United Airlines Is Bullish. Should It Be?

0:00Jay Shabat: Hello and welcome to the Airline Weekly Lounge. I'm your host Gordon Smith and I'm joined as usual by co-host Jay Shabat. In this week's show we're crunching United's latest numbers.

0:26Jay Shabat: Hi Jay, how's it going? all right gordon and you do very very well back from my travels as anyone who's watching as opposed to listening uh will be able to tell back in sunny lisbon i can i just say use my platform unashamedly to say i've been on a lot of flights recently and one thing despite all the innovation we've had in the industry that is still below par for what it should be the bread it's not interesting okay oh my word i not on skiff dollar before anyone in the finance team has a heart attack i was at a couple of flights and premium i had some flights in economy and it was just everywhere didn't matter where you were flying if on a western carrier on an eastern carrier on a middle eastern carrier business class premium economy i covered it all over the past few weeks

1:10Gordon Smith: the bread has been lousy everywhere so listen please improve the bread yeah i kind of feel your pain there because i am a bit of a bread snob myself i like good bread right yeah well

1:25Jay Shabat: do you are you sort of one of those people you're like if i'm gonna have the bread all the carbs and all the processed stuff you might as well make a good bread um anyway yeah yeah yeah yeah like you know good if it's if i'm eating a croissant i want a good croissant a little bit of a snob in that area credit works to you not on this latest itinerary but i have actually once had incredible bread you're not going to be able to guess where it was i'm not even going to ask you aristana flying uh to almighty garlic bread was 10 out of 10 the best i've ever had on the ground or in the sky so more power to you aristana wouldn't go all the way to kazakhstan for your

2:01Gordon Smith: but it was pretty good um whoever knew kazakhstan was famous for garlic bread okay we know now

2:07Jay Shabat: my understanding is that the former ceo peter foster was a big fan of garlic bread and they kept it going. So I don't know if that's true, Peter. I think you stepped down last year, retired from the aviation industry. But hopefully the garlic bread lives on.

2:24Gordon Smith: Yes. And if I ever run an airline, it's going to have good pretzels. I really like good pretzels and they can vary a lot, right? You know, you get good quality pretzel and then kind of the junk pretzel, you know, it's big. So yeah, that's for anyone who is thinking about flying, you know, or jay in the future that's uh expect a good pretzel expect nothing less gordon airways pretzel

2:45Jay Shabat: free zones i can't stand them i've never i've never had a good one wow i'm not sure uh we can

2:52Gordon Smith: continue doing this broadcast together because i'm kind of offended by that but anyway i'll

2:57Jay Shabat: overlook it for now but that's well the lines have been drawn um the lines have also been drawn in uh in united world as well jay because there was some interesting color and commentary as you might expect from Scott Kirby and company. We've just in the past 45 minutes wrapped up the earnings call recording here a little later than normal on the 21st of October. That's a Wednesday in order to be able to accommodate the United's earnings and their investor call. Jay, for anyone that missed it or maybe on the part of it, what was your feeling? What was the mood music coming out of Chicago and Kirby and Co.?

3:33Gordon Smith: It was more of the same, all things considered. It was a very good set of earnings. Remember, we are kind of going through this, what some might call a fuel shock, maybe even fuel crisis, mitigated in the US anyway, and elsewhere in the world, to a large extent elsewhere in the world, by very strong demand. United's operating margin for the third quarter was about 7%, just below 7%, which again is good. Last year, same quarter, did about 9%. So, you know, I could see a little bit of a deterioration there. Delta, you'll remember we talked about them a couple weeks ago. They had about 9.5. So, you know, United 7, Delta 9.5.

