Ravi Shanker

Ravi Shanker sought clarification on whether the Q4 2025 insurance expense increase was a one-time event or a new baseline, and asked for details on volume shifts observed after the General Rate Increase (GRI).

Answer

President and CEO Fritz Holzgrefe clarified that the $4.7 million insurance increase was an unexpected adverse development from prior years and not indicative of a new run rate, though he acknowledged the underlying inflationary nature of accident expenses. EVP and CFO Matt Batteh explained that some volume shifts are typical after a GRI, but Saia is seeing better-than-historic acceptance rates (over 90%) due to its enhanced network and value proposition.

Ravi Shanker asked for clarification on whether the Q4 self-insurance costs were a one-time event or a new baseline, and requested more details on volume shifts observed after the General Rate Increase (GRI).

Answer

Fritz Holzgrefe, President and CEO, clarified that the Q4 self-insurance increase was an unexpected, adverse development from prior years and should not be considered a new run rate, though underlying accident expense is an ongoing business cost. Matt Batteh, EVP and CFO, explained that some volume movement after a GRI is typical and often temporary, but Saia's acceptance rates for the recent GRI were better than historical, exceeding 90%, partly due to the strength of its national network.

Ravi Shanker of Morgan Stanley asked whether Saia's recent cost actions were short-term tactical responses to the volume environment or longer-term structural gains. He also questioned if current headcount reductions could risk limiting operating leverage in a future upcycle.

Answer

President & CEO Frederick Holzgrefe acknowledged that some variable labor costs would return with volume. However, he emphasized that the optimization of the line haul network is a significant, structural change. As density builds in the national network, the incremental margins can be very good without requiring a proportional increase in headcount, creating a sustainable scale opportunity.

Ravi Shanker of Morgan Stanley asked if the current volume weakness is purely cyclical or if it reflects a structural share shift away from large LTL carriers to smaller ones or other modes like truckload. He also inquired about competitive dynamics at the lighter-weight end of the market, citing new products from UPS and Amazon.

Answer

President and CEO Fritz Holzgrefe acknowledged that shifts to other modes could be happening on the fringes but believes freight will return to traditional modes when the market tightens. Executive Matthew Batteh emphasized the long-term value of a national network in attracting shippers back to quality. Regarding the low end, Fritz Holzgrefe noted that Saia's new markets are actually seeing heavier, more industrial-type freight, not lighter consumer-exposed freight.

Ravi Shanker of Morgan Stanley asked about the extent of LTL spillover from the truckload market and requested clarification on the ongoing run-rate for 'other revenues'.

Answer

CEO Fritz Holzgrefe attributed Saia's recent tonnage growth primarily to company-specific execution in new markets, stating that any spillover from the truckload sector has been marginal. He explained that the 'other revenue' line is inherently volatile due to items like deferred revenue timing and bad debt expense, making a specific run-rate difficult to predict. He suggested it is better viewed as a percentage of revenue over a multi-year period.

Ravi Shanker of Morgan Stanley followed up on the Mastio survey, asking for data comparing service rankings from existing versus new customers and its commercial impact on pricing. He also asked for normal Q1 and Q2 operating ratio seasonality benchmarks.

Answer

CEO Fritz Holzgrefe stated they do not have a specific data carve-out for new versus existing customers but noted that customer feedback on pricing can also influence survey scores. Executive Matthew Batteh explained that providing forward seasonality for Q1/Q2 is not current practice and that historical data from many years ago is less relevant given the company's significant transformation.

Ravi Shanker asked about the 50% increase in RXO's late-stage brokerage pipeline, seeking details on its drivers, customer types, timing for implementation, and expected pricing. He also inquired about the second half 2026 outlook for AI initiatives, the mid-year productivity inflection, and how AI is assisting SMB outreach.

Answer

Drew Wilkerson, Chairman and CEO, RXO, attributed the pipeline growth to the team's focus, successful integration, and strong customer relationships, noting a mix of existing and new enterprise customers. He expects bids to be implemented in Q2, leading to truckload outperformance by mid-year, with contractual pricing in the low to mid-single digits and significantly higher spot rates. Jared Weisfeld, Chief Strategy Officer, RXO, highlighted significant AI progress across volume, margin, productivity, and service, reporting a 19% productivity increase in 2025 and nearly 40% over two years, emphasizing the early stages of AI's incremental margin opportunities.

Ravi Shanker asked for clarification on customer optimism regarding trade tariffs and inquired about the impact of AI on productivity, its potential limits, and RXO's progress in leveraging it.

Answer

CEO Drew Wilkerson clarified that customer optimism stems from having more clarity on tariffs, which allows for better planning. CSO Jared Weisfeld and CEO Drew Wilkerson described AI as a long-standing tool, particularly in pricing, with productivity up 45% over two years. They stated RXO is in the "very early innings" of AI's potential and is currently staffed for future growth.

Ravi Shanker asked about the potential market share for asset-light players in LTL and inquired about the source of the repeatedly raised synergy targets from the Coyote acquisition.

Answer

CEO Drew Wilkerson positioned RXO as a sales channel and partner for LTL carriers, focusing on growing RXO's own volume, which is currently 25% of total but could grow significantly. CFO James Harris explained that synergy increases come from technology integration, real estate consolidation, and procurement savings from combining vendor contracts, which will yield a strong return on the cash outlay.

Ravi Shanker questioned why RXO's 2025 contract rate forecast appeared more conservative than asset-based carriers' targets. He also asked for the reason behind Coyote's different seasonal business patterns compared to legacy RXO.

Answer

CSO Jared Weisfeld explained their low-to-mid single-digit rate forecast is based on current data, but a sharper market recovery could lead to higher rates, which RXO would capture via its strong spot market presence. CFO Jamie Harris clarified that Coyote's distinct Q4 seasonality is primarily driven by a single large customer with significant contractual volume during that period.

Ravi Shanker asked Derek Leathers to confirm his continued bullish stance on the supply side, despite the fleet rationalization, and whether the company considered delaying the restructuring until after a potential market peak.

Answer

Derek Leathers, Chairman and CEO, reaffirmed his consistent bullish view on supply-side constraints, emphasizing that the one-way fleet rationalization was a proactive move to accelerate the return to appropriate margins and better utilize scarce resources, not a bearish signal. He suggested that, in hindsight, the restructuring might have been beneficial even sooner.

Ravi Shanker asked for confirmation that Werner's fleet rationalization does not signal a more bearish outlook on the cycle and questioned the timing of the One-Way restructuring.

Answer

Chairman and CEO Derek Leathers reaffirmed his consistent bullish stance on the supply side, noting that enforcement is gaining momentum and is very real. He explained the timing of the One-Way restructuring was driven by the desire to accelerate the return to appropriate margins for shareholders and confidence in the PowerLink variable capacity model. He views it as a better application of scarce resources and capital, supporting long-term Dedicated relationships and selective One-Way freight, rather than an abandonment of One-Way.

Ravi Shanker from Morgan Stanley questioned whether the favorable Texas Supreme Court ruling signals a turning point for tort reform and insurance costs, and asked about the performance of Werner's non-discretionary retail business amid reports of consumer pressure.

Answer

Chairman & CEO Derek Leathers described the court ruling as a significant win but cautioned against viewing it as a 'tidal wave' of tort reform, emphasizing that state-by-state efforts are still crucial. Regarding consumer demand, Leathers confirmed that Werner's non-discretionary and discount retail customers remain resilient, with some even showing volume growth, as the company's engineered solutions are deeply integrated with these clients.

Ravi Shanker from Morgan Stanley highlighted the contrast between the management's bullish tone and their guidance, and asked about technology's role in mitigating insurance costs.

Answer

CEO Derek Leathers attributed the cautious guidance to the volatile operating environment, particularly around trade policy, while affirming the positive underlying market trends. On insurance, Leathers emphasized continued investment in in-cab technology like side-view cameras, driver training, and legal reform. He also noted that safety technology improvements in passenger cars are a significant positive factor for the industry.

Ravi Shanker inquired about the nature of the elevated health insurance claims and driver school costs, asking if they were one-time issues, and also asked for details on recent contractual rate increases and the outlook for the 2025 bid season.

Answer

EVP, Treasurer & CFO Chris Wikoff explained that the health insurance claims were uniquely elevated in the quarter, impacting EPS by over $0.05, but noted their inherent volatility. Chairman & CEO Derek Leathers added that recent rate increases targeted the most distressed freight and that while it's too early to predict the magnitude of 2025 rate hikes, the market is showing signs of tightening and the time for increases is approaching.

