An Aviation Crisis – with a Twist

Hello and welcome to the airline Weekly Lounge. I'm your host Gordon Smith,

and I'm joined as usual by co-host Jay Shabbat.

In part one, we're making sense of a busy few days of industry news,

and in part two, we turn our attention to the Philippines.

Hey Jay, how's it going? I'm good Gordon. How are you? Doing very, very well. I'm on my travels this week.

Got the sort of palatial splendor of a hotel room instead of my usual background in Portugal,

but we're keeping the show on the road literally here because it is such a busy time for the industry.

Magnemari Shuhu, obviously, is a familiar voice to many on the podcast. She's in Los Angeles today

with United. I think she's expecting to get some time with Scott Kirby and Agenda Seller,

the C-suite team there. So looking forward to some interesting news lines there. Keep an eye on

on Skift and airline Weekly for that. But Jay, we thought we'd start the show this week with just

a bit of a recap on what's going on because there are a lot of issues that in a normal week and

I know last week we spoke about. The airline industry is always in a state of flux. It's just a case

of how crazy it is. But there are a lot of elements just now that I think even within the airline

industry are notable and they are worth just updating our listeners and our viewers on.

Let's start with the fuel price. Where are we there? Because this is a crisis as we described

last week, which some people thought I might have a shop spike. And then we might come back down

to work quite quickly with political and diplomatic solutions. But that straight-of-home news is

proving pretty tricky. It is. I think crisis is the right word to use, particularly if you're

talking on the cost side of the industry. Of course, the demand side of the industry is a little

bit different, but we'll think we talked a little bit about last week how demand is actually very

strong throughout the industry. Let's talk a little bit more about that today. So it's a little

bit of a crisis, but at the same time, not everybody is experiencing it to the same degree.

Okay, so you asked me about the fuel price. So we are speaking on Tuesday, March 24th.

I will refresh my browser here, the price of oil, two major indices that we use or benchmarks

that we use. WTI, which is Texas. So that's a lot of US prices are based off that. Ben Schmark,

we're at 91. So that's we're down a little bit from where we were. And then the Brent, which is,

I would say, same majority of contracts are based off of the Brent. That is at 102. So that's

a little bit higher, but still down from where it was. So we're, you know, bit of a better position

this week, week four of the quote unquote crisis than we were a week earlier, but still very high.

And that's obviously just the oil price, the jet fuel price is a little bit harder to pin,

harder to pin down because it can vary so much on different parts of the world and even different

parts within each markets. But using the IATA jet fuel price monitor, their latest data,

they have jet fuel prices on average up 119% year on year. So we're talking about more than

double there. And you can see if if nothing else that that alone explains why we're using the term

crisis here. And if I can just say one, even get more specific, we'll talk more about

Sabu Pacific Airlines in the second part of our discussion here. And the reason we'll talk about

Dennis because they just reported their earnings. But the reason why that's relevant is because

we have a very fresh perspective on what this quote unquote crisis actually means to this one

individual airline. And they said over the past two or three weeks. And by the way, Sabu is what

we'll explain later for those who are new to the industry or don't know. Sabu is a low-cost

carrier in the Philippines. So remember last week we talked a lot about the US airlines,

their perspective. We get some insight from Asia now. They said over the past two weeks, two to

three weeks, jet fuel prices have increased significantly from an average of around $86 per

barrel in February to a run rate of approximately 180 through the month of March. And in recent days,

I think it was talking on Monday here. In recent days, it's exceeded $200 per barrel.

Thanks to that fuel price update, Jay, obviously a lot of caveats and a lot more detail that we

didn't get into there. But as always, a lot more detail in the next issue of airline weekly. And

we're keeping our readers abreast of other issues as well because obviously we've got the TSA

drama ongoing at US airports. I would be remiss not to mention the kind of express incident as well

at La Guardia as we're recording here on the 24th of March. Our thoughts go to everyone involved

in that situation there. But there's also just more general drama in the industry. Some changes

around Indigos, new strategy chief United big order. And I will have Megna as we mentioned

brings a lot more detail on that. Finair going for E2 jets. There's a lot more detail that we will

get into in the next issue of airline weekly. And we've also got some earnings as well coming

up Jay because you mentioned Cebu, which we're going to preview in part two. But some big

Brazilian carriers or really only the two biggest Brazilian carriers in town. Maybe if you exclude

Latin, which is more of a South American everywhere, anywhere player. But yeah, Go and Azul both

reporting the next few days. Right. Q4 earnings tend to roll out over an extended period.

Some airlines I suppose need longer time to put together their annual reports.

