Flight School trains diverse pilots for airlines in desperate need

In November 2006, a young and curious Kourtney Gillespie waited by her gate at Tampa International Airport. The 12-year-old was traveling with her cousin to see her brother play football at Ohio State University, and it was her first time flying. Her cousin had told her it was like “riding in a car,” but Gillespie quickly realized that wasn’t right. As the Southwest Airlines plane pulled up to the gate, she saw it was painted to look like SeaWorld’s Shamu the whale. “Get out of here,”….....»»

Republic Airways asked the FAA for permission to recruit co-pilots with a minimum of 750 hours of flying time. Republic Airways said that its plan could help tackle the pilot shortage.AP Photo/Jenny Kane The FAA blocked Republic Airways' request to cut the number of hours co-pilots need to fly for training. Republic Airways said the proposal would help address the pilot shortage, but the FAA disagreed. The FAA said in a denial exemption that Republic's request "would adversely affect safety." The Federal Aviation Administration (FAA) has refused to allow a US regional airline to employ co-pilots with less experience amid a shortage because it believes the move would impact safety.The Associated Press reported the news.Republic Airways, which operates on behalf of American, Delta, and United Airlines, asked the FAA in April for permission to recruit pilots out of its training academy program with a minimum of 750 hours of total flight time. Commercial co-pilots are required to fly for at least 1,500 hours before they can serve airlines. Military pilots can qualify with fewer flying hours, however. Republic said in the request that its pilot school would "exceed the safety standards" of military aviation training.According to a denial exemption released on Monday, the FAA disagreed."The FAA has determined that the relief requested is not in the public interest and would adversely affect safety," per the denial exemption. The FAA said Republic's pilot training cannot be compared with military training programs, per the denial exemption. The agency added the argument that Republic's request would address "a perceived pilot shortage" was "overly simplistic."Republic CEO Bryan Bedford said in a statement to AP that the airline's request would "enhance safety" because it would offer student pilots a "highly structured, mission-specific training approach." He added that the FAA's decision was disappointing but not surprising, per AP.The FAA told Insider in a statement: "The FAA denied a request by Republic Airways to allow the airline to reduce the number of hours needed to become a co-pilot. The agency determined that the airline's new training program does not provide an equivalent level of safety as the regulation requiring 1,500 hours of flight experience before a pilot may work for an airline."Republic didn't immediately respond to Insider's request for comment made outside of US operating hours.Carriers are struggling to fill their flight schedules because of a shortage of pilots. Insider's Taylor Rains previously reported that airlines are dropping some requirements and trying to cut training hours because they are so desperate to hire more pilots.Read the original article on Business Insider.....»»

Ron Fishman is a full-time pilot and father who says the commutes can be brutal, but the layovers in places like Turks and Caicos make it worthwhile. Ron Fishman.Courtesy of Ron Fishman Ron Fishman is a commercial pilot for Frontier Airlines with more than 17 years of experience. He gets tested regularly on flying and says getting to travel is the best part of the job. This is his story, as told to writer David Silverberg. This as-told-to essay is based on a conversation with Ron Fishman, a 42-year-old commercial pilot from Toronto, Ontario, who's been flying for more than 17 years. The following has been edited for length and clarity.When I was growing up in Toronto, I didn't know what I wanted to do with the rest of my life. At one point, I decided I was done partying and wanted to get into the Canadian military, and I joined as a grunt, nothing fancy. I was an infantry soldier, but I realized it wasn't the life for me.When I was 26 and four years out of the military, a friend handed me a brochure for Durham Flight Centre in Ontario, and I enrolled right away. It just felt like the right thing to do.This one-year certificate gave me my private pilot license (PPL), commercial pilot license (CPL), instrument rating (IR), and other things like night ratingsA private pilot license allows you to fly for fun, meaning you aren't allowed to profit from piloting. A commercial license allows you to make money as a pilot, with limitations. For example, to fly for an airline, you need an airline-type pilot certificate, which has more requirements like 1,500 hours of flight time instead of the basic 250 for the commercial license.An instrument rating allows you to fly in poor weather conditions, like clouds. The flying is done with reference to the instruments inside the aircraft rather than with visual references outside. My night rating allows me to fly after sundown.After I earned my licenses, I headed to Las Vegas, where half of my family is from, and decided to enroll in the College of Southern Nevada, where I earned my associate degree in aviation.At the time, I was a high school dropout with just a GED. I wanted to prove to myself I could accomplish more. Also, some airlines require you to have experience, certificates (licenses), and a degree, so it made me more competitive.My first pilot job was at Elite Flight Training out of North Las Vegas AirportI was hired in 2008. It was for traffic watch, which meant I flew a reporter who would broadcast traffic status of the Las Vegas Valley. I was also teaching students to earn their own certificates and/or ratings.In 2017, I began flying for where I now work, Frontier Airlines, one of the greenest airlines in the US. Even though oil prices have increased so much in the past few weeks due to the Russia-Ukraine crisis, it hasn't affected us as much as other airlines. We're very fuel-efficient, and we use less gallons per seat per mile compared to other airlines, so we can continue to keep costs lower.These past few years, I've seen a lot of unruly passengers cause trouble for our flight attendantsI'd say I've seen around a 50% increase in incidents, usually from passengers who refuse to wear their mask or get too drunk.I feel so bad for flight attendants who have to deal with these passengers because that's something I don't see first-hand, but I'll make a call or text our dispatch — an SOS of sorts — so they can help us determine the next steps. I have no problem grounding the flight and calling police to escort someone off my flight. I had to do it on a flight out of Cincinnati this year when I heard about two passengers beginning to fight over something related to the Super Bowl.Then there was COVID-19's effect on our flights. Attendants, copilots, the ground crew, and the handlers all got hit with COVID-19, and that meant so many delays. It's hard to foresee how long some delays might be, and it can be tough on both pilots and passengers. One time I was sitting for an hour on the tarmac in Vegas, and it reached 130 degrees outside as we were waiting for a gate to open.In regards to the recent lifting of the mask mandate, I trust in the professionals and each airline to do what's bestI'm not an expert on communicable diseases.We can go to stadiums with tens of thousands of people maskless, so