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Airlines Confidential Podcast
333 - Guest Co-Host Henry Harteveldt. Guest: Vicki Jaramillo, EVP/CCO, Orlando Int. Airport
00:59:30
Guest Co-Host Henry Harteveldt. Guest: Vicki Jara…
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- [00:04]
Announcer
Airlines confidential with Scott McCartney is made possible with support from RTX, Collins Aerospace, Pratt and Whitney and Raytheon. Connecting and protecting our world. RTX.com infinityflight the leader in Cadet Academy flight training programs. Infinityflight.com Ontario International Airport in Southern California state SoCal so easy. FlyOntario.com the executive MBA in aviation at the University of Colorado denver business ucdenver.edu and by Cirium, the world's most trusted source of Aviation Analytics. Cirium.com we also welcome your business support. Contact us at airlinesconfidential.com welcome to episode
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Scott McCartney
333 of Airlines Confidential. I'm Scott McCartney and I'm not really a believer in numerology, but I'm told that 333 is a positive spiritual angel number signaling alignment, creative growth and protection. It represents the trinity of mind, body and spirit. And we certainly want all of that in alignment here on Airlines Confidential. It is also linked to the witching hour 3:33am Often seen as a time of deep spiritual, creative and intuitive insight. And that's what you are here for. Henry Harteveld, Deep, spiritual, creative and intuitive insight. Welcome back, Henry.
- [01:45]
Henry Harteveld
Well, thank you, Scott. Wow, that's a steep wall to climb. No, I'll do my best. When I saw 333 being the avgeek I am, my first thought was that's the IATA code for the Airbus 330. 333 was also Air Canada's customer code at Boeing. So, you know, there's, you know, so again, no one ever accused me of having a logical mind, but maybe that's why I'm in this industry. Anyway, thank you. It's, it's, it's great to be back and getting back to reality and certainly substantive matters. I think the only other number that matters as Importantly today besides 333 is 289 as in negative 289 as in Delta Airlines had net losses in the first quarter of 2026 of $289 million. Now, there was a lot of positive news that came out of Delta's earnings report and on the earnings call, which we'll discuss. But there are a lot of concerns, a lot of legitimate concerns. And the biggest one, of course, for I think that a lot of us are thinking is that if Delta had a loss of 289 million, what will the rest of the industry be reporting? You know, it's going to be pretty darn red this quarter. Not exactly an angel number and perhaps not an angelic outlook.
- [03:20]
Scott McCartney
Yeah, no. And the first quarter may not be as bad as the second quarter. Delta said they're going to have to pay an extra $2 billion for fuel in the second quarter. So, yeah, as you say, Delta has been the strongest of late. And so if this is as good as it gets, a loss of 289 million, it's going to be, you would think, ugly. For the rest, it'd be interesting to see. So we'll talk about that and we'll talk about a magical kingdom as in Orlando, Florida. We're going to talk to Vicki Jaramillo, the chief commercial officer of Orlando International Airport, who is a seasoned and skilled developer of air service and extremely knowledgeable of all things airline competition and, and international service. I'm really looking forward to that conversation at this crucial time for international travel. Okay, Delta first quarter financial results. The big news was that Delta's results were better than expected, landing within the original guidance the airline gave before jet fuel prices spiked. And Delta was pretty bullish for the rest of the year, relatively speaking. The airline said, as airlines have been saying, that demand remained strong in Delta said it set a record for corporate sales in the quarter. Premium revenue was up 14%. Loyalty revenue was up 13%. Those are really strong numbers. Last year those numbers were good too for Delta. So on top of that, and operating revenue was up 9.4%. Having your own oil refinery certainly helps. Delta had an earnings boost from that which other airlines won't see. So all in, all right. Delta CEO Ed Bastian did say that Delta was planning meaningful capacity cuts if oil prices remained high. Delta had only 1% capacity growth in the just completed quarter. Bastian also said what we've been saying, that higher fuel prices are likely to hurt the weaker players more than the stronger and also likely to drive more industry consolidation and or capacity reduction, all of which is good for Delta. While we're on fuel and weaker players, JP Morgan analyst Jamie Baker had an interesting note. He noted that if jet fuel does remain at $4.60 a gallon for the rest of the year, Spirit Airlines, perhaps the weakest of the weak players, would see its operating margin go from negative 7% for this year to negative 20%. Spirit would have $360 million in added fuel expense. Jamie said, remember last week my back of the Napkin estimate was 400 million. So pretty close. And Baker noted that Spirit's year end cash balance was only 337 million. Bottom line, Spirit Survival is kind of trapped in the Strait of Hormuz. Sure it'll raise more cash from selling airplanes and gates. But a reorganization plan just doesn't work with negative 20% margins and dwindling cash. And I'll note that late Friday, I believe Citibank, representing the revolving credit agreement lenders, filed an objection to Spirit's reorganization plan with the court on numerous grounds. Citibank objected to Spirit just changing the terms of the revolving credit agreement, said that the collateral pledged to secure the agreement wasn't worth what it needs to be. So technically, Spirit was in default. And the biggest objection, it seemed, was that the reorganization plan just doesn't work as is. The creditors want more information, but they also want Spirit to figure out how this is going to work if oil prices remain high. So as we've been saying, very high bar. But there it was in writing, in a court filing.