4:18Gordon Smith: That's kind of consistent with what we've been seeing quarter after quarter. You know, Delta up here. If you're just listening, not watching, I put my hand up in the air. Delta kind of, you know, up in the sky and then United not too far behind. I was thinking about the analogy of the coyote trying to catch the roadrunner, but it's not quite the coyote because the coyote winds up falling on his face and getting hurt. That's not United at all. That's maybe some other airlines that we'll talk about in future podcasts. But yeah, so the simple answer to your question, it was a good solid quarter, all things considered.

5:00Jay Shabat: It was a good solid quarter. I listened to the Colin Fool as well. and the feeling is, I don't know about you, Jay, we are sort of having a beauty parade here and we are seeing some of the more beautiful candidates, let's say, in our beauty parade first and foremost and it's going to get ugly, frankly, as earnings season progresses, certainly from a US point of view and you certainly got that from the executives in Chicago today, the impression that Delta and United are very much in a league of their own And it wasn't that hard, actually, to see Kirby when he was reviewing the successful carriers in the U.S.

5:38Jay Shabat: from a legacy point of view. He didn't name American Airlines, but he also didn't name American Airlines, if that makes sense. He didn't say American are doing really crap, but he completely excluded them for the most part when he was discussing successful operators. and you know there was an interesting point my understanding is that uh ed bastion he's due to receive recognition of the wings club in new york late this week and he had some good words for for ed bastion when he was asked from uh i think the leslie josephs or one of the others uh on the call so that was all very interesting um plenty of respect he said he'd taken inspiration although he did interestingly say that he thinks united are now ahead of delta as you would expect a little bit of camaraderie and uh tete-a-tete between the two big successful carriers there Jay, but laying in pretty thick into American and actually the industry more broadly in terms of in this high fuel environment, you can't wing it, to pardon the pun.

6:34Jay Shabat: There is nowhere to maneuver when fuel is high and when it's staying high. Fuel prices are high. Kirby thinks they're going to stay high right through next year. And he believes others are going to be in the firing line. Changes are coming. This idea that there are operators out there, US operators that are on borrowed time. Again, not brand new commentary from Kirby, but he seemed to be laying it on particularly thick today. Was that your reading of it as well?

7:00Gordon Smith: Yeah, he definitely likes twisting the knife into American, which, as we know, hasn't quite performed up to United and Delta in terms of its profit margins over the past couple of years. We know the history. Kirby was on track to become the chief executive of America. And he was not chosen for that role. He wound up leaving, going to United. So, you know, whatever, whatever the psychology, uh, might be, uh, behind some of these words, uh, he clearly enjoys bad-mouthing American. Uh, he mentioned, you know, at one point, uh, no, I was actually, you know, like after I heard him talk about, uh, the Ritz, the Ritz Carlton, uh, comparison, you, you probably know what I'm talking about.

7:47Gordon Smith: Cause you listen to the call, but he was talking about how, you know, just because you invest in a bunch of premium hard products, first class E, for example, you know, it's not like you can just take a Ritz Carlton room, put it in a Motel 6 and it's automatically going to, you know, please all the customers. And, you know, my initial reaction, I think he was talking about American and all its investment in premium. Then I was wondering if maybe he was talking about Southwest as well. I have to go back and look at the transcript. I don't know if you have any thoughts on that but um uh that for whoever he was talking about his point is that and it's not the first time he said this uh kirby that united has become uh in his words a brand loyal airline and there are basically two brand loyal airlines uh united and delta and they're attracting the lion's share of uh corporate traffic particularly in markets that you know where we're we're people have a choice.

