Shannon Doherty

Shannon Doherty asked if AerCap foresees systemic risk from financially weaker airlines failing to meet contractual return conditions due to high maintenance escalation costs. She also inquired about expectations for lease extension rates to decline or normalize and the run-off timeline for COVID-era leases.

Answer

CEO Aengus Kelly acknowledged that financially weaker airlines may fail to meet return conditions, but AerCap's scale allows it to provide alternatives, such as engine leasing or MRO slot access. Regarding lease extensions, Kelly expects them to persist due to OEM delivery delays and the reduced durability/increased shop time of new-generation engines, which will take well into the 2030s to improve. CFO Pete Juhas added that COVID-era leases represent about 12% of the fleet and will largely run off by 2031-2032.

Shannon Doherty asked if AerCap foresees any systemic risk to lessors from financially weaker airlines failing to meet contractual return conditions due to high maintenance costs. She also inquired about the expected decline or normalization of lease renewal rates and the percentage and run-off timeline of AerCap's COVID-era leases.

Answer

CEO Aengus Kelly acknowledged that airlines, often non-investment grade, may fail to meet return conditions, but AerCap's scale allows it to provide alternatives like engine leasing or MRO slots, citing examples with GOL and Spirit. He views this as part of daily business management. Kelly expects elevated lease extension levels to persist due to OEM delivery delays and the reduced durability/time-on-wing of new technology engines, which require more shop time. He anticipates time-on-wing improvements will flow through the fleet well into the 2030s. CFO Pete Juhas stated that COVID-era leases constitute about 12% of AerCap's fleet and are expected to largely run off by 2031-2032.

Shannon Doherty, an Equity Research Analyst at Deutsche Bank AG, asked for quantification of any current impact from the government shutdown, noting JetBlue's typically low government exposure. She also inquired whether domestic routing is expected to outperform international in the current quarter, and requested an update on demand by region.

Answer

Joanna Geraghty, CEO of JetBlue Airways, confirmed that the company had not seen any meaningful impact from the government shutdown but was monitoring the situation closely. Marty St. George, President of JetBlue Airways, stated that international demand continues to be stronger than domestic, and premium demand outperforms core. He noted that domestic routing "has a ways to go" but expressed optimism for future improvements with the introduction of new premium products, which will help JetBlue compete more effectively against legacy carriers.

Shannon Doherty, on for Mike Linenberg, questioned the competitive dynamics and yield environment in Seattle following the international expansion. She also asked for an update on the corporate revenue backdrop, particularly on the West Coast.

Answer

CCO Andrew Harrison expressed high confidence in the Seattle hub's success, citing network strength, loyalty, and One World partnerships. He acknowledged that while large tech and manufacturing corporate accounts on the West Coast remain soft, overall business travel has seen a double-digit booking increase recently, and the new global routes are expected to attract more corporate contracts.

Shannon Doherty of Deutsche Bank asked about the implications of dropping the lawsuit in Chicago for the airline's schedule and inquired about the potential impact of the Embraer tariff on aircraft deliveries.

Answer

CEO Robert Isom described Chicago as a major growth opportunity, stating they have the necessary gate capacity to increase peak departures to over 500 next year. Regarding Embraer, he expressed confidence that any tariff issues will be resolved through government and company negotiations, calling the E175 an exceptional aircraft and noting he does not anticipate long-term delivery problems.

Shannon Doherty from Deutsche Bank asked about demand trends in international markets beyond the U.S., such as Central and South America, and requested the number of grounded aircraft in Q2 and the full-year outlook for GTF engine issues.

Answer

EVP Holger Blankenstein confirmed that recovery trends are visible in both transborder and domestic markets, with close-in bookings enabling yield improvements. CFO Jaime Esteban Pous Fernández stated there were 36 grounded aircraft in Q2, a number expected to remain stable for the rest of the year, describing it as the 'new normal'.

Shannon Doherty, on behalf of Michael Linenberg at Deutsche Bank, asked about demand trends in international markets beyond the U.S., such as Central and South America, and requested a repeat of the number of grounded aircraft in Q2 and the outlook for the full year.

Answer

Holger Blankenstein, EVP of Airline Commercial & Operations, noted that recovery trends are visible in both transborder and domestic markets, with close-in bookings enabling yield improvements. CFO Jaime Esteban Pous Fernández confirmed there were 36 grounded aircraft in Q2, with a similar number expected for the rest of the year. He emphasized that this is the 'new normal' and the focus should be on ASM growth, which the company is managing effectively.

Shannon Doherty asked if the RASM gap between premium and main cabin could remain stable despite growing premium seat mix and inquired about the potential impact of a later Easter on travel patterns in the March and June quarters.

Answer

President Glen Hauenstein confirmed that Delta's 2025 plan assumes a continued premium revenue growth trajectory, with potential upside coming from an acceleration in main cabin performance. Regarding the calendar, he noted a later Easter is generally positive for the overall spring season as it lengthens the peak travel period.

Shannon Doherty from Deutsche Bank asked for specific drivers of the $150 million cost savings program and which revenue initiative management is most bullish on for achieving its 10-14% pre-tax margin target.

Answer

CFO Mark Mitchell identified the key cost-saving drivers as network simplification to over 80% out-and-back flying, crew base footprint optimization, aggressive headcount management, and automation. CEO Barry Biffle stated that while network maturity is the single largest contributor to reaching margin goals, he is most excited about the long-term potential of premium products and loyalty. He noted that loyalty revenue is currently just a few dollars per passenger, representing a massive untapped opportunity compared to industry peers.

Shannon Doherty of Deutsche Bank inquired about the reasons for E-Jet utilization remaining under six hours despite improvements in pilot attrition. She also asked about the potential for Mesa to return to mid-teen operating margins and what steps would be necessary to achieve pre-pandemic profitability levels.

Answer

Chairman and CEO Jonathan Ornstein explained that the low utilization is a temporary issue related to the time required to ramp up pilot training, which takes three to four months. He highlighted that pilot attrition is at a record low and training output is now producing a net gain of nearly 40 pilots per month. Regarding profitability, Ornstein stated that once the fleet reaches full utilization of over 10-10.5 hours per day, the company believes it can achieve consistent operating margins between 5% and 8%. He noted this could take another year to achieve and that there may be further cost-saving opportunities once operations stabilize.