What not. So as you mentioned, yeah, the Brazilian carriers that the two independent ones

aside from Latin have not yet reported and they will this week. So by the time airline weekly

is published on Monday, we'll have all the information about that. We're still waiting on the

mainland Chinese carriers as well. At least as far as I know, I'm a little behind on my earnings

updates here because I spent the entire day yesterday in the dentist chair. So I'm

spent the morning catching up. But I, but I, so I don't think they reported yet. But so, you know,

please don't know no angry emails about you. What are you talking about? You missed the Chinese

earning Chinese carriers just reported yesterday. What are you talking about? So I may be a little

behind, but we haven't seen the big I have not seen the big Chinese carriers report yet.

So we have a few other stragglers. What's more painful, Jay, a root canal or try to navigate

the investor relations section of a Chinese airline's website?

Oh, putting it coming up with those operating margins. They are only published in Chinese language

and I have to use Google Translate. And that is, yeah, that's a horse race there between what's

more painful. It's a spare question. Well, thanks for the speedy recovery. I don't know who

your dentist is, but big shout out to them. And I, I dare say you were enjoying the Arsland

Saga class when you were in your dentist chair. I was, as I told you, I have, right,

for anybody watching, listening, I, I texted Gordon yesterday and I said, you made me laugh. I was

sitting in my chair and I was literally like laughing out loud thinking of Gordon talking about

the, the business class that feels like a dental chair. And so I, so thanks for providing that

a little bit of a light hearted relief for me when I was under the, under the drill there.

Literally laughing gas, organic laughing gas. Who needs laughing gas? Just got some good Saga,

Saga class jokes. Yeah, it's a airline nerdy jokes. That's all you need to get through a root canal.

And we're, we're capping off Q4 here, Jay and sort of financial year numbers or fiscal year numbers

for a lot of carriers. But believe it or not, we already have the date for Delta for their Q1 numbers.

Yeah, should we, is it too early to wish everybody a happy earning season?

It's a perennial, it's a perennial celebration of this stage. I've decorated my house already.

I've got the, I've got the trees that is up and ready to celebrate. But yeah, you're not

kidding. April 8th is Delta's first quarter earnings call. So stay tuned is about two weeks

from now. So we got wow, a whole, another round of information coming from first the US airlines

and some others as well report early will get a better sense of how airlines are reacting to

and thinking about this again, quote unquote crisis.

Absolutely, not a word that we like to use flippantly on the podcast. We like to be a little bit

more measured, but I think for most intensive purposes, our qualification for what is a crisis

has been met on this occasion. So yeah, definitely much more detail.

This crisis, the reason why I struggle with using that word is because like I said before,

you know, as we've talked about demand is so good. And I just have, I'm trying to come up with a

metaphor in my mind. I haven't come up, but you know, I just picture it's a lightning storm out

out and people are swimming in the beach and having a good time. And that's, you know, kind of,

and what it feels like, you know, people are still traveling. People obviously with a major exception

of the area directly hit by the war, the Gulf carriers. And that's obviously an exception, but

the demand is, you know, we've heard from Lahtanza and Turkish and United and Delta, now Sabu

Pacific, that Cafe Pacific is another that the man has been very, very strong. So the question,

you know, there's there's multiple sub questions to that. Is, is demand strong because that's

demand? I've heard it away from the Gulf. Maybe, but it's got to be more than that because even

U.S. domestic demand is very strong, even, you know, demand, although who knows it could be?

Well, I was thinking about going to, this is more I'd say for Asia. So Sabu Pacific, for example,

they said like, you know, I was thinking someone in Asia may be thinking about going on vacation in

Dubai, but right now instead, they're going to travel locally to Tokyo or to Korea. You know,

somewhere within East Asia. So that could be the driver of the demand of some of this. Could

just be, you know, the economy is still, you know, pretty strong in a lot of regions and could be

people just trying to get ahead of these fair increases. Oh, let me just do the vacation now,

because it's going to be more expensive if I wait two weeks to book, could be that. I think,

was it Alaska Airlines? I can't remember. One or two airlines were mentioned last week that

the demand driver could be simply that last year, there was so much tariff uncertainty,

people may have canceled the vacations, and there's a lot of pent up demand. So, okay, we're not

canceling again this year. Who knows? We'll get, we'll get a better picture of that as, you know, Q1

earning season rolls rolls on. Absolutely. Delta earnings not too far away. And lots of nuance,

lots of caveats as always, Jay, but thanks for running your studios, those key details. You mentioned

to be specific there. We will be discussing them in part two, but before that quick reminder,

to send any questions or comments that you might have for us to podcasts at skif.com.

