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- [00:02]
A
I'm John Ostrower, editor in chief of the Air Current.
- [00:04]
B
I'm Brett Snyder, author of Cranky Flyer.
- [00:07]
C
And I'm Brian Summers. I write the Airline Observer. You're listening to the Air show, the podcast where we talk about what happens in the business of the sky. John and I are back from Rio de Janeiro and the IATA annual general meeting.
- [00:22]
B
Now, I know you guys are always trying to get me to go to this thing, but this year I had my son's 8th grade promotion, as they call it, as a convenient excuse use. But please make me regret not going once again. Or try to if you can. So what did you guys learn?
- [00:39]
C
Well, first of all, Brett, you can come to China with us next year for the agm. I'm sure you're going to enjoy that, just like the US Airline executives will.
- [00:48]
B
That's a tougher sell. I. I heard maybe there were some groans or displeasure when the location was announced in the audience.
- [00:57]
A
I'm excited, but not about the bureaucratic mess that's going to ensue for actually getting into the country. But that's a separate issue.
- [01:04]
C
But let's talk about last week's event. Brett, just to be clear here, do you want key themes or do you want gossip?
- [01:12]
A
Oh, okay, hold on, hold on. Before we dive in, I want to send a shout out to listener Ben Frank, who went through all 100 episodes, hopefully with a AI agent of some kind for the sake of his spending his quality time to count money belonged in the Scott Kirby jar. The answer was $39.50 after an embarrassing 158 mentions of Scott Kirby over 100 episodes. And yes, we did have one single episode where he was mentioned 13 times.
- [01:45]
B
That is amazing. And I'm guessing 157 of those were by Brian. Although you actually just mentioned him again, John. So now we're up to 159.
- [01:55]
A
3975.
- [01:57]
B
But that is impressive. I think we can all agree this is what AI is for. So, good news all around there. But we can include that link to all the data in the show notes. Right? Let's do that. Thank you for that, Ben. I appreciate this. Let's do that.
- [02:11]
C
Oh, yeah.
- [02:11]
B
All right, let's get back to IATA here. To answer your question, Brian, I'm guessing I probably already saw all of the key themes blasted out in very boring IATA press releases. Some of them I even managed to stay awake for. I know you love your gossip, but I get. Let's. Let's get a nice mix of both. How about that.
- [02:30]
C
Okay, Brett. Well, let me tell you the most important thing that I learned because I did have breakfast with David Nealman of Breeze and JetBlue and Azul fame, who it turns out does not drink coffee. And so I didn't get as much coffee as I wanted. But David gave me the key to life. He was really excited about this. He had just come back from sprinting on the beach and he said, if we want a long life, men, we should also be sprinting on the beach. I did not do that.
- [03:04]
A
I did.
- [03:05]
C
Unfortunately, guys, the breakfast was otherwise off the record. So I can't tell you exactly when the IPO date will be. Not that I actually know. But let's talk about some things today that I can tell you guys. First of all, I think it's time for a two part episode. So I'll start with some real takeaways about airlines. And then John, after the break you can share some nuggets about airplanes. You know, that part of the business that Brett and I don't really cover. John, you seem to have a really nice time at this dog and pony show at Embraer.
- [03:44]
B
I'm sorry, I'm just trying to debate if a long life is worth living if you have to sprint on the beach. And I'm just not there yet.
- [03:53]
A
Okay. So I actually went out of my way to take some walks on the beach just for set the scene here. The hotels for iata, the AGM are right on the beach. I went for a couple really lovely walks in the morning. Like 7:30, 8:00 clock in the morning. It was spectacular. So yes, Mr. Neillman is absolutely right about this and this was a wonderful place to walk along the water.
- [04:15]
B
Yeah, I want to just say a walk is very different than a sprint. And I am all for walks. I am not all for sprints, but whatever. So Brian, you do know when he's going to submit a bid for JetBlue though, right? Oh, it was off the record.
- [04:29]
C
You said never, I believe is the answer to that.
- [04:33]
B
Come on, spite gets things a long way.