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Henry Harteveld
Yeah, Scott, that was really, really sobering. And obviously we are all, I think, very anxious about the state of the world, in particular, what will or will not happen in Iran and the Gulf region and the impact on oil prices and jet fuel, but also the availability, critically the availability of jet fuel. That actually is a good point for me to just share something from the recent Aviation Festival Asia conference that I co chaired a couple of weeks ago in Singapore. I had the chance to interview some airline sea level executives and of course attendance interviews and sessions with other airline leaders. And the Iran war was topic number one. And what was really sobering was hearing how already at that point and the war was probably going on two to three weeks at that point, or maybe it was a month at that point. But we were hearing like for example in the Philippines which had begun imposing gas rationing and four day work weeks. And, and the president, Philippine Airlines, Richard Natal, said that they were finding it already difficult to get refueled in certain countries. Certain countries or certain airports were telling them that they shouldn't count on getting enough fuel or that there were wouldn't be the fuel at all and they should look into tankering. They were looking at modifying their schedules, cutting capacity where they could. And at the same time we also were hearing from various Asian airlines how some that have long haul routes were benefiting from the war in the Gulf. And that is because with the Gulf carriers basically having limited schedules up to that point and people being very fearful of flying to or through the Gulf, they were seeking options. So for example, Qantas, Philippine Airlines, Japan Airlines on Nippon Airways, Thai Airways, Singapore were all talking about how they were seeing a growing number of connections between either Europe or North America and various parts of the Asia Pacific as well. As the Indian subcontinent. And they attribute that to the fact that Emirates, Etihad and Qatar Airways were all either shut down or operating limited flights at the time. And you know what was also interesting is they said, all of these executives said we're grateful to have the extra business, and they certainly didn't wish ill on their competitors. But they said they were going to do everything they possibly could to keep as much of that business once the situation normalized. And they realized, of course, that's going to be an uphill battle. Geographically, the Gulf is a very convenient place to connect between many points of the world. And the Gulf carriers have outstanding service reputations and their hub airports are well designed. But these airlines as well as airlines in Europe are all saying they're going to do whatever they can to keep those customers that are flying on them. And so it'll be very interesting to watch how that part plays out. There's also something else I'd like to share. The organizers of the conference asked my company, Atmosphere Research, to do some research among airline passengers. It was a last minute request because they asked me to conduct a session at the conference. And so we did that. We scrambled and so we fielded an online survey in the US The UK India, Hong Kong and Australia. And we picked those countries because they have sizable populations of air travelers. But we could also field a study in English and we could afford to do it. There were some trade offs we had to make, so it was an English only survey. But I just want to share just a couple of highlights about how US Airline passengers are feeling right now, starting with the fact that we asked people even before, before the war began, did that, you know, how easy or difficult was it for them to save the money they felt they needed for their personal travel? 39% of American Americans, and these again are all airline passengers, said it was difficult for them somewhat or very difficult for them to save enough money to travel. 41% said it was somewhat or very easy for them to save. So it's almost even. But the US we saw the highest number of people saying that it was difficult here in the US which just illustrates the broader economic challenges we face as a country right now. 12% of the leisure passengers said that they had booked personal trips sooner than they had planned to lock in airfares ahead of concerns of the affairs getting even more expensive. So we heard, for example, Delta talk about on the earnings call how they've had some very strong booking days in the past 30 days. And, and by the way, United and perhaps some other Airlines have also commented just in other events and interviews about this, and that's great, but I'm just wondering how much of that is borrowed business, if you will. It's business that was advanced that may have come, you know, if things were normal a few weeks later or maybe a month or two later as people get normally do their, their summer vacation planning. 68% of the business and leisure passengers together said that airfares were noticeably higher than they are used to paying, which I thought was interesting. And 31% of the leisure passengers said that they were concerned that increased inflation because of higher gasoline prices and everything else might make their summer travel plans unaffordable. That was sobering to me. Yeah. You know, we asked if airfares were to rise 10% or more above what these passengers expected for summer travel, what would they do? And it was really interesting to see what they said because there's a lot of determination there to take the trip. 29% said that they would try to adjust when they traveled to a time where the airfares were less expensive and fit their budget. But 26% said that they would change airlines from their most preferred carrier to another airline if that meant they could find a less expensive fare that would fit their budget. 19%, almost 1 in 5 said they just canceled the trip outright. And 11% said that they would look to another destination to what I call proxy travel that might get most, if not everything that they wanted to do, but again would fit their budget. So US travelers are resourceful, and thanks to the Internet and our mobile apps and everything else, we've got technology and tools to help us figure out how to travel within our budget. But, you know, it's, it puts airlines in a real, real, real, real tough position. You know, data from Airlines for America on the jet fuel spot prices has shown at one point that it was up nearly double since before the fighting began.
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Scott McCartney
Yeah.
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Henry Harteveld
And airlines can't be expected to absorb all that, and they're not. But airlines also know that they can push the fares up only so much before the bookings fall off. And so it's just going to be very interesting to see how the airlines manage it, you know, what other airlines have to say about their second and third quarter outlooks. And, you know, I think we're all hoping that there's going to be some kind of peaceful resolution to what's going on, because clearly, you know, what's going on in Iran is disrupting the entire world.