I think a few hundred people on an airplane that's cycling fresh air throughout the cabin every two minutes with HEPA filters must be safer than that. I'm not anxious and I support United, Delta, Frontier, JetBlue, and each airline's decisions, regardless of their stance on masks.You always have to stay on your toes as a pilot Sure, you have a license to fly, but pilots get tested regularly to ensure they know every procedure. Every six months I go through a "check ride" in a simulation program that tests everything from emergency protocol to how I approach landing.There's a lot of pressure here because if you fail that test twice, you could be fired from your job and go back to the bottom of the ladder in a way. You'll be less likely to get hired again, even if you have 40 years of experience at a major airline. Thankfully, I've never failed a check ride.I study constantly, and about a month before my recurrent check ride, I dive in harder. I study all the memory items, bold items, panels, and hot topics. I review all my procedures and chair fly, which is kind of like a visualization of the check ride. The ride is basically the same, but they like to concentrate on different maneuvers or events. Last year we had to do high-altitude stalls, while this year I was doing more 5G interference.Some passengers may think pilots are actively flying the whole flight, but the flight is mostly on autopilotI fly up to 18,000 feet and then turn on autopilot to concentrate on other things, like ensuring I can make this the smoothest flight possible for passengers. I haven't had any issues with dangerous flying or major emergencies in my 17 years of being a pilot.The biggest thing I like to do to create a great experience for the passengers is to communicate. Often, we don't know any more information than they do. I won't know why we're delayed or what the timeline looks like. But as long as you communicate that we're aware and are trying to find out more details, passengers are mostly happy.When we have extended delays, I go on the PA and ask if anyone wants to come check out the flight deck. I'm available to answer their questions and concerns, and I also try to update them every 15 minutes.There's a lot to love about being a pilot, but I always cherish those layovers Anytime I can spend a few hours or a day at the beach, that's the best. My favorite layover was in Turks and Caicos, where I ran along some beautiful beaches and snorkeled in clear-blue waters.I've also been to 25 of the 32 MLB ballparks. And I really like laying over in Portland, Maine, where I take the ferry to the island for different music festivals.When I worked a bit as a private-jet pilot, I usually interacted with athletes who hired me to fly their planes, and I really love athletes like Miami Heat star Kyle Lowry, who regularly tipped me $100 when he was on the Toronto Raptors. He chatted with me as if I were a friend.Then there are other athletes, such as an Ottawa Senators player I won't name who ordered me to open his bottle of champagne like I was just there to serve him.The biggest downside of being a pilot is how often I'm away from my wife and 6-year-old daughter in Toronto It's tough to be a full-time pilot and father, so I really love the time I can get off, or when I'm on call but can still see my family.The commute to and from where I need to fly out of can be brutal, too. If I need to fly out of Tampa one day, I have to hop on a flight with any airline to get from wherever I am to Tampa. Sometimes it works out, but sometimes it doesn't if a flight doesn't have an extra seat for me. That means finding a roundabout way to get to Tampa, and that can get really frustrating if I'm desperate to get there by a certain time to make my own flight.I'm very appreciative for the ride, and I like to bring the flight attendants some kind of treat, like a box of chocolates or something fun. I don't have a need for control, so I'm just as happy letting someone else fly. I've never felt I could do a better job.In the end, though, it truly is an amazing profession. I get paid to travel the world, and I can't imagine doing anything else.Want to share what your job is like? Email Lauryn Haas at lhaas@insider.com.Read the original article on Business Insider.....»»

A dress, skirt, trouser suit, and jumpsuit make up the women's wardrobe, while a three-piece suit is available for men. The upgrades are the first in 20 years. British Airways For the first time in 20 years, all British Airways employees will sport brand-new uniforms. The 125-piece collection includes hijabs, tunics, a trench coat, and an industry-first jumpsuit. British Airways' new look represents a growing trend to create more inclusive uniforms. British Airways has a new look for the first time in 20 years  After first teasing the new garb in January, the London-based airline finally released its new pilot and flight attendant uniforms on Thursday.A dress, skirt, trouser suit, and a "stylish" jumpsuit make up the women's wardrobe, while a three-piece suit with regular or slim trousers is available for men. Other items like a trench coat, hijab, ties, tunic, and a long or short-sleeved top are also part of the collection.The entire line-up consists of 125 individual pieces — the trench coat and dress being the most popular, according to British Airways.Take a look at the airline's full collection, and how its uniforms have changed over the decades.Created by British-Ghanaian fashion designer Ozwald Boateng, British Airways' new uniforms will be the norm for nearly all employees starting on September 28.Courtesy of British AirwaysPilots and flight attendants across the system will transition to the new uniforms on Thursday, with airport employees at Heathrow, Gatwick, London City, and New York-JFK airports also getting the new collection.The rest of the company's global airport workforce will transition to the new uniforms "over the coming days," according to British Airways.This comes after over 5,000 employees, including engineers, mechanics, and ground staff, started wearing the outfits in May 2023.BA's ground operations uniforms unveiled in May 2023.British AirwaysThese garments include detachable tool belts, clothes with extra pockets, and a fleece-lined quilted jacket, the latter being showerproof to keep employees warm and dry in more extreme weather conditions.According to British Airways, the employees' old uniforms have been given to charities or recycled. This is also the plan for the former customer-facing uniforms after Thursday's official rollout.All of the garments and patterns have been carefully selected to represent the brand as well as create continuity across the collection.British Airways' new uniforms.British AirwaysThe suit, which British Airways calls a "fundamental element of the customer-facing uniform," uses a jacquard fabric that points to the airline's historic speedmarque logo.Meanwhile, items including ties, scarves, and the quilted jacket sport an "airwave" design that nods to air moving over an aircraft wing — a detail British describes as a "signature feature" of the collection. The jumpsuit is an industry-first, according to the airline. A tunic and hijab have also been created as an option for employees.British Airways' new uniforms.British Airways"One of my main objectives was to create something that spoke to, and for, the airline's colleagues," Boateng said in a press release. "Something that inspired and empowered them, encouraged them to conduct their roles with pride and most importantly to ensure that they felt seen and