- [04:36]
C
Let's talk about some of the key themes that I learned beyond what to do on the beach, especially for the US Airlines that the three of us cover the closest. So the first one that I learned was about fuel. I can tell you guys that at least U.S. carriers, they're not all that worried. And I think that there are three reasons for that. The first, at least as of last week, fuel was expensive. But trending downward, we'll have to see if that continues to be the case or if it goes down further. Number two, we all know this. The revenue environment is red hot, and there is some optimism in this industry, like, real optimism, that even when fuel goes down and airlines can keep prices high, and that's a recipe for some really nice profits. And number three, this is not unprecedented, or as 80% of the people at the AGM say, unprecedented. Airlines have a playbook for this. It's not like this crazy stuff like a pandemic or a blockade where you don't really plan ahead for it. Fuel goes up, fuel goes down. Airlines know how to deal with it.
- [05:49]
B
All right, well, look, now, I mean, this was all at the agm, and since then, as we know, Iran war is totally over. And by that, I mean paused for 60 days or until we start bombing again, whenever, anyway. But fuel's definitely going down. Nothing to worry about. Everything's awesome. Iran and the US Are all at the controls, flying the plane, free to pursue a life of religious fulfillment. But I digress. So you're saying even before this, during iata, they didn't complain about fuel at all?
- [06:23]
C
Complain, not really. Use some gallows humor a little bit. I was chatting with two executives who decided right then and there, I think, in the hotel lobby, to coin a new term that they think they should use for analysts. Of course, they were both joking and not joking. They mean it, but they won't say it publicly. E, B, T. Do you guys know what that might mean?
- [06:50]
A
I do, because I was standing right there when they said it, but, yes, I'll let Brett guess here.
- [06:55]
B
I believe it's earning before taxes.
- [06:57]
C
No, in this case, it would be earnings before Trump. Oh. Kind of like EBIT or ebitda. The profits they would have made had the government decided to not do what it did. At the same time, though, guys, we're smart. We know it's a little misleading, because if fuel prices had gone up, we probably wouldn't have seen fares rise in the same way that they did. And we might still have a zombie US Airline with a yellow paint job dragging prices down for everyone. Still, though, it's an amusing acronym.
- [07:34]
A
Yeah, I love how it's dragging prices down. This is an industry podcast, like Dragging Down, Holding Down. It really is, you know, it's. It. I would say it's just a matter of which side of the ledger you're on.
- [07:45]
C
John, I love how you're always the voice of the consumer, but shareholders own these companies. The idea is, you know, to make money.
- [07:53]
A
Don't.
- [07:53]
B
Don't worry. DOJ is going to step right in anytime now. So it's fine. Yeah.
- [07:59]
A
No collusion going on at the massive airline CEO conference. None of that.
- [08:04]
C
John, don't give away the secrets about what happened at those beach bars, okay?
- [08:08]
B
Oh no. You guys are going to be like deposed now. Is this what you want? I just want to remind everyone I was not there. I did not participate in this.
- [08:18]
A
There was at least one anecdote that was shared with me by some executives in a conversation with other competitors. And other people were bringing up various things. And the other executive who was in the, in the little scrum said I need to walk away as quickly as humanly possible because like there are conversations that happen. We're not, let's not kid ourselves about like what people talk about in kind of casual company. But I think that there is really, there is a deep sensitivity within the industry toward making sure that no one gets themselves in trouble.
- [08:46]
C
John, you make a good point, actually. I mean, I have literally seen airline executives walk away or say, we have to stop the conversation.
- [08:55]
B
Yeah, I actually did that once at a pricing like a technology meeting that we had with several airlines back when I was just an analyst and someone at another airline was talking about something and I was like, oh my God. We just walked away right there. It was, it was something else. But that's a story for my, My Autobiography, which will be coming out in no stores.
- [09:19]
A
Hardest landing, the Brett Snyder story.
- [09:22]
B
Anyway. But back to what you were saying, Brian. So yes, the yellow birds are gone. Well, they're in the desert. But the airline is gone. And. But even with that, there's still some potential zombies out there. Right? So that combined with the fact that the general assumption is that this current administration will be very permissive for mergers. Was there any M and A talk out there?