That's podcast with an S at the end. And please don't forget to follow, I'll subscribe to the

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there's five stars or leave us a positive review so we can continue to spread the word about the

airline weekly launch. Don't go anywhere. We'll be right back. Before we head into the break, we're

drawn by a skifter that you might not be so familiar with. And that's Adam Stacey. He's a senior

editorial event and awards producer. Oh, that's a big title. And he's currently working on the

skift idea awards. Adam, welcome to the airline weekly launch. Thank you very much. Glow in

introduction. The benefit of listeners who aren't familiar with the idea awards, what are they all

about? Yeah. So, uh, skipped idea awards, we're just moving into our eighth year. So the awards

were launched really to recognize and celebrate the most impactful ideas across travel, just the

entire ecosystem. But I like to think of them as the travel industry's innovation, Ben Smock.

You know, we all know we're at the pivotal moment of transformation for the industry, structurally,

technologically, operationally. And these are awards about spotlight in the companies and leaders

who are actually driving that change. So, you know, I'm talking about things like

advancements in customer experience, AI, digital transformation, sustainability, product design,

all that good stuff. And what's important with the awards as well is that it's not necessarily

about scale. So we're open to everyone because our focus is about impact. So we see submissions

from startups, midsize players, global brands, you know, individual leaders. I was like the

think innovation doesn't call it with the size of the company or call it with the execution and

the results that they're putting out the last while we are recognizing with these awards.

Totally agree. Sometimes it helps if you're a little bit more nimble, a bit smaller,

you can be a little bit more disruptive than a very large corporation. But what would you say

add them to an airline weekly lounge listener who says, that all sounds great, but where do I fitted?

Yeah. And I'm not an airline expert, so I'm not going to tell people what to do. But I think for

this audience, you know, we have an obvious category, which is airlines and airports is specifically

designed for that industry. You know, that could cover anything from carbon innovation,

distribution strategies, you know, emerging advanced aimability. You know, we're seeing all this

stuff with flying taxis and this crazy stuff. But we also have categories specifically for

technology. So, you know, this industry specifically is deep into AI deployment, you know,

with folks in on revenue optimization, workforce planning, retail transformation, data-driven

personalization, you know, unsustainability as well. That's another area where this industry is

focused on sort of fleet strategy, emissions tracking, you know, new planes, all that stuff.

So, we're looking for initiatives really that just demonstrate tangible progress and the

better in the experience for the end use and the industry as a whole. Sounds great. And if anyone

still unsure, I believe you've got a quiz as well. We do. We do our marketing team. I'd like to

call them the best in the biz. They've come up with a quiz that you answer a couple of questions

and the quiz will tell you basically which categories are the best fit. One new thing we've

launched this year is where is that you can actually download a sample form before you submit.

So, you know, if you're entering on behalf of a client, maybe or you know, quite sure

what the submission forms looks like, you can just download a PDF sample and take a look

in advance. Super, super helpful. Okay. You've got everyone interested. What is the call

to action? Where do they go next if they want to apply or learn a little bit more?

Yeah. So, the next step is to just head to the website, which is horseydonlive.skift.com,

and then you just follow through to ID rewards. As you mentioned, we've got the quiz. You'll find

all of the categories, the sample PDFs, judges, previous winners if you're curious to see

who's made in the past and all of the relevant timelines. The submission process is very

straightforward and streamlined. It's all done remotely via our online system. You can buy

now at the lowest rate and continue to edit up until the entry deadline in July. So there's no,

you know, huge time commitment there. And one thing I would say is even if you're unsure

about whether your project or initiative will qualify as worth exploring some, you know,

from speaking to past winners, some of the most compelling, I've come from projects that they

didn't think would be a good fit. And then they've gone on to win. So yeah, if you've got a smart

solution that solves a real world problem, take a look. We love to take a look. Fantastic. Yeah,

sounds great. Thanks again for coming up the show. Adam and telling us all about it. And I can

speak for myself for the global forum in New York, last September, we go see for ourselves many of

the idea awards winners. And they are from right across the industry. It's not always who you might

expect. So yeah, do check that website out, like dot skiff.com where you find all the details for

the idea awards. Just scroll down to the bottom of the page. You'll get all the info there. Thanks

for adding for joining us on the show and listeners hanging around because we'll be talking I.G.

Right after the short break.