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Scott McCartney
Yeah. And the uncertainty, I think, is just creating a lot of Anxiety, as you found in the survey with, with consumers. That's fascinating data, Henry. Thank you very much for sharing that and for doing the survey. I was interested. I think this is very much in alignment. The University of Michigan's consumer sentiment survey, which is widely followed and widely respected, sank to a record low in April. Yeah, people just are not. And to your point about borrowed business, you know, that would all sort of, it would all be in alignment, it would seem, where there could be a drop off in demand because people have bought earlier and so they're not going to be shopping and because the sentiment is just and people are going to, they have a budget and they're going to shift and be resourceful, as you noted. I just don't know. It's been interesting how airlines have been able to push up prices and we'll see if that can continue one other way, obviously they are pushing up prices is is in checked baggage fees. And as expected over the past week, since our last episode, we saw Delta, American, Alaska and Southwest all increase check baggage fees. United and JetBlue had done so the prior week and American slipped in a change to basic economy rules. With that, American joined United and Delta in taking away advanced seat assignment privileges and upgrades from elite level travelers flying on basic economy tickets. One more way to push their best customers away from their lowest fares. And an interesting change at a time when I think everybody's, you know, you talked about finding cheaper fares on other carriers or giving up your preferred carrier. But one way to save money, obviously for some people would be to trade down to a basic economy ticket. And now American, like its rivals, have made that more distasteful for people with status. Any thoughts on that change?
- [18:28]
Henry Harteveld
Yeah. So first let's, I'm not surprised about the increase in the checked baggage fees. I said at the outset of the war, war when fuel started to go up, that airlines would do this. And they are, I think we're all waiting to see once the fighting stops and jet fuel prices return towards what we would call hopefully more normal levels if those price increases get rolled back. I bet they do not. But I'm also wondering how this will play out at the gate. Right. Because travelers are savvy and if you've got a rollerboard type of suitcase and you've got, you know, boarding group 3432-900, you know, you know you're not going to get your bag on the plane, but if you're being told, oh, well, it's going to cost you $50 because you don't have status, you don't have the credit card. You're going to take that bag with you through security to the gate and gate check it. And so I'm just wondering what that will do to airline turn times and on time performance and so on. As far as the changes American, United and Delta have made to their basic economy tickets, I say good. These privileges should never have been part of the product from the get go. I actually was doing some consulting work with Delta when the airline was developing basic economy and the discussions were all about making it attractive enough to bring over travelers who would otherwise think about taking a budget airline, but unattractive enough so that their medallion elite tier skymiles members wouldn't trade down and importantly their corporate account travelers wouldn't trade down. So good for American and United and Delta in taking away advanced seat assignment privileges and good for taking away the upgrade privilege. You know, when you're operating an asset that may cost you $150 million or more, more, your objective as a business is to get as many people as possible to pay you as much money as possible. And you know, the basic economy ticket product or fair product is a good one. But you know, again, you are trading off a lot of convenience and control and now privilege to get that less expensive product. And you know, if you value the upgrade or you want to make sure that you get your preferred seat, buy the product that includes that or gives you the access to that. So hooray for the big three.
- [21:02]
Scott McCartney
Yeah, yeah, I get it. You mentioned corporate travelers. Many corporate booking sites don't even display basic economy and don't want their people on basic economy. And that's what the airline wants.
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Henry Harteveld
Let me just weigh in here. I'm having a Larry David moment. I realized, you know, there are more and more companies that are allowing basic economy fares to be displayed under certain scenarios and sometimes it's just to certain types of travelers. Okay. But the thinking is that for example, if you're doing a short haul same day round trip flights, 90 minutes or less, or you're frankly relatively low on the totem pole or junior, you know, you don't have too much tenure with the company, they may show it to you. Now they flag that in the online booking tools. Again, not most companies don't want their employees booking these because they are so restricted, but there are more who are allowing it. And oh, something else that came up in at the airline conference in Singapore regarding corporate travel is airlines were all telling me that they're hearing from their corporate accounts that they're taking steps to discourage unnecessary staff travel. They are taking steps to make staff travel, frankly, a more difficult thing to do, all in an interest of saving money because they're being affected by the fuel challenges as well. So, you know, Delta seemed to paint a relatively rosy picture in its earnings call about its corporate business. And I just wonder know when did they survey these corporate accounts and how much follow up was done. There's another red flag warning, as if we don't have enough. I feel like we're running out of red flags to fly. The Department of Homeland Security sent a memo to its employees this week or this past week that was widely reported saying that they should not expect to be paid by Beyond April 4th. In fact, they were told they didn't need to bother to turn in their time cards right away because the president's executive order that got them paychecks and back pay that they were owed apparently does not go beyond April 4th. For them to get paid at this point, barring another executive order perhaps is for Congress to resolve the budget standoff, you know, and that's again, according to the dhs. Now, it's unclear where this really applies to TSA workers. There's some lack of clarity about this because the president did say he wanted TSA workers to be paid. The newspaper the Hill had some interesting numbers on TSA callouts. Workers who were not showing up for work or even quitting while they weren't getting paid until that started again. The peak nationally occurred on March 27th when 12.35% of the entire TSA workforce called out absent. That's the same day President Trump signed his executive order. Recovery has been slow and uneven. In Atlanta, a quarter of the TSA workforce called out sick on Easter Sunday, April 5th. However, you know, good news is most airports, at least up to now, have been operating at more normal levels. But this is a tenuous environment and it's, I'm very, very concerned that we could see a return of the higher sick out rates. TSA reported more than 500 employees quit. And I think this, the shutdowns and lack of being paid is going to make recruiting very, very difficult for the tsa. And of course, there's now calls for airport security to be privatized, though operated under guidelines from tsa. So stay tuned. Let's hope this gets resolved very soon before these good people miss more of the paychecks that they're entitled to for the work they do. And of course, before we see long lines return to airports.