- [09:46]
C
There's always chatter about M and A people asking about other airlines. But John, you probably heard this too. When you actually talk to the executives on background, they all say no. And it's possible that they're misleading us because I'm a journalist, but generally speaking, I do believe what they say, especially when they give their reasons. It's no secret that JetBlue is probably the obvious airline that could be up for grabs. But it's pretty clear that no carrier wants to absorb its debt, certainly to gain non first place positions in South Florida, New York and Boston. Maybe we'll argue on another podcast if South Florida is one market or two. I do find all this chatter about JetBlue kind of funny because almost every time I brought up the Airline. I heard a version of the same answer and it's like, I love Marty St. George. He's so smart. Joanna Garrity is a strong leader, a good manager, she's doing good things, and still the place is kind of screwed.
- [10:53]
B
Yeah, I don't know what you're talking about, Brian. JetBlue is number one in all of South Florida north of Miami. It is also number one in Boston and at JFK among airlines that don't fly widebodies. So what else do you need? But yes, the debt load on JetBlue seems like the real holdup for some airlines, but I'm still surprised someone hasn't tried to make a move anyway to bolster their own positions. Like, if American were bold and wise at what they were doing, man, that airline should have already made a bid for JetBlue. Like, United is getting these benefits of its JetBlue partnership with no downside. Right now it's just getting that feed, getting that loyalty stuff. It makes no sense to me. If American were to make a bid, it forces United to do the same thing. Like, United's not just going to let American walk in there. But no, American's too busy doing whatever that would require American to be bold, strategic and forward thinking. Anyway, I digress on that too. I've been digressing multiple times today. This is a, this is, I think, as you said, Brian, this is probably a future podcast we need to do here.
- [11:54]
A
Well, the Air show podcast brought to you by Digression. Ask your doctor if digression is right for you.
- [11:59]
B
Do not take if you're also taking a velo.
- [12:05]
A
Okay, but back to the big picture for just a second. Yes, there were a lot of off the record conversations. Yes, there were a lot of background conversations. But I had two very interesting on the record conversations with Alaska cfo. Now Alaska President Shane Tackett, who joined Scott Kirby in saying, also on the record, that they're going to sit out consolidation and in the case of Alaska, they want to focus on the ongoing Hawaiian integration. Somehow we went from the inevitable next round of consolidation in the US for the airlines, like most likely to grab a competitor now saying like, no thanks, not for us. Look, Kirby still wants American. That's really, really clear. Effectively saying acquiring American would not happen without the decapitation of American Airlines board in the C suite. It's all a matter of the words. You words you choose here.
- [12:48]
B
Funny, you might be able to make the same argument for saving American as a standalone.
- [12:52]
A
Well, you know, we had multiple episodes on that, but look, this whole region of the airline business is starting to feel like Spider man, pointing fingers at each other, saying the other guys are going to be the. The ones to consolidate. So let's see how this unfolds here.
- [13:07]
B
The Multiverse.
- [13:08]
C
John, I am glad that you were able to talk to Shane Tackett of Alaska. On the record, I did not get that opportunity, but I can say that for an airline president and possible future CEO, he is very, very funny.
- [13:25]
A
That's the extent of the on the record observation that at this point, what could I do?
- [13:30]
C
Sometimes we're bound by the promises we made.
- [13:34]
A
Indeed. Okay, so look, there were a lot of conversations that we had and yes, American kept coming up. And I'm really kind of curious, Brian, what were your big kind of like takeaways on, like, where American is here? Because again, you know, Scott Kirby was more than happy to say that he didn't have a willing partner, which is, of course, a subtle dig at Robert Isom. But where do things stand on this run?
- [13:58]
C
Well, John, I'm going to be writing a piece very soon on my newsletter, the Airline observer, about this, and I'm not going to give away anything too exciting on this podcast, but I can tell you guys pretty much the same thing John said, especially in light of our recent podcast series, a lot of people, and I mean a lot of very important people, would start a conversation about not what's wrong with American, but how much longer does Robert Isom have? And I don't think anybody knows for sure, but there is a theory out there that he might be a short timer, maybe would last the year, perhaps not much longer. Of course, there's another theory out there that he's going to last for the foreseeable future. So, yes, no one knows anything, but that didn't stop people from asking who might succeed him. That list I'm going to have on the newsletter very soon. I'm not going to give it to you guys then, but suffice to say, there are a lot of interesting names on this list and a lot of people who used to have very senior jobs at airlines that maybe you haven't thought of in a while.