Hello and welcome back to the online weekly lounge. I'm Gordon Smith joined as usual

by cohost Jay Shabbat. Oh, one, we were a bit of a news review. Really, Jay, I don't know,

there was a bit of a, a bit of a hodgepodge, but just keeping our listeners and our viewers updated

on, on the various big stories floating around at the moment, but we're going to drill down now.

I was going to say, see booze. Don't use that word.

Hey, is it a trigger for you now after the dentist? Yeah, I know. I get nightmares when I hear that,

you know, when you said that, I just heard the drilling sound.

And now, Jay, we're going to discuss see boo Pacific because this is an airline out of the

Philippines. Gained a little bit of notoriety or maybe I'm going to go for notoriety by

packing in more people into a a 350, I think it was in any other in the very dense all economy

config. I think it was more than 450 seats on the very, very dense a 350, but, you know,

notwithstanding that incredible aircraft, it is actually a very interesting airline

that doing some very interesting things. And it's maybe one that doesn't get the appreciation for

operation. It's complexity and actually sometimes it's profitability on the international scene.

I know you're in that part of the world, erasure and via jet and some of the Japanese carriers,

certainly carry a little bit more international currency, but we thought we'd give a little bit of

air time to see boo Pacific, maybe an overlooked carrier because they're doing some pretty interesting

stuff. 459 seats on their A330 Nios.

A330 Nios? I thought it was a 350. Good grief.

459. Wow. Imagine how many they could get into a 350.

Yeah, wow. Yeah, it's, or how about a 380? Let's see, there's a few in the second hand market, Jay.

All right, more seriously, you want to, you want to hear about boo Pacific. So, yeah,

say what Pacific is for those who don't know, I mentioned before, they're low cost carrier in

the Philippines. And they do, they're primarily narrow body. They do have some ATR turbo props,

but they're very heavy on the A320 on NIO. In fact, they just purchased a, you know, made a big order,

or I think it was 2024. But they do have a handful of those super densely seated A330 Nios,

which they actually, they mostly use those within Asia. The reason why they have them

is mostly because Manila, which is the capital of Philippines, the airport there is just heavily,

heavily slot constrained. So, they're able to just get a lot more revenue out of the limited

slot positions that they have. So, it's just, it's very, say boo Pacific specifically to them,

they, it's a very, you know, they have a unique reason why they, why they have the aircraft.

They do fly them to Australia, and they will fly them to the Gulf. They're, they've cancelled

their Dubai flights, as you can imagine. They are still running their flights to Riyadh in Saudi Arabia.

So, those are as of, you know, as of now they're, they're still operating. And a lot of those flights

are catered to, uh, Philippine workers, you know, a lot of, there's a large number of Philippine,

large percentage of the Philippine population that work abroad in, in different sites around the

world, including the United States, including Europe, including Gulf, Japan, etc. So, they, they cater

to that market. But their biggest market is actually domestic. I think seven like 70% of their

seats are domestic, and they do very well. This is a very, very profitable airline pre-COVID.

I mean, you're talking, you know, they were years where had, you know, 20% margins. Very, very, very

profitable. Yeah. Um, just, just well run, good, good airline. Uh, they compete against

primarily Philippine airlines and against Eurasia. So, the question is, um, are they, uh, just as profitable

now as they were pre-COVID? The answer is no, but they're doing rather well. And as we just learned, um,

this week, in 2025 for the full year, they had an 11% operating margin. So, that's, you know, pretty

solid. They did say that the first half was better than the second half. The second half had some

issues with, uh, they do have, because as I mentioned, they had those a through 20 NEOs.

Well, they use the, the Pratt & Whitney Geertobrofan engines, which have had, you know, the,

the grounding issue powdered metal issues that require inspections. So, they've had a lot of

planes grounded. Uh, they've also had some bad weather in the Philippines last quarter,

in particular, a couple typhoons that hit some of the brick markets. So, they do have, uh, they did,

they did encounter some challenges, let's say. Now, fast forward to, you know, here we are in 2026.

We've got this, you know, quote unquote crisis, certainly fuel price crisis. How are they doing?

And we pretty much alluded to it earlier, but they are, you know, struggling badly with the,

with the fuel cost, but the man is still very, very good. And they did mention, uh, like I said,

they, they, they, they suspect hard to say for sure. They suspect that some of the demand that

they're seeing locally within East Asia is demand that, you know, might have gone to, uh, the

Middle East or might have even gone to Europe. Uh, you know, let's, I don't want to take a vacation

of Paris this year. Just let's stay closer to home. Let's do a domestic vacation. Let's just go

over to Taiwan. Let's just go over to, you know, visit Hong Kong, whatever. So they, they are seeing

that, you know, great demand that seems to be, you know, the big theme across the industry. So,

so, you know, so far, I don't want to say so far, so good because I'm not necessarily saying that

the strong demand is ultimately going to nullify the effects of the pricey fuel.