8:46I don't think he's saying that if you live in Dallas, Fort Worth,

8:52Gordon Smith: Metroplex, and you're flying all the time that you're choosing United. But if you're in a competitive market like Chicago or New York or Los Angeles, United is winning that game along with Delta. So he continues to harp on that point. And one very specific thing you can see, United is very much, let's call it a horse. It's really riding long mileage now is this Starlink service that they offer. They're really putting a lot of emphasis on that. United says that it's really making a difference in terms of the, as a decision factor when people are choosing which airline to fly. when they have a choice so uh and they do have this advantageous position where american will get starlink but they're quite a bit of ways behind uh in terms of installation and then delta is they didn't go with starlink at all they're going to go with amazon's product which isn't ready yet so they're quite a bit behind so united is really really emphasizing that point they're using in their marketing and uh you know insisting that they'll gain some market share because of it

10:15Jay Shabat: yeah i think that's a great point and if anyone wants to play a united airlines drinking game completely unofficial unrelated to the airline uh before well the two you know for you and your drinking companion it doesn't have to be alcohol it can be orange juice or uh or soda but if you

10:30Gordon Smith: want to if you want to get can you eat a pretzel absolutely no absolutely no i'm not i'm not i'm I won't go there. I won't go there. Sorry. No.

10:36Jay Shabat: Go on. You can have a pretzel. You and your drinking companion, whatever you may be drinking, one of you does a shot every time Starlink was mentioned on that call, your companion for brand loyalty. Because I agree, Jay, they were the two mega buzzwords. Every question that was asked, somehow they were able to bring it back to Starlink and brand loyalty and this idea that it is, like you said, just United and Delta in Kirby and Teams' mind that have that stickiness. And this idea as well, the turnaround strategies, they were asked in the Q &A after the prepared statements. Kirby saying that hope is the strategy of a lot of US airlines, when that frankly is not going to be good enough.

11:22Jay Shabat: You need the whole package, he said, and they, I don't know if you agree or disagree with this. I have some strong thoughts. Kirby thinks that they've got the best product in the Western world, airline-wise. And he's mindful of saying not just the hard product, but also the technology, the back end. He said they've been investing hundreds of millions with limited visibility in terms of what the ROI would have been going back five, six years on how this is actually going to affect customer behavior and everything else, turnaround times, et cetera. And it is paying off very, very handsomely in terms of, anecdotally, you hear the app is very strong.

11:57Jay Shabat: you hear the recovery times are better than what they otherwise would have been. So this idea that, yes, you can put lipstick on a pig, you can put a fancier seat on an aircraft, you can have an airport launch. But if you don't have the entire package, which Kirby argues United does, and only really Delta otherwise does, in his view, then you're not going to have the brand loyal customers making that switch. We don't have American here to defend themselves. But one place that they will be defending themselves is at the aviation forum. We've got Nat Piper, the chief commercial officer of American Airlines.

12:32Jay Shabat: He'll be in conversation with us on stage November 12th at the JFK hotel at CWA rather hotel at JFK. Go to live.skiff.com if you want to secure one of the last remaining tickets there. So looking forward to hearing what Nat's got to say with us on stage, but we will, even before that, hear from American Airlines. They are publishing the results later on this week, Jay. So we'll get a broader picture there. What did you think around the talk around Chicago, just bringing it into American? There's obviously been a bit of a turf war between United and American Airlines at O 'Hare. We won't go into the ancient history, but American kind of, I think it's fair to say, sort of deprioritized O 'Hare a little bit.

13:16Jay Shabat: Maybe a harsher critic might say they took their eye off the ball.

13:18Gordon Smith: Chicago is one of those places where American is striving, as you just said, to gain back share that it perhaps at one time had in the past. Los Angeles, New York, might be some other places. And United insists that it's just winning there and that American doesn't have a chance. I think Andrew Nacella, Kirby's right-hand man there, said that United has a 14-point unit revenue premium in Chicago and a unit cost advantage as well. you know, you could take those numbers. Uh, you may not want to, um, you could always, you know, I don't know what those numbers are for real. I mean, they, you know, I'll take, can't totally take, take them, uh, at his word.

14:05Gordon Smith: You never really know what the, what the true answer is, but, you know, I think it's fair enough to say that they probably do, but they surely do have some revenue, revenue, you know, revenue premium, um, just because they have superior schedules there. And, you know, they just offer destinations that American doesn't, et cetera. So, you know, American does, that is a tough market for them. They, you know, United seems to think that Spirit's failure was not an isolated event. And I don't think that anyone expects American to follow them into oblivion. But perhaps we all know what's happening with JetBlue and the financial fragility there.