heard."The new outfits were first teased in January when the carrier published a two-minute video of employees sporting the new looks.British Airways' new uniforms.British AirwaysAccording to British Airways, Boateng has worked on the uniforms since 2018, shadowing employees and sourcing feedback from more than 1,500 company staff who participated in workshops to determine the durability and functionality of the design.Then, the uniforms underwent six months of "secret trials" before the January announcement, including having pilots and cabin crew wear them incognito on cargo flights. Maintenance employees also wore them when working on aircraft at Manchester and Cotswold airports in England, both of which were out of the public eye.In addition to regular wear and tear testing, the company also trialed the clothes in 0-degree showers and freezers.British Airways' new uniforms.British AirwaysBritish Airways explained the reasoning behind the extreme tests was to ensure "they're water resistant, durable, and fit for extreme weather conditions."Changes were made to the design during the process as employees requested modifications specific to their roles.British Airways' new uniforms.British AirwaysFor example, mechanics asked for "easy access tool pockets" while ground handlers requested touchscreen-compatible fabric so they didn't have to take off their gloves in cold weather to operate devices. The upgrade comes after 20 years of the same look, which was first introduced in 2003 and became one of the most-recognized uniforms in the industry.British Airways uniforms from 2003-2023.Max Mumby/Indigo/Getty ImagesAfter Thursday, the old — yet still bold and sophisticated design — will become one of a line of former uniforms used by the tens of thousands of employees who have worked for British Airways over the last century.British Airways was actually the airline that first pioneered crew uniforms after an early version of the company gave them to employees in 1922.Lieutenant Ellen E. Church was the "world's original airline stewardess" when she was hired by United in 1930.Bettmann/Getty ImagesAccording to Airways Magazine, Instone Air Line, which would eventually become the British Airways we know today, designed military-inspired uniforms using pretty much any garment that was available, and they were fit to the male figure. Female uniforms would not become available until after the first women flight attendant, Ellen Church, flew her first leg in May 1930 with Boeing Air Transport, which is now United Airlines.Most early female cabin crew were nurses, so their look reflected their occupation.After years of dull and ordinary uniforms, the airline eventually spruced up its look with a number of stylish collections in the following decades.Flight attendant uniforms from 1945 (left) and the 1960s (right).Hulton Archive/Getty Images, British AirwaysAs British Airways aircraft improved in the 1930s with more high-class cabins, male flight attendant uniforms soon upgraded to include a white coat to wear when serving meals.The 1940s was the first time a designer was hired to create a full collection for British Airways (then called the British Overseas Airways Corporation, or BOAC), which resulted in more military-style outfits for both men and women that included items like belts and closed collars.The 1950s, however, saw female flight attendants ditch their military-inspired uniform's belt and tight collar for more fashionable pieces.This includes adding more high-fashion garments, like striped skirts and dresses, wool jackets, and flared trousers. The 1960s also saw the airline add red to its uniforms.Each crew member pictured is sporting the uniform they were wearing then they flew the Queen.British AirwaysThe desire for higher fashion was represented in Sir Norman Hartwell's 1960s collection for BOAC, which included navy suits, white blouses, and gloves. Men's outfits continued to be clean and crisp, using dark colors like blue and black.Hartwell also famously designed dresses for the British royal family.Another royal dressmaker, Sir Hardy Aimes, would add red to the uniform, complemented by blues and whites — a nod to the UK's Union Jack flag. Staple pieces were a long red trench coat and the shorter skirts.Aimes' successive designs would be used through the 1970s after the merger that created the British Airways we know today.There were several failed designs, however — particularly the airline's iconic "paper dress" in 1967, as well as one specifically created for the supersonic Concord in 1976.PA Images via Getty Images, -/Central Press/AFP via Getty ImagesThe paper dress — which was actually fireproof and more of a paper-like garment — was worn on flights between New York and the Caribbean, and it was thrown out after one use.The entire outfit included a flower-patterned dress cut specifically to each flight attendant's height, as well as tan tights, green slippers, white gloves, and a flower pinned to their hair.The style didn't last long, however, with BOAC retiring it about a year after its release.Meanwhile, the pale blue and navy Concord-specific uniforms — which were made to highlight the exclusivity of the speedy jet — lasted a mere six months as the company didn't want Concord staff to come off as elitist. Flight attendants from places like Japan and India could also wear cultural dresses from their home countries.British Airways unveiled new cabin crew uniforms for its South Asian routes in 2016.Christophe ArchambaultAFP via Getty ImagesSpecially designed uniforms included garments like kimonos and saris, with this practice being common across the various collections in British Airways history.  Designer Julien MacDonald eventually created the 2003 look, but the airline's newly unveiled uniforms are more diverse and are intended to represent the "next chapter" of British Airways.British Airways staff modelling uniforms from the past 90 years at a Johannesburg fashion show in 2012, with Georgia May Jagger in the front center.Rebecca Hearfield/Gallo Images/Getty ImagesMacDonald's collection, who is a former designer for Chanel, adds options for women and employees of different cultures while still emanating the heritage of British Airways."We're really excited to start the final phase of the rollout of our brand-new uniform for more than 30,000 colleagues," British Airways' CCO Calum Laming said in a press release. "The stylish modern collection offers our colleagues more choice than ever to help them display more of their original personalities at work."The move comes as airlines worldwide create more inclusive uniforms, like Virgin Atlantic Airways and Alaska Airlines allowing some employees to wear non-gender-specific clothes.Courtesy of Virgin AtlanticBritish Airways is also now allowing all of its employees to wear things like makeup and fake eyelashes, while any Virgin employee can wear either gender uniform.Meanwhile, Alaska is creating a gender-neutral uniform for flight attendants and airport staff and recently updated guidance on things including nails, hair, and jewelry.Other carriers like Iceland-based Play and Ukrainian airline SkyUp now allow its female flight attendants to ditch the heels and wear sneakers instead.New SkyUp flight attendant uniforms.SkyUpThe uniform rules for female flight attendants was particularly strict over the decades. However, a shift in many countries now allows women to wear pants, jackets, and regular shoes when working instead of the traditional look of dresses, skirts, and heels.Read the original article on Business Insider.....»»