- [25:12]
Scott McCartney
Yeah, definitely stay tuned and fingers crossed. Congress needs to get this solved, plain and simple. I do think that's the bottom line to it. The bottom line for us is Time now to thank our sponsors for making this podcast possible. Thanks to Infinity Flight Academy, the leader in cadet academy training programs, for helping us make this possible. Whether you're looking to build a custom pipeline or strengthen your existing cadet program, Infinity Flight Academy delivers consistent airline ready results. And for those of you listening who have always dreamed of flying or know someone who has, Infinity Flight has trained thousands of students, many now flying from major airlines around the world. Learn more@infinityflight.com Infinity Flight Academy, where future airline pilots take off and we also want to thank Cirium. Cirium offers the most accurate and precise data and analytics to enable airlines to to optimize planning, operations and passenger services. The right intelligence drives operational efficiencies, enables you to predict market shifts, and helps airlines respond quickly to maximize revenue, manage costs and seize commercial opportunity. Visit cirium.com for more.
- [26:29]
Henry Harteveld
In addition, we want to thank the good folks at Ontario International Airport, which is celebrating a decade of local control, for its sponsorship as well. Thanks to public support, the local community reclaimed ont, revived it as a vital gateway in Southern California and ensured the airport is ready to soar even higher in the years to come. Visit flyontario.com 10 to learn Ontario International Airport's story and find out how you can join the year long celebration of how a decade of local control has turned ONT into one of California's fastest growing and most economical airports.
- [27:10]
Scott McCartney
Okay, let's bring in Vicky Jaramillo. Vicki Jaramillo is Executive Vice President and Chief Commercial Officer of Orlando International Airport and as knowledgeable as anyone I know about air service development and leisure travel in the U.S. she she's responsible for air service development for cargo, real estate, airline relations, concessions and rental cars. Vicki has brought dozens of new nonstop routes to mco, including Frankfurt, Dubai, Sao Paulo, Amsterdam, Medellin, Bogota, Madrid, Dublin, Panama, Paris, Seattle, San Diego, and I think most recently nonstop from Japan. During her 32 years with Orlando, passenger traffic has risen from 22 million to over 58 million annual passengers. She's a graduate of Florida State University, and it's an absolute pleasure to have her joining us on the podcast, especially at this very turbulent time for the travel industry. Welcome Vicki.
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Vicki Jaramillo
Thank you very much, Scott. Great to be here.
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Scott McCartney
So we always start with what we affectionately call the Ben Baldanza question, because this was Ben's favorite first question. How'd you get into this crazy business?
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Vicki Jaramillo
Ironically, I was sitting at Miami International Airport, getting ready to take a flight to New Orleans for a conference. And I was working in economic development, catching up on my newspapers. And I'm reading the Miami today that the position for chief of aviation marketing happened to close the next day. So I get to New Orleans and. And I got together somehow, miraculously, sent in a copy of my diploma, of my bio and some other information they requested, and that was in May. And it actually took six months because of the process to get hired at Miami International Airport. And that was in 1991 that I started at Miami International, worked there for two years before I met the folks from Orlando at a conference in Rio and then came up to Orlando later that year. So, yes, it was sitting at an airport, reading the newspaper. When I read about the position at Miami International, I always had wanted to get into aviation somehow.
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Scott McCartney
Yeah, that was the big thing. I was curious, why the airport? Why did that excite you?
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Vicki Jaramillo
Something about airports? I mean, as a young child, I traveled a lot to Columbia, South America, because my. My parents are from there. And I was just always intrigued about airports, but also kind of wanted to do something regarding bilaterals and how, you know, airports and cities connect each other.
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Henry Harteveld
Vicki, before that, were you working in
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Vicki Jaramillo
another role prior to coming to work for Miami International? I worked in economic development. So I helped recruit companies to expand in the Miami Dade area.
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Henry Harteveld
Ah. So, you know, I'd like to ask you about running air service development at Orlando, you know, because I have a feeling a lot of people think that airlines just flock to you and you're like order takers, right? That you just sit there and say, yes, of course you can come and serve our airport, but from our conversations, I know it's very, very different. So help us understand what it's like to run air service development at such a fast growing airport.
- [30:38]
Vicki Jaramillo
Absolutely. And, you know, it's a phrase that many of us use in air service. It's a marathon, not a sprint, because you don't go to a conference and meet with airlines and come back and say, guess what? I got five deals. Some of these deals or these air service development routes can take 5, 10, 15, 19 years. I mean, for Lufthansa to come to MCL, it was 14 years with Emirates, it was 11 years with LATAM, it was 12 years with Avianca, which ironically is Colombian. Took me 19 years. So it's called perseverance and it's called passion. And I think when you're a leisure destination, it's a bit more challenging. Yes, you have some great, great theme parks here in Orlando. But when you're talking to an international carrier, they need to make sure that there is a business opportunity. And there are people sitting in the front of the plan playing, not just people coming, you know, to the, the theme park. So we have to demonstrate that there is business here in Orlando beyond the theme parks.