14:55Gordon Smith: We'll get a better sense of JetBlue's situation in, is that this, that's next week. Next week, yeah. Yeah, next week. But, you know, United said that other airlines will be, quote unquote, next up on the firing line. You know, that was a quote from Kirby. another quote you know changes are coming unquote so i think you know his i his sense is that spirit spirits collapse was a momentary reprieve for for a carrier perhaps like jet blue but ultimately there's a reckoning to be had if jet fuel prices remain uh in the you know four dollars eighty four ninety approaching five dollar range that's a very very dangerous level and i thought it was something that Kirby said, not in the call, but in an interview with, I think it was CNBC, I might be wrong about that, asked about his assessment of the economy.

15:58Gordon Smith: And he seems to think that there is an artificial intelligence investment bubble, an AI bubble, which is kind of the growing talk of corporate America and Wall Street right now. We have had healthy economic growth over the past couple of years. And a lot of that growth is very much tied to this enormous investment in data centers, which are just basically giant computers to enable all of these new wondrous AI technology. He seems to think that there's a bubble there and that could collapse. Now, if he's right, well, he's probably then not also right that fuel prices will stay high. You assume that if the economy somehow buckles for bubble reasons or otherwise, that fuel prices would come down as well because there'd be a lot of demand destruction.

16:47Gordon Smith: Now, again, who knows? Maybe not because maybe the oil and fuel will stay high because of supply side issues. Obviously, we have refinery shortages and damage to refineries in Russia and Qatar and other places around the world. So, you know, my larger point is that who the heck knows, but it's impossible to predict fuel prices. I always, you know, anytime someone, even if it's some fancy investment bank that says, you know, we forecast fuel to average so-and-so next year. You know, I just kind of look the other way because nobody knows.

17:26Jay Shabat: But Kirby does believe they're going to stay elevated into next year for sure.

17:29Gordon Smith: So he seems to think that, and he does seem to, at the same time, think that there's this AI bubble, which would potentially cause some damage. And he didn't elaborate on that during the call. That may have been just an off-the-cuff remark in this interview I'm referring to.

17:45Jay Shabat: It was interesting when he was asked by a couple of investors about various slightly thornier topics he acknowledged, I think once at least, he said, I've made enough headlines this week. I'm not going to say anything else.

17:56Gordon Smith: So I think even by his standards, he thought, maybe I've already said enough. Right, right. Maybe it was a different question, but someone asked him, are you going to merge or JetBlue? Are you going to buy JetBlue?

18:10Jay Shabat: Yeah. Just without getting into the financial weeds, there were some changes to the financial levers that they've got available to them. And they've basically got more money to play with if they want it. added a couple of billion to a facility that they have. And then I think it was Mike, the CFO, he came and gave his answer. Then Kirby, before the next question came in and said, don't you be thinking this is going to be for M &A activity? Absolutely not.

18:38Gordon Smith: When they first announced, you know, when I first heard that, that they had that additional credit line, you know, they seem to downplay the significance, you know, maybe they just, whatever, they're trying to angle for an investment grade reading for their balance sheet. and that that may be just a way to help them in that regard or whatever you know that maybe uh we shouldn't look too much into it but when fuel prices reach these very dangerous levels you do start to see airlines uh you know like a squirrel collecting nuts before the winter kind of thing you know like a you do you do see cash preservation um access the ability to access cash become more of a priority.