Ravi Shanker requested a reminder on who XPO competes with for local accounts and how the cyclicality or seasonality of these accounts differs from national accounts.

Answer

Mario Harik, Chairman and CEO, XPO, defined local accounts as small to medium-sized customers (approximately 30% of LTL shippers) that typically have less density and higher margins. He stated that XPO competes with all carriers, both regional and national, for this segment, emphasizing the need for excellent service and strong customer relationships, supported by a 25% increase in salesforce over the last few years, which onboarded 10,000 new accounts in 2025. Harik explained that while larger accounts (using TMS) see shipment count fluctuations with the cycle, local customers experience a higher impact on weight per shipment, with weight per shipment decreasing in a downcycle and increasing in an upcycle.

Ravi Shanker requested clarification on XPO's competition for local accounts and how the cyclicality or seasonality of these accounts differs from national accounts.

Answer

Mario Harik, Chairman and CEO of XPO, defined local accounts as small to medium-sized customers, representing about a third of LTL shippers, typically operating at higher margins. He stated XPO competes with all carriers for this segment and is halfway to its 30% target. Harik explained that local customers typically see a higher impact on weight per shipment during downcycles, whereas larger national accounts tend to experience more fluctuations in shipment count.

Ravi Shanker from Morgan Stanley asked for a quantification of the measurable returns from AI initiatives and inquired about the transferability of XPO's tech and operational strategies between its US and European businesses.

Answer

CEO Mario Harik quantified recent AI gains, including a low-to-mid single-digit reduction in normalized line haul miles, a double-digit cut in empty miles, and an 80% reduction in diversions. He noted that while some initiatives like route optimization and labor productivity tools are transferable to Europe, others like line haul optimization and pricing technology are not, due to differences in network scale and pricing structures (pallet vs. class/weight).

Ravi Shanker of Morgan Stanley asked if competitors pulling back on CapEx presents an opportunity or a risk, and requested more detail on the proprietary software that predicts freight volumes.

Answer

CFO Kyle Wismans noted that XPO's own CapEx as a percentage of revenue is expected to moderate but that the company can remain flexible. Executive Mario Harik explained the predictive software is an AI-driven demand forecasting model that uses current volumes, seasonality, and the sales pipeline to project tonnage up to 90 days out. This enables service centers to optimize labor planning and improve productivity, even in soft volume environments.

Ravi Shanker from Morgan Stanley asked if competitors reducing CapEx is an opportunity or risk, and requested more detail on the proprietary software that predicts volume shifts.

Answer

CFO Kyle Wismans noted that XPO's own LTL CapEx as a percentage of revenue is expected to moderate this year and beyond, toward a long-term range of 8-12%. CEO Mario Harik explained that their proprietary 'crystal ball' is an AI-driven demand forecasting model that analyzes volumes, seasonal trends, and the sales pipeline to predict tonnage up to 90 days out, enabling service centers to optimize labor in real-time.

Ravi Shanker from Morgan Stanley asked if service improvements, like damage claims, were facing diminishing returns and about the lag for these improvements to appear in national rankings.

Answer

Executive Mario Harik asserted that they are not done improving, with a goal to be best-in-class and reduce the damage claims ratio to 0.1%. He noted that while they have seen significant improvement in third-party surveys, the most important metric is direct customer feedback and their willingness to pay for better service, which is reflected in the company's strong yield and margin performance.

Ravi Shanker asked for elaboration on the company's tech stack opportunity, its benefits, and whether these initiatives are being implemented now or will wait until after the merger. He also inquired about the timing of the previously mentioned investor day, asking if it's still a 2026 event or if it might be pushed to 2027.

Answer

Greg Anderson, CEO, explained that technology modernization has unlocked value, allowing for quicker commercial moves, better data utilization, and improved customer communication, as seen during recent winter storms. He confirmed that the investor day is expected to pace with the transaction close, aiming for a 2026 event if the merger closes in the second half of the year.

Ravi Shanker asked for elaboration on the "tech stack opportunity" mentioned at the top of the call, inquiring if these initiatives are currently being implemented or if they await the merger's completion. He also asked if the previously mentioned investor day is still expected in 2026 or if it might be pushed to 2027.

Answer

CEO Greg Anderson explained that technology investments are now more focused and practical, with modernized IT unlocking value by enabling faster commercial moves, better data utilization, and improved customer communication, as seen during recent winter storms. He stated that the investor day is expected to pace with the transaction close, and if the merger closes in the second half of 2026, there should still be room for an investor day in 2026.

Ravi Shanker asked for insight into Allegiant's potential 'normalized' EPS in 2026 and the key variables it would depend on. He also sought clarification on the Q3 demand environment, asking if it reflects a normal trough or is still impacted by softness from the first half.

Answer

President and CEO Gregory Anderson declined to provide a 2026 EPS target but stated that key initiatives should lead to materially improved earnings. SVP & CCO Drew Wells cautioned against viewing Q3 as 'normal,' explaining that they expect a demand recovery pattern similar to 2024 but starting from a lower base, which mutes the overall benefit.

Ravi Shanker asked about the strategic choice to drive margins through higher capacity versus higher pricing and questioned the firmness of the 'by summer' timeline for a Sunseeker transaction.

Answer

Chief Commercial Officer Drew Wells explained that the growth strategy leverages existing infrastructure, where the marginal cost is low, to drive absolute earnings. President and CEO Gregory Anderson stated the 'by summer' timeline for Sunseeker is their best estimate, providing a buffer to secure the optimal deal, but noted it could conclude in early summer.

Ravi Shanker from Morgan Stanley questioned the expected return of freight that shifted from LTL to truckload during the down cycle, now that the truckload market is tightening, and the anticipated cadence of this shift back.

Answer

CFO Adam Satterfield described this as a natural market adjustment, noting truckload capacity rationalization and changing pricing. He emphasized Old Dominion's significant network, equipment, and personnel capacity, positioning the company to capture market share during the early stages of an economic inflection.

Ravi Shanker asked about the expected return of freight from truckload to LTL as the market tightens, and the anticipated cadence of this share shift.

Answer

Adam Satterfield, CFO, explained that this is a natural market change, noting capacity rationalization in the truckload environment. He stated that Old Dominion is well-positioned with excess capacity (equipment and people) to capitalize on this inflection, historically gaining significant market share in the early stages of a cycle recovery.

Ravi Shanker followed up on October's volume step-down, asking if it was transitory (e.g., government shutdown related) and if it would continue through Q4. He also inquired if the tightening truckload (TL) market was leading to LTL volume return.

Answer

Adam Satterfield, CFO, indicated that October's tonnage underperformance relative to seasonality was consistent with earlier quarters, suggesting no significant worsening, but also no inflection. He noted no direct government business impact and did not explicitly confirm LTL volume return from TL, but implied that the overall demand environment remained consistent.

Ravi Shanker from Morgan Stanley asked if the significant sequential drop in October tonnage was transitory, possibly due to a government shutdown, and if this trend would persist through Q4. He also inquired if Old Dominion Freight Line was observing any volume return from the tightening truckload market to LTL.

Answer

Adam Satterfield, CFO, indicated that October's sequential tonnage decline of 5% (compared to a 10-year average of 3%) represents a "similar underperformance" rather than a worsening trend, and demand feels consistent. He did not anticipate a major inflection in Q4 2025 but hoped for improvement by Q1 2026.

Ravi Shanker from Morgan Stanley asked whether the prolonged downturn could be indicative of a structural change in the LTL industry, such as a permanent share shift to truckload.

Answer

EVP & CFO Adam Satterfield acknowledged a temporary share shift to truckload has occurred, driven by TL carriers operating at or below cost. He believes this is cyclical, not structural, and expects this freight to shift back to LTL as the truckload market tightens and rates increase, as multi-stop freight is not the preferred business for TL carriers.

Ravi Shanker from Morgan Stanley questioned whether the prolonged three-year downturn could signify a structural change in the LTL industry, such as a permanent share shift to truckload, rather than a cyclical one.

Answer

EVP & CFO Adam Satterfield expressed confidence that the current environment is cyclical, based on customer conversations. He acknowledged a temporary share shift to the truckload market, where carriers are operating at or below cost, and expects that freight to return to LTL when the truckload market tightens and rates increase. He affirmed ODFL is well-positioned with capacity to capture that returning volume.