John Tortorich is a 33-year-old fighter pilot for the Navy. He has completed the Topgun pilot training and flown 20 combat flights. Lt. Cmdr. John Tortorich has flown 20 combat flights on deployment in Iraq and Syria.USS Dwight D. Eisenhower Media/John TortorichLt. Cmdr. John Tortorich, 33, is a pilot in the Navy. He was deployed in Iraq and Syria in 2016 aboard the USS Dwight D. Eisenhower.Tortorich now trains pilots of Strike Fighter Squadron 105, also known as the "Gunslingers."This as-told-to essay is based on a conversation with Lt. Cmdr. John Tortorich, a pilot in the US Navy. It has been edited for length and clarity.The Naval Academy wasn't on my radar in high school, but being a successful swimmer got me noticed by their college recruiters.My grandfather and uncle were also Navy reservists in the 1950s. The application process was pretty arduous: There's a fitness test and medical screening, and, generally, military academies have pretty low acceptance rates. I also had to get nominated by a member of Congress from Louisiana — my home state — to even be considered.I was a strong swimmer, so naturally I thought I'd become a Navy SEAL. During the first two years in college, that was my goal.John Tortorich next to an F/A-18C in the Mediterranean Sea.Ryan Mahon It all changed the first time I flew in a T-34 aircraft. It was 2010, the summer between my sophomore and junior years.We had to do a monthlong program where you're introduced for one week to each of the Navy's four "communities": Marine Corps, surface warfare, submarines, and aviation.At the time, I was nervous about flying and told the pilot as much when I got into the single-engine propeller plane. He was supportive, and by the time we'd landed I was set on becoming an aviator.It was a turning point for my career in the NavyDuring senior year, I put "Navy Pilot" as my first preference for a postgraduation assignment, and, thankfully, I got it. It wasn't a problem that I hadn't flown before, because the Navy is geared towards people who haven't.An F/A-18E executes a high-speed fly-by.Nathan ElswickI went to flight school near Pensacola, Florida, then on to Mississippi, and finally settled in Virginia Beach, Virginia, where I've been since 2015.Initially, you do all kinds of different trainings that we call "workups." Some are just the aviators, and other, larger sessions will bring the whole force together: aircraft carriers, cruisers, destroyers, and submarines.This phase adds up to about a year of training in different places — from Key West to Nevada to somewhere off the east coast in the Atlantic Ocean. We had to travel often and stay in each place for three to six weeks.The day-to-day of a Navy pilotOur schedule varies a lot depending on the type of aircraft you fly and the squadron you're in.In general, your day is determined by the daily flight schedule — which isn't written until the previous afternoon — so your entire life has to be flexible. It's frustrating at first, but I adapted pretty quickly.My wife also used to be in the Navy. We used to plan our lives around both of our schedules.Pilots are constantly training. Every flight we do has a purpose. Luckily we end our days in the same airport unless there's an emergency.I've flown 20 combat flights on deployment in Iraq and SyriaDeployments usually last six months but can get extended to 10 months. My wife and I didn't see each other from June 2016 until August 2017 because we had back-to-back deployments.You can't choose your deployment, but you're usually told well in advance of where and when you're going to deploy. I've deployed once, in 2016, aboard the USS Dwight D. Eisenhower in support of Operation Inherent Resolve.A combat-loaded F/A-18C taxis to the catapult aboard the USS Dwight D. Eisenhower.Mass Communication Specialist 3rd Class J. Alexander DelgadoWe executed combat missions in the skies over Iraq and Syria supporting the ground troops there. During those six months, I went on 20 combat flights.On the morning of a flight, they brief us on what kind of developments have taken since our last time out. As a professional fighter pilot, you should keep up with what's going on every day, even when you're not flying.Combat flights are draining, but they're also my most memorable momentsYou usually don't know your target before you get into the cockpit, and a lot can change during the 7 ½ hours you're in the air. Being in the plane alone can be draining, but you're also in constant communication with ground forces.Sometimes they need to know what resistance to expect as they move forward, and other times they'll call for fire or assistance.The first time I went into combat it was nerve-racking. Over time I got more comfortable, but I had to fight off complacency because that also can get you into trouble.Flying all over the different kinds of aircraft and seeing new places — including those combat flights over Iraq and Syria — are my most memorable moments.One time, my squadron played an important role in stopping a group of ISIS fighters on the ground.Graduating from Topgun flight school was strenuous and a blastA combat-loaded F/A-18C launches off the deck of the USS Dwight D. Eisenhower.USS Dwight D. Eisenhower MediaIn 2019, I was eventually selected to enter Topgun, which, if you graduate, makes you a Navy Strike Fighter Tactics instructor.It's three months of the most intense tactical flying lectures, simulators, and training. Even if you get in, that doesn't mean that you'll finish. It's strenuous, but I also had an absolute blast.When you graduate, you get to wear a special patch on your right shoulder.After graduation, I started teaching existing fighter pilots all of the latest tactics, techniques, and procedures in aerial combat. I did that for two years.In the Navy, you're usually in a specific job for only two to three years. So if I stayed on as a training officer for more than that, I'd age out of the tactics.More recent Topgun grads would be more up-to-date, so it makes sense that they would replace me after a few years and I'd move on to a higher position.I'd make more money as an airline pilot, but it wouldn't be as rewardingThese days, I work as a fleet training officer, where I work specifically with the "Gunslingers" of Strike Fighter Squadron 105. I'm in charge of training the entire squadron, and especially the junior officers in it.As an F-18 pilot, I could have been placed in California or Japan — the only other F-18 bases — but luckily I was placed in Virginia Beach.I spend a lot of time at work, and it takes a toll on the family. There's the possibility of leaving the military and becoming a pilot with an airline, which pays much more. But right now, that doesn't interest me as I don't think it'd be nearly as fulfilling as this job.Overall, being a fighter pilot and then a trainer of fighter pilots has been a tough but extremely worthwhile career. It's been an honor to wear the uniform.Read the original article on Business Insider.....»»