- [31:37]
Henry Harteveld
You raise a good point. Orlando, we think when you say Orlando, a lot of people think of the theme parks, the Mouse House, you know, all of that. But. But it really is a growing city with, I mean, growing convention meetings and convention business, growing other forms of business, a lot of people relocating. There's. But Orlando has had a history of aerospace and technology going back a long time, which you shared with me actually was a reason why Disney decided to locate Disney World in Orlando rather than somewhere else. And again, without Disney, there probably wouldn't be the success at MCO you've got. And without mco, Disney wouldn't be as successful. None of the destination attractions would be. So could you share with us a little bit of that backstory? Absolutely.
- [32:26]
Vicki Jaramillo
And I can firsthand, because my father worked at what was eventually Lockheed Martin, but when it first started in the late 50s in Orlando, it was called the Martin Company, Martin Company became Martin Marietta, which eventually became Lockheed Martin. So there was high tech being done in Orlando back in the late, well, the early 60s, to help put the whole aerospace and defense industry and to accommodate that growth, they actually put in the interstate. Well, I'd say the connection between the southwest part of town, Orlando, where Lockheed Martin is located here, over to the Space coast, over to connect to the Kennedy Space center area. And then when the highway bill back also in the 60s, that actually put in the road interstate forward between Daytona and between Tampa. So, yes, the story goes is that when Walt Disney was looking for his next park after California, he looked at the road infrastructure. So the road infrastructure that was helped put in place by the aerospace and defense industry is what helped locate Disney here in Central Florida. They had looked at Ocala, they had looked at Miami, but it was Orlando that had the crossroads for the road infrastructure. But Lockheed is still 8,000 employees here in Central Florida. So again, it's kind of one of those stories that a lot of people don't realize was here 14 years before Walt Disney opened the first park.
- [33:53]
Scott McCartney
Wow, that's so fascinating. And also this idea of the marathon and air service development, I think it shows just how competitive the airport business is. I always think people think of airports as local monopolies, but you're on the front lines of a very competitive business because that airplane that goes to Orlando could go anywhere else in the world and maybe with higher paying customers.
- [34:27]
Vicki Jaramillo
Well, and it's very, very true. As I remind people, an airplane is a movable asset. You can't pick up and move an airport, but you can move an airplane. So if that flight is not doing well financially, it's going to move someplace else. And a perfect example of that was back in 2011, we had air France start service to Paris, but they put in an aircraft that was a very heavy configuration and leisure, like 475seats in the back and only 14seats in the front of the plane. Well, the economics don't work because you need to have more seats, obviously in business class. And so they pulled out within 10 months because it wasn't doing as well as they had hoped. They came back to mco, took years to convince, but they came back in May of last year and it started with four flights a week. It's grown to five, and then it will be daily by the summer. But part of it was they put a different aircraft that made more sense. They put the A350, 900. And what really is surprising them is that the point of sale, Orlando, from the front of the plane has been increasing and is doing extremely well. Why? Because we don't have that many connections, you know, on a European hub. And it's doing, like I said, doing very well as Iberia when they started late last year. So, yes, that plane can move. And if you don't make it sure that it succeeds while it's here, it's going to go to another market. And in Florida there's a lot of competition. You're right, Scott. I mean, I have, you have Tampa, you have Daytona, you have Melbourne, you have Sanford, you have Miami, you have Fort Lauderdale. You have so much competition in the states. So you have to make sure that your rates and charges are competitive, but also that you have a dynamic marketplace.
- [36:05]
Scott McCartney
And I mentioned Japan at the beginning of this. Tell us about, about that, because that started, I think, even before you got to Orlando.
- [36:15]
Vicki Jaramillo
Well, and you know, when I say a marathon, this one is even more than a marathon because, yes, we were the first airport in Florida to get passenger service. Yes, Miami and I think Tampa had baseball charters, but that really, you and me as a passenger couldn't have bought a ticket. When I worked for the state of Florida in tourism in 1981, I was in Japan and. But I had also written a letter for the governor of Florida at the time, Governor Graham, and sent a letter to the CEO of J.A.O. suggesting you should look at a flight between Florida and Japan. So fast forward I finally come to work for the airport and it was something that we had been working on for years because obviously Florida is the third largest state population. There is a lot of travel two ways, but a lot of it has been hesitation because of the distance. When we look at Dubai Orlando, it's further than what a Tokyo Orlando is. And so they had four initial charter flights, ZipAir and they actually did very well in both directions. They sold it from Orlando as well as obviously sold it from, from Tokyo. And ironically, you know, zip, the last letter of the Alphabet, 26 was, became the 26th airline that I've helped bring to Orlando.
- [37:30]
Scott McCartney
Wow, that's so funny. And I would imagine for leisure travelers, I mean, there's huge business between Japan and California. So convincing them to come to Disney World instead of Disneyland. Was that what it was or having an airplane that would make, make the flight?
- [37:50]
Vicki Jaramillo
Yeah, no, there's a lot of affinity that you are correct with the Japanese and, and Disney. But then there also is a lot of folks from here that are interested in going to Japan. But on the business side you have Mitsubishi Power Systems, which is the largest Japanese company in the state of Florida, who has its America's headquarters here in Central Florida. So there's also some business demand that's just, that's just one, one case of a company that's going back and forth. So obviously our goal is ultimately to have scheduled service, but I think having these charters demonstrated that there is a demand both ways.