Ravi Shanker asked for the rationale behind the reduction in 2025 capital expenditures, questioning if it was driven by macro softness, ODFL's specific investment cycle, or broader LTL industry trends.

Answer

CFO Adam Satterfield explained that with over 30% excess capacity in their service center network from recent investments, the company chose to defer certain real estate and equipment projects. This decision was made to manage depreciation costs amid economic uncertainty, while still ensuring capacity for future growth.

Ravi Shanker asked about the rationale for the CapEx reduction, questioning if it was driven by macro factors, ODFL's specific investment pace, or broader LTL industry trends.

Answer

CFO Adam Satterfield clarified the reduction is a strategic deferral of projects, not a cancellation, made to manage depreciation costs amid economic uncertainty. He noted that with over 30% network capacity, ODFL has sufficient service center, fleet, and personnel capacity to handle a business reacceleration.

Ravi Shanker asked if ODFL could increase its self-insurance to offset rising costs and whether new industry capacity could absorb the slack left by Yellow's exit.

Answer

CFO Adam Satterfield stated that ODFL already employs a strategic mix of self-insurance and third-party coverage, which has kept costs historically stable as a percent of revenue. Regarding capacity, he expressed confidence that ODFL is well-positioned to gain share in an upcycle, regardless of competitors' actions, based on customer feedback and service advantages.

Ravi Shanker asked for further thoughts on the Mastio survey results and whether there's a risk that competitors might use aggressive pricing to compensate for a service gap.

Answer

CFO Adam Satterfield stated he was pleased the Mastio results confirmed a maintained, sizable service gap between ODFL and its competitors. He emphasized that ODFL will not 'rest on its laurels' and will stick to its proven, long-term strategy of service-backed value, regardless of temporary pricing decisions made by others.

Ravi Shanker sought clarification on whether January trends were idiosyncratic to ArcBest or industry-wide, and inquired about any changes in the competitive dynamic, particularly with speculation surrounding Amazon entering the third-party LTL carrier market.

Answer

CFO Matt Beasley clarified that while ArcBest felt industry-wide weather impacts, the January dynamic was somewhat specific due to a lower mix of truckload-rated business in January 2025, influencing year-over-year comparisons. Chief Commercial Officer Eddie Sorg noted that the company focuses on controllable factors, observing general uncertainty among customers but no significant change in competitive dynamics, and highlighted growth in Managed Solutions.

Ravi Shanker sought clarification on whether January's trends were idiosyncratic to ArcBest or industry-wide, and asked about any changes in the competitive dynamic, specifically regarding speculation about Amazon potentially entering the third-party LTL carrier market.

Answer

Matt Beasley, Chief Financial Officer of ArcBest, clarified that while ArcBest felt industry-wide weather impacts, January's dynamics were also specific to a comp for January 2025, which had a lower mix of Truckload-rated business. Eddie Sorg, Chief Commercial Officer, addressed competitive dynamics, stating that ArcBest focuses on controllable factors, acknowledges general customer uncertainty, and sees strong growth in Managed Solutions as a result of its integrated logistics approach.

Ravi Shanker of Morgan Stanley questioned whether the new volumes being added are 'sticky' or more transitory. He also asked if competitors are responding by becoming more aggressive on pricing to reclaim market share.

Answer

President & CEO-Elect Seth Runser expressed confidence that the new business is sticky. He explained that ArcBest acts as a strategic advisor, helping customers navigate uncertainty with solutions that provide cost efficiency and supply chain stability. This partnership model, he argued, differentiates ArcBest from competitors and fosters long-term relationships across all solutions, not just LTL.

Ravi Shanker asked about the apparent divergence in demand between the weaker LTL market and a stronger TL market. He also questioned if there is still an opportunity for mid- to high-single-digit pricing when the freight cycle recovers.

Answer

President Seth Runser addressed the freight environment, noting the length of the cycle and uncertainty from weather and potential regulations, but stated ArcBest is well-positioned for any environment. Chief Strategy Officer Christopher Adkins handled the pricing question, reaffirming the company's long-standing discipline of securing contractual rate increases regardless of the market to offset cost inflation, supported by the premium service customers value.

Ravi Shanker asked about the difference between CN's guidance and that of its peers, particularly direct competitors. He questioned whether this delta is primarily due to CN's new guiding philosophy or if there are idiosyncratic differences in CN's end markets or comparative base for the year.

Answer

Tracy Robinson, CEO, explained that CN's new guidance model reflects the current volatile environment, where many peers and CN have had to adjust or miss guidance. She stated it's the 'right model for right now' given unique volatility from tariffs and currency. She also noted CN's greater exposure to Canada compared to peers. Ghislain Houle, CFO, quantified specific headwinds for 2026: approximately CAD 100 million less in capital credits due to a smaller capital program, close to CAD 100 million less in other income compared to 2025, and an increasing effective tax rate (24.7% in 2025 to 25-26% in 2026), all of which CN is working to offset through productivity.

Ravi Shanker asked about the delta between CN's guidance and its peers' guidance, particularly its direct peer, questioning if it's solely due to CN's new guiding philosophy or if there are idiosyncratic differences in end markets or comps.

Answer

Tracy Robinson, President and CEO, explained that CN's new directional guidance reflects the current volatile environment, especially regarding tariffs and currency. She noted CN's greater exposure to Canada compared to some peers, which influences tariff sensitivity. Ghislain Houle, Chief Financial Officer, added that specific headwinds for 2026, such as lower capital credits, reduced other income gains, and a higher effective tax rate, also contribute to the guidance.

Ravi Shanker asked for more detail on how customers are rethinking their supply chains in both the short and long term in response to the current environment.

Answer

Interim Chief Commercial Officer Janet Drysdale explained that in the short term, customers in areas like metals are using CN's network to create alternative intra-Canada and intra-US supply chains. In the long term, customers are exploring ways to reduce exposure to the U.S. market and increase offshore exports, a strategic conversation CN is actively engaged in with them.

Ravi Shanker followed up on customer conversations regarding long-term tariff impacts, asking if these discussions are accelerating and if any major projects in CN's pipeline have been pushed out as a result.

Answer

CEO Tracy Robinson stated that very few, if any, projects have been delayed, with most customers in a "wait-and-see" mode. CCO Remi Lalonde provided a specific example, noting Dow paused its Path to Zero project investment, but clarified this was not expected to impact CN's volumes until 2028 anyway. Conversely, he highlighted strength in other areas, like a new frac sand facility, showing a balanced pipeline.

Ravi Shanker inquired about CN's long-term investment plans for its international gateways like Prince Rupert and Halifax, considering the ongoing disruptions in global supply chains.

Answer

President and CEO Tracy Robinson stressed the importance of being nimble. Chief Commercial Officer Remi Lalonde added that both ports have ample room to grow and that CN is already making significant investments, such as adding bridge capacity at Prince Rupert, to enhance flow and service reliability for customers.

Ravi Shanker from Morgan Stanley asked for the normalized run rate of new business growth to better understand the split between a macro rebound and CN-specific initiatives.

Answer

President and CEO Tracy Robinson stated that CN-specific initiatives are expected to contribute about 50% of volume growth, enabling the company to grow faster than the overall economy. She noted that this growth can be 'choppy' and will provide a more detailed view for 2025 in January.

Ravi Shanker asked about Mark Rourke's perspective on 2026, including bid season pricing assumptions for the midpoint and high end of the guidance, and Darrell Campbell's supply-side assumptions underpinning the financial outlook.

Answer

Mark Rourke, President and CEO, indicated mid to low single-digit contract renewals in the network business, emphasizing a continued lean into price recovery. He also highlighted intermodal volume growth despite mixed revenue per order. Darrell Campbell, EVP and CFO, explained that the guidance assumes continued supply exit due to regulatory enforcement, with the pace influencing movement within the range. He also noted the embedded $40 million in cost savings for 2026 and other factors supporting the midpoint.

Ravi Shanker of Morgan Stanley inquired about the 2026 guidance, specifically asking for insights into bid season pricing expectations at the midpoint and high end, and the underlying supply-side assumptions.

Answer

Mark Rourke, President and CEO, indicated mid to low single-digit contract renewals in Network, with an expectation to lean into price recovery. Darrell Campbell, EVP and CFO, explained that the guidance assumes continued supply exit due to regulatory enforcement, with the pace influencing the range. The midpoint includes $40 million in cost savings and growth in differentiated areas like Intermodal and specialty Dedicated.

Ravi Shanker asked how Schneider navigates pricing conversations with customers amid extreme uncertainty and polar opposite market outcomes, and also inquired about the company's reaction to Aurora's commercial launch of autonomous trucks.