Spirit Airlines, Inc. (NYSE:SAVE) Q2 2023 Earnings Call Transcript August 3, 2023 Operator: Thank you for standing by. My name is Adam, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Spirit Airlines Q2 2023 Earnings Call. All lines have been placed on mute to prevent […] Spirit Airlines, Inc. (NYSE:SAVE) Q2 2023 Earnings Call Transcript August 3, 2023 Operator: Thank you for standing by. My name is Adam, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Spirit Airlines Q2 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to Vivian Taveras, Manager of Investor Relations. Please go ahead. Vivian Taveras: Thank you, Adam, and welcome everyone to Spirit Airlines’ second quarter 2023 earnings conference call. This call is being recorded and simultaneously webcast. As soon as it is available, we will archive a replay of this call on our website for a minimum of 60 days. Presenting on today’s call are Ted Christie, Spirit’s Chief Executive Officer; Matt Klein, our Chief Commercial Officer; and Scott Haralson, our Chief Financial Officer. Also joining us are other members of our senior leadership team. Following our prepared remarks, there will be a question-and-answer session for analysts. Today’s discussion contains forward-looking statements that are based on the company’s current expectations and are not a guarantee of future performance. There could be significant risks and uncertainties that cause actual results to differ materially from those contained in our forward-looking statements, including, but not limited to, various risks and uncertainties related to the acquisition of Spirit by JetBlue and other risk factors discussed in our reports on file with the SEC. We undertake no duty to update any forward-looking statements, and investors should not place undue reliance on these forward-looking statements. In comparing results today, we will be adjusting all periods to exclude special items unless otherwise noted. For an explanation and reconciliation of these non-GAAP measures to GAAP, please refer to the reconciliation tables provided in our second quarter 2023 earnings release. A copy of which is available on our website under the Investor Relations section at ir.spirit.com. I will now turn the call over to Ted Christie, Spirit’s President and CEO. Ted Christie: Thanks, Viv, and thanks to everyone for joining us on the call today. I want to start by saying thank you to our entire Spirit team and our business partners for their commitment and dedication and caring for our guests and minimizing the negative impact from the rash of thunderstorms that have plagued us here in the Fort Lauderdale area and across much of our network in recent months. And while our reported DOT operating metrics for the quarter were negatively impacted by all the weather events, and a plethora of air traffic control initiatives. Our controllable completion factor for the quarter was very good, coming in at 99.7%. Turning to our second quarter 2023 financial performance. Operating margin was 3.3%, about 2 points below our initial guide. Total RASM for the quarter was strong and well above pre-COVID historical averages. However, demand for the peak summer travel period has not built as we expected, resulting in lower fare levels. We are comparing to a period of exceptionally strong domestic and near-field international demand in 2022, while at the same time, seeing a dramatic demand shift away from these regions towards long-haul international. Inclement weather and ATC disruptions in the peak part of June also contributed to the lower TRASM. These demand and pricing trends and difficult weather continued throughout July and are expected to continue into the fall. However, once the international summer travel season ends and kids go back to school, we expect demand will shift back towards domestic. This should mean a more normal pricing and demand environment for the peak holiday travel periods in the fourth quarter. Before Matt and Scott share further details about our second quarter performance and forward outlook, I want to update you on our issues with the GTF engine that powers our neo fleet. Last week, RTX shared that Pratt & Whitney had recently discovered a quality control issue during the manufacturer of a disc on neo engines produced primarily between Q4 2015 and Q3 2021. Out of an abundance of caution, Pratt has identified an initial 200 engines for accelerated inspection, and we were told that we had up to 13 engines in this group. The current plan is to begin pulling these engines from service after Labor Day, which will result in seven neo aircraft being removed from scheduled service. This is above and beyond the current set of aircraft on ground or AOG as we refer to them, which as of today sits at seven aircraft. For planning purposes, we are assuming these seven additional aircraft will be out of service post Labor Day through the end of the year. Matt will discuss this impact in more detail, but the close-in nature of the schedule reduction does have a significant impact on revenue for September. It is worth noting that Spirit is the largest operator of GTF-powered neos in the United States with the highest number of engines produced during the 2015 to 2021 period. Exposure to this issue is very unique and material for us and is having an impact on our margin. We should know by mid to late September, how many of the additional 1,000 engines Pratt has identified for inspection are ones we operate. Timing for the engine inspections on the next 1,000 is not yet known, but we believe it likely the inspections will need to be performed before the end of September 2024. Pratt has indicated that some of the 1,000 engines may already be scheduled for removal in 2024. So the net incremental impact may be smaller. However, we will learn more in September. We are still managing through a significant number of unscheduled neo engine removals due to an assortment of issues previously disclosed and discussed. Throughout the second quarter, we had six and currently have seven aircraft out of service and have assumed the same for the fourth quarter. That said, our maintenance planning team is gaining confidence by the end of the year, we should see discount reduce at least temporarily to about four aircraft. And while unscheduled removals should ease as we enter 2024, unfortunately, next year, we have a large spike in the number of scheduled neo engine checks as a result of a short time life-limited part, which means that we will have the equivalent of at least 10 aircraft out of service during most of 2024. This, of course, doesn’t include any additional aircraft we will have to ground as a result of the latest engine issue. This new issue is yet another frustrating and disappointing development. RTX has promised to make the airlines affected by this new neo engine issue hole. And for now, we intend to take them at their word and use that assumption in our planning. The details and timings of those reimbursements are unknown as of yet. We’ll keep you posted as we get further updates. Matt, over to you. Matthew Klein: Thanks, Ted, and a special thanks to all our team members. We carried a record number of guests and everyone involved continues to do a great job managing the high volumes while navigating the numerous weather and ATC challenges. I’ll start with a brief overview of our second quarter revenue performance and provide some color on the demand environment for the third quarter. Total revenue for the second quarter was $1.43 billion, up 4.8% year-over-year. Total RASM was $10.03, a decrease of 10.7% on a capacity increase of 17%. Load factor was 82.9%, down 3.1 points year-over-year. Compared to Q2 2019, total RASM was up 9.6% on a capacity increase of nearly 30%, a strong result, but short of our expectations. On a per segment basis, passenger revenue per segment decreased 20% year-over-year to $57.86. Non-ticket trends remain strong, and on a per segment basis increased 2.9% or about $2 year-over-year to a second quarter record of over $70. Based on trends we were seeing earlier in the year, coupled with the