> 00:03:35,880 Speaker 1: and he knows everything about how the airline aviation industry 66 00:03:35,920 --> 00:03:38,360 Speaker 1: works and what's going on to us. Scott, thank you 67 00:03:38,440 --> 00:03:41,720 Speaker 1: for coming back on odd lots. So great to be here. 68 00:03:41,800 --> 00:03:45,600 Speaker 1: Thank you both for having me. What happened with Austin? 69 00:03:45,920 --> 00:03:47,960 Speaker 1: And there was I don't know if it was just Austin, 70 00:03:48,000 --> 00:03:50,040 Speaker 1: but there was something like there wasn't enough jet fuel. 71 00:03:50,160 --> 00:03:52,600 Speaker 1: They're like, what happened there? Yeah, Austin is a little 72 00:03:52,600 --> 00:03:56,680 Speaker 1: bit of a special case. The Austin bergs from airport because, uh, 73 00:03:56,800 --> 00:03:58,880 Speaker 1: for a couple of reasons. One, it is one of 74 00:03:58,920 --> 00:04:02,760 Speaker 1: the fastest expanding airports in the country, one of the 75 00:04:02,760 --> 00:04:06,480 Speaker 1: fast expanding metro areas in the country, and so the 76 00:04:06,560 --> 00:04:09,920 Speaker 1: airlines and the infrastructure in place that the airport is 77 00:04:09,960 --> 00:04:12,440 Speaker 1: having trouble keeping up. And so where you see that 78 00:04:12,480 --> 00:04:15,560 Speaker 1: come to a head recently is with jet fuel, where, 79 00:04:15,680 --> 00:04:19,440 Speaker 1: unlike most major airports which are actually directly connected to 80 00:04:20,200 --> 00:04:24,599 Speaker 1: fuel pipelines, the Austin airport is actually not connected to one. 81 00:04:24,760 --> 00:04:27,920 Speaker 1: Fuel actually has to be trucked in from a pipeline 82 00:04:27,960 --> 00:04:30,680 Speaker 1: I believe about fifteen miles away or so, and so 83 00:04:31,040 --> 00:04:34,000 Speaker 1: with the expansion not only of the number of planes, 84 00:04:34,040 --> 00:04:37,440 Speaker 1: but with larger and larger planes, more international flights, you know, 85 00:04:37,480 --> 00:04:41,080 Speaker 1: flights to the Netherlands and elsewhere. What you're seeing is 86 00:04:41,120 --> 00:04:45,039 Speaker 1: that the airport infrastructure just can't provide the fuel necessary 87 00:04:45,040 --> 00:04:47,600 Speaker 1: and airlines having to take some pretty extraordinary steps as 88 00:04:47,640 --> 00:04:51,839 Speaker 1: a result, including flying in airplanes with enough fuel to 89 00:04:51,880 --> 00:04:54,640 Speaker 1: be able to fly out to their destination. They call 90 00:04:54,720 --> 00:04:58,880 Speaker 1: that tankering or other sorts of mitigation tactics. Unfortunately, this 91 00:04:58,960 --> 00:05:02,040 Speaker 1: is something that is not especially widespread. Austin is a 92 00:05:02,120 --> 00:05:05,200 Speaker 1: little bit of a special case. But you know, look 93 00:05:05,200 --> 00:05:08,840 Speaker 1: there's some concern that between jet fuel prices and jet 94 00:05:08,880 --> 00:05:12,760 Speaker 1: fuel availability, that's become a larger and larger problem in 95 00:05:12,880 --> 00:05:15,960 Speaker 1: other areas as kind of we get back to a 96 00:05:16,000 --> 00:05:18,400 Speaker 1: new normal after the past couple of years. So I 97 00:05:18,440 --> 00:05:20,960 Speaker 1: wanted to like stay on the topic, but I actually 98 00:05:21,040 --> 00:05:24,400 Speaker 1: just flew out of Austin. I mentioned an intro, and 99 00:05:24,560 --> 00:05:27,000 Speaker 1: I took a flight recently, but actually, like one more 100 00:05:27,080 --> 00:05:29,160 Speaker 1: question about this, and I know it's not that timely, 101 00:05:29,240 --> 00:05:33,480 Speaker 1: but I'm curious, Like Austin has grown just an insane 102 00:05:33,480 --> 00:05:36,880 Speaker 1: amount in the last twenty years, particularly ten years, just 103 00:05:36,920 --> 00:05:39,480 Speaker 1: like unbelievable at the number of conferences and events and 104 00:05:39,720 --> 00:05:43,239 Speaker 1: population growth, Like what does that due to it an airport, 105 00:05:43,279 --> 00:05:45,599 Speaker 1: because I can't imagine that like airports are easy to 106 00:05:45,680 --> 00:05:49,000 Speaker 1: just like build more gags on. It is very difficult 107 00:05:49,080 --> 00:05:52,080 Speaker 1: to and and and a time consuming process to expand 108 00:05:52,120 --> 00:05:57,920 Speaker 1: in airport's capacity. Now, the Austin situation is especially different 109 00:05:57,960 --> 00:06:00,800 Speaker 1: than in many cases, in part because they an old terminal, 110 00:06:00,880 --> 00:06:04,279 Speaker 1: the South Terminal, that is not exactly sufficient for today's 111 00:06:04,600 --> 00:06:06,720 Speaker 1: demand out of flights in there, and so there's been 112 00:06:06,760 --> 00:06:08,960 Speaker 1: a lot of discussion with the local government of trying 113 00:06:09,000 --> 00:06:11,440 Speaker 1: to expand it, but been a lot of kind of 114 00:06:11,720 --> 00:06:15,320 Speaker 1: regulatory roadblocks and doing that. Even in the best of times, 115 00:06:15,680 --> 00:06:19,599 Speaker 1: trying to expand airports and build new infrastructure is not 116 00:06:19,680 --> 00:06:22,279 Speaker 1: a month's process. It's not a one or two year process. 117 00:06:22,279 --> 00:06:24,839 Speaker 1: It tends to be a five to ten year uh 118 00:06:24,920 --> 00:06:27,679 Speaker 1: project and sides and part why it takes goes so slow. 119 00:06:27,760 --> 00:06:31,359 Speaker 1: A funny thing though, happened early in the pandemic where 120 00:06:31,960 --> 00:06:34,760 Speaker 1: airports like Salt Lake City again another one that has 121 00:06:34,800 --> 00:06:39,600 Speaker 1: expanded the metro population significantly over the past decade, they 122 00:06:39,720 --> 00:06:44,080 Speaker 1: were already undergoing an airport expansion process that they're actually 123 00:06:44,480 --> 00:06:46,800 Speaker 1: you know, you never hear these words so much in 124 00:06:46,800 --> 00:06:50,120 Speaker 1: infrastructure these days, but they have completed it ahead of schedule. 125 00:06:50,480 --> 00:06:54,480 Speaker 1: And the reason why was because the passenger volume, obviously 126 00:06:54,480 --> 00:06:58,640 Speaker 1: early in the pandemic dropped and so what that meant 127 00:06:58,680 --> 00:07:02,720 Speaker 1: was that they could shut down airport for significantly more 128 00:07:02,760 --> 00:07:05,839 Speaker 1: greater swaths of time, significantly greater parts of the day 129 00:07:06,000 --> 00:07:09,640 Speaker 1: in order to complete the construction and not disrupt air 130 00:07:09,680 --> 00:07:12,200 Speaker 1: travel the way it would have in normal times. So 131 00:07:12,280 --> 00:07:14,600 Speaker 1: there was a kind of a brief window there where 132 00:07:14,640 --> 00:07:18,320 Speaker 1: you could actually complete some of this airport infrastructure projects 133 00:07:18,360 --> 00:07:22,640 Speaker 1: ahead of schedule. That that window is fortunately closed as 134 00:07:22,680 --> 00:07:25,360 Speaker 1: air air travel is rebounding. But it's a it's a 135 00:07:25,400 --> 00:07:30,280 Speaker 1: difficult timely thing. I'm getting a flashbacks to covering keythrow 136 00:07:30,360 --> 00:07:33,240 Speaker 1: airport slots in the building of Terminal five as a 137 00:07:33,320 --> 00:07:38,440 Speaker 1: baby transport reporter in London. But uh, nevertheless, um, you 138 00:07:38,480 --> 00:07:42,920 Speaker 1: mentioned mitigation of fuel costs there, and you know this 139 00:07:43,000 --> 00:07:46,440 Speaker 1: is something airlines do, being large consumers of jet fuel, 140 00:07:46,600 --> 00:07:49,880 Speaker 1: They buy their future needs and they hedge what they 141 00:07:49,920 --> 00:07:52,240 Speaker 1: need to get what does it look like right now 142 00:07:52,400 --> 00:07:54,920 Speaker 1: in terms of hedging. So we have this big spike 143 00:07:55,400 --> 00:07:58,160 Speaker 1: in the price of crude oil. Is all of that 144 00:07:58,240 --> 00:08:01,240 Speaker 1: going to flow through into airline underlying costs or is 145 00:08:01,280 --> 00:08:05,960 Speaker 1: there some mitigation here. There's gonna be a significant amount 146 00:08:06,000 --> 00:08:09,040 Speaker 1: that flows through to the airline's costs, and then obviously 147 00:08:09,080 --> 00:08:11,720 Speaker 1: some of that will get passed onto consumers. I mean, 148 00:08:11,800 --> 00:08:15,400 Speaker 1: just to take stock today, the price, the spot price 149 00:08:15,440 --> 00:08:18,000 Speaker 1: of a gallon of jet fuel is three dollars uh 150 00:08:18,040 --> 00:08:22,679 Speaker 1: and one cents, which is almost at least when nominal terms, 151 00:08:22,720 --> 00:08:24,800 Speaker 1: where it was at that record high in two thousand 152 00:08:24,800 --> 00:08:27,400 Speaker 1: and eight when it reached three dollars and eighty nine cents, 153 00:08:27,400 --> 00:08:29,960 Speaker 1: and so it is very, very high. And just to 154 00:08:30,040 --> 00:08:33,559 Speaker 1: underscore how important this is for airlines, jet fuel is 155 00:08:33,600 --> 00:08:37,160 Speaker 1: the number two expense at airlines. There are no airlines 156 00:08:37,200 --> 00:08:39,760 Speaker 1: with significant you know, there are no airlines with electric 157 00:08:39,840 --> 00:08:46,079 Speaker 1: airplanes and commercial operation, no airlines with significant sustainable aviation 158 00:08:46,120 --> 00:08:49,960 Speaker 1: fuel or all other alternative fuels. They're all basically exposed 159 00:08:50,240 --> 00:08:52,880 Speaker 1: to the price of oil in a pretty major way. 160 00:08:53,160 --> 00:08:55,880 Speaker 1: But I'm glad you brought up hedging because that's historically 161 00:08:55,920 --> 00:08:58,760 Speaker 1: one of the ways that airlines have tried to navigate 162 00:08:58,800 --> 00:09:01,720 Speaker 1: this world where they have are exposed to the price 163 00:09:01,760 --> 00:09:04,920 Speaker 1: of oil. Where you saw this really come to a 164 00:09:05,000 --> 00:09:07,280 Speaker 1: head was during the oh eight oil seven O eight 165 00:09:07,280 --> 00:09:11,160 Speaker 1: oil crisis, where a lot of the airlines we're seeing, 166 00:09:11,600 --> 00:09:14,720 Speaker 1: even in the face of a recession, their prices be 167 00:09:15,120 --> 00:09:18,200 Speaker 1: going way way up again because the price of a 168 00:09:18,200 --> 00:09:20,880 Speaker 1: barrel of oil hit a hundred and forty seven dollars. 169 00:09:20,880 --> 00:09:22,840 Speaker 1: So as a result, the airlines were actually kind of 170 00:09:22,920 --> 00:09:26,439 Speaker 1: late to the game of oil hedging, and they frankly 171 00:09:26,480 --> 00:09:29,320 Speaker 1: had a pretty bad experience dipping their toes in andto 172 00:09:29,360 --> 00:09:32,160 Speaker 1: they got into it too late. They ended up timing 173 00:09:32,200 --> 00:09:35,959 Speaker 1: it just they basically started hedging right around the peak 174 00:09:36,360 --> 00:09:39,080 Speaker 1: and ended up losing billions and billions and billions of 175 00:09:39,120 --> 00:09:42,040 Speaker 1: dollars in the process. Uh. And so there are a 176 00:09:42,040 --> 00:09:46,080 Speaker 1: few kind of legacy effects of that experience for the airline. 