We don't know how that's going to, you know, it depends on how long this whole thing lasts.

It spends exactly just how expensive fuel gets. Um, and then a lot will depend to,

uh, and to what extent, Sabu Pacific will adjust their capacity.

They've already started to tweak it a little bit. They were, and remember, this is an airline

that just, they wanted to grow 20% last year, but could only grow 10% because of the GTF issues

and the weather issues, and I mentioned other operational issues. So they really want to grow. That's a

big, uh, mechanism through which they keep their unit costs low is through their economies of

scale, the growth. So they really want to grow. They're starting to take that growth down a little

bit from, from planned, uh, from what they planned. They did say that, look, if fuel prices stay

at these rates for an extended period, we're expect more cuts. Uh, in fact, they even,

I don't know if I can find it in my notes here, but I think they literally just said that,

you know, fuel stays where it is, the whole industry is going to lose money.

Yeah, I've got a quote here. Is it by Mike Suge? Yeah. Yeah, see the CEO. I've seen him at a couple

of press conferences and Paris airshow and other bits and pieces. He's a great character. He

have a pretty, pretty interesting earnings call, especially in a puddle world where they can

sometimes be a little bit drier, let's say, in terms of the, uh, the delivery, uh, very corporate,

et cetera. Uh, here we go. Uh, fuel impact. These levels are clearly not sustainable for

seafood, Pacific. If they persist, but alongside the rest of the airline industry, ultimately,

the industry will face losses. And then this is, I think, is the one you were referring to in

terms of a quote, Jay. Current price levels will effectively double our fuel bill, all else being

consistent. Um, and, uh, yeah, Mike continuing here, we've started taking steps to pass on the

incremental cost through fair adjustments. And we are encouraged by the continued resilience

in demand from March and April. However, we know from history that there are limits to fair

increases before demand softens. So, uh, some fresh insights there from, from Mike and the team.

Yep. Yep. So, and good, um, glad you kind of said that quote because in there, he mentions how

they're aggressively raising fares. So the demand strength is despite the fair increases,

which, you know, that's pretty impressive, but how long does that last? You know, at some point

the demand's going to break. I mean, you know, it's got Kirby. Last week kind of was very adamant

that a lot of the demand is not particularly elastic. It's not particularly sensitive to fares

that, you know, people want to go. They're going to go. A lot of the people traveling are

operating from people and they're, you know, willing to go. But, you know, at some point,

it's just the economics 101 says that if you raise fares too much, you're going to start

breaking the man. So it's all, uh, yeah, it's a wait and see at this point and everybody kind of

crossing their fingers that the conflict deescalates and supply chains for energy and other important

commodities and products all, you know, just, just kind of normalize. Uh, and, you know,

remembering that all of this just is happening four years after the Russia Ukraine conflict,

cause a lot of very similar, you know, fuels by commodity shortages, supply chain bottlenecks.

You know, the last thing the world needs is another one of these. And besides just the human toll

of all this. So fingers crossed that the conflict winds down and there's peaceful resolution.

But until then, yeah, it's really wait and see for, for, you know, from the airline's perspective.

Absolutely. And we, as we said earlier in our discussion, Jay, some regions more exposed than

others to oil from the middle east. And I think the Philippines and that part of Asia are particularly

exposed. You know, there's not a fuel price podcast and never will be. And we're not fuel price

experts. But we've got a reasonable working knowledge and is useful, I think, to share with our

listeners and our viewers that not everyone is being impacted equally. And although the global

fuel price is obviously global, there are nuances and there are a lot of caveats in there

with with super Pacific and the airlines more broadly in the in the Philippines and the far east

among those generally speaking that can be hit a little harder by any blockages or any shortages

of the usual supply coming out of the of the Gulf. I'll see a lot more detail in the next issue

of airline weekly. If you're not already subscribing, go to airlineweekly.com forward slash

subscribe. There you can get free trial issue, find out what all the fuss is about. And a reminder

that as an airline weekly subscriber, you can access all the airline news on skiff.com, especially our

daily reporting, which is particularly useful right now when there's so many changes from day to

day affecting, not as the Gulf, but the entire global sector. So airlineweekly.com forward slash

subscribe. Thanks to J for joining me and thanks as always to our producers, John Monica and Will,

whether you are on the world, thanks for listening and we'll catch you next time. Bye for now.

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