knowledge of what performed exceedingly well in the summer of 2022, we made the intentional move to increase the number of longer stage flights heading into the peak summer travel period. In the second quarter, in aggregate, these routes performed in line with pre-COVID historical averages. However, we were anticipating they would outperform those averages and have results similar to what we had experienced in the recent past. In addition, demand did not build into the peak summer period as we had anticipated, leading to lower fares across the network. When we look at our second quarter revenue guide compared to flow in results, approximately 25% of the revenue miss was associated with elevated cancellations in the quarter and the balance of the revenue variance was split between longer haul domestic performance, as I just described above, along with a general regional demand impact. Ted mentioned earlier that we had to make a significant change to our September schedule due to issues regarding the GTF engines for Pratt & Whitney. We received the update on the last day before we put our September scheduled event. This update required us to remove seven available aircraft from the fleet on less than 24 hours’ notice. Under normal circumstances, we would select a flying that is expected to have the lowest contribution to the network. However, in this situation, we had to remove flying that our already built lines of flying could offer up relatively easily since we didn’t have time to build out an entirely new schedule. This results in an operating schedule that isn’t exactly as commercially effective as we would otherwise set out for sale. We did remove nearly 5% of planned September capacity due to this specific engine removal issue, and we expect this new AOG issue will penalize revenue production in Q3 by approximately 1.5%, which is on top of the lost revenue for the original neo AOG issue, which we estimate reduces revenue by nearly 6%. So we do expect to smooth out our schedule in October, but the impact to top line revenue will continue until these issues are resolved. Turning now to third quarter guidance. We expect the demand trends in the domestic U.S., Latin America and the Caribbean to continue to be weaker than normal throughout the third quarter as a result of the carry forward of demand shifting to long-haul international and very difficult operations throughout the peak due to weather and ATC. Taking this into account as well as adjusting for the additional out-of-service aircraft, we estimate total revenue for the third quarter 2023 will range between $1.3 billion and $1.32 billion down 3.2% to down 1.7%, with capacity increasing 13.7% year-over-year. This equates to unit revenue being down 13.6% to 14.9% year-over-year in the third quarter. And with that, I will now turn it over to Scott. Scott Haralson: Thanks, Matt. After briefly discussing our Q2 results and Q3 guidance, I’ll share a few details about our recent fleet changes. Our second quarter operating costs were $1.39 billion. Nonfuel operating expenses came in at the better end of our expectations at $994.5 million. Fuel expense was in line with our guide. Fuel gallons were modestly lower, but average fuel price was higher than estimated. Compared to when we gave our guide in late April, crude oil prices improved crack spreads widened across the board, driving a fuel price per gallon for the second quarter of $2.62, slightly higher than estimated guide of $2.60 per gallon. On a year-over-year basis, lower fuel expense driven by a 39.1% decrease in average fuel prices, offset increases driven by more flight volume, additional aircraft rent and inflationary wage pressures. Total nonoperating expense came in better than we estimated, primarily due to a noncash benefit related to the mark-to-market valuation of the derivative liability associated with the 2026 convertible notes. As a reminder, when we give our non-op guidance, it excludes any potential change in the mark-to-market adjustment. Liquidity at the end of the second quarter was $1.5 million, which includes unrestricted cash and cash equivalents short-term investments and the $300 million of capacity under our revolving credit facility. During the second quarter, we retired three A319neos, took delivery of five A320neos and delivery of our first A321neo aircraft, ending the quarter with 198 aircraft in the fleet. We currently estimate that total capital expenditures for the full year of 2023 will be about $255 million. Looking ahead to the third and fourth quarters, the development of the new neo disc issue, together with our other remaining neo engine availability issues, drive lower overall capacity production that harms our efficiency. However, on a positive note, our pilot attrition has reduced and assuming this lower level of attrition continues for the remainder of the year we would have been at full fleet utilization by Q4. The recent frat news results in even less aircraft in our fleet being available for operations. And this means we will likely be overstaffed and carry more pilots than required for Q4 and into early 2024. With pilot attrition no longer being a drag on our utilization by the fourth quarter, we can now isolate the AOG issues and look at the core airline. The core airline that is excluding AOGs, should be back to full utilization by Q4 and is expected to be closer to run rate margin in CASM ex production. The drag on margin caused by the AOG aircraft should be viewed as neutralized due to RTX make-whole commitment. Now let me discuss some of the recent changes to the Airbus order book. Early this year, we were given delayed aircraft delivery dates for 2023 and part of 2024, piling up deliveries in 2024. In addition, it has been widely expected that these delays would continue beyond 2024. We also had some decisions regarding a few of our A319neo orders and option aircraft that needed to be made. Airbus has also been clear to us about their own production limitations and backlog of orders that will likely push new order deliveries into 2030 and beyond. Also, in the near-term, we need a general slowdown of growth to de-risk the business and give ourselves a chance to digest the previous few years of growth. Given all of these things and the fact that our original orders only extended into 2027, we started discussing a broader reevaluation of our future aircraft deliveries. At the end of the day, we agreed to make the following changes without changing the total number of commitments. One, we reduced 2024 deliveries by 11 and smooth the remaining deliveries between 2025 and 2029. Together with our direct lease commitments and the retiring of our A319, these changes slower growth in the near-term and provide us a consistent level of deliveries for the back half of the decade. Number two, we up gauged all of our A319neo orders to A321neos to be delivered between 2025 and 2029. And three, we moved the timing of our option aircraft decision by one year and smooth the timing of those options. A lot of moving parts here, all of which we believe are positive to both Spirit and Airbus. And we appreciate Airbus partnering with us together to make a meaningful agreement giving us a stable and predictable order book for the aircraft mix we view as most beneficial to Spirit. At the time we made these decisions, we estimated these fleet changes would produce the 2024 growth rate in the high teens. However, that was before learning about the latest neo engine issue. It will be a few more months before we fully understand what the impact may be on our 2024 capacity plans. Looking ahead to the third quarter, we estimate our operating margin will range between negative 5.5% to negative 7.5%. We estimate fuel cost per gallon will average $2.80 with total operating expenses ranging between $1.39 billion and $1.40 billion. Our third quarter guidance metrics are included in our investor update published today, a copy of which can be found on our website at ir.spirit.com. Before I hand it back to Ted, I do want to recognize our operators. The past few months have been a difficult