177 00:09:46,480 --> 00:09:49,200 Speaker 1: For most of the US airlines, they just got out 178 00:09:49,200 --> 00:09:51,920 Speaker 1: of hedging entirely after the experience. They said, this is just, 179 00:09:52,040 --> 00:09:55,040 Speaker 1: you know, a sort of scheme to enrich Wall Street 180 00:09:55,040 --> 00:09:57,320 Speaker 1: bankers were not going to play it anymore, will mostly 181 00:09:57,360 --> 00:09:59,920 Speaker 1: just rely on the spot price of jet fuel dealt 182 00:10:00,040 --> 00:10:03,640 Speaker 1: them took a slightly different path and actually purchasing an 183 00:10:03,640 --> 00:10:06,920 Speaker 1: oil refinery in Pennsylvania so they could have at least 184 00:10:07,000 --> 00:10:12,200 Speaker 1: some control over the UH sort of production and refining process, 185 00:10:12,240 --> 00:10:14,640 Speaker 1: and this still kind of helps supply some of their 186 00:10:14,679 --> 00:10:17,880 Speaker 1: airplanes in the New York City metro area. But by 187 00:10:17,960 --> 00:10:20,959 Speaker 1: and large, the airlines just decide we are getting out 188 00:10:20,960 --> 00:10:23,920 Speaker 1: of with the major exception of Southwest, which still engages 189 00:10:23,920 --> 00:10:27,320 Speaker 1: in hedging today. But where you see this conduct having 190 00:10:27,320 --> 00:10:30,280 Speaker 1: an interesting ripple effect is that is not the case 191 00:10:30,360 --> 00:10:34,040 Speaker 1: with European airlines. European airlines by and large do still 192 00:10:34,160 --> 00:10:36,800 Speaker 1: do a lot of fuel hedging, and so what that 193 00:10:36,880 --> 00:10:39,160 Speaker 1: ends up meaning is that the European airlines are obviously 194 00:10:39,160 --> 00:10:44,640 Speaker 1: seeing much lower fuel costs today compared to the US airlines, 195 00:10:44,720 --> 00:10:47,160 Speaker 1: which are having to pay the spot price. So if 196 00:10:47,160 --> 00:10:50,240 Speaker 1: you think about a flight between the US and Europe, 197 00:10:50,800 --> 00:10:54,720 Speaker 1: most of the cheapest fares today on flights to Europe 198 00:10:54,720 --> 00:10:57,920 Speaker 1: are actually on European airlines. Like I was teching a 199 00:10:57,960 --> 00:11:01,000 Speaker 1: look at a flight from New York to Switzerland, cheapest 200 00:11:01,040 --> 00:11:03,160 Speaker 1: airline to fly on it right now is s A 201 00:11:03,440 --> 00:11:06,640 Speaker 1: S with a Scandinavian airline, And many of those European 202 00:11:06,679 --> 00:11:09,600 Speaker 1: airlines are able to offer lower fares as a result 203 00:11:09,679 --> 00:11:13,280 Speaker 1: because they're not paying the current inflated prices of jet 204 00:11:13,320 --> 00:11:16,280 Speaker 1: fuel and so that ends up having ripple effects for 205 00:11:16,400 --> 00:11:19,320 Speaker 1: your Deltas and your Americans and your Uniteds which have 206 00:11:19,400 --> 00:11:22,640 Speaker 1: to decide do we charge a more expensive fair and 207 00:11:22,800 --> 00:11:25,320 Speaker 1: risk you know, being undercut on price and all our 208 00:11:25,360 --> 00:11:28,679 Speaker 1: customers buying their flights on s A S or Lufthansa 209 00:11:28,800 --> 00:11:32,640 Speaker 1: or British Airways, or do we lower our fares and 210 00:11:32,720 --> 00:11:35,000 Speaker 1: compete on price but then end up having to eat 211 00:11:35,040 --> 00:11:37,440 Speaker 1: the cost of higher fuel. And it's a I don't 212 00:11:37,600 --> 00:11:40,000 Speaker 1: envy the folks in revenue management who are having to 213 00:11:40,040 --> 00:11:43,720 Speaker 1: make these decisions today. I'm kind of surprised. I would have, like, 214 00:11:43,800 --> 00:11:47,080 Speaker 1: my assumption would be that there's a market price of 215 00:11:47,440 --> 00:11:51,720 Speaker 1: a ticket or you know, roughly, and that the company 216 00:11:51,760 --> 00:11:54,839 Speaker 1: and the airlines that are paying uh that are hedged 217 00:11:54,920 --> 00:11:56,920 Speaker 1: or making more money, and the airlines that are spot 218 00:11:56,920 --> 00:11:58,920 Speaker 1: are going to pay less. I'm kind of surprised that 219 00:11:58,960 --> 00:12:02,079 Speaker 1: there is a noticeable enough difference or that companies or 220 00:12:02,120 --> 00:12:06,840 Speaker 1: that airlines can afford to charge significantly more for a 221 00:12:06,880 --> 00:12:10,040 Speaker 1: given route than their competitors just because they happen to 222 00:12:10,040 --> 00:12:12,199 Speaker 1: be paying more at a given moment for their their 223 00:12:12,200 --> 00:12:14,960 Speaker 1: fuel cost. Yeah, one of the one of the most 224 00:12:15,120 --> 00:12:18,040 Speaker 1: interesting things. And I would say, most unique things about 225 00:12:18,080 --> 00:12:21,920 Speaker 1: the airline industry compared to other industries is just the 226 00:12:22,040 --> 00:12:26,240 Speaker 1: volatility of airfare. It is unlike anything else we purchase. 227 00:12:26,320 --> 00:12:30,400 Speaker 1: It is the most volatile purchase that consumers regularly make. 228 00:12:30,400 --> 00:12:32,880 Speaker 1: And there are a few kind of unique challenges for 229 00:12:32,920 --> 00:12:36,720 Speaker 1: the airlines and why that's the case. One is air 230 00:12:36,880 --> 00:12:39,520 Speaker 1: airplane seats are what are called rival goods. You know, 231 00:12:39,559 --> 00:12:42,160 Speaker 1: if I buy a seat, that same seat can't be 232 00:12:42,240 --> 00:12:45,040 Speaker 1: sold to someone else. It's only uh can be sold 233 00:12:45,040 --> 00:12:48,920 Speaker 1: to one person. Two, you have spoilage. You know, as 234 00:12:48,920 --> 00:12:51,920 Speaker 1: soon as the airplane door closes, any seats that are 235 00:12:52,000 --> 00:12:54,920 Speaker 1: unsold are are are spoiled. You can't get any money 236 00:12:54,920 --> 00:12:57,000 Speaker 1: for them, and so they have to try to sell 237 00:12:57,000 --> 00:12:59,000 Speaker 1: them by that date. But then three, you have sort 238 00:12:59,000 --> 00:13:02,680 Speaker 1: of unpredict stability of demand. When you know you have 239 00:13:02,760 --> 00:13:06,320 Speaker 1: to kind of project forward when you think travelers are 240 00:13:06,360 --> 00:13:09,520 Speaker 1: going to purchase, when you think business travelers might purchase, 241 00:13:09,840 --> 00:13:12,080 Speaker 1: what you think the world will look like, three, six, 242 00:13:12,160 --> 00:13:14,960 Speaker 1: nine months from now. It's almost akin to having to 243 00:13:15,040 --> 00:13:18,360 Speaker 1: buying a futures contract where you have to guess today 244 00:13:18,400 --> 00:13:20,720 Speaker 1: what the kind of outlook will look like nine months 245 00:13:20,720 --> 00:13:22,520 Speaker 1: from now. And that's why it's such a difficult thing, 246 00:13:22,559 --> 00:13:26,640 Speaker 1: and why airfare tends to be so so volatile. Yeah, 247 00:13:26,760 --> 00:13:29,640 Speaker 1: there was a consultant I wish I could remember his name, 248 00:13:29,720 --> 00:13:33,320 Speaker 1: but he used to describe airlines very similar to a 249 00:13:33,360 --> 00:13:35,560 Speaker 1: grocery store in the sense that you know, you have 250 00:13:35,679 --> 00:13:38,800 Speaker 1: a thing that might not be worth it, Well, it's 251 00:13:38,800 --> 00:13:40,679 Speaker 1: not going to be worth as much in a day 252 00:13:40,760 --> 00:13:43,160 Speaker 1: or two. You know, the plane is leaving, whether it's 253 00:13:43,160 --> 00:13:46,600 Speaker 1: full or not, sort of similar to the way fruit 254 00:13:46,679 --> 00:13:49,680 Speaker 1: or vegetables would spoil. So you kind of need to 255 00:13:49,880 --> 00:13:54,839 Speaker 1: sell that produce or that product when you can. And 256 00:13:54,960 --> 00:13:57,000 Speaker 1: on that note, one thing I was wondering is, okay, 257 00:13:57,080 --> 00:13:59,679 Speaker 1: you have all this pent up. Well, first of all, 258 00:13:59,760 --> 00:14:02,600 Speaker 1: how much pent up demand do you see for air travel? 259 00:14:02,640 --> 00:14:05,959 Speaker 1: And then secondly, are you expecting a big ramp up 260 00:14:06,080 --> 00:14:09,840 Speaker 1: in capacity by airlines to respond to it. Yes, So 261 00:14:10,120 --> 00:14:13,520 Speaker 1: I would say that there has been a significant amount 262 00:14:13,559 --> 00:14:17,080 Speaker 1: of pent up demand until pretty recently. I think it's 263 00:14:17,120 --> 00:14:20,480 Speaker 1: really kind of getting released this spring and into this summer, 264 00:14:20,920 --> 00:14:23,120 Speaker 1: and I think by the fall we're going to start 265 00:14:23,160 --> 00:14:26,560 Speaker 1: to enter a sort of period of stability similar to 266 00:14:26,680 --> 00:14:29,600 Speaker 1: like we saw pre pandemic. You know, I think these 267 00:14:29,680 --> 00:14:31,960 Speaker 1: next kind of four or five six months or where 268 00:14:31,960 --> 00:14:35,520 Speaker 1: we're seeing that pent up demand getting released. But I'm 269 00:14:35,520 --> 00:14:40,000 Speaker 1: glad that you called out capacity, because while demand is 270 00:14:40,680 --> 00:14:44,520 Speaker 1: close to recovered, especially domestic demand, and I would say 271 00:14:44,880 --> 00:14:50,120 Speaker 1: leisure demand vacationers visiting families and relatives, is actually higher 272 00:14:50,160 --> 00:14:53,920 Speaker 1: today than it was pre pandemic. And obviously it's just 273 00:14:54,040 --> 00:14:57,960 Speaker 1: the dearth of business travel that's resulting in lower overall 274 00:14:58,160 --> 00:15:02,040 Speaker 1: travel numbers. Capacity is actually still down quite a bit 275 00:15:02,120 --> 00:15:06,360 Speaker 1: from where it was pre pandemic, about about fifteen percent, 276 00:15:06,600 --> 00:15:09,520 Speaker 1: but some routes, you know, especially trans Pacific ones, still 277 00:15:09,600 --> 00:15:13,440 Speaker 1: down as much as seventy from where it was. Think 278 00:15:13,480 --> 00:15:17,040 Speaker 1: about flights to China. The actual volume of travel from 279 00:15:17,160 --> 00:15:20,720 Speaker 1: US and China right now is down from where it 280 00:15:20,800 --> 00:15:25,480 Speaker 1: was pre pandemic. It is unbelievable, both how important it 281 00:15:25,600 --> 00:15:29,840 Speaker 1: was in and just how absent it is today. But 282 00:15:29,960 --> 00:15:32,880 Speaker 1: that kind of diminishment, well, you know, the main story 283 00:15:32,920 --> 00:15:36,320 Speaker 1: that get talk gets talked about is how travel demand 284 00:15:36,480 --> 00:15:39,720 Speaker 1: is kind of rebounding very very quickly, much quicker than 285 00:15:39,800 --> 00:15:44,160 Speaker 1: most analysts expected, and that's causing probably the single greatest 286 00:15:44,160 --> 00:15:47,720 Speaker 1: cause of why we're seeing such a bump in overall 287 00:15:47,840 --> 00:15:52,920 Speaker 1: airfare prices. The capacity not rebounding quite as quickly over 288 00:15:52,960 --> 00:15:56,640 Speaker 1: the past six nine months, in large part due to 289 00:15:56,720 --> 00:16:00,200 Speaker 1: this ongoing pilot shortage, is a pretty signific a con 290 00:16:00,280 --> 00:16:02,720 Speaker 1: factor that I think ought to deserve a lot of 291 00:16:02,760 --> 00:16:05,920 Speaker 1: credit for the higher fares as well, that the airline 292 00:16:06,200 --> 00:16:09,160 Speaker 1: airlines aren't able to operate as many flights as they 293 00:16:09,200 --> 00:16:12,640 Speaker 1: would like to because they just don't have the capacity, 294 00:16:12,720 --> 00:16:15,200 Speaker 1: they don't have the crew, and in some cases they 295 00:16:15,200 --> 00:16:17,160 Speaker 1: don't have the planes to be able to do so 296 00:16:17,240 --> 00:16:19,520 Speaker 1: that they would like to. And that just gets into 297 00:16:19,880 --> 00:16:22,680 Speaker 1: you know, our favorite topic of supply chains, whether it's 298 00:16:22,720 --> 00:16:26,720 Speaker 1: the labor supply chain of training and certifying new pilots, 299 00:16:26,800 --> 00:16:30,160 Speaker 1: or whether it's the aircraft supply chain of building and 300 00:16:30,240 --> 00:16:47,240 Speaker 1: shipping out new planes. So I think this is actually 301 00:16:47,280 --> 00:16:50,200 Speaker 1: a good spot to tell us where exactly do we 302 00:16:50,320 --> 00:16:53,360 Speaker 1: stand in terms of relative levels. I mean, you mentioned 303 00:16:53,480 --> 00:16:56,680 Speaker 1: U as China, but for the various categories, whether it's 304 00:16:57,000 --> 00:17:02,520 Speaker 1: domestic leisure, international leisure, business travel, like, where are we 305 00:17:02,840 --> 00:17:09,000 Speaker 1: versus I guess the benchmarks. Yeah, so compared to domestic 306 00:17:09,040 --> 00:17:13,200 Speaker 1: air travel is currently down about five percent, but again 307 00:17:13,240 --> 00:17:15,880 Speaker 1: I think that belies the the the sort of makeup 308 00:17:15,960 --> 00:17:19,760 Speaker 1: difference today versus pre pandemic, where it's much more weighted 309 00:17:19,800 --> 00:17:23,520 Speaker 1: towards leisure travel. Leisure travel is higher today than it 310 00:17:23,680 --> 00:17:27,200 Speaker 1: was pre pandemic. One of the reasons actually, why when 311 00:17:27,280 --> 00:17:30,000 Speaker 1: you got down an airplane I'm assuming Trason Joe, when 312 00:17:30,000 --> 00:17:32,640 Speaker 1: you're going to be flying soon or when you flow recently, 313 00:17:32,920 --> 00:17:36,560 Speaker 1: that airplane I can pretty safely guess was completely full 314 00:17:36,720 --> 00:17:39,440 Speaker 1: or almost completely full. And the reason why is that 315 00:17:39,680 --> 00:17:44,080 Speaker 1: airlines are having to sell far more seats today than 316 00:17:44,200 --> 00:17:49,000 Speaker 1: they used to make up for that lack of business travel. 