- [15:16]
A
And are you going to include the airline CEO who asked for his name to be included on the list as a courtesy?
- [15:22]
C
John, I'm glad you bring that up because we like to focus sometimes here on how the sausage is made. And just like podcast hosts, a lot of people in the airline industry have very large egos, and some people just want to be included on these lists to raise their own profiles. So yes, you do mention this person and this person just thought it would be fun if they made the list. And I said, has anybody from American contacted you? And this person said, no, but you can still put me on the list.
- [16:00]
B
Well, all right. Well, one person who we know is not on the list is Steve Johnson, whose retirement was just announced at the end of this year. Steve has been starting at America West. He has been there forever and I'm going to say congratulations to him, assuming that this was his decision to, to walk away from, from the airline after a long and fascinating career. So congrats to you, Steve.
- [16:26]
C
Can I just go on a quick tangent here, Brett, before you continue? I hate that airlines and other corporations have co opted the word retirement. So often you find like some 47 year old person and the press release says they retired. I mean probably they technically retired and they get their flight benefits, but we know what happened. Whereas a guy like Steve Johnson, first of all, he gets until the end of the year, which is a lot of months. He is not a young person. He's worked in the industry forever and he deserves the word retirement.
- [17:01]
B
He does. So he's not on the list for American, but I can reveal that I am on the list.
- [17:08]
A
Oh, that would be, that would be fun.
- [17:10]
B
Apparently my experience working good airlines 20 years ago is good enough. I think so. And I have had conversations with anyone who's out there, you know, at American. I think I talked to a res agent the other day and told them I was on the list.
- [17:24]
A
I'm just saying you would not be the first America west employee to run American Airlines.
- [17:29]
B
Oh man, really? That's okay. All right, fine. Anyway, I will be watching the inbox for that full American update from you, Brian. We're going to have many, many future episodes that will come out of the things we're talking about today.
- [17:45]
C
I think now there is one actual open first rate CEO job before we shift it to talk about airplanes with John. Do you want, you want to talk about that one?
- [17:57]
B
Yeah, let's do it. Who is it? And I expect that you will say this in two languages.
- [18:02]
C
Yes, indeed, you do have to speak French or at least a little bit of French. Maybe read off a teleprompter or be able to have a few sentences of conversation with a government minister to have this job. And that is CEO of Air Canada. The current CEO, Mike Russo is going to retire no later than September 30th. A lot of people at the AGM talking about who might replace him. Just one more plug for the Airline Observer. I've already written about the list. I think the top two candidates, we could always get surprised are probably Chief Operating Officer Mark Nassar, who's worked there for a long time in a wide range of jobs. And then a blast from the past. Ben Smith, former senior executive at Air Canada and now CEO at Air France klm.
- [19:00]
B
Look, I like Mark Nassar, but if the prodigal son Ben Smith wanted to come home, that might postpone Mark's rise. Right? But he would have to leave his post running one of the big three in Europe, soon to be proud majority owner of the mighty sas, to go back to run the fifth largest airline in North America. So would he want to do that?
- [19:23]
C
Brett, have you seen the Air France KLM shareholders? The two biggest ones are the French state and the Dutch state. You've got China Eastern owning 4.6%, you've got employees who are always great to work with owning 3%, and then Delta owning 2.8%. Does that sound like the greatest group to deal with? And then also a lot of people at the AGM pointed out European airlines do not pay well. Just a different way of thinking in Europe, Canada will pay a little bit better. Maybe not at US Rates, but there was some discussion that maybe if Air Canada was going to pay a lot of money, maybe $20 million Canadian a year, Ben Smith might take an offer seriously.
- [20:11]
A
20 million Canadians, that what, like 9,000
- [20:13]
B
U.S. i think the Europeans pay a little bit better on that. But also you talk about, have I seen those shareholders? But have you seen Air Canada's shareholders? The answer is no, you haven't, because they've all been inside watching the NHL finals and crying about how a Canadian team hasn't won in 36 years.
- [20:30]
C
Cold.
- [20:31]
B
Where was I going with this, man? I think I'm digressing again. Carry on.
- [20:35]
A
Digression may come.
- [20:37]
C
You know, it's probably a good time, guys, to take a break here. And when we come back, John will tell us what he learned in Brazil. Is there anything more frustrating than having a ton of points that are scattered in all the wrong places?