Answer

EVP & Group President Jim Filter explained that during allocation events, they clearly state their market assumptions to customers, allowing for further discussion if conditions change. CEO Mark Rourke responded to the Aurora question by expressing respect for their capability and confirming Schneider's ongoing engagement, currently hauling lanes in Texas with a safety driver. He stated they will continue to explore use cases for the technology.

Ravi Shanker requested quantification on current rate renewals, referencing peer commentary, and asked if the recent market strength is transitory or sustainable through the first quarter.

Answer

CEO Mark Rourke stated that while it's very early in the renewal season, discussions are more constructive than in the past two years. He noted a significant spot price increase from Thanksgiving through January. EVP and Group President Jim Filter added that customers understand the need to cover cost inflation, like insurance, and are locking in rates to secure capacity.

Representing Ravi Shanker of Morgan Stanley, Christine Burby asked about the path to profitability for the one-way network business, which is currently operating at a loss. She also inquired if customers were discussing a potential freight pull-forward ahead of possible 2025 tariffs.

Answer

CEO Mark Rourke outlined a multi-pronged strategy to improve network profitability, focusing on rate restoration, growing owner-operator capacity through the new Freight Power platform, and minimizing network volatility by expanding the Dedicated and Intermodal segments. EVP Jim Filter stated that there have not been significant customer discussions about a pre-tariff pull-forward, as their current focus is on the normal holiday replenishment cycle.

Ravi Shanker asked for confirmation if the January 27th changes are performing better than expected, inquiring whether both incoming revenues and 'book away' are higher, or if 'book away' is lower. He also questioned if the initial high ancillary revenues might normalize or improve over time, given potential customer surprise.

Answer

COO Andrew Watterson confirmed that the new seating products are performing better than expected, noting 'book away' from other carriers due to poor reliability is a benefit, with those customers now buying higher fares or standalone seats. He added that ancillary benefits increase with fuller flights, as customers at the gate show a higher propensity to buy up.

Ravi Shanker asked for confirmation that the January 27th changes are performing better than expected, and whether both incoming revenues and 'book away' are higher or lower than anticipated. He also questioned if there's a risk of ancillary revenues normalizing over time or if they are expected to improve.

Answer

COO Andrew Watterson confirmed that the Extra Legroom and assigned seating initiatives are performing better than expected. He noted that book away from other carriers due to poor reliability is a consistent tailwind, with those customers now buying standalone seats or higher fares. He added that ancillary benefits increase with fuller flights, as customers show a higher propensity to buy up at the gate.

Ravi Shanker of Morgan Stanley inquired about customer feedback from recent surveys on new initiatives and the potential for a 'Bookaway' effect, where customers might book with other airlines due to the changes.

Answer

Chief Operating Officer Andrew Watterson explained that Southwest constantly surveys its customers and that recent sentiment has evolved positively as customers better understand the new policies. He noted that engaged customers realize their benefits are preserved or enhanced, and the company has seen no evidence of 'Bookaway' in its real-time data, with customer satisfaction exceeding his expectations.

Speaking on behalf of Ravi Shanker of Morgan Stanley, an analyst asked for an outlook on industry capacity for mid-2025 and for a progress update on the premium cabin initiative since the Investor Day.

Answer

COO Andrew Watterson and CEO Bob Jordan conveyed a belief that the industry capacity backdrop will remain constructive for years due to OEM constraints at both Boeing and Airbus. On the premium cabin initiative, CEO Bob Jordan highlighted the recently amended Chase co-brand agreement as a key milestone. COO Andrew Watterson added that the successful launch of dynamic pricing for upgraded boarding serves as a technological proof point for the new products.

Ravi Shanker inquired about the potential impact of the harbor maintenance tax exemption possibly going away on CPKC's cross-border volumes.

Answer

EVP and CFO Nadeem Velani stated that the cross-border volume business specific to that tax is currently very small for CPKC, and therefore, he does not foresee a significant impact if the fees or regulations change.

Ravi Shanker, Managing Director at Morgan Stanley, asked about the potential implications for CPKC's cross-border volumes if the harbor maintenance tax exemption were to be eliminated, seeking the company's view on the impact.

Answer

Nadeem Velani, EVP and Chief Financial Officer, stated that the cross-border volume business specific to this tax is currently very small for CPKC, and therefore, he does not foresee a significant impact if the fees or regulations were to change.

Ravi Shanker questioned if CPKC's long-term pricing target of 3%-4% might be raised, given that pricing has been above this target for several quarters, or if it's expected to revert.

Answer

EVP and CMO John Brooks stated that while inflation has come down, CPKC's pricing discipline, focused on the value of service and capacity, continues to outperform peers. He expects pricing targets for his sales team to remain in that neighborhood for 2026. EVP and CFO Nadeem Velani added that a stronger macro environment would support incremental pricing, but CPKC hasn't benefited from that in the past 10 months.

Ravi Shanker asked about CPKC's pricing trends, noting they have been above the long-term target of 3-4% for several quarters, and whether there's an opportunity to raise that long-term target or if current performance is an overperformance.

Answer

EVP and CMO John Brooks stated that while inflation has come down, CPKC will continue to push hard for pricing based on service and capacity, aiming for targets in the 3-4% neighborhood for 2026. EVP and CFO Nadeem Velani added that a stronger macro environment would be supportive of incremental pricing, but CPKC has not benefited from that in the past year.

Ravi Shanker asked for more detail on the impressive 40% year-over-year growth in MMX intermodal service volumes, questioning if it was related to tariffs or a pull-forward of demand.

Answer

EVP and CMO John Brooks attributed the strong growth to a successful sales effort for a superior, truck-like service. He highlighted key drivers including a new, sizable automotive parts contract and the ramp-up of refrigerated business with partner Americold, stating he expects the growth trajectory to continue.

Ravi Shanker of Morgan Stanley asked about the company's contingency plan and cost flexibility if a prolonged cliff in incoming port volumes were to occur, referencing a potential 'pandemic playbook'.

Answer

President & CEO Keith Creel asserted that the company never takes a 'wait and see' approach. He emphasized their ability to see volume changes weeks in advance and react quickly by adjusting crew starts, fleet sizes, and yard expenses, stating the company is always prepared for a downturn even if not planning for one.

Ravi Shanker noted that customer surveys show a shift towards CPKC's MMX service and asked if this was due to a maturation of the offering or a recent change in commercial strategy.

Answer

EVP and CMO John Brooks agreed it is a maturation of the service, resulting from a natural sales cycle and a proven track record of performance. He gave an example of a customer who tested the service extensively before awarding a significant piece of business. Brooks noted the progress is impressive given the challenging trucking market and stated that new offerings via the Meridian Speedway to CSX and NS will continue to open up the portfolio of options for shippers, leading to more growth.

Ravi Shanker asked if JetBlue was observing a "chilling impact" on forward bookings in the Caribbean due to recent airspace warnings and restrictions, similar to what some peers reported, beyond the quantified impact of the early January shutdown. He also inquired about early feedback on the JFK lounge and the potential for a broader network of domestic lounges.

Answer

President Marty St. George confirmed a temporary booking depression for a couple of weeks following the disruption, particularly during the New Year's return, but stated it was less severe than what other airlines reported, and forward-looking bookings were now fine due to JetBlue's diversified Caribbean network. CFO Ursula Hurley stated there are no plans for a network of lounges, but the JFK lounge has been successful with 80%+ NPS and driving premium card sign-ups. She added that the Boston lounge is opening this year, and Fort Lauderdale is being evaluated, but any lounge expansion would require a strong return and alignment with premium customer initiatives.

Ravi Shanker asked if JetBlue observed any chilling impact on forward bookings in the Caribbean due to recent airspace warnings/restrictions, beyond the initial shutdown, and sought early feedback on the JFK lounge, including its measurable impact on loyalty, and the potential for a broader network of domestic lounges.

Answer

Marty St. George, President, confirmed a couple of weeks of booking depression in the Caribbean, but noted a quick recovery, attributing it to JetBlue's diversified Caribbean network. Ursula Hurley, CFO, reported 80%+ NPS for the JFK lounge, driving premium card sign-ups, and stated that while Boston is next, a broader network of lounges is not planned, with future lounges evaluated based on strong returns and alignment with premium customer initiatives.