317 00:17:49,080 --> 00:17:51,879 Speaker 1: You know, historically they would want to keep some number 318 00:17:51,920 --> 00:17:55,240 Speaker 1: of seats unsold up until the last few weeks or 319 00:17:55,359 --> 00:17:58,920 Speaker 1: last few days before departure in order to take advantage 320 00:17:58,920 --> 00:18:04,639 Speaker 1: of those late per purchasing but price insensitive business travelers. Today, 321 00:18:04,680 --> 00:18:07,920 Speaker 1: they know that those business travelers aren't quite as prevalent 322 00:18:08,000 --> 00:18:09,520 Speaker 1: as they used to be, and so they have to 323 00:18:09,520 --> 00:18:12,639 Speaker 1: sell more seats to account for that. They know leisure 324 00:18:12,640 --> 00:18:16,280 Speaker 1: travels the ballgame, and that's why airplanes on average today 325 00:18:16,320 --> 00:18:19,119 Speaker 1: are more full than they were pre pandemic. You know, 326 00:18:19,200 --> 00:18:22,600 Speaker 1: today a planes eight nine percent full on average versus 327 00:18:22,640 --> 00:18:25,840 Speaker 1: the same week in it was eighty six percent full. 328 00:18:26,320 --> 00:18:29,360 Speaker 1: Not not a whole lot of elbow room. But international too, 329 00:18:29,560 --> 00:18:32,119 Speaker 1: you know, just to touch briefly on it is still 330 00:18:32,240 --> 00:18:36,200 Speaker 1: down quite a bit compared to pre pandemic. It depends 331 00:18:36,200 --> 00:18:40,000 Speaker 1: a little bit region to region. Mexico is actually up 332 00:18:40,080 --> 00:18:43,080 Speaker 1: and been one of these sort of success stories, and travel, 333 00:18:43,119 --> 00:18:46,439 Speaker 1: if you will, over the past year is significantly higher 334 00:18:46,520 --> 00:18:50,680 Speaker 1: today in terms of travel demand than it was pre pandemic. 335 00:18:50,720 --> 00:18:55,840 Speaker 1: Actually higher more passenger volume between the US and Mexico 336 00:18:55,960 --> 00:19:01,159 Speaker 1: today than the same month in But international to let's say, 337 00:19:01,200 --> 00:19:07,200 Speaker 1: Europe still down, you know, to Canada down, close to down, 338 00:19:07,280 --> 00:19:11,679 Speaker 1: over across the Pacific down, and so that's where you're starting. 339 00:19:11,720 --> 00:19:15,240 Speaker 1: You're really seeing kind of airlines hoping that we're going 340 00:19:15,280 --> 00:19:18,000 Speaker 1: to see a rebound, and especially hoping that we're going 341 00:19:18,040 --> 00:19:20,720 Speaker 1: to see the end of the requirement that you show 342 00:19:20,800 --> 00:19:23,639 Speaker 1: a recent negative test to get back into the US, 343 00:19:23,800 --> 00:19:26,920 Speaker 1: even if you've been fully vaccinated. I want to ask 344 00:19:26,920 --> 00:19:29,879 Speaker 1: you more about testing your harms and also labor shortages. 345 00:19:29,920 --> 00:19:33,800 Speaker 1: But before we do, there was a moment post two 346 00:19:33,840 --> 00:19:37,720 Speaker 1: thousand eight when a bunch of airlines started or new 347 00:19:37,760 --> 00:19:43,040 Speaker 1: startups began experimenting with business class only airlines, and part 348 00:19:43,040 --> 00:19:45,679 Speaker 1: of that was in response to higher oil prices, and 349 00:19:45,680 --> 00:19:50,320 Speaker 1: the thinking was, well, most planes, most airlines make the 350 00:19:50,359 --> 00:19:53,960 Speaker 1: majority of their money from business class passion passengers. The 351 00:19:54,000 --> 00:19:57,959 Speaker 1: business class passengers are essentially subsidizing economy, so why not 352 00:19:58,080 --> 00:20:01,400 Speaker 1: just cut out economy and have this class only carriers 353 00:20:01,440 --> 00:20:04,679 Speaker 1: for popular roots like London to New York or London 354 00:20:04,720 --> 00:20:08,119 Speaker 1: to Paris or wherever. And it didn't work out so well. 355 00:20:08,119 --> 00:20:12,200 Speaker 1: But I'm wondering what happens in the current cycle, because 356 00:20:12,240 --> 00:20:16,280 Speaker 1: on the one hand, you have very high fuel prices. 357 00:20:16,320 --> 00:20:19,560 Speaker 1: On the other hand, you have business class travel still missing, 358 00:20:19,600 --> 00:20:22,320 Speaker 1: and no one's quite sure whether or not it's coming back. 359 00:20:22,359 --> 00:20:25,119 Speaker 1: So maybe airlines want to focus on leisure. But how 360 00:20:25,160 --> 00:20:27,840 Speaker 1: did they do that? What sort of creative ways are 361 00:20:27,880 --> 00:20:32,480 Speaker 1: you seeing of responding to the current environment. Yeah, let 362 00:20:32,520 --> 00:20:34,280 Speaker 1: me let me give you just a brief Let me 363 00:20:34,320 --> 00:20:36,359 Speaker 1: give you a couple of data points here. When you 364 00:20:36,359 --> 00:20:41,840 Speaker 1: look at Delta's financials in versus the number of seats 365 00:20:41,880 --> 00:20:44,439 Speaker 1: that they had on a plane that were premium, you know, 366 00:20:44,800 --> 00:20:48,600 Speaker 1: premium economy business class first class in eleven was nine percent, 367 00:20:49,960 --> 00:20:54,560 Speaker 1: that it almost tripled to and the percentage of the 368 00:20:54,640 --> 00:20:57,760 Speaker 1: first class seats that they sold that they didn't give 369 00:20:57,760 --> 00:21:00,000 Speaker 1: away for free or you know, giveaway to somebody who 370 00:21:00,080 --> 00:21:02,280 Speaker 1: is well dressed or something like that that they actually 371 00:21:02,320 --> 00:21:07,639 Speaker 1: sold and got money for. Inn was but En was 372 00:21:07,960 --> 00:21:11,760 Speaker 1: six and so as what what that is telling us 373 00:21:11,880 --> 00:21:15,919 Speaker 1: is that the premium section of the airlines are where 374 00:21:16,200 --> 00:21:20,720 Speaker 1: the airlines are seeing the significant growth in their revenue. 375 00:21:21,119 --> 00:21:24,480 Speaker 1: That it is becoming increasingly important to airlines to be 376 00:21:24,560 --> 00:21:27,159 Speaker 1: able to monetize the front of the plane. And so 377 00:21:27,240 --> 00:21:31,160 Speaker 1: that's why you see airlines not only building out larger 378 00:21:31,240 --> 00:21:34,880 Speaker 1: business class cabins, but also building out you know, premium economy, 379 00:21:35,000 --> 00:21:38,840 Speaker 1: something that didn't really exist a decade ago but now 380 00:21:39,600 --> 00:21:42,199 Speaker 1: is a pretty it's a big money maker for the 381 00:21:42,240 --> 00:21:45,439 Speaker 1: airlines because it only the premium economy seats are only 382 00:21:45,520 --> 00:21:49,080 Speaker 1: about thirty to fifty larger than a regular economy seat, 383 00:21:49,119 --> 00:21:51,639 Speaker 1: but they generally charged double the price for it. So 384 00:21:51,680 --> 00:21:53,399 Speaker 1: you can see how that works out pretty well in 385 00:21:53,400 --> 00:21:57,639 Speaker 1: the airline's favor. Singapore Airlines just announced in the past 386 00:21:57,680 --> 00:22:01,160 Speaker 1: week that their business class section and of their airplanes 387 00:22:01,240 --> 00:22:05,000 Speaker 1: was actually selling out now before economy was. And now 388 00:22:05,000 --> 00:22:08,000 Speaker 1: it's a you know, stark reversal of what was happening 389 00:22:08,040 --> 00:22:11,320 Speaker 1: pre pandemic. And so I think you're seeing a couple factors. 390 00:22:11,560 --> 00:22:16,040 Speaker 1: By and large, the airlines are marketing more towards affluent 391 00:22:16,280 --> 00:22:20,439 Speaker 1: leisure travelers rather than primarily business travelers in order to 392 00:22:20,480 --> 00:22:23,879 Speaker 1: sell these premium seats. And secondarily, I think they're getting 393 00:22:23,960 --> 00:22:27,800 Speaker 1: much better at sort of the pricing mechanisms to reach them, 394 00:22:27,840 --> 00:22:30,200 Speaker 1: you know, not just having a sort of one size 395 00:22:30,200 --> 00:22:32,879 Speaker 1: fits all, very high inflated price. And then there are 396 00:22:32,880 --> 00:22:34,920 Speaker 1: a lot of unsold seats and maybe they'd give them 397 00:22:34,920 --> 00:22:38,439 Speaker 1: away to two elite members and instead being able to 398 00:22:38,560 --> 00:22:41,760 Speaker 1: do much more sort of dynamic pricing. I don't know 399 00:22:41,800 --> 00:22:45,320 Speaker 1: if you had this offer one your recent flights, but 400 00:22:45,920 --> 00:22:48,040 Speaker 1: what they'll do many times if they have a number 401 00:22:48,040 --> 00:22:50,919 Speaker 1: of unsold business or premium economy seats when you go 402 00:22:51,040 --> 00:22:54,120 Speaker 1: to check in or nearing the flight datas, they'll actually 403 00:22:54,200 --> 00:22:56,800 Speaker 1: hold something of an auction on it. Will they ask, 404 00:22:57,040 --> 00:22:58,800 Speaker 1: you know, hey, how much would you be willing to 405 00:22:58,840 --> 00:23:00,760 Speaker 1: pay to upgrade to be since class? You know, and 406 00:23:00,760 --> 00:23:03,360 Speaker 1: you can put in your bid and if it gets accepted, 407 00:23:03,400 --> 00:23:05,760 Speaker 1: they get it. And and and so the airlines have 408 00:23:05,840 --> 00:23:09,320 Speaker 1: just gotten much better at monetizing that kind of scarce 409 00:23:09,400 --> 00:23:12,280 Speaker 1: space on an airplane. And so when you the last 410 00:23:12,320 --> 00:23:14,400 Speaker 1: data point here is that when you look at Delta's 411 00:23:14,480 --> 00:23:19,399 Speaker 1: revenue over the past decade eighteen, their overall revenue grew 412 00:23:19,480 --> 00:23:23,560 Speaker 1: by nine billion dollars, it was up, but their economy 413 00:23:23,640 --> 00:23:28,160 Speaker 1: ticket revenue actually fell by one billion dollars. And that's 414 00:23:28,200 --> 00:23:32,360 Speaker 1: because they're getting so much better at at diversifying their 415 00:23:32,440 --> 00:23:36,320 Speaker 1: business model away from the old model of just relying 416 00:23:36,359 --> 00:23:39,480 Speaker 1: solely on economy ticket revenue. Yeah. I was on a 417 00:23:39,560 --> 00:23:41,639 Speaker 1: flight recently and there was some offered a bid on 418 00:23:41,720 --> 00:23:43,320 Speaker 1: business and I was like, this is too confusing. I 419 00:23:43,359 --> 00:23:45,560 Speaker 1: don't want to, Like, I don't engage in some like 420 00:23:45,640 --> 00:23:49,480 Speaker 1: complicated financial derivative just to fly. You know. The other 421 00:23:49,520 --> 00:23:51,720 Speaker 1: thing is also it's like if there's a power outlet 422 00:23:51,800 --> 00:23:54,639 Speaker 1: and working WiFi, Like, I don't care if I'm in coach. 423 00:23:54,720 --> 00:23:57,560 Speaker 1: I'm just happy serving my phone for five or six hours, 424 00:23:57,560 --> 00:24:01,479 Speaker 1: So I really don't mind. Anyway, that's a divergence. So 425 00:24:01,560 --> 00:24:05,480 Speaker 1: we've talked about what's going on with volumes and what's 426 00:24:05,480 --> 00:24:08,199 Speaker 1: going on with leisure volumes, of what's going on with travel, 427 00:24:08,720 --> 00:24:11,560 Speaker 1: what's going on with price, and how much is price 428 00:24:12,200 --> 00:24:15,200 Speaker 1: you know, in the coming months predictable because we've seen 429 00:24:15,560 --> 00:24:19,400 Speaker 1: um a pretty big jump in airfares over the last 430 00:24:19,440 --> 00:24:21,120 Speaker 1: several months. I think it was like a huge one 431 00:24:21,160 --> 00:24:25,760 Speaker 1: month jump in the last uh CPI report. But how predictable, 432 00:24:25,800 --> 00:24:28,840 Speaker 1: like is it? Can you extrapolate and say, okay, as 433 00:24:28,960 --> 00:24:32,000 Speaker 1: things normalized further and as a bunch of people take 434 00:24:32,040 --> 00:24:34,720 Speaker 1: trips this summer, that we're going to see further upward 435 00:24:34,720 --> 00:24:39,119 Speaker 1: price pressure or like what can we say confidently about 436 00:24:39,160 --> 00:24:44,239 Speaker 1: the sort of like aggregate trajectory of airfares? Yeah, so 437 00:24:44,520 --> 00:24:48,440 Speaker 1: you're you're absolutely right. In uh March of two, we 438 00:24:48,480 --> 00:24:53,600 Speaker 1: saw the single highest one month jump in airfare on record. 