- [38:27]
Henry Harteveld
Vicki, I want to ask you about non aeronautical revenue and its importance, but before I do, I'm just, you know, regarding international travel, are there any concerns at the airport about the reports that are being published regarding jet fuel shortages that are starting to emerge abroad, in particular in Europe, and the risk of that affecting any of your summer international flights that are planned going to and from Orlando.
- [38:57]
Vicki Jaramillo
Right now we're in a good situation with our fuel capacity, our fuel farm, we have capacity up to nine to 10 days and our fuel, et cetera, is coming from the Gulf. So we're not impacted as much as other airports in say in Europe. Sometimes again, because we have so much capacity, they may top off in Miami, then they'll say come to Orlando for more fuel. So we are in a better situation. We've been asked that question. But again, we're in a very positive situation because we added 2 more fuel farm or 2 more fuel capacity a couple years ago, so expanded our capacity up to 10 days.
- [39:36]
Henry Harteveld
But what about, you know, the flights originating overseas? Like are you hearing from airlines? Oh, we may have to cut back our flights by a day or two or even suspend the route because we can't.
- [39:48]
Vicki Jaramillo
We haven't heard that yet. But you know, when we look at the ultra low cost carriers where fuel obviously is a big component. Component. Yeah, we'll be watching to see what's going to happen with the ULCCs.
- [39:58]
Henry Harteveld
Okay, thanks. So non aeronautical revenue is incredibly important to airports, you know, and you, you are responsible for a lot of that. Rental cars, concessions, real estate, so much, you know, can you share with us why it's so important, what the growth drivers are and what you've learned from running that part of the business and because that's, that's relatively new to your portfolio, right?
- [40:26]
Vicki Jaramillo
Yeah. So you know, my group which is responsible for the revenue, which again as you mentioned is concessions, but it's also ground transportation, parking, rental cars and it represents real estate 44% of the revenue budget of the airport. And one of the things that we in a sense pride ourselves with is that we have a very diversified base. Revenue base because we can't put all of our airlines contribute about 30 plus percent for the, for the revenue. So this is our way to try to keep our rates and charges competitive by having an increase in that non aeronautical part of it. We're lucky that we have actually, you know, 11,605 acres so that we can continue to develop the airport. We have obviously some projects which I can't name at this point but will be coming out of the ground hopefully soon that will help us increase that non aeronautical. And again for us it's all about diversifying the revenue base. We're the largest rental car market in the world. And so when you think about that, and so that really helps to contribute to our revenue base. You know, we have a hotel and we have, you know, parking. We never have enough parking, but we're getting more parking. So there's a lot of opportunities here for us at the airport to continue to increase that non aeronautical revenue.
- [41:45]
Henry Harteveld
Are you concerned or is the airport concerned that the growth of transportation network companies such as Lyft and Uber could eat into the parking revenue that the airport has? Or the growth of autonomous vehicles where, you know, people might at some point not even need to own a car, they'll just summon a robo taxi to take them to the airport. This came up at Aviation Festival Asia where Where some of the airports, they were saying they were having to plan for less parking revenue and looking for other ways to grow their revenue to compensate.
- [42:22]
Vicki Jaramillo
For us, though, I mean, we do have, obviously the Lyft and we do have the Uber, and they're in dedicated particular areas. Don't see that the TNCs are going to do that much of an impact. We continue to have. It's the issues, the shortage of the parking. You know, we're one of the airports that when you rent a car from one of the major rental car agencies, you walk out and have your car there. That takes a lot of spaces out of the, the inventory. But also we have the Turos, and so those are taking up parking spaces. And you know, it's ironic because with the pandemic and you had a lot of migration here to, to Central Florida, the point of sale, Orlando, has increased both domestically and internationally. And that means people, more people are flying from here out of Orlando. So that's impacting it. We will have 8,000 more spaces by 2030. We'll also have a parking guidance system that'll be, it's currently being installed so that, you know, how many spaces are available on one particular floor. We also have reserve parking. And so we just don't have enough capacity for the, for the demand that we have. So we don't see those other factors like the TNCs impacting it so much.
- [43:32]
Scott McCartney
So there's a lot of construction underway. You mentioned some, some, some projects and also mentioned the, the need to keep cost per employment low at low levels for, for leisure markets at other airports with major construction projects. We've seen the CPE rates soar. How does Orlando balance that? What, what's going to happen to, to your cost per employment?
- [43:59]
Vicki Jaramillo
Well, like everything, they will slightly increase. But again, I go back to that, the importance of diversifying our revenue base so that it's not all about the airlines. It's all about what can those other areas bring in to help keep that CPE competitive. You know, low is a. You know, I wish we could use that term, but it's to say competitive. So we have to look at who's around as far as competition. Obviously look at what's to the west, what's to the east, and what's to the south. We do have to look at our capital improvement and we look at our projects. And as our current CFO says, we can do all these things. We just can't do everything all at once. And so we have to prioritize what are the most important Projects we need to pay attention to. We opened terminal C several years ago, beautiful facility. I don't know if you've had a chance to experience it, but our north terminal is, is over 40 plus years old. And if you look at a building that's 40 plus years old, you're going to have challenges with the, you know, the infrastructure, et cetera. So we need to pay attention to our buildings that have been around as well as our baggage system that needs improvement. So there are many great projects we want to do, but they just have to be looked at when there is availability in the future as far as the funding so that we can keep our rates and charges competitive.