- [20:57]
B
That's the worst. We've all been there. When you're just short of what you need to book an award you want, but you have plenty in other airline accounts.
- [21:04]
C
Exactly. And then we all have to do travel math and see if we can find a way to get enough into that one account so we can actually hit confirm on booking.
- [21:14]
B
That's why the ability to move points around using points a plus grade company's exchange solution is such a game changer. It's the bridge. It lets travelers move their points to where they need them, when they need them.
- [21:25]
C
It's a huge win for travelers when it works. But we've seen exchanges before that are treated like a check the box feature. They build the connection to a partner and then it just sits there.
- [21:37]
B
Which is wild because when a member moves points, they're telling you they're ready to engage. If the program isn't paying attention in the moment, then it's just leaving revenue on the table.
- [21:46]
C
That's why points work so well. It's an actively managed, fraud secure approach that's built to actually improve performance after the connection goes live.
- [21:56]
B
Because at the end of the day, connecting partners is one thing.
- [22:00]
C
Actually moving the needle, that's another.
- [22:02]
B
Points exchange helps leading brands move beyond simple connectivity to drive real loyalty growth. Learn more@plusgrade.com.
- [22:14]
C
And we're back. John, what did you learn in Brazil? What was most interesting to you?
- [22:19]
A
Before you dive into the aerospace side, I actually want to dive into something on the airline side. One of the most interesting recurring themes that I came across coming out of iata, at least from the perspective of the US and European airlines, was how fares were moving. Look, for US Carriers, it definitely seems like that all the traditional assumptions around the elasticity of demand, that is tickets go up, demand goes down, wasn't just playing the way they thought it would. Scott Kirby, quarter in the Jar, pointed out that demand just wasn't falling off in a way that he would have expected. But, but I think this is really important that demand preservation, which comes along with obviously as capacity has fallen, has allowed for a roughly 20% increase in fares across the board. So what's different this time? And I kept asking executives this, as one exec put it to me, and Brian said, quote, you're only as smart as your dumbest competitor, which is to say that everyone's fares went up, one player didn't hold them down. So the fare increases stuck collectively as capacity fell.
- [23:23]
B
Yeah, those, those kind of sound bites are going to be great fodder for congressional hearings on the anti competitive nature of the consolidated industry someday. But anyway, but like I think then
- [23:33]
A
you have the flip side in Europe, like where all the airlines are significantly more fuel hedged than in the US where they aren't at all and carriers are ultimately really earning and enjoying a huge win on their fuel bets in Europe. Look, Ryanair obviously being the poster child to this, of course, but like they can keep fares lower as fuel hasn't hit them in the same way. So the carriers that needed to raise fares did, but at a greater cost than demand than their hedged competitors who become winners in the hem still commoditized airline business.
- [24:09]
C
John, why don't you do losses in hedging over the last 15 years as well?
- [24:13]
A
I'm not saying, I'm not saying hedging is a good thing or a bad thing. I'm just saying that's what the dynamic is right now. And you kind of see where this plays out relative to the economic assumptions that you make. Yes, in the US it's probably allowed them to raise fares collectively. That is obviously to the benefit of the industry. In Europe, lower fares are still a magnet for demand. I mean that is not exactly a state secret here. But I think the, the dynamics driving that in this particular case really kind of center on who's been shielded from $11020 a barrel oil.
- [24:45]
B
All right John, let's talk about metal. What did you learn on the metal side here?
- [24:49]
A
Well, okay, so I had a really interesting conversation with Shane Tackett. He mentioned that the 7378002 were most likely going to replace the 7 1/7 for Hawaiian Inter island operations. It's not inevitable, but that's just their leading candidate for what's coming here. More about that in the air current this week.
- [25:10]
C
What about Embraer? John, I know you went to the factory. What'd you learn there?
- [25:17]
A
After a three day sprint through AGM land I along with about 100 other international journalists sans Mr. Summers who are supposed to come with us. He's literally making a face of me right now.
- [25:27]
C
It's not the aircraft that bother me, John, it's being on a plane with a hundred other journalists. Group trips the worst.