439 00:24:53,640 --> 00:24:55,840 Speaker 1: It was up eleven per cent, and that you know, 440 00:24:55,960 --> 00:24:58,960 Speaker 1: goes in line with the one over the past twelve months, 441 00:24:59,000 --> 00:25:02,000 Speaker 1: it's up twenty four percent. But when you dig a 442 00:25:02,080 --> 00:25:04,360 Speaker 1: little bit deeper and you zoom out a little bit, 443 00:25:04,400 --> 00:25:08,040 Speaker 1: you see that over the past two years compared to 444 00:25:08,280 --> 00:25:12,080 Speaker 1: you know where we were in in March, air fares 445 00:25:12,119 --> 00:25:15,560 Speaker 1: down five percent today compared to then, compared to five 446 00:25:15,640 --> 00:25:19,600 Speaker 1: years ago, down compared to a decade ago. Air fare 447 00:25:19,680 --> 00:25:22,760 Speaker 1: is down thirty and those are in real numbers and 448 00:25:22,840 --> 00:25:26,040 Speaker 1: inflation adjusted, And so I think, you know, look, a 449 00:25:26,080 --> 00:25:31,080 Speaker 1: lot of folks are understandably confused, upset, not happy with 450 00:25:31,200 --> 00:25:35,480 Speaker 1: seeing the price of flights going up. In the near term, 451 00:25:35,720 --> 00:25:38,480 Speaker 1: it is, it is absolutely going way, way up. But 452 00:25:38,520 --> 00:25:40,280 Speaker 1: I think if you if you take a bit of 453 00:25:40,280 --> 00:25:43,040 Speaker 1: a longer term perspective, you see that we're actually still 454 00:25:43,119 --> 00:25:45,960 Speaker 1: living in what I call the golden age of cheap flights. 455 00:25:45,960 --> 00:25:49,240 Speaker 1: It's never been cheaper to fly as it has been 456 00:25:49,240 --> 00:25:53,439 Speaker 1: since about mid While we're on this topic of of 457 00:25:53,520 --> 00:25:58,320 Speaker 1: kind of average airfare increasing, prices of flights generally going up, 458 00:25:59,000 --> 00:26:01,880 Speaker 1: I think the most important thing to recognize is that 459 00:26:02,359 --> 00:26:06,040 Speaker 1: two things can be true at the same time. First, 460 00:26:06,240 --> 00:26:10,480 Speaker 1: average airfare can be increasing, and second, cheap flights can 461 00:26:10,560 --> 00:26:15,080 Speaker 1: still be plentiful. You know, in March, as the average 462 00:26:15,080 --> 00:26:18,800 Speaker 1: fares went up that record spike of eleven percent, a 463 00:26:18,880 --> 00:26:21,280 Speaker 1: few deals that you know, we found in sent Scot's 464 00:26:21,440 --> 00:26:25,240 Speaker 1: Flights members, like three hundred dollars round trip to Paris, 465 00:26:25,600 --> 00:26:28,240 Speaker 1: going to Costa Rica for a hundred and ninety three 466 00:26:28,240 --> 00:26:31,120 Speaker 1: dollars round trip, Hawaii for a hundred and ninety seven 467 00:26:31,200 --> 00:26:34,240 Speaker 1: dollars round trip. These are all on full service airlines, 468 00:26:34,600 --> 00:26:38,320 Speaker 1: and so airfare is rather than it's being something with 469 00:26:38,400 --> 00:26:42,720 Speaker 1: a sort of narrow curve and all kind of clustering 470 00:26:42,800 --> 00:26:46,399 Speaker 1: around the average air fare. Airfare is something instead that 471 00:26:46,480 --> 00:26:51,159 Speaker 1: has a super super wide distribution. You have expensive flights 472 00:26:51,200 --> 00:26:53,000 Speaker 1: and you have cheap flights. You know, I recently took 473 00:26:53,000 --> 00:26:56,120 Speaker 1: a flight to Boston. Uh you know, I paid two 474 00:26:56,160 --> 00:26:58,760 Speaker 1: hundred dollars round trip, but for my flight from Portland, 475 00:26:58,760 --> 00:27:01,359 Speaker 1: Oregon to Boston. And that's the person sitting next to me, 476 00:27:01,400 --> 00:27:03,000 Speaker 1: what did they pay for this flight? And they paid 477 00:27:03,040 --> 00:27:06,200 Speaker 1: six hundred dollars for it. So between the two of us, 478 00:27:06,240 --> 00:27:09,600 Speaker 1: we paid four hundred dollars, but neither of us actually 479 00:27:09,640 --> 00:27:12,760 Speaker 1: paid that average fair four hundred dollars. We either paid 480 00:27:12,800 --> 00:27:15,880 Speaker 1: two hundred or six hundred, and so air average airfairs 481 00:27:15,920 --> 00:27:18,320 Speaker 1: can absolutely be going up, but there can still be 482 00:27:18,640 --> 00:27:21,679 Speaker 1: a plethora of cheap flights available. And that's I think 483 00:27:21,920 --> 00:27:24,359 Speaker 1: kind of different than a lot of other goods of 484 00:27:24,440 --> 00:27:40,560 Speaker 1: services that we tend to purchase. So I have a 485 00:27:40,640 --> 00:27:44,879 Speaker 1: slightly existential question. But there used to be this great chart, 486 00:27:45,040 --> 00:27:47,160 Speaker 1: and probably one of my all time favorite charts, although 487 00:27:47,160 --> 00:27:49,320 Speaker 1: I haven't seen an updated version for a long time, 488 00:27:49,359 --> 00:27:54,560 Speaker 1: but it basically showed airlines average cost of capital versus 489 00:27:54,680 --> 00:27:59,919 Speaker 1: airlines average return on capital, and you could see throughout 490 00:28:00,000 --> 00:28:03,159 Speaker 1: modern history cost of capital was basically more than the 491 00:28:03,200 --> 00:28:08,280 Speaker 1: return on capital, and historically airlines have been extremely unprofitable. 492 00:28:08,359 --> 00:28:10,600 Speaker 1: Maybe they have these boom bust cycles, but I think 493 00:28:10,640 --> 00:28:15,520 Speaker 1: over time they tend to to lose money. How long, 494 00:28:15,680 --> 00:28:19,560 Speaker 1: you know, given the rising pressures, labor costs, fuel costs, 495 00:28:19,640 --> 00:28:21,160 Speaker 1: none of that seems like it's going to go away 496 00:28:21,200 --> 00:28:25,119 Speaker 1: anytime soon. But will we always have the option to 497 00:28:25,320 --> 00:28:29,320 Speaker 1: travel at a reasonable amount to wherever we want to 498 00:28:29,400 --> 00:28:32,800 Speaker 1: in the world? Essentially? Yeah, So, I mean this is 499 00:28:32,840 --> 00:28:37,240 Speaker 1: somewhat of a recent phenomenon being able to travel, especially 500 00:28:37,320 --> 00:28:41,320 Speaker 1: long haul travel, at much more affordable prices than we 501 00:28:41,400 --> 00:28:43,800 Speaker 1: have historically. You know, to touch on your first point 502 00:28:43,840 --> 00:28:47,240 Speaker 1: about airline financials, Look, we've all heard the Richard Branson 503 00:28:47,600 --> 00:28:49,959 Speaker 1: joke about how the quickest way to become a millionaires 504 00:28:50,000 --> 00:28:52,880 Speaker 1: to have a billion dollars and buy an airline. You know, 505 00:28:53,120 --> 00:28:55,920 Speaker 1: I think that underscores a certain truth when even in 506 00:28:56,280 --> 00:29:01,800 Speaker 1: pre pandemic times, airlines tend to lose money on flights 507 00:29:01,800 --> 00:29:03,920 Speaker 1: and actually make it up on other things. So in 508 00:29:05,080 --> 00:29:08,640 Speaker 1: when you looked at air American airlines financials, the revenue 509 00:29:08,800 --> 00:29:11,720 Speaker 1: from every of what are called available seat miles, they 510 00:29:11,760 --> 00:29:14,840 Speaker 1: made about fourteen point four cents off of but the 511 00:29:14,920 --> 00:29:18,280 Speaker 1: cost for a per available seat mile was fourteen point 512 00:29:18,360 --> 00:29:21,600 Speaker 1: nine cents, So they were actually losing money on every 513 00:29:21,600 --> 00:29:24,680 Speaker 1: plane that they flew. And where they made it up 514 00:29:24,720 --> 00:29:28,000 Speaker 1: and why they turned a profit was from the billions 515 00:29:28,000 --> 00:29:31,520 Speaker 1: of dollars that they made selling miles, frequent flyer miles 516 00:29:31,560 --> 00:29:35,360 Speaker 1: to banks and credit cards. And so the airline business 517 00:29:35,480 --> 00:29:40,120 Speaker 1: model is one that has significantly changed over the past decade, 518 00:29:40,240 --> 00:29:42,560 Speaker 1: or really over the past thirty forty years, but especially 519 00:29:42,600 --> 00:29:48,160 Speaker 1: over the past decade, where historically airlines relied almost entirely 520 00:29:48,320 --> 00:29:51,080 Speaker 1: on economy air fare to fund their revenue and to 521 00:29:51,120 --> 00:29:54,240 Speaker 1: fund their operations, to one today where they make a 522 00:29:54,280 --> 00:29:57,880 Speaker 1: majority of their revenue on things other than economy air fare. 523 00:29:57,920 --> 00:29:59,480 Speaker 1: They make it, you know, we talked about the front 524 00:29:59,520 --> 00:30:03,520 Speaker 1: of the plane selling business and premium economy seats. They 525 00:30:03,560 --> 00:30:06,280 Speaker 1: make it on selling frequent flyer miles and credit cards. 526 00:30:06,280 --> 00:30:09,320 Speaker 1: They make it on corporate contracts, they make it selling cargo. 527 00:30:09,440 --> 00:30:12,840 Speaker 1: They make it certainly on ancillary fees, bags and seats selection. 528 00:30:13,200 --> 00:30:16,320 Speaker 1: They make it on commission selling you know, hotels and 529 00:30:16,440 --> 00:30:19,280 Speaker 1: car rentals after you purchase your flight. And so what 530 00:30:19,320 --> 00:30:22,120 Speaker 1: it means is that they have all these revenue streams 531 00:30:22,160 --> 00:30:25,000 Speaker 1: today that they didn't use to. That makes them fly 532 00:30:25,040 --> 00:30:27,760 Speaker 1: a little bit certainly much more diversified, but also more 533 00:30:27,800 --> 00:30:31,160 Speaker 1: resilient than they used to be. Uh. And this is 534 00:30:31,240 --> 00:30:35,480 Speaker 1: why Tracy, to your point, the economy airfare has followen 535 00:30:35,640 --> 00:30:38,040 Speaker 1: so much over the past decade while we're living in 536 00:30:38,040 --> 00:30:39,880 Speaker 1: this golden age of cheap flights. You know, think of 537 00:30:39,880 --> 00:30:43,720 Speaker 1: it like a restaurant where economy seats are are the 538 00:30:43,800 --> 00:30:47,800 Speaker 1: states the main course that's essentially sold at cost, maybe 539 00:30:47,800 --> 00:30:52,120 Speaker 1: there's a very slight profit margin. The premium seats, frequent 540 00:30:52,120 --> 00:30:55,880 Speaker 1: flyer miles commissions. Those are you know, the sodas, the alcohol, 541 00:30:56,040 --> 00:30:58,480 Speaker 1: the salads, the things that get marked up at a 542 00:30:58,600 --> 00:31:01,840 Speaker 1: huge profit. And so if they if the airline you know, 543 00:31:01,960 --> 00:31:06,240 Speaker 1: didn't have those sort of answerers, those high profit or 544 00:31:06,360 --> 00:31:09,720 Speaker 1: high margin products, they would be much more difficult for them. 545 00:31:09,720 --> 00:31:12,280 Speaker 1: And that's why historically it was. But they've been able 546 00:31:12,320 --> 00:31:16,200 Speaker 1: to generate those while while combining it with the sort 547 00:31:16,200 --> 00:31:20,720 Speaker 1: of low margin parts of the travel experience, like buying 548 00:31:20,760 --> 00:31:23,280 Speaker 1: your economy ticket. And so that's why I think the 549 00:31:23,680 --> 00:31:27,600 Speaker 1: because the business model has changed, why I'm pretty bullish 550 00:31:27,680 --> 00:31:30,520 Speaker 1: on the outlook for cheap flights generally that I think 551 00:31:30,920 --> 00:31:34,360 Speaker 1: the just the model has changed that's going to continue 552 00:31:34,400 --> 00:31:38,040 Speaker 1: to allow these cheap economy air fairs, whether you're flying 553 00:31:38,080 --> 00:31:41,240 Speaker 1: to mescal or but especially if you're flying long hault 554 00:31:41,400 --> 00:31:45,400 Speaker 1: places like Europe, places like South America or beyond. So 555 00:31:45,720 --> 00:31:48,200 Speaker 1: I have a question, and it's kind of a big picture, 556 00:31:48,240 --> 00:31:50,280 Speaker 1: but you know all of these when we talk about 557 00:31:50,280 --> 00:31:53,280 Speaker 1: the state of the economy and we talk about normalization, 558 00:31:53,800 --> 00:31:56,120 Speaker 1: there's always this question of, like, well, how much of 559 00:31:56,160 --> 00:31:59,720 Speaker 1: what we're experiencing now, whether it's inflation or other disruptions, 560 00:32:00,120 --> 00:32:02,640 Speaker 1: is a function of the fact that things are still 561 00:32:02,720 --> 00:32:07,680 Speaker 1: weird because of the pandemic versus some sort of new normal. 