- [45:16]
Henry Harteveld
And that goes back to the non aeronautical revenue, right? The hotels, the other development that you do, the concessions and so on to bring in revenue and help keep the airline's costs low, correct?
- [45:31]
Vicki Jaramillo
Yes. Right now in the real estate group we have close to a billion dollars in projects of capital projects that are looking to come in. And again, these are all mostly all non aeronautical. When you also look at last year we broke ground for United airlines, their expanded MRO, a $330 million project. And so there are other projects that are going to be coming online in the next year or two.
- [45:57]
Henry Harteveld
So Vicki, you know, again, Orlando's reputation is one of perennial fun, right? It's got the theme parks, it's got usually very good weather, there are a lot of attractions, lots of ways to, for people to be entertained and of course, you know, meetings, conferences, business, everything and a growing population. I read that the Orlando Economic partnership said approximately 1500 people are moving to the area each week. I think it was.
- [46:29]
Vicki Jaramillo
And yes, correct.
- [46:31]
Henry Harteveld
And so the population is now just under 3 million in the Orlando MSA, which is enormous, perhaps much larger than some people thought. So I think a lot of people wonder, is Orlando a recession proof airport? Kids are always want to go to the theme parks, people always want to be entertained, they always want to have fun. And arguably Orlando is one of the fun capitals of the world.
- [47:00]
Vicki Jaramillo
I would say, you know, people, certain things you give up, but I think people still need and want to take those vacations and they make it work as far as, you know, saving up for, for that, for that trip. And in a sense, yes, I would say we are to a certain degree recession proof. Different markets, different times. You know, we used to have seasonality as far as, you know, the traffic here, but it's pretty much a flat line. Even September doesn't dip that much when kids are back in school. So. Because if you look at, for instance, I'm going to say Chile. People from Chile, their high season sometimes is September. Well, September used to be a slow month here, but so our line is pretty much flat as far as the seasonality goes. And again, people will give up other things, but they want to take that vacation. But again, also on the business side, as I mentioned, we, with the migration down here, we are seeing and we have seen that that point of sale has grown. We also have for instance, the largest over 55 community one hour away from Orlando International Airport called the Villages. And they are great because they travel in the, for them, the off season. They travel eight to nine times a year out of mco. They go all over the world. So there's so much more than a lot of people don't realize is taking place in central Florida.
- [48:24]
Henry Harteveld
You know, that's really interesting. I mean the, the growth and the diversity, diversification of the area is fascinating to me. You know, are there any sectors, industry sectors, business sectors that seem to be growing faster that lend themselves to more travel? You know, is it, whether it's tech or professional services or medical and healthcare or anything else?
- [48:46]
Vicki Jaramillo
Actually simulation technology is one of our strong points. There's, you know, I think it was years ago they named Orlando Stockholm. And there's a third one as the simulation technology. When you look at JetBlue, when they decided where to put in their JetBlue university and all that, they looked at the technology and the simulation that was taking place in central Florida and decided to put that facility here. So simulation technology, you still have the aerospace and defense and especially now with the Artemis and there's that interest in space. You have a lot of companies. The laser was developed here in central Florida back in the 60s and there's still probably 100 plus companies in this area that do laser technology, Fintech and also the healthcare industries. The veterans hospital here, which is about 10 minutes from the airport is the largest one in the entire system in the United States. This is also where they do the simulation technology training. So again, simulation technology I would say would be key in our area as well as photonics.
- [49:48]
Scott McCartney
Fascinating, fascinating. And while we're on it, have you been affected, you mentioned visitors from Chile. I'm curious if immigration issues, if all that has that affected Orlando in any meaningful way?
- [50:04]
Vicki Jaramillo
Well, on the numbers of visitor numbers, they didn't go down from Canada and I think that's not just an Orlando issue. I think that happened to kind of across the board as where they were traveling too. But then you have other markets that kind of compensated for that. Markets like Colombia and Brazil that continued to increase from there. So where you have one go down, the other one is going up. We continue to have a large, you know, numbers from, from the UK and then also now with Paris and then Spain and then soon coming will be Portugal. They help kind of bring those numbers up.
- [50:38]
Scott McCartney
So Vicki, what do you see as the biggest challenge for the airport for the next few years?
- [50:44]
Vicki Jaramillo
I would say it would be keeping up with what we need to do as far as updating our infrastructure. And again, there's so many things we need to do. It's just prioritizing what are the key elements. And again, part of it is the baggage system that we need to update as well as the facilities, you know, they opened back in 1981. So it's time to basically upgrade those facilities as well and keeping our, you know, keeping our rates and charges in check.
- [51:14]
Scott McCartney
Very good, Very good. Vicki, thank you so much. I think we have all learned a lot about Orlando and about Orlando International and about the airport world in general. Really appreciate your insights and spending the time with us.
- [51:32]
Vicki Jaramillo
Well, I thank you both for this opportunity. It was great talking with you again and hope that you'll be able to come visit soon and come visit us at Orlando.
- [51:40]
Henry Harteveld
Vicki, I add my thanks to Scott. This has been so interesting and informative and we're both so grateful to you.
- [51:48]
Vicki Jaramillo
Thank you, thank you, thank you guys.
- [51:51]
Scott McCartney
And we will be right back with more on Airlines Confidential promotional support provided
- [51:57]
Announcer
by the Ultimate Avgeek website, theercive.net a vast collection of airline memorabilia, timetables, route maps, rare cabin and airport photos, special flights and more, all@theairchive.net, the hub of air transport history.