Ravi Shanker from Morgan Stanley asked whether the continued challenges in trough periods are cyclical or structural, and how this influences 2026 capacity planning, particularly for Q1. He also requested further details on JetBlue's corporate comments, specifically regarding strong yield growth and activity on the East Coast, particularly in finance.

Answer

Marty St. George, President of JetBlue Airways, stated that challenging troughs are a perennial issue for leisure-focused airlines, not new, and common during economic slowdowns. He expects troughs to eventually normalize but acknowledged they will always present a challenge for the business. St. George clarified that corporate business is a small segment for JetBlue, significantly reduced in corporate-heavy markets. He noted strong double-digit yield increases in their corporate markets, primarily driven by Mint and competitive pricing, but reiterated that leisure remains the company's core focus.

Ravi Shanker from Morgan Stanley asked about the implementation timeline for the 'Blue Sky' partnership, questioning if the ramp-up would be lumpy or linear. He also asked about the risk of demand weakness resuming in the fall and whether the industry has cut enough capacity.

Answer

CEO Joanna Geraghty explained the implementation will be staged, with earn/burn and interline sales coming sooner (in 2026) and the Paisley integration later, with a full run-rate not expected until 2028. President Marty St. George stated he is more concerned about industry capacity than a drop in demand. CEO Geraghty added that JetBlue has a proven playbook to react quickly to demand shifts by cutting costs and capacity.

Ravi Shanker sought confirmation on monthly booking trends since January and asked if 'peakier peaks' create a RASM opportunity. He also questioned why demand was strong in secondary cities despite the weak macro environment.

Answer

President Martin St. George confirmed that March was the weakest trough period, while April benefited from a strong peak period with high single-digit RASM growth. He noted that revenue management is focused on maximizing revenue during these peaks. Regarding secondary cities, he explained that these markets had long-standing demand for JetBlue's service, and the brand's strong value proposition and improved product quality are resonating very well with customers, leading to strong bookings.

Ravi Shanker inquired about transatlantic demand trends and the potential for summer upside. He also asked if the $95 million outperformance on 2024 revenue initiatives was a pull-forward or indicative of potential upside to the total target.

Answer

President Marty St. George described the transatlantic market as still in ramp-up but expressed optimism, citing strong growth in Mint premium cabin yields. He noted that most transatlantic aircraft deliveries are deferred, stabilizing the network. He confirmed the $95 million revenue initiative beat is currently viewed as a pull-forward of future benefits, though he remains optimistic about all JetForward initiatives.

Ravi Shanker asked about the long-term earnings growth trajectory and normalized EPS, considering the significant changes since the 2024 Investor Day.

Answer

Carol Tomé (CEO, UPS) acknowledged the substantial changes since 2024, particularly the Amazon glide-down, which was not planned then. She requested patience, stating that 2026 is a pivotal year for UPS, and a new long-term view would be provided after the year concludes.

Ravi Shanker asked about the company's long-term earnings growth trajectory and normalized EPS, given changes since the 2024 Investor Day and the Amazon glide down.

Answer

Carol B. Tomé (CEO, UPS) acknowledged significant changes since 2024, including the Amazon glide down, and requested that the company be allowed to get through 2026, which she described as a pivotal year, before providing an updated long-term outlook.

Ravi Shanker inquired about UPS's significant headcount reductions, particularly for drivers and in buildings, and how this aligns with the union's commitment to net job increases over the contract's remaining two and a half years.

Answer

Carol Tomé, CEO, affirmed that UPS is in compliance with the terms of its contract. Brian Dykes, CFO, explained that the contract allows UPS to offer full-time positions to part-time employees, which is beneficial for career pathing and creating committed, trained workers. He clarified that this process does not necessarily change net headcount but rather facilitates internal transitions.

Ravi Shanker inquired about how UPS plans to reconcile recent headcount reductions with the union's commitment to net job increases throughout the duration of the current contract, and whether the company anticipates needing to rehire to meet those commitments.

Answer

Carol Tomé, CEO, affirmed that UPS is in compliance with the terms of its contract. Brian Dykes, CFO, clarified that the contract allows for offering full-time positions to part-time employees, which creates career pathing and does not significantly alter net headcount, while fostering a committed workforce. He also offered to clarify any confusing messaging on this topic.

Ravi Shanker of Morgan Stanley asked for the percentage of U.S. Domestic volume attributed to Amazon and inquired about the potential risk from Amazon scaling its own in-house returns program.

Answer

CFO Brian Dykes estimated that Amazon represents around 20% of U.S. volume. Regarding returns, he and Chief Commercial and Strategy Officer Matthew Guffey expressed confidence in UPS's position, citing the convenience of its 5,200-store physical footprint and the enhanced digital experience from the Happy Returns acquisition, which offers a 'no box, no label' solution. CEO Carol Tomé provided further context on the volume glide down, noting it will accelerate from 250k packages/day/year to 1.25M packages/day/year.

Ravi Shanker questioned the logic of increasing peak season hiring to 125,000 people while customer volume expectations are softening.

Answer

CEO Carol Tomé justified the higher number by noting that this year's volume is expected to be positive, unlike last year's decline, but stressed that UPS will only hire what is needed and has the technological flexibility to adjust hiring plans instantly. Executive Nando Cesarone added that the hiring mix is more favorable, with a 10% increase in seasonal helpers who improve driver productivity.

Ravi Shanker asked if the 2026 guidance's high end already bakes in current US domestic demand levels, implying potential upside if domestic demand normalizes further. He also requested key takeaways from the IT audit and actions taken to prevent future outages.

Answer

Ben Minicucci, CEO, Alaska Air Group, and Andrew Harrison, EVP and CCO, Alaska Air Group, clarified that if current demand trends flatten, the midpoint is achievable, but continued improvement could lead to the high end. Ben explained that IT outages were due to configuration issues and hardware failures, not lack of investment. Experts are assisting in reconfiguring infrastructure for resilience, with mitigation efforts and associated spending already included in the 2026 budget.

Ravi Shanker asked if the 2026 guidance's high end, which points to current trends continuing, bakes in the current level of U.S. domestic strength, and if normalization of U.S. domestic demand would represent upside. He also inquired about the key takeaways from the IT audit, the issues identified, and actions being taken to prevent recurrence of outages.

Answer

Ben Minicucci, CEO, clarified that current trends are factored into the guidance, and if they flatten, the company feels good about the midpoint or better, but if they continue to improve and fully backfill missing revenue from last year, it would lead to the high end. He noted that domestic performance in Q4 was strong, especially in main cabin and Saver fare. Regarding IT outages, he stated they were due to configuration issues, hardware failures, and backup systems not kicking in, not a lack of investment. Experts are helping configure infrastructure for resilience, and mitigation spending is already in the budget.

Ravi Shanker asked if Hawaii could benefit as an alternative for U.S. travelers avoiding international trips and about the potential impact of local tourism restrictions. He also questioned if the strong Hawaiian loyalty momentum is an early peak or if it will accelerate with full integration.

Answer

Executive Shane Tackett positioned Hawaii as a "durable premium market" and a great alternative as international travel normalizes. Executive Andrew Harrison stated that loyalty momentum will "continue to accelerate" with the upcoming single loyalty program and new premium card. CEO Benito Minicucci added that they have just "scratched the surface" on the loyalty opportunity, expecting it to grow as integration progresses.

Ravi Shanker of Morgan Stanley asked about the timeline for realizing integration gains, such as the combined booking system and loyalty program, and if it could be accelerated. He also inquired about the company's fuel cost profile, given the different structures of Alaska and Hawaiian.

Answer

CCO Andrew Harrison provided a clear timetable, stating the single loyalty process will be complete by October and the single passenger service system by April of the following year, calling them 'hard dates.' CFO Shane Tackett noted the Q1 fuel price is tracking around $2.65. He explained that Hawaiian has a different cost structure supplied from Singapore but that the company's overall hedging program has been suspended, resulting in minimal recognized hedge expense this year.

Ravi Shanker asked about the source of the incremental customer for the expanding premium cabin and sought confirmation that customer booking behavior has normalized following the January Flight 1282 incident.

Answer

CCO Andrew Harrison explained the incremental premium customer comes from "all of the above"—main cabin conversions, partners, and competitors—driven by better merchandising and a strong appetite for the product. Both Harrison and CEO Benito Minicucci confirmed there are no lingering impacts from the grounding, with Minicucci highlighting the company's 2023 DOT ranking for the lowest customer complaints as a testament to their operational strength.

Ravi Shanker inquired about the strategy for protecting acquired brands and retaining customers/drivers while unifying the LTL brand, the implications for other brands, and early insights into the truckload bid season.