562 00:32:07,720 --> 00:32:09,840 Speaker 1: And of course that's a huge question for economists trying 563 00:32:09,840 --> 00:32:13,040 Speaker 1: to evaluate the inflationary environment. But just from like an 564 00:32:13,080 --> 00:32:16,680 Speaker 1: airline specific industry, are there things yet that you feel 565 00:32:16,680 --> 00:32:21,040 Speaker 1: comfortable saying this is going this about air travel is 566 00:32:21,080 --> 00:32:25,040 Speaker 1: going to be fundamentally different than it was in and 567 00:32:25,080 --> 00:32:27,400 Speaker 1: this is a new shift. This is some new trend 568 00:32:27,440 --> 00:32:30,719 Speaker 1: that's emerged that was not the case, and it's not 569 00:32:30,800 --> 00:32:33,719 Speaker 1: likely to revert. Like do you see like structural changes 570 00:32:33,760 --> 00:32:35,800 Speaker 1: having taken place as a result of what we've all 571 00:32:35,800 --> 00:32:38,640 Speaker 1: experienced over the last two years. Sure, I'll give you 572 00:32:38,680 --> 00:32:42,320 Speaker 1: one from a consumer perspective and one from an industry perspective. 573 00:32:42,360 --> 00:32:44,920 Speaker 1: So from a consumer perspective, one of the things that 574 00:32:45,040 --> 00:32:48,640 Speaker 1: is absolutely changed today from pre pandemic is that you 575 00:32:48,680 --> 00:32:52,600 Speaker 1: have a lot more flexibility to change your plans after 576 00:32:52,720 --> 00:32:55,920 Speaker 1: you book your flights than you used to. Historically, when 577 00:32:55,960 --> 00:32:58,959 Speaker 1: you booked your flight, you're pretty well locked in, and 578 00:32:59,000 --> 00:33:01,640 Speaker 1: if you wanted to even just change your the dates 579 00:33:01,680 --> 00:33:04,160 Speaker 1: that you're going to fly on, you had to pay 580 00:33:04,320 --> 00:33:06,960 Speaker 1: first a penalty of you know, two hundred, three hundred, 581 00:33:07,040 --> 00:33:10,239 Speaker 1: sometimes four hundred dollars or more. Uh, in addition to 582 00:33:10,280 --> 00:33:13,240 Speaker 1: any fair difference. But one of the things that airlines 583 00:33:13,280 --> 00:33:16,440 Speaker 1: across the board did early in the pandemic was to 584 00:33:16,480 --> 00:33:20,280 Speaker 1: get rid of those change fees, because they their assumption 585 00:33:20,440 --> 00:33:25,000 Speaker 1: was that travelers needed to be able to uh feel 586 00:33:25,120 --> 00:33:27,360 Speaker 1: confident that they could change their plans, that they could 587 00:33:27,400 --> 00:33:30,960 Speaker 1: have flexibility later if they were gonna have any hope 588 00:33:30,960 --> 00:33:35,080 Speaker 1: of booking flights today. Uh. So, across the board, airlines 589 00:33:35,160 --> 00:33:38,200 Speaker 1: kind of really trumpeted that they were permanently getting rid 590 00:33:38,320 --> 00:33:41,360 Speaker 1: of change fees. Uh. And so now when you book 591 00:33:41,400 --> 00:33:43,440 Speaker 1: your flight, you know you can you can if you 592 00:33:43,520 --> 00:33:46,640 Speaker 1: decide you don't want to take that Memorial Day trip 593 00:33:46,720 --> 00:33:49,440 Speaker 1: like you'd originally book, you can just push it back 594 00:33:49,480 --> 00:33:51,200 Speaker 1: till later in the summer. You can push back to 595 00:33:51,240 --> 00:33:54,480 Speaker 1: the fall, to the winter, whenever. It Not only I 596 00:33:54,640 --> 00:33:57,840 Speaker 1: think is a real benefit for consumers to be able 597 00:33:57,880 --> 00:34:01,520 Speaker 1: to have that flexibility automatical a but the airlines like 598 00:34:01,600 --> 00:34:04,320 Speaker 1: it too, because it's one of the areas of differentiation 599 00:34:04,360 --> 00:34:07,560 Speaker 1: and upsell that they that they tend to not make 600 00:34:07,600 --> 00:34:11,360 Speaker 1: this available if you book a basic economy ticket, and 601 00:34:11,400 --> 00:34:14,880 Speaker 1: so that encourages folks then to pay slightly more to 602 00:34:15,040 --> 00:34:17,920 Speaker 1: purchase a main economy ticket and be able to have 603 00:34:18,040 --> 00:34:22,239 Speaker 1: that flexibility. One of the major changes from an industry 604 00:34:22,280 --> 00:34:26,160 Speaker 1: perspective is this ongoing pilot shortage where the airlines are 605 00:34:26,280 --> 00:34:29,200 Speaker 1: still kind of paying for some of the decisions that 606 00:34:29,239 --> 00:34:32,200 Speaker 1: they made early in the pandemic, you know, rewind to 607 00:34:32,400 --> 00:34:37,520 Speaker 1: March April. Airlines, this was an existential question for them, 608 00:34:37,560 --> 00:34:40,880 Speaker 1: are we going to survive this as an airline? Not 609 00:34:40,960 --> 00:34:42,839 Speaker 1: just are we going to be a smaller coming out 610 00:34:42,840 --> 00:34:45,279 Speaker 1: of this, but will we exist at all? And so 611 00:34:45,400 --> 00:34:51,960 Speaker 1: airlines virtually overnight UH stopped hiring new pilots and other personnel, 612 00:34:52,440 --> 00:34:54,880 Speaker 1: and they stopped doing a lot of the training, and 613 00:34:54,920 --> 00:34:58,040 Speaker 1: they started offering a lot of buyouts, early retirements and 614 00:34:58,040 --> 00:35:01,040 Speaker 1: whatnot across the board and ess actually for pilots, and 615 00:35:01,080 --> 00:35:06,120 Speaker 1: so by the time travel started rebound, travel demand started rebounding. 616 00:35:06,120 --> 00:35:09,000 Speaker 1: That happened much quicker than the analysts or any of 617 00:35:09,040 --> 00:35:12,240 Speaker 1: the airlines expected. The airlines were caught pretty flat footed 618 00:35:12,280 --> 00:35:15,360 Speaker 1: that they didn't have as many pilots, not to mention 619 00:35:15,440 --> 00:35:18,160 Speaker 1: all the the airplane supply chain issues, but they just 620 00:35:18,200 --> 00:35:20,080 Speaker 1: didn't have enough pilots to be able to fly the 621 00:35:20,160 --> 00:35:22,880 Speaker 1: number of planes they wanted. And so they've been quickly 622 00:35:22,920 --> 00:35:26,120 Speaker 1: trying to ramp up in order to deal with that, 623 00:35:26,560 --> 00:35:29,319 Speaker 1: by you know that doing everything from starting their own 624 00:35:29,360 --> 00:35:33,600 Speaker 1: flight schools to increasing pay. In many cases, they're actually 625 00:35:33,600 --> 00:35:36,480 Speaker 1: poaching the large kind of mainline airlines like Delta and 626 00:35:36,520 --> 00:35:40,000 Speaker 1: American are actually poaching airlines either from the smaller budget 627 00:35:40,000 --> 00:35:43,640 Speaker 1: airlines who have lower pay, or maybe they're poaching them 628 00:35:43,680 --> 00:35:46,640 Speaker 1: from what are called regional airlines that fly you know, 629 00:35:46,719 --> 00:35:51,320 Speaker 1: smaller planes to smaller airports, and so u the large 630 00:35:51,360 --> 00:35:55,440 Speaker 1: airlines have been able to navigate this pretty well. They're 631 00:35:55,480 --> 00:35:58,000 Speaker 1: close to where they want to be from a pilot perspective, 632 00:35:58,040 --> 00:35:59,279 Speaker 1: or at least there's a light at the end of 633 00:35:59,320 --> 00:36:01,839 Speaker 1: the tunnel by the end of this year that they'll 634 00:36:01,880 --> 00:36:05,640 Speaker 1: have the number of sort of pilots and overall personnel 635 00:36:05,680 --> 00:36:09,160 Speaker 1: that they'd like. But who's really struggling with this are 636 00:36:09,200 --> 00:36:11,520 Speaker 1: the regional airline So I think you know, your small 637 00:36:11,560 --> 00:36:15,160 Speaker 1: flights took places in Montana to Reno to you know, 638 00:36:15,360 --> 00:36:20,960 Speaker 1: Colorado Springs, places like that that rely on regional airline service, 639 00:36:21,000 --> 00:36:23,880 Speaker 1: where that's where you're seeing a ton of the cancelations, 640 00:36:23,920 --> 00:36:27,160 Speaker 1: a ton of the schedule cuts, and a lot less 641 00:36:27,239 --> 00:36:31,359 Speaker 1: capacity today than you had in nineteen. It's just much 642 00:36:31,400 --> 00:36:34,680 Speaker 1: more difficult to fly to some of the smaller cities 643 00:36:34,719 --> 00:36:37,640 Speaker 1: and destinations than it used to be because of this 644 00:36:37,760 --> 00:36:40,000 Speaker 1: pilot shortage that I think is going to be we're 645 00:36:40,040 --> 00:36:41,879 Speaker 1: still going to be dealing with for the next year 646 00:36:42,000 --> 00:36:45,960 Speaker 1: or two at least. So two questions here, but one 647 00:36:46,200 --> 00:36:49,320 Speaker 1: where do new pilots come from? And I realized that 648 00:36:49,440 --> 00:36:52,960 Speaker 1: might sound like a weird question, but it used to 649 00:36:53,000 --> 00:36:55,399 Speaker 1: be that you would get a lot of X Air 650 00:36:55,480 --> 00:36:57,800 Speaker 1: Force pilots at least to the U S who would 651 00:36:57,840 --> 00:37:01,080 Speaker 1: migrate into commercial and that's certainly what my dad did, 652 00:37:01,560 --> 00:37:05,560 Speaker 1: And what's the value proposition for being a pilot now, 653 00:37:05,680 --> 00:37:07,640 Speaker 1: especially if you're someone who has to start out on 654 00:37:07,680 --> 00:37:11,480 Speaker 1: a regional carrier where the schedules suck and there's a 655 00:37:11,480 --> 00:37:14,320 Speaker 1: lot of stress and maybe you're not making enough money initially. 656 00:37:14,400 --> 00:37:16,600 Speaker 1: And then speaking of a lot of stress and the 657 00:37:16,640 --> 00:37:21,040 Speaker 1: schedules sucking, um, what's going on with flight attendants at 658 00:37:21,040 --> 00:37:23,279 Speaker 1: the moment, because it seems like there's some pressures on 659 00:37:23,480 --> 00:37:27,520 Speaker 1: that supply of labor as well. Yeah, absolutely so, I 660 00:37:27,520 --> 00:37:30,880 Speaker 1: mean in terms of sourcing of new pilots, yes, absolutely, 661 00:37:30,880 --> 00:37:33,480 Speaker 1: you know X X military, X air Force is it 662 00:37:33,560 --> 00:37:37,600 Speaker 1: was has historically been a pretty big abundance supply of 663 00:37:37,760 --> 00:37:40,960 Speaker 1: commercial pilots. And then you know, just just there are 664 00:37:41,000 --> 00:37:44,680 Speaker 1: also folks who go to school, come out of college 665 00:37:44,719 --> 00:37:47,799 Speaker 1: with the intention of getting into the airline industry. And 666 00:37:47,880 --> 00:37:50,560 Speaker 1: there are a lot of flight training schools where folks 667 00:37:50,719 --> 00:37:53,839 Speaker 1: go into in many cases, pretty significant debt in order 668 00:37:53,880 --> 00:37:57,520 Speaker 1: to get certified as a commercial pilot. And and you know, 669 00:37:57,520 --> 00:38:00,280 Speaker 1: in some ways that there's a similarity with the medical 670 00:38:00,360 --> 00:38:03,200 Speaker 1: profession where we think of you know, doctors is relatively 671 00:38:03,239 --> 00:38:07,920 Speaker 1: well compensated, but there is a big ramp up time 672 00:38:07,960 --> 00:38:10,600 Speaker 1: there's a lot of training, a lot of schooling that's required, 673 00:38:10,840 --> 00:38:13,480 Speaker 1: and a lot of regulatory requirements in terms of the 674 00:38:13,520 --> 00:38:16,680 Speaker 1: amount of training you need. In the US to be 675 00:38:16,719 --> 00:38:19,320 Speaker 1: a commercial pilot, you have to have had fifteen hundred 676 00:38:19,360 --> 00:38:23,239 Speaker 1: hours in the cockpit or other training. And so that 677 00:38:23,360 --> 00:38:27,560 Speaker 1: ends up kind of limiting the amount of supply and 678 00:38:27,560 --> 00:38:29,719 Speaker 1: and making it difficult for airlines to be able to 679 00:38:29,800 --> 00:38:31,919 Speaker 1: quickly higher up. I mean, I don't you know, it's 680 00:38:31,960 --> 00:38:34,760 Speaker 1: not an entry level job where they can just quickly 681 00:38:34,880 --> 00:38:38,719 Speaker 1: meet demand. That it takes. You know, it's a matter 682 00:38:38,760 --> 00:38:41,640 Speaker 1: of months and years to be able to train and 683 00:38:41,719 --> 00:38:43,520 Speaker 1: high up new pilots. And that's why so many of 684 00:38:43,520 --> 00:38:47,000 Speaker 1: the airlines are getting into actually owning and operating many 685 00:38:47,000 --> 00:38:49,839 Speaker 1: of the new flight schools themselves, because they want to. 686 00:38:49,960 --> 00:38:52,439 Speaker 1: They can't. They don't feel like they can rely on 687 00:38:52,560 --> 00:38:55,799 Speaker 1: the supply of new pilots in the way that they 688 00:38:56,280 --> 00:38:59,040 Speaker 1: that they used to. And you know, the the other 689 00:38:59,080 --> 00:39:01,240 Speaker 1: area where it's kind of smilar to the medical profession 690 00:39:01,280 --> 00:39:04,440 Speaker 1: in some ways is that the entry level pay, the 691 00:39:04,520 --> 00:39:08,200 Speaker 1: initial pay is actually much lower than many folks realize. 