weather and ATC environment and our crews, our airport staff, the operations control center staff and the other operation support personnel have been the ultimate professionals, and I wanted to give them a quick shout out. So now I’ll turn it back over to Ted for closing remarks. Ted Christie: Thanks, Scott. Although we made progress on improving our operating margin in the second quarter of 2023, we are clearly still underperforming our potential and face a challenging Q3. We acknowledge that some of this is due to decisions we made coming out of the pandemic. In hindsight, slower growth would have been more ideal during and coming out of the pandemic. This was largely impossible for us due to the pace of our contracted deliveries. That, coupled with high pilot attrition issues have been contributing factors and are struggled to return to full fleet utilization. It is possible that we are being overly conservative with how tight we are willing to run the network with the intention of supporting operational reliability but at the cost of penalizing utilization. Labor, weather and infrastructure issues have been volatile and unpredictable. But we are optimistic that some of our learnings over the past few years will help productivity in the back part of 2023 and full year 2024. Pilot attrition rates in June, July and indications for August are trending better than we expected, which is great. It also means that for Q3, we could have flown more hours on the peak days than we scheduled and has resulted in a missed opportunity. Nonetheless, assuming our pilot attrition rates stay where they are or improve further, our growth is no longer constrained by pilots, which bodes well for our core fleet, achieving full utilization in peak Q4. In fact, if we weren’t burdened with aircraft being pulled from service due to GTF issues, we believe we could achieve full utilization on our entire fleet by year-end. We believe we missed out on some passenger volume in June and July holding out for higher yields that did not materialize, and we have revised our approach for the fall. Not surprisingly, accurately predicting the new normal demand levels post pandemic has been challenging. We are making tactical changes to our network post the Labor Day holiday, including more variation between peak and nonpeak day of week flying, which in this demand environment, we believe is the revenue and margin maximizing answer. The fleet decisions we have made, including the early retirement of the A319s, revising the pace of our aircraft deliveries beginning in 2024 through 2029 and up gauging more deliveries to the A321 variant should all drive fuel and other cost efficiency benefits in 2024 and beyond and allow us to deliver growth more in line with expected demand growth. In conclusion, the dynamics of the airline business are constant. One thing that I have learned over my two plus decade career is that things in the airline industry can change quickly and often. Sometimes the answer is to pivot and sometimes the better answer is to stay the course. The current setup is simply not favorable to a domestic-focused airline, especially while still operating with some lack of efficiency and productivity. I believe these things will change in our favor, and we are taking steps now to be positioned to capitalize on. Frustrations aside, our team is doing a great job adjusting as necessary, and I strongly believe our expected 3Q performance is an anomaly. Most important for us, as we trend towards a normalized utilization rate. We expect our cost structure to return to industry leading levels and provide us margin tailwinds and a considerable advantage against the rest of the industry. And now back to Vivien to begin the Q&A session. Vivian Taveras: Thank you, Ted. We are now ready to take questions from the analysts. We ask that you limit yourself to one question with one related follow-up. Adam we are ready to begin. Q&A Session Follow Spirit Airlines Inc. (NASDAQ:SAVE) Follow Spirit Airlines Inc. (NASDAQ:SAVE) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions]. Your first question comes from the line of Conor Cunningham with Melius Research. Your line is open. Conor Cunningham: Ted just comment of shifting day of week, it’s been a big theme this — just ignoring the potential fair impact. But just — when you think about operational stress on the system, when you add more [Technical Difficulty]. Ted Christie: Hey, Conor, you’re — sorry, Conor, you’re cutting in and out, but I think you asked about day and week variation and the operational effect of that, is that right? Conor Cunningham: Yes. Sorry about that part. Ted Christie: Okay. No problem. So you’re right. I mean one of the things that we implemented as a result of our learnings from 2021 here was that we started to smooth the airline out a little bit more, because it is easier for particularly airport ops to understand and schedule the airline. But that is only one of the many things that we’ve implemented as part of our operational enhancement package. And I alluded to that in my comments that we have quite a few things that we’ve done to make our operation run, and I think it’s been having a nice effect. And so as part of the learnings from that, we’re looking at things that are most effective and some of the things that we did that weren’t having as much of an impact. And so we believe that while we’re not going to stress the airline too much going from peak to off peak. There is some opportunity for us to drive some of that, which will help unit revenue, and we think it helps the margin at the end of the day, particularly in the off-peak period. Conor Cunningham: Okay. And then on the GTF issue, you mentioned that perhaps talking about making a whole. I’m just — I know you expect that to play out. Is that — I mean I think Alliance talked about maintenance credits? Just any thoughts there would be helpful. Thank you. Ted Christie: No problem. Yes, it’s still early. This all developed quite quickly on us. As we said, we had to make quick changes to September, which is not favorable at all. But one thing I will say about Pratt, we’re a long-standing customer. This is a storied institution in the United States, one of the biggest industrials in the history of the United States, and we’ve had a long-standing partnership with them, and they’ve always stood by their customers, and they’ve always honored their commitments. And so we expect that to be true. They’ve intended to make us whole on this issue, and that is our expectations. But coming to the details of what that will look like and how it will take form, it’s still too early to tell. Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore ISI. Your line is open. Duane Pfennigwerth: Hey, good morning. Thanks. Ted, your comment about holding out for yield was kind of interesting. I think there was a line in the press release about an acute reduction in demand. Can you talk about when you first saw that kind of acute reduction in demand? Is it sort of the other side of the coin of maybe holding out for yields? So I assume it was kind of late in the quarter issue? And any color on the markets where that was kind of felt most acutely, maybe Caribbean, et cetera? Ted Christie: Sure, Duane. Thanks. I’ll give just a brief intro, but I’m going to let Matt coloring around the edges. I think some of the points you made, and we used the words intentionally drive home as we saw was very acute. We feel like it’s isolated and noticeable and ties nicely with what we’ve witnessed and now heard people talk about rapid and distinct shift away from domestic and near-field international, which was very strong last year to long-haul international, which is obviously considerably outperforming this year. And our strategy around handling yield clearly was patterned off of what we were seeing over the last 12-plus months, and that did not play out well towards the end of June. But Matt, what would you add about geography and that sort of thing? Matthew Klein: Sure, Duane. I can — one perfect example, I think, as you touched and talked about Caribbean