Answer

CEO Adam Miller clarified that the LTL strategy shifted to a single brand for customer clarity, a difficult but necessary decision. He explained the integration of Abilene Motor Express into Swift Transportation due to Abilene's struggles, aiming for efficiency and better driver opportunities within Swift's network, confirming no other brands would undergo this. For TL bid season, he reported constructive conversations, positive rate expectations (low to mid-single digits), and a potential shift from brokers to assets due to regulatory capacity exits. CFO Andrew Hess added that customers are looking to increase asset coverage in bids.

Ravi Shanker asked how the company protects against customer and driver losses when integrating acquired brands like Abilene into Swift and unifying the LTL brand, and for early comments on the truckload bid season.

Answer

CEO Adam Miller explained the LTL strategy shifted to a single brand for customer preference and maximized network potential. Abilene Motor Express was integrated into Swift due to its smaller size and struggles, aiming for efficiency and driver success within a more robust network. He noted constructive early conversations for the TL bid season, with positive rates and no pressure to reduce rates, supported by ongoing capacity reductions from regulatory enforcement.

Ravi Shanker (Morgan Stanley) asked if the anticipated capacity tightening is reflected in current guidance, sought an update on early 2026 bid season conversations, and inquired about the timeline for knowing if additional special peak season projects will materialize.

Answer

CEO Adam Miller confirmed that while some capacity tightness is observed in certain brokerage markets, it is not yet widespread and is not factored into the Q4 guidance. He reiterated that the capacity impact from regulatory changes is expected to build into 2026, potentially over a one-to-two-year timeline. Regarding peak season projects, Miller stated that current guidance only includes awarded projects, with potential additional projects similar to last year's mid-Q4 developments not yet confirmed or included, offering potential upside if they materialize.

Ravi Shanker asked for confirmation that current guidance does not reflect capacity tightness, an update on the 2026 bid season, and when visibility on potential mid-Q4 peak season projects would be available.

Answer

CEO Adam Miller confirmed that current guidance does not include widespread capacity tightness, though pockets are observed, with broader impact expected in 2026. He reiterated that Q4 guidance only includes already-awarded projects, and any additional significant peak season projects are not factored in, with visibility on such projects being a moving target.

Ravi Shanker of Morgan Stanley questioned the moving parts behind the gain on sale of equipment, which was lower than expected in Q2 but is guided to increase in Q3.

Answer

CEO Adam Miller explained that the used equipment market can be volatile and that Q2 results were impacted by being short on inventory for certain in-demand items. CFO Andrew Hess added that the company's capital expenditures are back-end loaded for the year, which will result in more used equipment becoming available for sale in the second half, supporting the higher Q3 guidance.

Ravi Shanker asked for clarification on the seemingly contradictory message of having downside risk in the guidance while also achieving low to mid-single-digit price increases, and whether this was based on actual changes in customer behavior.

Answer

Executive Adam Miller explained the conservative outlook is based on direct feedback from dozens of large customers. He categorized them into three groups: one-third proceeding as normal, one-third in a 'wait-and-see' mode drawing down inventory, and one-third who have actively canceled or stopped orders from China. This customer sentiment and their volume forecasts are what's driving the cautious guidance. Executive Andrew Hess added that customers' actions are a reaction to tariff costs, not a weakened view of the consumer.

Ravi Shanker questioned why the guidance reflects only "normal seasonality" when recent data points suggest better-than-seasonal strength, asking if the recent strength is considered unsustainable.

Answer

Adam Miller, an executive, responded that it is too soon to draw sweeping conclusions from recent data, especially with weather disruptions making trends difficult to read. He stated the guidance is based on what they believe is achievable now. While acknowledging positive signs like higher rejections and less truck availability, Miller emphasized the need for more sustained data before adopting a more aggressive market view.

Ravi Shanker from Morgan Stanley inquired about the observed shift of customers from brokers to asset-based carriers, its comparison to prior cycles, and its potential effect on rate volatility.

Answer

Executive Adam Miller confirmed the cyclical shift towards asset-based carriers is occurring but highlighted that a new, significant driver is cargo security. He explained that rising cargo theft is causing shippers to prioritize the robust security of large asset players over small cost savings from brokers, a dynamic not as prevalent in past cycles.

Ravi Sanker sought clarification on the nature of Aurora Innovation's relationship with International (buying trucks versus an OEM partnership) and the timeline for commercial launch. He also asked about the bill of materials (BOM) cost for Gen 2 and Gen 3 hardware and the timing for discussing pricing with OEM partners and customers.

Answer

CFO David Maday confirmed Aurora is buying stock trucks from International for upfitting, not engaging in a co-development partnership, leveraging Aurora's extensive integration experience. Co-Founder and CEO Chris Urmson added that the International LT Series truck is expected to be driverless in Q2 2026. David Maday stated that Aurora has good insight into the BOM costs for the Aurora Driver, which are factored into the 'driver-as-a-service' subscription model, with more specific pricing details to be provided later.

Ravi Shanker inquired about the customer and industry feedback since the driverless launch, the gating factors for scaling the fleet, and which metrics the company will report going forward.

Answer

CEO Chris Urmson described the feedback as universally enthusiastic, noting it has crystallized partner conversations. CFO David Maday added that customer interest is very high. On scaling, Urmson cited operational execution and exercising the full product suite as the current focus. Maday stated that development metrics like ARM and API will be retired, with future reporting focused on value demonstration, including driverless miles and revenue.

Ravi Shanker followed up on the non-domicile CDL role, asking about the timing and indirect impact on Ryder, drawing comparisons to past regulatory changes like the ELD mandate. He also inquired about structural trends in private fleet growth and the ongoing defleeting phenomenon.

Answer

Robert Sanchez, Chairman and CEO, stated that while the timing of the CDL impact is uncertain, an estimated 5% of drivers could exit over a couple of years, tightening the driver market. This tightening typically benefits outsourcing, increasing demand for dedicated services and transactional leasing. He confirmed that private fleets have been defleeting over the last two to three years, a trend believed to be nearing its end.

Ravi Shanker sought clarification on whether CSX is already seeing opportunities due to the merger, and how far in advance customers plan rail sourcing or shifts.

Answer

Mike Cory, EVP and COO, clarified that current market opportunities are a result of consistent team efforts over years, now materializing as the industry focuses on growth and improved operations, noting increased industry cooperation.

Ravi Shanker of Morgan Stanley asked for the expected run-rate of 'Other Revenue' and inquired about any other lumpy or unexpected items in Q2 that contributed to the strong operating ratio performance.

Answer

EVP & CFO Sean Pelkey projected 'Other Revenue' at $115-120 million per quarter, noting Q2 benefited from a non-recurring reduction in freight-in-transit reserves. He also identified a net favorable impact of about $20 million in 'Purchased Services and Other' from items like casualty results, which will create a headwind in Q3.

Ravi Shanker asked for a reminder on the pricing floors in CSX's coal contracts and requested guidance on a sustainable run rate for the 'Other Revenue' line item.

Answer

EVP and CCO Kevin Boone confirmed that coal contracts have pricing floors and that current prices are above those levels. CFO Sean Pelkey advised that the Q1 'Other Revenue' figure of approximately $115 million serves as a good run rate for the remainder of the year, with some potential variability.

Ravi Shanker asked about customer conversations regarding the recent series of discrete items and operational bottlenecks, and whether there is a risk of market share shift as a result.

Answer

EVP and CCO Kevin Boone stated that customers are excited about the significant investments being made, which will allow them to reach new markets. CEO Joe Hinrichs added that despite disruptions, customer Net Promoter Scores reached all-time highs in Q3 and Q4. He attributed this to proactive communication and a commitment to finding solutions, which builds long-term confidence and drives volume growth.

Ravi Shanker of Morgan Stanley asked about the impact of the government shutdown, seeking quantification, potential outcomes, and whether the Q4 guidance includes an 'act of God' provision for a continued shutdown.

Answer

President Brett Hart stated that despite press, air traffic controllers are professional, and the system is running well, with no measurable impact on bookings in the first couple of weeks of October. He expressed hope for a political resolution but acknowledged that risk grows with prolonged shutdown. EVP and CFO Mike Leskinen confirmed that the Q4 EPS guidance range was calibrated with a government shutdown in mind, allowing for reasonable room but not infinite.

Ravi Shanker of Morgan Stanley inquired about the expected resilience of the loyalty and co-brand business in a consumer recession and confirmed if fuel price assumptions were consistent across both full-year guidance scenarios.