692 00:39:08,239 --> 00:39:10,560 Speaker 1: You know, it tends to be forty K fifty K 693 00:39:10,760 --> 00:39:13,920 Speaker 1: many times starting out if you're flying for one of 694 00:39:13,920 --> 00:39:16,400 Speaker 1: the regional airlines who are really kind of small, you know, 695 00:39:16,520 --> 00:39:20,120 Speaker 1: nine seat type of aircraft, and it can take a 696 00:39:20,120 --> 00:39:22,800 Speaker 1: while to get to you quote unquote the big leagues, 697 00:39:22,880 --> 00:39:26,360 Speaker 1: where not only do you have a lot more prestige, 698 00:39:26,440 --> 00:39:29,600 Speaker 1: a lot more pay, a lot more more kind of 699 00:39:29,640 --> 00:39:34,120 Speaker 1: desirable flight schedules in general, uh, in terms of you know, 700 00:39:34,520 --> 00:39:37,719 Speaker 1: we talk about the pilot shortage, and that feels like 701 00:39:37,840 --> 00:39:40,239 Speaker 1: in many ways where the most pressing part of the 702 00:39:40,320 --> 00:39:42,600 Speaker 1: labor shortage of the airline industry is. But I think 703 00:39:42,600 --> 00:39:44,600 Speaker 1: you really kind of raise a good point that that 704 00:39:44,920 --> 00:39:48,799 Speaker 1: it's not the only aspect of airlines that are struggling 705 00:39:48,800 --> 00:39:51,560 Speaker 1: with labor. You know, you see uh, you see it 706 00:39:51,680 --> 00:39:53,560 Speaker 1: in phone agents. You know, I don't know if you 707 00:39:53,640 --> 00:39:56,000 Speaker 1: ever had to call an airline in the past two years, 708 00:39:56,040 --> 00:39:59,240 Speaker 1: but the weights tend to be you know, measured in hours, 709 00:39:59,320 --> 00:40:01,879 Speaker 1: if not as sometimes to be able to get through 710 00:40:01,880 --> 00:40:05,120 Speaker 1: to a phone agent. And it's measured oftentimes in other 711 00:40:05,160 --> 00:40:08,400 Speaker 1: sort of ancillary services, not just flight attendant, is not 712 00:40:08,480 --> 00:40:11,799 Speaker 1: just gate agents, but think about the baggage handlers or 713 00:40:11,880 --> 00:40:15,160 Speaker 1: folks who are refueling the plane, the ground support at 714 00:40:15,160 --> 00:40:18,960 Speaker 1: an airline. Those tend to be more entry level jobs, 715 00:40:18,960 --> 00:40:22,399 Speaker 1: but they tend to pay. They're they're competing in many 716 00:40:22,440 --> 00:40:25,440 Speaker 1: ways with these sort of similarly if not better paying 717 00:40:25,480 --> 00:40:28,120 Speaker 1: warehouse jobs that that folks might be able to get. 718 00:40:28,120 --> 00:40:30,799 Speaker 1: And so if you are looking for one of these 719 00:40:30,800 --> 00:40:33,560 Speaker 1: types of jobs, do you take the eighteen dollar an 720 00:40:33,560 --> 00:40:37,120 Speaker 1: hour job kind of taking and loading bags off a 721 00:40:37,200 --> 00:40:40,239 Speaker 1: plane in January in Chicago, or do you take the 722 00:40:40,680 --> 00:40:45,120 Speaker 1: similarly paid job working on Amazon warehouse where at least 723 00:40:45,120 --> 00:40:48,759 Speaker 1: it's temperature controlled and other sorts of uh, you know, 724 00:40:49,200 --> 00:40:51,480 Speaker 1: not having to deal with the kind of Chicago winters 725 00:40:51,480 --> 00:40:53,759 Speaker 1: in the same type of way. And so I think 726 00:40:53,840 --> 00:40:58,560 Speaker 1: that competition is become becoming more difficult for airlines today 727 00:40:58,560 --> 00:41:01,080 Speaker 1: than it used to, and why they're seeing uh, labor 728 00:41:01,080 --> 00:41:05,160 Speaker 1: shortages across the board, not just with pilots. You know. 729 00:41:05,360 --> 00:41:09,240 Speaker 1: Tracy mentioned flight attendants, and of course the mask mandate 730 00:41:09,680 --> 00:41:12,840 Speaker 1: just in the last week when we're recording this UM 731 00:41:13,120 --> 00:41:16,040 Speaker 1: went away. And I'm sort of curious about perception. So 732 00:41:16,080 --> 00:41:18,320 Speaker 1: here's my guess as too. And I don't know because 733 00:41:18,320 --> 00:41:21,440 Speaker 1: I haven't seen any like official surveys, but my guess 734 00:41:21,440 --> 00:41:25,160 Speaker 1: as to the perception of among flight attendants is probably 735 00:41:25,200 --> 00:41:27,800 Speaker 1: there's some mix. I'm guessing most people don't like having 736 00:41:27,840 --> 00:41:31,160 Speaker 1: to wear a mask all day while they're work, That's 737 00:41:31,160 --> 00:41:33,799 Speaker 1: what I was gonna say. I'm guessing there's sort of universal, 738 00:41:34,320 --> 00:41:39,080 Speaker 1: um sort of displeasure at having been essentially deputized to 739 00:41:39,320 --> 00:41:41,640 Speaker 1: enforce one of the most sort of divisive things over 740 00:41:41,640 --> 00:41:44,120 Speaker 1: the last two years, their job which they never you know, 741 00:41:44,239 --> 00:41:45,960 Speaker 1: signed up to get in the middle of this sort 742 00:41:45,960 --> 00:41:48,520 Speaker 1: of culture war whatever you want to call it, of 743 00:41:48,640 --> 00:41:52,319 Speaker 1: enforcing mask mandates. How much talk to us a little 744 00:41:52,320 --> 00:41:54,120 Speaker 1: bit about that. How much of a burden was that? 745 00:41:54,200 --> 00:41:57,520 Speaker 1: How much did that contribute to what I believe there's 746 00:41:57,560 --> 00:42:00,560 Speaker 1: been an uptick and sort of air rage incident and 747 00:42:00,719 --> 00:42:04,120 Speaker 1: what uh sort of the aftermath in terms of inclination 748 00:42:04,160 --> 00:42:06,440 Speaker 1: to fly and other things now that the mass mandate 749 00:42:06,480 --> 00:42:09,040 Speaker 1: has gone. Yeah, I think that's exactly right. You know, 750 00:42:09,120 --> 00:42:11,640 Speaker 1: being a flight attendant is not an easy job, but 751 00:42:11,719 --> 00:42:14,080 Speaker 1: none of them signed up to have to also be 752 00:42:14,120 --> 00:42:16,839 Speaker 1: a bouncer at thirty thousand feet Like it's just trying 753 00:42:16,880 --> 00:42:20,160 Speaker 1: to make those decisions, and in many cases having physical 754 00:42:20,280 --> 00:42:24,320 Speaker 1: harm inflicted on them from these incidents was really, uh, 755 00:42:24,360 --> 00:42:27,840 Speaker 1: pretty awful to see. And so I think, um, whether 756 00:42:27,920 --> 00:42:31,480 Speaker 1: the root cause of that is because of the mass mandate, 757 00:42:31,560 --> 00:42:35,000 Speaker 1: or whether the root causes more sort of systemic because 758 00:42:35,040 --> 00:42:37,359 Speaker 1: you see, you know, across the board in society, a 759 00:42:37,400 --> 00:42:40,239 Speaker 1: lot of types of the incidents are are on the rise. 760 00:42:40,320 --> 00:42:42,880 Speaker 1: It's it's a little bit hard to say, but I 761 00:42:42,920 --> 00:42:45,840 Speaker 1: think the general trend, at least over the past few months, 762 00:42:46,200 --> 00:42:50,360 Speaker 1: uh and sentiment among fighting has been trending towards wanting 763 00:42:50,400 --> 00:42:54,440 Speaker 1: the mandate to be lifted. It's obviously a contrast between 764 00:42:54,800 --> 00:42:58,000 Speaker 1: the folks who are the most exposed to everybody who's 765 00:42:58,040 --> 00:43:00,920 Speaker 1: coming onto a plane and and and and any germs 766 00:43:00,920 --> 00:43:03,040 Speaker 1: they might be bringing. But also there are the folks 767 00:43:03,080 --> 00:43:05,600 Speaker 1: who are having to wear masks all day every day 768 00:43:05,640 --> 00:43:08,280 Speaker 1: at their job, and so as in much of society, 769 00:43:08,280 --> 00:43:11,880 Speaker 1: there's a real kind of diversity of opinion. There fortunately 770 00:43:12,400 --> 00:43:15,640 Speaker 1: a lot of the sort of safety mechanisms that exists 771 00:43:15,640 --> 00:43:19,560 Speaker 1: on airplanes, between the HEPA filters that constantly changed the 772 00:43:19,719 --> 00:43:23,040 Speaker 1: air the onboard you know, oxygen is constantly coming into 773 00:43:23,040 --> 00:43:26,560 Speaker 1: the plane from the outside during a flight, the downward airflow. 774 00:43:26,640 --> 00:43:29,759 Speaker 1: The fact that people are quiet tends to fortunately mean 775 00:43:29,840 --> 00:43:33,640 Speaker 1: that there's not nearly the amount of in plane transmission 776 00:43:33,680 --> 00:43:35,840 Speaker 1: that a lot of folks might have assumed early in 777 00:43:35,880 --> 00:43:38,920 Speaker 1: the pandemic, but that doesn't mean that it never happens. 778 00:43:38,960 --> 00:43:42,239 Speaker 1: And so the last thing I'll say on this is 779 00:43:42,280 --> 00:43:47,319 Speaker 1: that the UH in there was no federal mandate that 780 00:43:47,320 --> 00:43:50,839 Speaker 1: that airplane airons had to our transportation had to have 781 00:43:51,360 --> 00:43:54,400 Speaker 1: require mass. But you saw across the board all the 782 00:43:54,520 --> 00:43:57,879 Speaker 1: US airlines require it voluntarily because that's where they felt 783 00:43:57,920 --> 00:44:01,040 Speaker 1: like the sentiment was, where where you know, the the 784 00:44:01,080 --> 00:44:05,120 Speaker 1: demand was today Now that with the mask mandate gone, 785 00:44:05,800 --> 00:44:09,040 Speaker 1: zero airlines voluntarily required, and I think that kind of 786 00:44:09,080 --> 00:44:12,160 Speaker 1: reflects where they see, you know, the folks with money 787 00:44:12,200 --> 00:44:14,680 Speaker 1: on the line here see that it is they're going 788 00:44:14,719 --> 00:44:18,440 Speaker 1: to take advantage of demand in a greater way without 789 00:44:18,640 --> 00:44:22,120 Speaker 1: having without imposing a mandate than with one. So you 790 00:44:22,200 --> 00:44:24,560 Speaker 1: touched on this earlier, but just on the topic of 791 00:44:24,600 --> 00:44:28,960 Speaker 1: the mask mandate rolling off, we still have vaccination and 792 00:44:29,000 --> 00:44:33,480 Speaker 1: testing requirements for a lot of international travel. How much 793 00:44:33,480 --> 00:44:36,960 Speaker 1: of a drag is that still on air travel and 794 00:44:37,000 --> 00:44:41,000 Speaker 1: how much would you expect demand to pick up once 795 00:44:41,080 --> 00:44:46,280 Speaker 1: those are removed. It's significant, you know, the international travel 796 00:44:46,680 --> 00:44:50,719 Speaker 1: still down anywhere from fifteen to thirty percent today, why 797 00:44:50,840 --> 00:44:55,239 Speaker 1: whereas domestic travel has largely rebounded essentially on parity with 798 00:44:55,280 --> 00:44:58,480 Speaker 1: where it was in and I think the single largest 799 00:44:58,640 --> 00:45:02,759 Speaker 1: reason why you see that disparity is because of the 800 00:45:02,880 --> 00:45:07,120 Speaker 1: requirement that all travelers flying on an airplane to the US, 801 00:45:07,280 --> 00:45:10,880 Speaker 1: even Americans who have been fully vaccinated, have to show 802 00:45:10,920 --> 00:45:14,560 Speaker 1: a negative test that they took one day before their flight. 