- [52:11]
Scott McCartney
Thanks again to Vicki for great stories and all the great work she does promoting air air service and the airport and airline industry. Before we get to the mailbag, special thanks to the Executive MBA in Aviation at the University of Colorado Denver. The Executive MBA in Aviation at CU Denver is the first degree of its kind in the world, taught by industry experts and designed for ambitious leaders from across the aviation ecosystem. With classes located at Denver International Airport and week long residencies in Washington, D.C. d.C. And at airports around the world, students experience a hybrid flexible course structure that balances in person and online classes without career interruption. Go to Business ucdenver. Edu to learn more.
- [53:00]
Henry Harteveld
We'd also like to thank RTX for its longtime sponsorship of Airlines Confidential. RTX rallies more than 180,000 innovators around a very powerful vision to create a safer, more connected world. With industry leaning tools and technology, the RTX Global team works across market leading businesses Collins Aerospace, Pratt and Whitney and Raytheon to drive progress for generations to come together. RTX pushes the boundaries of known science and finds new ways to connect and protect our world. Visit rtx.com to learn more.
- [53:39]
Scott McCartney
Okay, in the mailbag this week, some important reaction to several safety issues we've talked about. First, Todd from Connecticut offered this hi Scott, I listened to your impassioned views on the LaGuardia crash today. Like you, I think this accident really hit me differently. I was angry that this kind of event can occur at one of our major airports. The system's stress fractures continue to show, But I have two quick points to add. 1. Since the CRJ was so close to touchdown and the visibility was not great, the fire truck operator may have looked as he surely is trained to do, and he may not have seen things so clearly. Given his sight picture across the ground and the high number of low level lights. He simply may not have seen it as clearly as he might have had the aircraft been 300ft or 500ft up in the air. Number two the staffing debates will continue, but my simple view is this. If an emergency is declared on the field, all traffic should either hold or divert until the situation is no longer an emergency. The controllers and fire trucks were understandably focused on that event and all the uncertainty that comes with an emergency continuing with arrivals and departures when a ground emergency is active and still being addressed strikes me as unwise and asking for trouble. I salute the Air Canada Jazz flight crew. Such an awful and unnecessary tragedy. Todd, I appreciate that very much. All I can say is that I continue to believe this is a management failure more than a frontline failure. I think you make great points and I'm sure the NTSB will address all of that.
- [55:32]
Henry Harteveld
And here's a letter concerning my current home airport, San Francisco International. I say current because I'm preparing to move back to Dallas, Texas where I lived once before. Eric from Northern Arizona writes in saying, I listen to your podcast often and find it very informative today. When listening to the most recent episode, you spoke about the FAA reduction of flying in San Francisco. You mentioned that if it was safety related then that is okay. But then you and Christina Cassotis went on about how it impacts the economy and seemed to think that it was safe because it has been going on for several years. I'll mention helicopter Route 4 at DCA was in use for several years without incident as well, but that is closed now and for good reason. As an Airbus captain for a major airline operating in and out of SFO frequently, I can say that the simultaneous approaches, and I believe he's referring to the simultaneous parallel landing approaches on runways 2, 8 right and left here, are unsafe. There were a large number of TCAs resolution advisories regularly at this airport and subsequent Aviation Safety Action Program reports by pilots to address the issue. I'm sure the traffic can be increased in the future when a new procedure is implemented to allow more sufficient aircraft spacing, possibly similar to the offset RNAV approach to Runway 16R in Denver. Regardless of how the FAA fixes this issue, it is welcome that they have taken precautionary safety measures now to mitigate an unnecessary catastrophe while still providing SFO with decent throughput. Thanks very much for that, Eric. And as someone who's lived in San Francisco and flown in, and I was a passenger for more than 35 years, I certainly understand why you're saying it. The two runways, Runway 28 right and left, are spaced only 750ft apart. We've got weather issues, we've got congestion. And so certainly the FAA is acting out of an interest in safety. What I did hear, though, from the airport and airlines is that the FAA gave everyone almost no advance notice that this was coming, which in addition to the Runway construction that was planned, caused them to scramble even more. But, Eric, you make very, very good points, and especially as an airline captain flying in and out of sfo. Thank you.
- [57:54]
Scott McCartney
Yes, as always, we have the best listeners, don't we? I really appreciate Eric adding to our knowledge of the situation. I just wish the FAA had been as informative as Eric. Right. I mean, we get pronouncements without explanation. Look at the Homeland Security memo we talked about before sent to all employees. But differing messages from the administration about whether or not it applies to TSA workers. I think the one clear takeaway is that we really need better communications. If there is a safety issue, explain it. Explain what we're doing to fix it and make it clear. But it was not clear from what the FAA was saying that that was the issue at all. And anyway, I look forward to more clarity in all the communications. Well, that's all we have to communicate this week. Thanks to Vicky Jaramillo and thanks to you, Henry. Always informative, always great. Appreciate you very much.
- [59:01]
Henry Harteveld
Well, Scott, thank you. So long, everyone. Stay well. Have a great and productive week.
- [59:07]
Scott McCartney
And we have one more goodbye from George and Caroline from Dallas, Texas. Sis, tell us what you want to say, George and Caroline, we love to travel. We love to travel. All right. With that, we will say, so long, everybody. Have a great week.
- [59:27]
Announcer
This podcast is produced by Mass media info@massmedia.net.