Answer

EVP and CFO Mike Leskinen and EVP and CCO Andrew Nocella both expressed high confidence in the loyalty business, citing its resilience during the pandemic and the strengthening effect of growing the brand-loyal customer base. Leskinen confirmed the fuel price assumption is the same in both scenarios, acknowledging that a recession could provide a further, un-modeled tailwind from lower fuel prices.

Ravi Shanker inquired about the potential of Starlink as a competitive differentiator and asked if the company plans to host an Investor Day to discuss the loyalty program and other strategic initiatives.

Answer

EVP and CCO Andrew Nocella described Starlink as a 'game changer' for enhancing the customer experience and growing the MileagePlus program. EVP and CFO Mike Leskinen stated that while an Investor Day is an important tool, the timing is still under discussion, as they find earnings calls effective for communicating their long-term strategy.

Ravi Shanker asked about J.B. Hunt's current technology investments, specifically regarding J.B. Hunt 360°, the technology capital envelope, key initiatives, and how the ICS business is expected to evolve from a technology and automation perspective over the next three to four years.

Answer

CEO and President Shelley Simpson detailed J.B. Hunt's strategy to transform logistics through J.B. Hunt 360°, leveraging 50 deployed AI agents to automate tasks and streamline operations. She cited examples like 60% automated third-party carrier check calls and 73% auto-accepted orders. She emphasized empowering people, improving operational performance, and enhancing customer experience, particularly for small to mid-sized ICS customers, and mentioned a partnership with UpLabs for process and technology rewriting.

Ravi Shanker posed a long-term question to Shelley Simpson regarding J.B. Hunt's technology investments, specifically J.B. Hunt 360°. He asked about the current technology capital envelope, key initiatives, and the envisioned future state of the ICS business from a technology and automation perspective three to four years from now.

Answer

CEO Shelley Simpson highlighted J.B. Hunt's strategy to transform logistics through J.B. Hunt 360°, focusing on smarter, more predictive, and automated processes. She cited examples like 50 AI agents deployed, 60% automated third-party carrier check calls, and 80% paper invoices paid without manual touch. She emphasized that technology empowers people, improves operational performance, enhances customer visibility, and will significantly aid ICS in growing with less technologically sophisticated small to mid-sized customers.

Ravi Shanker of Morgan Stanley observed the convergence of Intermodal and Dedicated EBIT, asking if this trend is cyclical or structural and how the profitability of these two segments might diverge during a market upcycle.

Answer

SVP of Finance Brad Delco attributed the convergence primarily to the current market cycle, noting Dedicated is performing closer to its margin targets than Intermodal is. Intermodal President Darren Field and Dedicated President Brad Hicks both acknowledged the friendly internal competition, with each expressing confidence in their segment's growth and path to target margins.

Ravi Shanker of Morgan Stanley asked about the competitive intensity in the dedicated market and whether the 'rate repair' needed in Intermodal would require multiple pricing cycles to achieve.

Answer

Brad Hicks, President of Dedicated, said the market is not more competitive than it has been, with their focus remaining on private fleet conversions. Darren Field, President of Intermodal, clarified that 'margin repair' is the goal and will likely take more than one bid cycle to fully achieve, particularly given the current excess capacity in the network.

Ravi Shanker sought clarification on the BNSF commentary, asking if management believes BNSF will not implement PSR at all and how J.B. Hunt's strategy would change if they did.

Answer

Darren Field, President of Intermodal, stated unequivocally, "I don't believe BNSF is implementing PSR." He emphasized that their joint dialogue is focused on efficiency and customer needs, which is different from a PSR strategy, and that BNSF is committed to growing its Intermodal business.

Ravi Shanker asked about customer reactions to the expiry of the de minimis rule, whether this represents a new normal, and if there was any pull-forward of international volumes that benefited Q1.

Answer

EVP & Chief Customer Officer Brie Carere described the de minimis period as stressful for customers, particularly small exporters, and highlighted FedEx's partnership and digital automation support. She refrained from speculating on future trade environments but stated that FedEx does not see indications of pull-forward in international or domestic volumes, noting July's strength was due to Prime Week and U.S. retailers' sales.

Ravi Shanker of Morgan Stanley asked for the percentage of revenues tied to the de minimis rule and for confirmation on whether the European business is currently profitable.

Answer

President and CEO Rajesh Subramaniam stated that a minority of the company's export revenue base is covered under the de minimis exemption, with the majority linked to B2B volumes. He did not directly confirm profitability for Europe but highlighted the $600 million in DRIVE savings achieved there this fiscal year with more expected.

Ravi Shanker inquired about Frontier's path back to positive and eventually double-digit margins, as well as the airline's preliminary capacity plans for 2026.

Answer

CEO Barry Biffle outlined the path to improved profitability, citing improving forward booking trends, a reduction in competitive capacity in Frontier's markets, benefits from maturing routes, and incremental revenue from loyalty and premium products. Regarding 2026 capacity, Biffle stated that plans have not been set and will depend on how the broader industry adjusts its capacity in the coming months.

Ravi Shanker inquired about the potential for normalized earnings per share in the out-years beyond the 2025 guidance and asked about customer survey data or feedback regarding the introduction of premium and first-class products.

Answer

CEO Barry Biffle directed investors to company filings for long-term projections but noted that at 10% margins on a potential $5 billion revenue base, the math is straightforward. Regarding premium products, he stated that beyond positive survey feedback, the company has hard data from its UpFront Plus product, which achieved over 70% sold load factors in Q4, proving customers are willing to pay for a premium experience. Chief Commercial Officer Bobby Schroeter added that Frontier can deliver these products at a lower cost, making them accretive.

Ravi Shanker of Morgan Stanley inquired about the 2025 RASM trajectory with mid-single-digit capacity growth and questioned the key drivers behind management's confidence in reaching double-digit margins by summer 2025, a target significantly above street consensus.

Answer

CEO Barry Biffle stated that the path to double-digit margins is driven by maturing revenue initiatives, including the network, 'The New Frontier' premium products, and loyalty programs. Biffle emphasized that the most misunderstood factor is the maturation of the network, where 20% of capacity was redeployed and is expected to see a 20-30% RASM improvement, contributing 4-5% to overall RASM. He also cited a favorable industry capacity backdrop as a significant tailwind.

Ravi Shanker of Morgan Stanley asked for more details on the technology projects driving productivity, whether there are explicit targets associated with them, and for clarification on the projects required to reach the high end of the guidance range.

Answer

President & CEO Phillip Yeager explained that tech projects involve retiring legacy systems and building AI-driven tools on top of new platforms to enhance decision-making, with a focus on Final Mile and brokerage. He confirmed these initiatives have specific productivity targets that underpin the company's cost-saving goals. He clarified that reaching the high end of guidance depends on the successful ramp-up of $150 million in new annualized Final Mile revenue and the duration of the strong West Coast demand.

Ravi Shanker from Morgan Stanley inquired about the potential LTL margin ceiling achievable through internal actions and the impact of the current tariff environment on customer supply chains, particularly between the U.S. and Canada.

Answer

Alain Bedard, President, CEO & Chairman, detailed several internal initiatives to improve margins, including implementing Optum software for P&D, reducing claims ratios, and leveraging AI for labor efficiency. He noted that tariff instability has slowed U.S.-Canada trade, impacting their most profitable LTL lanes, and has caused U.S. industrial truckload customers to pause, depressing volumes.

Ravi Shanker inquired about the path to achieving $8 normalized EPS, asking how much of that journey depends on TFI's internal actions versus waiting for a cyclical recovery, and also asked for 2025 guidance.

Answer

Executive Alain Bedard explained that significant internal cost reduction work remains, particularly at TForce Freight and the recently acquired Daseke. He noted that without market improvement, cost optimization alone could bring EPS closer to the $7.00-$7.25 range. Bedard stated that TFI is not providing 2025 guidance due to the 'foggy' and difficult market environment, characterized by a deep freight recession at the start of the year.

Ravi Shanker asked about the earnings pressure in U.S. LTL, questioning whether it is cyclical or due to evolving industry dynamics post-Yellow. He also sought clarification on the full-year 2024 EPS guidance.

Answer

CEO Alain Bedard explained that TFI's focus is on improving its internal cost base and service levels in U.S. LTL, acknowledging that service is currently subpar according to a Mastio survey. He noted efforts to move more freight from rail to road and improve claims ratios. Bedard confirmed that due to challenging market conditions, the full-year 2024 EPS is now expected to be similar to 2023's performance.