803 00:45:15,080 --> 00:45:17,520 Speaker 1: And what that means is that, you know, especially in 804 00:45:17,520 --> 00:45:21,239 Speaker 1: the world now where there are many breakthrough infections, folks 805 00:45:21,280 --> 00:45:24,040 Speaker 1: who have been fully vaccinated and boosting still able to 806 00:45:24,080 --> 00:45:27,080 Speaker 1: contract the virus. A lot of folks have, I think 807 00:45:27,160 --> 00:45:31,799 Speaker 1: pretty reasonable worry that if they take that trip to Barcelona, 808 00:45:31,960 --> 00:45:35,239 Speaker 1: they take that trip to Cancoon and they catch or 809 00:45:35,280 --> 00:45:38,160 Speaker 1: breakthrough infection, they're going to be stranded in a foreign 810 00:45:38,160 --> 00:45:42,520 Speaker 1: country for seven and fourteen days. Not only the expense 811 00:45:42,600 --> 00:45:45,640 Speaker 1: and hassle of that, but also the you know, I 812 00:45:45,640 --> 00:45:49,080 Speaker 1: don't know any pet care, any work obligations. It's just 813 00:45:49,280 --> 00:45:52,719 Speaker 1: the downside. Risk is a lot higher today than it 814 00:45:52,880 --> 00:45:54,960 Speaker 1: used to be in twenty nineteen, and so I think 815 00:45:55,000 --> 00:45:56,520 Speaker 1: you see a lot of those folks who might have 816 00:45:56,680 --> 00:45:59,879 Speaker 1: otherwise been interested in taking that that trip to your 817 00:46:00,160 --> 00:46:03,879 Speaker 1: that trip to Latin America instead traveling domestically. And why 818 00:46:03,920 --> 00:46:07,720 Speaker 1: you see the kind of balance of international versus domestic 819 00:46:07,760 --> 00:46:13,080 Speaker 1: trips waited today towards domestic. There's rumors, there's you know, 820 00:46:13,200 --> 00:46:16,719 Speaker 1: tongues are wagging right now that the uh the test 821 00:46:16,800 --> 00:46:20,439 Speaker 1: requirement could end sometime in the next month or two. 822 00:46:21,080 --> 00:46:24,160 Speaker 1: If that comes to past, I would anticipate we're going 823 00:46:24,239 --> 00:46:29,680 Speaker 1: to see a pretty big jump in international travel moving forward. 824 00:46:29,719 --> 00:46:33,640 Speaker 1: I think that this is probably the big, single largest roadblock. 825 00:46:34,160 --> 00:46:36,000 Speaker 1: I think it will still be some time until it 826 00:46:36,000 --> 00:46:38,520 Speaker 1: gets back to parity, but I think you'll see a 827 00:46:38,560 --> 00:46:43,200 Speaker 1: pretty large jump because you won't have that same concern 828 00:46:43,440 --> 00:46:47,120 Speaker 1: about about breakthrough infections impacting your ability to get home 829 00:46:47,640 --> 00:46:52,200 Speaker 1: that you would today. You speaking of international travel, and 830 00:46:52,200 --> 00:46:56,520 Speaker 1: you mentioned that US China travel is down, and in 831 00:46:56,520 --> 00:47:00,600 Speaker 1: a way, I'm surprised it's not. Maybe it is, but 832 00:47:00,800 --> 00:47:03,600 Speaker 1: you know, one of the stories of the last decade, 833 00:47:03,840 --> 00:47:09,520 Speaker 1: I think in international tourism was this rise of the 834 00:47:09,640 --> 00:47:13,880 Speaker 1: Chinese middle class. Tourism class going all over the world. 835 00:47:14,680 --> 00:47:17,759 Speaker 1: I assume for some carriers in some country is a 836 00:47:17,840 --> 00:47:20,839 Speaker 1: huge source of tourism demand and travel. And I don't 837 00:47:20,840 --> 00:47:24,439 Speaker 1: think it's obvious that it's gonna come back anytime soon. 838 00:47:24,640 --> 00:47:27,799 Speaker 1: I mean, obviously, like China is as lockdown or more 839 00:47:27,840 --> 00:47:30,560 Speaker 1: locked down than it ever has been. And I know, 840 00:47:30,880 --> 00:47:34,040 Speaker 1: who knows how long that last. That must really blow 841 00:47:34,080 --> 00:47:36,960 Speaker 1: a whole uh for a lot of like airlines budgets, 842 00:47:36,960 --> 00:47:39,279 Speaker 1: and I assume some countries even for whom that was 843 00:47:39,320 --> 00:47:44,040 Speaker 1: a major source of tourism dollars. Yeah, and it's both 844 00:47:44,239 --> 00:47:47,520 Speaker 1: tourism dollars in certain you know countries and economies have 845 00:47:47,680 --> 00:47:51,759 Speaker 1: more exposure to that than than others. But it's also airfare, 846 00:47:52,200 --> 00:47:56,480 Speaker 1: especially to elsewhere in Asia. One of the main reasons 847 00:47:56,520 --> 00:47:59,640 Speaker 1: why we saw so many cheap flights across the Pacific 848 00:47:59,760 --> 00:48:04,319 Speaker 1: where you know, two places like Vietnam, Thailand, Singapore, Bali, etcetera, 849 00:48:04,680 --> 00:48:08,480 Speaker 1: was because of the rise of Chinese airlines that they 850 00:48:09,160 --> 00:48:13,320 Speaker 1: were really kind of flooding the market with a significantly 851 00:48:13,360 --> 00:48:17,759 Speaker 1: more capacity that had a downward pressure on overall prices. 852 00:48:17,880 --> 00:48:20,440 Speaker 1: You know, you see the same story play out not 853 00:48:20,560 --> 00:48:25,120 Speaker 1: just domestically but increasingly internationally, where budget airlines are just 854 00:48:25,400 --> 00:48:28,839 Speaker 1: more airline capacity at large having a really kind of 855 00:48:28,880 --> 00:48:33,840 Speaker 1: downward impact on prices. Because the single largest determinant of 856 00:48:33,880 --> 00:48:36,279 Speaker 1: how many cheap flights you see on around is just 857 00:48:36,360 --> 00:48:41,360 Speaker 1: how much competition there is between airlines, and so the 858 00:48:41,360 --> 00:48:45,919 Speaker 1: the removal of many, you know, the the vast, vast 859 00:48:45,960 --> 00:48:50,800 Speaker 1: majority of Chinese airlines on these long haul international flights 860 00:48:51,239 --> 00:48:53,640 Speaker 1: is one of the reasons why we see so few 861 00:48:54,000 --> 00:48:57,920 Speaker 1: cheap flights right now across the Pacific, even as a 862 00:48:58,000 --> 00:49:00,799 Speaker 1: lot of countries really kind of open up their tourism 863 00:49:01,120 --> 00:49:06,560 Speaker 1: doors in mass over the past couple of months, you know, Thailand, Singapore, Vietnam, elsewhere, 864 00:49:07,080 --> 00:49:10,520 Speaker 1: most of Southeast Asia is now open for tourism. But 865 00:49:10,640 --> 00:49:13,799 Speaker 1: you haven't seen the same rebound in capacity or the 866 00:49:13,880 --> 00:49:16,880 Speaker 1: same cheap fares that we saw in twenty nineteen. And 867 00:49:16,880 --> 00:49:20,040 Speaker 1: I think the single biggest reason why is you don't 868 00:49:20,080 --> 00:49:24,399 Speaker 1: have the Chinese carriers kind of adding to that capacity 869 00:49:24,680 --> 00:49:27,560 Speaker 1: and depressing air fare prices. I have one of their 870 00:49:27,640 --> 00:49:30,400 Speaker 1: sort of like actually international question, and this is definitely 871 00:49:30,680 --> 00:49:34,160 Speaker 1: something that we couldn't have talked about when we talked 872 00:49:34,280 --> 00:49:38,560 Speaker 1: in February, But what is your understanding of the situation 873 00:49:38,800 --> 00:49:43,320 Speaker 1: with um the Russian airline industry, Because in addition obviously 874 00:49:43,440 --> 00:49:46,239 Speaker 1: to being cut off from much of the world, you know, 875 00:49:46,360 --> 00:49:49,840 Speaker 1: their import or their export restrictions, and I have to 876 00:49:49,880 --> 00:49:53,400 Speaker 1: assume that makes it difficult to service or get parts 877 00:49:53,400 --> 00:49:56,479 Speaker 1: for key airlines, although I guess, or key airplans, although 878 00:49:56,480 --> 00:49:58,880 Speaker 1: I'm not sure. And then I seem to recall that 879 00:49:59,360 --> 00:50:02,000 Speaker 1: Saber one of the key some of the key software 880 00:50:02,040 --> 00:50:04,600 Speaker 1: that they used cut them off, like what has happened 881 00:50:04,680 --> 00:50:07,160 Speaker 1: or what's going on? Or what's your read if if 882 00:50:07,160 --> 00:50:11,719 Speaker 1: you contain anything on what's happened to plane travel in Russia. Yeah, 883 00:50:12,239 --> 00:50:15,600 Speaker 1: the domestic Russian travel market has been one of the 884 00:50:15,680 --> 00:50:18,440 Speaker 1: largest growing over the past decade. It is a you know, 885 00:50:18,640 --> 00:50:22,279 Speaker 1: major major purchaser of Boeing planes and others, and so, 886 00:50:22,880 --> 00:50:25,360 Speaker 1: you know, and and by and large leasing their aircraft 887 00:50:25,400 --> 00:50:30,360 Speaker 1: in most cases from Western aircraft lessers. And so when 888 00:50:30,400 --> 00:50:35,480 Speaker 1: they made the decision to effectively nationalize the airlines, the 889 00:50:35,520 --> 00:50:39,439 Speaker 1: airplanes that they had, even if you took a very 890 00:50:39,560 --> 00:50:43,880 Speaker 1: best case scenario look at at you know that somehow 891 00:50:44,120 --> 00:50:47,920 Speaker 1: things are significantly improved over the next year or two, 892 00:50:48,440 --> 00:50:52,320 Speaker 1: the aircraft that exists in Russia today are essentially a 893 00:50:52,680 --> 00:50:55,759 Speaker 1: total loss for those lessers. And the reason why is 894 00:50:55,800 --> 00:51:00,520 Speaker 1: that in order for aircraft to continue to be so perviceable, 895 00:51:00,520 --> 00:51:02,960 Speaker 1: in order for them to continue to be underwritten by 896 00:51:03,000 --> 00:51:05,560 Speaker 1: insurance companies, in order for them to be sold to 897 00:51:05,680 --> 00:51:09,000 Speaker 1: other airlines down down the line, they need to have 898 00:51:09,200 --> 00:51:15,160 Speaker 1: impeccable maintenance records, and without the sort of Western support, 899 00:51:15,239 --> 00:51:18,960 Speaker 1: without the parts and without the access to these sort 900 00:51:19,000 --> 00:51:24,239 Speaker 1: of manuals and expertise that exist at Boeing and at 901 00:51:24,320 --> 00:51:27,200 Speaker 1: some of the other aircraft parts suppliers, they just can't 902 00:51:27,280 --> 00:51:29,640 Speaker 1: do that. One of the things that's different about the 903 00:51:29,680 --> 00:51:33,520 Speaker 1: aircraft industry that than than many other industries is that 904 00:51:33,800 --> 00:51:36,560 Speaker 1: when you buy a Boeing plane, when you buy you know, 905 00:51:36,600 --> 00:51:39,759 Speaker 1: a certain you know, Pratt and Whitney engine or Rolls 906 00:51:39,840 --> 00:51:43,919 Speaker 1: Royce engine, you don't get the full sort of manual 907 00:51:44,360 --> 00:51:47,560 Speaker 1: to how that thing operates. And in most cases you 908 00:51:47,560 --> 00:51:51,520 Speaker 1: actually have to still be in touch with the aircraft manufacturer, 909 00:51:51,560 --> 00:51:56,719 Speaker 1: with the engine manufacturer for maintenance, for repairs, things like that, 910 00:51:56,760 --> 00:51:59,719 Speaker 1: where they actually have dedicated teams working with you. And 911 00:51:59,760 --> 00:52:02,040 Speaker 1: because it's a you know, an intellectual property issue and 912 00:52:02,080 --> 00:52:06,120 Speaker 1: a proprietary issue, that now all of that is effectively 913 00:52:06,560 --> 00:52:08,720 Speaker 1: cut off. And so that's why it's such a big 914 00:52:08,760 --> 00:52:12,080 Speaker 1: deal of the Russian aircraft industry being cut off from 915 00:52:12,840 --> 00:52:15,719 Speaker 1: the kind of Western world. Now what do they end 916 00:52:15,800 --> 00:52:19,320 Speaker 1: up doing, Like does every does aeroflot just start using 917 00:52:19,600 --> 00:52:22,400 Speaker 1: two polufs or something like that. Like, there are Russian 918 00:52:22,480 --> 00:52:25,479 Speaker 1: made aircraft, although I'm not sure how many people would 919 00:52:25,480 --> 00:52:28,520 Speaker 1: want to be flying on them. Yeah, they're West They're 920 00:52:28,560 --> 00:52:33,080 Speaker 1: they're Russian made planes. There are Chinese. Chinese domestic industry 921 00:52:33,200 --> 00:52:36,160 Speaker 1: is starting to grow. They just kind of roll are 