- [25:35]
A
We can't all fly netjets. So okay, yes, we boarded a soon to be delivered Porter E195E2 bound for SAO Jose dos Campos, home to Embraer. It was a gorgeous evening. Flight out of Santo Simon airport and Rio was all lit up. It was lovely. We spent Tuesday night talking with execs doing a pretty cursory tour of the E Jet final assembly line and also got a peek at the LatAm E195 E2 as it was wrapping its trip down the final assembly line there. As a very interesting note for our listeners who are who have a keen interest in aircraft manufacturing, Embraer's E Jet line is actually one of the world's most unique. Embraer has figured out how to assemble the 76 seat E175, the E190 E2 and the all the way up to the 144 seat E195 E2, all on the same line from start to finish. These are two very different airplanes with totally different designs. Only the size of the tube is common and that's just in one dimension in the, in the cross section. But Embraer manages different wings, engines, systems, everything under the same roof. That's incredibly, incredibly hard to do if you are an aircraft manufacturer. Typically you put all aircraft with the same type down the same line and they have figured out a way to do it. It's a very impressive thing to, to see.
- [27:01]
C
And then John, I think you stayed in Brazil for even longer, right? What were you doing there?
- [27:06]
A
Yeah, I, I am on the verge of being able to declare permanent residency in Brazil for the amount of time. I was joking with the embryo folks that I just live in factory now. But no, it was, it was a really good visit. And after the international journals departed, another contingent of journalists showed up for three days of pre farmer international airshow briefings and conversations. But look what's really clear from my big takeaway on these days. Embraer is not ready to talk about a new product of any kind. Their focus, like Boeing and Airbus, is squarely on ramping up production of its E jets to about 10amonth and getting the KC390 airlifter into the hands of as many NATO and NATO friendly countries around the world. And they actually just got a commitment from Greece while we were there. So look, this is where they are focused. And by the way, when we say 10e jets per month, just as a reminder, Boeing is running around 47 737s a month and Airbus is north of 70ish, give or take.
- [28:11]
B
Okay, so to be clear for our listeners here, I am looking at what looks like your home office on the screen here. Did you recreate that in the factory? Are you still in Brazil or have you actually returned home?
- [28:25]
A
No, I have returned. It was a very good trip and I'm really glad I made the journey. Even if, you know, Brian didn't come along to see his first aircraft factory.
- [28:34]
B
But was this the, the part of the trip here where you sent us the photo of one of the biggest smiles I've ever seen of you sitting in a jump seat?
- [28:44]
A
Yeah, I was in my best impression of the Pope.
- [28:47]
B
Okay.
- [28:48]
A
And also by way of explanation for our listeners, the Pope and I both got to fly jump seat that same week and I am here for it. Look, he was on an A320 across Spain. There are few things better than sitting in the cockpit of an airplane while it is flying. So but full disclosure, I got the jump seat during this this adventure twice. Once on the KC390 airlifter coming out of Gavio Pascoto Airport, which is about 250 miles from Sao Jose Dos Campos and again the next day on another hop on the Porter E195E2 which was just going for a very indulgent sightseeing coast along the coast in and out of Sao Jose. So I I did end up having to leave Brazil a day earlier than planned to rush back for an unexpected championship game for my 7 year old. Yes, I did surrender a business class ticket for 20 hours of travel and economy to get back to Seattle on time. But like look I made it back in time and big congratulations to the Pirates on their 53 victory. Tis the season for Little League. But look, now it's time that to get ready for the pre air show scramble. The Air Current team will be there in force. Fun days ahead. And Brett, yes we will get you to IATA in Chemin next year in China. That's assuming we can get visas. And Brian yeah, we'll go knock on Comex door while we're there to get to your first fact.
- [30:17]
B
All right, one last thing before we go. We now have a LinkedIn page which you can access by going to LinkedIn.theairshowpodcast.com or just searching for the air show on LinkedIn. We'll post links to this show every week there, so feel free to drop by and discuss with us
- [30:34]
A
you've been listening to the Air Show. If you have suggestions or questions or interested in sponsoring the podcast, email us@infoheairshowpodcast.com or visit theairshowpodcast.com to get in touch.
- [30:45]
C
Leo Duran produced and edited this episode. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.
- [31:03]
A
Well, the Air Show Podcast brought to you by Digression.
- [31:06]
B
Do not take if you're also taking a velocity.