Ravi Shanker of Morgan Stanley asked to what extent merger discussions have been precipitated by shipper customers asking for a single-line transcontinental rail service to better compete with trucks.

Answer

CEO Jim Vena responded that customers have always been consistent in their needs: reliable service to their markets, clear options, and a competitive price. He emphasized that by delivering on these fundamentals—growing the business, increasing revenue, and operating efficiently—Union Pacific aligns with its customers, who want to partner with a railroad that opens up opportunities for them.

Ravi Shanker inquired about Delta's view on recent industry capacity reductions, particularly at the lower end, and the outlook for supply in Q3 and Q4. He also asked for more detail on the rollout and customer reception of Delta's cabin segmentation strategy.

Answer

President Glen Hauenstein noted the industry has impressively removed about four points of domestic capacity since April, with September seats expected to be down year-over-year, calling it a significant reduction in a non-recessionary environment. Regarding cabin segmentation, Hauenstein explained the goal is to replicate the success of Main Cabin segmentation in premium cabins, offering more choices and price points to customers.

Ravi Shanker from Morgan Stanley inquired about Delta's view on recent industry capacity reductions, particularly at the lower end, and whether supply and demand are now balanced. He also asked for an update on the reception of Delta's cabin segmentation strategy.

Answer

President Glen Hauenstein responded that the industry has done an "amazing job" reducing domestic capacity, noting a four-point reduction by September, which he has rarely seen in a non-recessionary environment. Regarding cabin segmentation, he explained the goal is to provide more choices and price points across all cabins, using the Main Cabin segmentation as a successful template for premium products.

Ravi Shanker asked for a historical perspective on the anatomy of a downturn and whether the current stalled growth is a typical precursor to a decline. He also asked for the percentage of transatlantic revenue from European point of origin and how that capacity might be redeployed.

Answer

CEO Ed Bastian reflected that every downturn is different and this one is unique as it feels "self-imposed" due to trade issues, but the management team is experienced in navigating adversity. President Glen Hauenstein stated that European point of origin is about 20% of transatlantic revenue and that historically, there has been enough global demand to resell that capacity if needed.

Ravi Shanker questioned if the unusual Q1 strength in European demand was a pull-forward from the summer and asked about the pricing strategy between main, mid, and premium cabins as main cabin RASM gains momentum.

Answer

President Glen Hauenstein expressed high confidence that the European strength is incremental, driven by the strong U.S. dollar, and not a pull-forward. He explained that Delta's strategy is to decouple premium pricing from the main cabin to control its own destiny, focusing on driving premium growth through higher load factors to encourage customer trial and adoption.

Ravi Shanker from Morgan Stanley inquired about Delta's view on industry capacity levels for the first quarter and asked about the balance sheet strategy for 2025 regarding debt paydown versus cash returns.

Answer

President Glen Hauenstein expressed encouragement with the industry's capacity discipline and hypothesized that more capacity would likely be removed from Q1 schedules. CFO Dan Janki reiterated that the primary focus remains on consistent cash generation, reinvestment, and debt paydown to further strengthen the balance sheet.

Ravi Shanker followed up on cargo theft, asking about the timeline to mitigate it, the technologies being used, and potential recourse. He also asked about the upside potential if shippers build inventory over the next 90 days.

Answer

CEO Frank Lonegro described combating theft as a constant defensive effort, confirming investment in AI-based tools that are showing success. Regarding a potential surge, he noted Landstar thrives in volatility but that uncertainty in U.S. trade policy with Mexico and Canada remains a headwind. Executive James Applegate added that the company's long-term strategic initiatives in areas like heavy haul and cross-border provide a strong foundation regardless of short-term swings.

Ravi Shanker of Morgan Stanley questioned the potential for a contract renewal 'cliff' as agreements signed during the pandemic mature. He also asked for quantification of cost savings from GXO's new AI and automation projects.

Answer

CEO Malcolm Wilson stated there is no concern of a renewal cliff, citing a gradual renewal process and high customer satisfaction. Chief Strategy Officer Kristine Kubacki confirmed that the first non-pilot cost savings from AI were recorded in Q1, noting that while the 2025 financial impact is immaterial, it creates a 'flywheel' for significant future savings.

Ravi Shanker of Morgan Stanley asked for color on the upcoming peak season, GXO's positioning between in-store and online sales, and the level of customer interest in emerging technologies like humanoid robots.

Answer

CEO Malcolm Wilson stated GXO is relatively agnostic to the sales channel, as its omnichannel warehouses are designed to fulfill orders for both brick-and-mortar and e-commerce from common stock. Chief Strategy Officer Kristine Kubacki addressed the robotics question, confirming significant customer interest. She highlighted GXO's capital-efficient pilot programs with partners like Agility and Reflex Robotics to develop real-world use cases for humanoids, positioning GXO at the forefront of this emerging technology.

Ravi Shanker of Morgan Stanley asked how sensitive the corporate and indirect channel share recovery is to macroeconomic conditions and questioned if there was a lingering "book away" impact from the recent tragic accident.

Answer

Vice Chair Steve Johnson responded that the share recovery currently appears resilient to macro factors, with business traffic remaining strong. CEO Robert Isom acknowledged a material impact from the accident in Q1 but stated no future impact is anticipated.

Ravi Shanker of Morgan Stanley inquired about the profitability of the corporate business after adjusting economics for key accounts and asked about the airline's strategy regarding seatback screens versus bring-your-own-device in its premium cabins.

Answer

Vice Chair Steve Johnson explained that economics were adjusted for about 24% of corporate customers to be more competitive, and the resulting revenue is still highly accretive. CEO Robert Isom clarified that new long-haul international aircraft will feature new Flagship Suites with seatback screens, while the domestic fleet will focus on providing high-speed satellite WiFi across all mainline and dual-class regional jets.

Ravi Shanker from Morgan Stanley inquired about the indirect effects of strong European travel demand on Sun Country's domestic leisure markets and requested clarification on the expected trajectory of margins and CASM throughout 2025.

Answer

CEO Jude Bricker stated that strong transatlantic demand is a net positive, as it leads to a reallocation of competitor capacity away from Sun Country's markets, with no evidence of demand shifting from their core destinations. President and CFO David Davis added that the margin and CASM trajectory will follow a typical seasonal pattern, influenced by the delivery timing of new Amazon cargo aircraft. Jude Bricker also highlighted that Q2 2025 has the most upside relative to the prior year due to favorable capacity shifts and the timing of Easter.

Catherine, on behalf of Ravi Shanker, asked for an update on the five leased Oman aircraft and whether they would be added to the fleet. She also followed up on the potential RASM opportunity for the upcoming year given recent industry capacity reductions.

Answer

President and CFO David Davis confirmed the five Oman aircraft will be added to Sun Country's fleet but noted that lease extensions into 2026 are likely for some of them due to OEM delays affecting other airlines, which aligns with Sun Country's cargo growth timeline. CEO Jude Bricker addressed the RASM question, stating that while booking trends are positive through April 2025, there is not yet meaningful booking volume beyond that point to provide a full-year outlook.

Ravi Shanker asked for clarification on the tariff commentary, specifically questioning if there could be a tailwind from shippers restocking ahead of potential tariffs before any headwinds materialize.

Answer

CEO Mark George characterized the situation as one of 'uncertainty' and believes the net volume impact will likely be a 'wash' over time, as the network is now nimble enough to handle shifts between imports and domestic production. CMO Ed Boyle agreed, adding that over 75% of the business is tied to the domestic economy and the sales force is prepared to respond to any changes.

Ravi Shanker asked how much pricing power Norfolk Southern needs to counter inflation in 2025 for its productivity gains to translate to the bottom line.

Answer

CMO Ed Elkins expressed confidence in the ability to price above inflation in core markets due to increasing service value. CEO Mark George clarified that for the key Merchandise segment, the strong service product supports pricing power. However, Intermodal pricing is dependent on the truck market, and coal pricing follows external indices.

Ravi Shanker of Morgan Stanley requested more detail on management's comments regarding potential East Coast port labor actions and the resulting shifts in customer behavior.

Answer

Ed Elkins, Chief Marketing Officer, explained that with the ILA contract deadline approaching, shippers are hedging by increasing activity to the West Coast. He believes a shortage of seaborne containers will lead steamship lines to limit inland moves from the West Coast, thereby creating a surge in demand for domestic intermodal services from that region.