922 00:52:36,280 --> 00:52:39,520 Speaker 1: rolling out their first domestically manufactured one. But those still 923 00:52:39,560 --> 00:52:44,360 Speaker 1: include a lot of Western technologies, especially from airlines like Lufthansa, 924 00:52:44,400 --> 00:52:47,000 Speaker 1: and so it's not a holy independent thing and probably 925 00:52:47,040 --> 00:52:51,560 Speaker 1: can't operate with a certain amount of Western support. What 926 00:52:51,600 --> 00:52:55,239 Speaker 1: they're likely doing. I have no idea what Russia's long 927 00:52:55,360 --> 00:52:59,080 Speaker 1: term plan or even medium term plan is for their aircraft, 928 00:52:59,120 --> 00:53:01,200 Speaker 1: but the short term plan at least is to be 929 00:53:01,280 --> 00:53:04,640 Speaker 1: able to take a lot of the planes that they 930 00:53:04,760 --> 00:53:08,479 Speaker 1: have and designate some of them to essentially just be 931 00:53:08,600 --> 00:53:11,120 Speaker 1: for parts for scrap, you know, where if if if 932 00:53:11,200 --> 00:53:14,960 Speaker 1: some parts starts to needs maintenance, needs replacement, needs repair, 933 00:53:15,040 --> 00:53:17,680 Speaker 1: they take it from one of these other aircraft. It's 934 00:53:17,680 --> 00:53:20,560 Speaker 1: a model that has been used in the past and 935 00:53:20,640 --> 00:53:24,239 Speaker 1: other kind of severely sanctioned economies, but it is it 936 00:53:24,360 --> 00:53:26,360 Speaker 1: is absolutely more of a band aid, more of a 937 00:53:26,400 --> 00:53:30,319 Speaker 1: short term fixed than something that's sustainable over the long run. 938 00:53:31,280 --> 00:53:34,360 Speaker 1: So before we go, Scott, I mean, I think this 939 00:53:34,400 --> 00:53:37,720 Speaker 1: summer is probably gonna be pretty wild for travel, probably 940 00:53:38,040 --> 00:53:42,040 Speaker 1: fairly expensive, everyone getting You know, after two years, many 941 00:53:42,120 --> 00:53:44,759 Speaker 1: people are going to be traveling or doing vacations in 942 00:53:44,760 --> 00:53:47,919 Speaker 1: a real way for the first time. Jet fuel costs 943 00:53:47,920 --> 00:53:50,719 Speaker 1: are up. What did you know, Scott's cheap flights? So 944 00:53:50,840 --> 00:53:54,520 Speaker 1: what's your what's your tip for anyone? I'd say, who 945 00:53:54,560 --> 00:53:57,400 Speaker 1: wants to take a take a vacation this uh, this summer? 946 00:53:57,440 --> 00:53:59,600 Speaker 1: What's your what's your big tip for them? Two very 947 00:53:59,680 --> 00:54:02,080 Speaker 1: quick tips. One, if you are just hoping to take 948 00:54:02,080 --> 00:54:04,279 Speaker 1: a vacation you really want to go somewhere cheap, but 949 00:54:04,360 --> 00:54:08,040 Speaker 1: you don't care where or when. Instead of deciding where 950 00:54:08,080 --> 00:54:09,719 Speaker 1: you want to go and when you want to go, 951 00:54:09,880 --> 00:54:13,120 Speaker 1: and then look at airfare, take that same three step 952 00:54:13,160 --> 00:54:16,320 Speaker 1: process and flip it on its head. Step one, where 953 00:54:16,360 --> 00:54:18,920 Speaker 1: are their cheap flights out of my home airport? If 954 00:54:18,960 --> 00:54:20,480 Speaker 1: you live in New York, Oh, there was you know, 955 00:54:20,600 --> 00:54:23,040 Speaker 1: just in the past week, there were flights to Barcelona 956 00:54:23,080 --> 00:54:27,200 Speaker 1: for two round trip, Santorini for five sixty six, or 957 00:54:27,440 --> 00:54:30,279 Speaker 1: Hawaii for four fifty. Oh, I'd love to go to 958 00:54:30,320 --> 00:54:33,880 Speaker 1: Barcelona two eighty six, choose your destination and then choose 959 00:54:33,920 --> 00:54:36,200 Speaker 1: the dates that work for you. By setting prices the 960 00:54:36,239 --> 00:54:39,480 Speaker 1: top priority rather than the last priority. That's how you 961 00:54:39,520 --> 00:54:41,359 Speaker 1: get cheap flights, and that's how you end up with 962 00:54:41,400 --> 00:54:43,719 Speaker 1: three vacations for the price you used to pay for one. 963 00:54:44,239 --> 00:54:46,120 Speaker 1: Last thing I'll say is that if you have a 964 00:54:46,160 --> 00:54:49,600 Speaker 1: specific trip, you need to be at X destination on 965 00:54:49,760 --> 00:54:53,399 Speaker 1: why dates they It's really really critical to get your 966 00:54:53,480 --> 00:54:57,040 Speaker 1: timing of when you book your flights right. I use 967 00:54:57,160 --> 00:55:00,760 Speaker 1: the WHAT model of the Goldilocks windows. So the best 968 00:55:00,800 --> 00:55:03,359 Speaker 1: time for when cheap flights are most likely to pop 969 00:55:03,440 --> 00:55:06,400 Speaker 1: up is not too early, not too late, just right 970 00:55:06,440 --> 00:55:09,879 Speaker 1: in the middle. If you're traveling domestically, one to three 971 00:55:09,920 --> 00:55:12,160 Speaker 1: months ahead of time is typically when you see those 972 00:55:12,239 --> 00:55:15,600 Speaker 1: cheap flights most likely to pop up. For international flights, 973 00:55:15,760 --> 00:55:18,080 Speaker 1: two to eight months is typically when you see those. 974 00:55:18,280 --> 00:55:21,080 Speaker 1: But if you're traveling during a peak travel period middle 975 00:55:21,120 --> 00:55:24,520 Speaker 1: of Summer, Christmas, New Year's Dublin for St. Patrick's Day, 976 00:55:24,760 --> 00:55:28,600 Speaker 1: add a couple of months to those recommendations. All right, Scott, 977 00:55:29,040 --> 00:55:32,560 Speaker 1: great to have you back back for your first episode. 978 00:55:32,560 --> 00:55:33,960 Speaker 1: I don't know how to describe it, but great to 979 00:55:34,000 --> 00:55:36,839 Speaker 1: have you back. We'll definitely have you on again and 980 00:55:36,960 --> 00:55:39,719 Speaker 1: appreciate all your insights. That was great, This is so 981 00:55:39,840 --> 00:55:57,560 Speaker 1: much fun. Thank you both for having me Tracy, I'm 982 00:55:57,600 --> 00:56:01,279 Speaker 1: really glad we had Scott back. It really does feel like, 983 00:56:01,360 --> 00:56:04,600 Speaker 1: at least in domestically and maybe US Europe and US 984 00:56:04,719 --> 00:56:07,480 Speaker 1: Mexico and some other routes, travel is just about to 985 00:56:07,480 --> 00:56:09,480 Speaker 1: get It's just going to get even more crazy for 986 00:56:09,520 --> 00:56:13,719 Speaker 1: a while, well barring some sort of event that makes 987 00:56:13,800 --> 00:56:16,200 Speaker 1: us have to mothball this episode, like I don't know, 988 00:56:16,760 --> 00:56:20,919 Speaker 1: solar spots flare up or something like that. So pessimistic, Yeah, 989 00:56:20,960 --> 00:56:23,640 Speaker 1: I don't know. It just feels like it's been NonStop 990 00:56:24,120 --> 00:56:26,600 Speaker 1: over the past month or so. But anyway, Yes, that 991 00:56:26,680 --> 00:56:29,239 Speaker 1: was a really interesting conversation. One thing that struck me, 992 00:56:29,920 --> 00:56:33,840 Speaker 1: and again, my expertise in airlines sort of ended. Um, 993 00:56:33,880 --> 00:56:36,400 Speaker 1: I guess it would have been right around two thousand eight, Yeah, 994 00:56:36,560 --> 00:56:40,239 Speaker 1: right around the financial crisis. But it is interesting to 995 00:56:40,280 --> 00:56:45,200 Speaker 1: see how this historically loss making industry continues to adapt 996 00:56:45,560 --> 00:56:50,200 Speaker 1: and survive in really the worst of work circumstances. So actually, 997 00:56:50,320 --> 00:56:53,040 Speaker 1: I thought that was really interesting and I didn't appreciate 998 00:56:53,400 --> 00:56:58,120 Speaker 1: the degree to which these UH airlines have really diversified 999 00:56:58,520 --> 00:57:01,239 Speaker 1: their revenue stream and so you know, he mentioned, you know, 1000 00:57:01,280 --> 00:57:03,799 Speaker 1: there's the old cliche like how to become a millionaire 1001 00:57:03,880 --> 00:57:05,759 Speaker 1: like by and be a billionaire and then buy an 1002 00:57:05,760 --> 00:57:09,440 Speaker 1: airline or whatever it is. But my impression is that 1003 00:57:09,560 --> 00:57:14,680 Speaker 1: it's just a much in the core business has become 1004 00:57:14,760 --> 00:57:17,600 Speaker 1: less volatile. If you have all these ancillary revenues, if 1005 00:57:17,640 --> 00:57:21,680 Speaker 1: you have ways of selling business class tickets to leave 1006 00:57:21,760 --> 00:57:24,280 Speaker 1: your travelers, it seems like you can really sort of 1007 00:57:24,520 --> 00:57:27,320 Speaker 1: smooth things out a little bit, and not quite that 1008 00:57:27,320 --> 00:57:30,120 Speaker 1: would be quite so boom and bust. And it's interesting, 1009 00:57:30,120 --> 00:57:31,960 Speaker 1: like I feel like it's when we were kids, like 1010 00:57:32,080 --> 00:57:34,720 Speaker 1: airlines were going bankrupt all the time, like big ones. 1011 00:57:35,520 --> 00:57:38,360 Speaker 1: You know what happened up My dad worked for Brand 1012 00:57:38,480 --> 00:57:40,520 Speaker 1: if I remember, they went bankrupt and he was out 1013 00:57:40,520 --> 00:57:43,600 Speaker 1: of a job. It was definitely boom bust cycle for sure. 1014 00:57:43,720 --> 00:57:46,080 Speaker 1: And it feels like I don't know if like an 1015 00:57:46,120 --> 00:57:48,840 Speaker 1: airline is like a good business, but it doesn't feel 1016 00:57:48,880 --> 00:57:54,080 Speaker 1: like a terrible business these days. Uh maybe maybe, I 1017 00:57:54,280 --> 00:57:57,040 Speaker 1: want to say, I hope so so historically I feel 1018 00:57:57,080 --> 00:57:59,640 Speaker 1: like what tends to get the airline. So, yes, there 1019 00:57:59,680 --> 00:58:04,920 Speaker 1: are unforeseen circumstances like the nine eleven terrorism attacks or 1020 00:58:05,000 --> 00:58:08,480 Speaker 1: something like a global pandemic things like that. But historically 1021 00:58:08,480 --> 00:58:11,680 Speaker 1: what tends to get the airlines is their own behavior, 1022 00:58:11,760 --> 00:58:15,000 Speaker 1: where for instance, they end up annoying all their consumers 1023 00:58:15,040 --> 00:58:18,400 Speaker 1: by charging ancillary fees and revenue and pushing all of 1024 00:58:18,400 --> 00:58:21,880 Speaker 1: that onto them, or they over expand and start price 1025 00:58:21,960 --> 00:58:25,400 Speaker 1: wars that then hurt everyone. It's kind of crazy. Like 1026 00:58:25,440 --> 00:58:27,320 Speaker 1: I'm looking at a chart right now in the terminal 1027 00:58:27,440 --> 00:58:30,240 Speaker 1: like Delta Airlines a d A. Like the stock just 1028 00:58:30,320 --> 00:58:33,720 Speaker 1: goes sideways. It's like it's basically exactly where it was 1029 00:58:33,760 --> 00:58:36,720 Speaker 1: in the middle like late right now, and so it's 1030 00:58:36,840 --> 00:58:40,560 Speaker 1: it's doing pretty well in nineteen and then of course 1031 00:58:40,600 --> 00:58:44,640 Speaker 1: the stock plunged in spring. But like they're not like 1032 00:58:44,720 --> 00:58:47,240 Speaker 1: it's sort of yeah, they're not likely to go bankrupt, 1033 00:58:47,280 --> 00:58:51,040 Speaker 1: but they're not exactly Like they're not the right tail 1034 00:58:51,200 --> 00:58:54,920 Speaker 1: is not there. They're not huge moneymakers. This is very true. Alright, 1035 00:58:55,000 --> 00:58:56,760 Speaker 1: shall we leave it there. Let's leave it there. This 1036 00:58:56,840 --> 00:58:59,560 Speaker 1: has been another episode of the All Thoughts podcast. I'm 1037 00:58:59,600 --> 00:59:02,080 Speaker 1: Tracy Alloway. You can find me on Twitter at Tracy 1038 00:59:02,080 --> 00:59:04,480 Speaker 1: Halloway and I'm Joe Why Isn't Though? You could follow 1039 00:59:04,560 --> 00:59:07,640 Speaker 1: me on Twitter at the Stalwart check out Scott Kais 1040 00:59:07,680 --> 00:59:10,960 Speaker 1: of Scott's Chief Flights. He's at s M Kais. Follow 1041 00:59:11,000 --> 00:59:15,040 Speaker 1: our producer Carmen Rodriguez at Carmen Rman. Followed the Bloomberg 1042 00:59:15,080 --> 00:59:18,800 Speaker 1: head of podcast Francesca Lead at Francesca Today, and check 1043 00:59:18,840 --> 00:59:22,840 Speaker 1: out all of our podcasts Bloomberg under the handle at podcasts. 1044 00:59:23,040 --> 00:59:23,840 Speaker 1: Thanks for listening,