19:22Gordon Smith: I think United did say that they actually want to bring down their cash down eventually because you don't want to hold cash because it doesn't earn interest. It's not always, you know, it's holding a lot of cash is good for safety, but it's bad for making money. So, you know, you kind of have to do trade-offs. So I don't know that. But it is, I remember, you know, during previous run-ups in fuel prices, certainly 2007-ish, 2008. You saw a lot of airlines try to sequester cash, arrange additional credit lines, and things like that. So, you know, these U.S. airlines, again, fortunately, they just have demand is so, so, so strong that the pressure is not quite as immense.

20:06Gordon Smith: At least for these, you know, as you mentioned before, we've seen like the earnings parade, all the peacocks are at the head, but then kind of, you know, the uglier creatures are going to follow. We're going to get them coming. The ugly ducklings are on their way. The ugly ducklings are going to be marching in the back.

20:23Jay Shabat: And speaking of - Not even marching, they'll be dragging themselves.

20:27Gordon Smith: Yeah. And hopefully that won't die on the way because there is that risk as well. I don't want to be too morbid, but the fuel of$5 a gallon, that's pretty serious. Any signs and by the way i've you know you're starting to see little anecdotally uh i know it'll be interesting by the time we hold our aviation forum in new york and what is it in third two three weeks it's coming up absolutely yeah um it's things are moving fast i wonder how we'll be talking about demand at that point i'm already starting to see you know i saw an article today from Japan that air travel is, volumes are down, tourism is down because the prices are getting a little bit high.

21:15Gordon Smith: So yes, fuel prices are up, demand's still strong, but these airlines, they're having to raise, you know, fares quite a bit, raise fees quite a bit. So, you know, there's no guarantee that the demand is going to, you know, remain as strong as it currently is. and I don't want to call them or refer to them as an ugly duckling by any means. I mean, very stellar airline, but I do want to mention that Alaska Airlines did report yesterday as we're speaking here on Wednesday. And yeah, go ahead, Gordon, you were going to say something.

21:49Jay Shabat: Well, I was just going to jump into the break, leave our listeners and viewers in suspense for just a moment. We'll return to that thought with Alaska Airlines immediately after the break, Jay, but hang fast for just one moment. Quick reminder before we do get into the break, any questions or comments that you might have for us podcasts at skiff.com podcastmaness at the end that's the email address you need and please don't forget to follow or subscribe to the podcast wherever you're listening or watching and if you are enjoying the show remember please rate us five stars leave us a positive review so you can indeed spread the word about the airline weekly don't go anywhere we'll be picking up with jay right after this hello and welcome back to the airline weekly lounge i'm your host gordon smith joined as usual by co-host jay shabbat the end of part one there jay i had to cut you off because we had to get into the break but you were discussing Alaska Airlines because we had the numbers out of them yesterday after market closes.

22:34Jay Shabat: We're recording here on October 21st. Jump straight back in. What are we going to say?

22:38Gordon Smith: We have their numbers. They haven't done their actual call yet where they discuss the numbers. So there's not a whole lot I'm going to say right now and in deference of time as well. You can certainly read as much as you want about how they did in Airline Weekly and the upcoming issue coming out on Monday. But I do have the numbers for everybody that's listening and they weren't great. I mean, they had a 5 % operating margin. So as I mentioned before, Delta was about 9.5, United 7, and Alaska only 5. Alaska traditionally does significantly better in the third quarter than other quarters. It's a very Q3 peaking type airline.

23:21Gordon Smith: And that comes back to the nature of its route network, the fact that Seattle is a very summer-centric kind of destination. So 5%, yeah, they can't be too happy about that. They actually had a net loss. Even if you strip out some of these extraneous accounting items, they still had about negative 1 % net margin. uh so not too pretty of a picture the only thing i'll say about why uh in for right now for the moment is uh what we're seeing in the u.s and around the world for that matter is a much greater variance in what carriers are paying for their fuel than is than is normal i mean you'd always have some in alaska would always pay a little bit more west coast fuel is just more expensive Delta would always pay a little bit less because they have the refinery.

24:14Gordon Smith: But that spread between different airlines is abnormally large. And I'll put some numbers to that. So Delta last quarter paid$3.61 per gallon. And we've talked about, I think in our previous podcast or whenever it was two weeks ago, we said how some of that comes back to the big savings that they're getting from the refinery. so 361 united pay 390 it's quite a big difference alaska pay 394 we'll see you know what some of these other airlines will see what american pay what southwest paid but you see it's quite a quite a big difference you know you start you start to wonder if united was paying exactly the same for fuel as delta would you know would it would it not look like the coyote so much anymore you know maybe maybe it would catch the roadrunner i don't know but that is a big difference a very important difference to point out.

25:09Jay Shabat: Yeah, absolutely. And for anyone that's new to the industry, new to the podcast, a reminder that fuel makes up the first or the second largest cost center. 30 to 40%. 30 to 40%. So when we are talking about cents on the dollar here, it can sound kind of trivial, but when you are flying as much as these airlines are, and you have such a huge percentage of your overall costs anchored in fuel, it really does add up jay um just a few final points from the from the united call the polite word uh is the sunsetting the or they're in the sunset period of the the contract with their existing loyalty partner and the banks there and i think it was described as being a historic contract which again is you know a polite diplomatic way of saying it's an old-fashioned contract not accustomed to the realities of just how profitable these schemes are in the 2020s so it'll be very very interesting to see, Jay, as those discussions continue, I'm sure with a number of different partners behind the scenes, just how that shakes down.

26:08Jay Shabat: And there was a question as well about Canada's Aeroplan loyalty scheme. And regular listeners and viewers will know that they gave 25 % to a selection of private equity firms, I think led by Blackstone and Quebec Pension Fund and a few others basically tapping out for cash, albeit with some options to buy back in six, seven, eight years' time. But Mike, the CFO of United, he was very complimentary about what Air Canada had done there with Aeroplan. And he was basically asked in his many words, is that something that you would be considering for your own? And he said, no, no, no, not in the moment, primarily because they have got that historic contract.

26:47Jay Shabat: And I think he said they're in a holding pattern, sort of just letting that run its course before things, change, but you did get the impression that the changes that had been made in Montreal with the Aeroplan were maybe something that were not to be directly mirrored with United, very, very different piece in many ways, but there was definitely some appreciation, let's put it that way, for what happened at Aeroplan. Was that your reading as well?

27:10Gordon Smith: Yeah, yeah, I thought that was interesting. I went back and looked actually that United deal with Chase, JP Morgan Chase, the credit card deal. Unless I missed, there may have been an update somewhere along the way, but that I'm forgetting about, you know, if you're listening or watching, definitely email if I, if I missed this, but it looks like that deal is from right before COVID, like literally February of 2020. And it was a decade long deal that's going to come to, you know, come expire in 2029. so um you can see how the economics of that may be a little bit tired or like a whatever the word you was you you use their uh older you know just outdated historic contracts and a holding yeah historic so you know that'd be interesting i'll tell you something that i've been watching in the background and you know i don't maybe think it's gets enough attention this all this enormous you know, money that airlines, U.S.

28:11Gordon Smith: airlines are earning from these frequent flyer programs, these co-branded credit card deals, it really rests on the simple fact that these credit card swipe fees aren't regulated in the U.S. So the banks, you know, the JP Morgans of the world and American Express and, you know, Bank of America, they're able to make such enormous enormous money themselves from these credit cards that they're just willing to just throw so much cash at these airlines. But there is a movement in Congress, and even President Trump kind of got on this bandwagon for a little bit as well. I can't remember if it was last year or earlier this year, to start regulating the swipe fees.

29:01Gordon Smith: Merchants, retailers, especially small businesses, They hate that. I mean, they have to pay these fees, these swipe fees. They hate them. And they're on the phone with their congressman, their lobbyists saying, you got to you got to regulate this. They regulate them in most parts of the world. um now i don't know the you know it'll take a political scientist to predict whether or not that that regulation or that you know lack of regulation um will persist i don't i don't know if congress or the president will ever act uh on it but it is something to watch because you know if if there is a legislative change you're talking about you know massive massive of amounts of money at stake here for the U.S.

29:46Gordon Smith: airlines. So yeah, definitely something to watch. Now, I know, you know, I talked about how the retailers are persistently lobbying hard. I mean, the airlines, if there was a time I remember a long time ago, airlines themselves once, you know, lobbied hard against these fees because they have to pay them too. But of course, on the other end, they're, you know, it's more than more than offset with how much they're collecting. But, you know, if you don't have a big frequent flyer program, if you're frontier or whatever,

30:11Jay Shabat: Or perhaps you wouldn't mind some regulation to these swipe fees.

30:17Gordon Smith: But on the other side of that, there are a lot of political interest in favor of the lack of fees as well. Obviously, the visas and the MasterCards of the world love it. The airlines love it. Consumers love it because they're able to get all these perks. So it may just be a political, you know, monster that's too hard to topple. I don't know. But definitely something that's, you know, these guys got to watch.

30:46Jay Shabat: Definitely got to watch.

30:47Gordon Smith: And we've got we've got a new Congress that's going to get elected in a couple of weeks here. So we don't know what it's going to look like, but we can assume pretty safely that at least one of the houses is going to change parties. So one of the branches of the legislature is going to change parties. So whether or not that will be a top priority, probably not, but I don't know.

31:06Jay Shabat: Yeah, absolutely. I agree. It feels like there's definitely an appetite in some quarters for change. And we don't have time to go into the weeds of this, but I would encourage if anyone wants to do some further reading on it and check out what's happening in Australia just now because they've made some changes in the past couple of weeks to their interchange fees and their credit card, sort of the swipe fees, as you said, Jay. and a bit of a backlash, not just from companies, but also from some merchants and even from some consumers saying, oh, hang on a minute, the little mom and pop shop who used to be okay with me using my credit card, now they're charging this fee and everything else.

31:38Jay Shabat: It's more complicated than it looks, and that's before we consider the aviation and the airline impact. But some fascinating further reading, very, very topical. It's still playing out in real time with Australia there. And then just from a loyalty point of view, two interesting names that we've got joining us at the Aviation Forum. We've got Gilbert Ott, who's the Director of Loyalty at the One One Alliance. He's joining us. And we've also got Tiffany Funk, who's the Head of Flying Blue at the Air France KLM group as well. So obviously slightly different in terms of U.S. exposure to these enormous programs, but some fascinating insights nonetheless, I'm sure, from Gilbert and from Tiffany at the Aviation Forum.

32:11Jay Shabat: You going to add something else, Jay?

32:12Gordon Smith: Oh, yeah, just real quick. Sorry, I know we're going long here, but you mentioned our speaker from Flying Blue. We had a Flying Blue, I think it was a different person, last year's event speak. And one thing that I learned among the, you know, the tons of things you learn at these events are, but one was that Air France is actually marketing, Air France, KLM, marketing credit cards in the U.S. I mean, that's where they have a lot of growth potential. So it's not just the U.S. airlines. I mean, that's where the big money is, but certainly like a British Airways and, you know, other foreign airlines definitely issuing their own co-branded credit cards in the U.S.

32:50Gordon Smith: as well, taking advantage of these, you know, unique set of circumstances here. I just final point here. I believe that Visa is the most profitable airline, most profitable company in the United States. Someone can fact check me on that. But if they're not number one, they're real close. I mean, their margins are enormous. And, you know, maybe they don't want me to say that publicly. So, you know, it attracts scrutiny. And, you know, some congressman may suddenly say, wait a minute, what? We need to regulate them. But they are. Because I always thought that, you know, the freight railroads were number one, or like a Microsoft or, you know, one of these Silicon.

33:30Gordon Smith: come but now it's i think visas that has like 50 net margins that don't quote me on that but they're they make a pretty penny they make a pretty penny um so much more we could get into

33:41Jay Shabat: jay but time is against us but like uh jay said if you're more detail uh not just on united but also air mexico we've had some interesting numbers out from and also alaska airlines and even by the time you're listening to this we'll have new numbers out from american and others get uh into that latest issue of airline weekly dropping every monday go to airlineweekly.com forward slash subscribe for a free trial issue. And if you want to get involved in the sort of, we don't like to call it a newsletter, but it is for all intents and purposes, a sort of weekly news digest. We'd make sense of everything that has happened and also empower you and inform you to know what to expect in the weeks to come, Jay.

34:18Gordon Smith: Any final thoughts before we wrap up? I did pull it up here real quickly. Visa in their most recent quarter had a$6 billion net profit on about $12 billion in revenue. So, you know, you could do the math on the margins there. Yeah.

34:36Jay Shabat: You don't need to be Jay Shabbat to know that that is a healthy little number. Yeah. You can see why, you know, when you've got the IATA team saying, oh, well, you know, the average profit per passenger is four euros, five euros, you can even buy a cup of coffee in Geneva for that, et cetera, et cetera. And you sort of think, well, that's an airline trade body. Of course, they're going to be batting that drum. But when you do look at some other industries, you get the impression that, we even heard it from the United team today, this pursuit of double-digit margins, sustained double-digit margins.

35:08Jay Shabat: And you see that from time to time at various large airlines, even IAG, I'm thinking from a European point of view. But this idea that the industry as a whole is underperforming when it comes to margin compared to others, that does seem to be a long-term trend and one that I'm sure their various representatives and lobbyists will be pounding hard. But yeah, more on that when we get it, but it's a long-term issue.

35:33Gordon Smith: Extremely difficult business, the airline business. And part of the reason she was just so subject to all these shocks is, as I say, you know, anything that happens bad in the world, the airlines are going to be on the front lines of it and get affected first. So, you know, fuel prices, terrorism, health scares, tornadoes, volcanoes, anything.

35:50Jay Shabat: So, yeah, it's bad news.

35:52Gordon Smith: I don't know why. You know, we should we probably have a more lucrative lucrative careers, Gordon, if we started credit card weekly instead of airline weekly. Yes, maybe we should consider that. But no pretzel weekly. That one's mine. Absolutely not. I'm not letting you in on that because you -

36:10Jay Shabat: That's all yours. So looking right back to our bread versus pretzels, in an alternative parallel universe, when you run an airline and I run an airline, I actually see it working perfectly, Jay, in complete harmony. We don't need any cartels, no sort of murky joint ventures or anything. You take the pretzel-loving passengers. I'll take the high-quality bread, non-pretzel-loving passengers, and that's how we will divide the industry. both offering perfect exceptional experiences there we go perfect yeah and zero zero chance

36:39Gordon Smith: of a merger yeah that would be tough like tough integration right if we ever merged very very uh yeah that would be a tense tense one but i think it would work stranger things at least separately yeah competing separately indeed right um that's all we've got

36:58Jay Shabat: time for but um enjoyed that conversation jay full disclosure we have a lot more u.s airlines still to report so don't expect this conversation to be going and some foreign airlines do and some foreign airlines some overseas airlines as well so we are very much still at the tip of the q3 iceberg so don't be taking everything that we've said in our conversation over the past 40 minutes or so as gospel that will change as we get further data points and data sets from competitors and

37:24Gordon Smith: peers right around the world.

37:25Jay Shabat: So more on that when we get it. Thanks, Jay, for joining us this week. Thanks, as always, to our producers, John, Monica, Kelsey, and Will, and wherever you are in the world. Thanks for listening, and we'll catch you next time. Bye for now.

37:54Jay Shabat: and hit the notification bell to find out whenever a new video drops.