there for a second, is Cancun would be an example of some of the abruptness that occurred during the quarter for us is April, within the same quarter, April, we saw incredible demand strength, pricing power and sold out flights basically every day. And then less than two months later, we saw in June, which is still a very strong time for Cancun reverse with unit revenues, in some cases, down very high double-digit numbers percent change year-over-year. And that’s all happening within the same quarter, and that’s how abruptly things kind of moved. And we have a couple of other examples like that, but that’s probably the biggest example. And having said that, our capacity is up a little bit in Cancun. So some of that could be explainable, but not to the level that we actually saw. And the industry has added some extra capacity there, too. So it’s always about supply and demand. But in this case, the demand just fell off. And as we talk about yield and think about June, but then also into the third — end of June, and then into the third quarter. We took a position that we had been seeing really for the last 15, 16, 17 months of the demand will be there and will come in and the yields will be impressive. And that just stopped relatively quickly. It’s not that it went completely away. It’s just that it stopped at the same pace that we had seen. And really, we just — we held out a little bit too long expecting to see those yields come in. Once you make an adjustment to that, then you are sacrificing yield for volume, and then you need to see the volumes come in. So we are anticipating and starting to see the volumes come in. They’re just at lower yields than what we’d like to normally see for third quarter. We have described this as an acute situation, and we are expecting to see demand trends here in the domestic U.S., but also near-field international as well as U.S. territories bounce back. And look more normal as we get out of the summer into the fall, and then especially at the peak periods in the fourth quarter. Duane Pfennigwerth: Any themes on the originating city aspect to that demand change? Or did you see sort of variation depending upon what region of the country you’re originating from? Matthew Klein: No, not really, Duane. It feels like it’s spread. I mean being heavily East Coast oriented, has an effect on some of the demand where that demand decides to go, because as you would expect, Transatlantic, Europe is not too far away from the East Coast, relatively speaking. So there was an impact with that. But in general, we saw impacts, but East Coast really took it probably the most. Duane Pfennigwerth: That’s great. I really appreciate that color. And then just on the engine issue, and this may be impossible at this point in time. But of this kind of negative 6%, negative 7% margin outlook for the third quarter. How many margin points do you think these specific engine issues are costing you? And to the extent that there’s reimbursement sometime down the road, how would you size that headwind as of today? Ted Christie: Sure. So we think the easiest way to think about the margin impact of this issue is really driven by our utilization and productivity. And given where we are right now with fleet utilization, which takes into account all the aircraft on ground that we have today, we’re probably missing 7-plus margin points as a result of that, broadly speaking. Now some of that can be attributed to some of our own restrictions, which we alluded to before about how we’re running the airline. But the vast majority of it is because we have AOGs. And so we’re going to be obviously in discussions about what the impact it’s having on us. And it is unfortunately for us, in the United States, we’re really to stand out here. And so it will be an important discussion that we have with the folks at Pratt and RTX. But as I said earlier, we’ve got a very strong partnership with them. They’ve always stood by us, and they’ve always honored their commitments. And we have no reason to expect that would change here. Duane Pfennigwerth: Thank you. Operator: Your next question comes from the line of Scott Group with Wolfe Research. Your line is open. Scott Group: Hey, thanks. Good morning guys. So I know there’s a lot of talk about the shift international in days of week. But if I take a step back, is it just possible that we’ve now finally surpassed pre-pandemic domestic capacity. At the same time, corporate demand is somewhat diminished from where it was and legacies are forced to just be a little bit more focused on leisure. So there’s just too much supply relative demand for some of the smaller carriers, and we just sort of reached that inflection point to possible that’s what’s just happening right now? Ted Christie: Yes, good morning, Scott. So look, I mean, the nuances of establishing what impacts demand are difficult to arrive at as you would expect. But given what we experienced in the latter part of Q2 and what we’re seeing here in Q3, we wouldn’t describe it that way. We would describe it as clearly a shift in demand geographically. And so we think that that move probably costs us 400 basis points on the margin this quarter. And we don’t expect that that will repeat next summer or in the fourth quarter more closely in. And so I wouldn’t say nothing that we’re seeing right now says that we have a noticeable supply demand imbalance. In fact, if you look at what’s been happening over the course of the recovery from the pandemic, unit revenues across the Board are up. And admittedly, we’re considerably larger, but the industry is only modestly larger, and it would tell you that there’s, there’s plenty of demand out there. So I don’t know that we see data yet. I mean your supposition would say, is it possible? I suppose anything is possible, right? But it’s entirely possible that right now, there’s an artificial lid on demand, because corporate travel hasn’t returned and because people are fatigued with the operations that we’ve all been dealing with over the last year and a half. And it becomes exhausting when you sit at an airport and you’re delayed six hours because of air traffic control initiatives and ground delay programs. So I mean, there’s just as much as there’s always possibilities that there’s changes happening in the demand profile. I think there’s just as many that say it’s possible that we’re seeing some things that are artificially living demand. So again, we’re more focused on what we saw in the second quarter and what we’re expecting here in the third, and we think that that’s what’s driving the disconnect in our performance. Scott Group: Okay. That makes sense. And then just given the merger and I guess the uncertainty of the merger, how do you plan for capacity growth next year? What are your initial thoughts? And I guess, how much capacity growth you need to have a shot of getting CASM down next year? Ted Christie: Well, the good news is, and Scott can jump in here after I’m done, is that the primary driver of getting the CASM where we wanted to be is getting the productivity of the existing assets to where we want it to be. So that’s not necessarily about — I mean, obviously, that drives growth because utilization will in fact drive growth. But as Scott said, we feel that we would be at that in the fourth quarter, excluding the AOGs with Pratt. That will help us get to our expected more expected kind of CASM trajectory, and that should be a tailwind for us. So looking at 2024, it’s a little cloudy right now, because we originally thought we had a pretty good beat on what was happening with the fleet. We made the necessary adjustments, which I think were smart. And then, of course, we just received information two weeks ago that kind of changes that. So what would you add to that? Scott Haralson: I think that’s right. So Scott, I think it’s about utilization first and foremost for us. I mean we’ve been running a pill for the last few years trying to catch up to the amount of aircraft we’ve been delivering. And with the changes in the Airbus delivery stream that we negotiated, I think, put us in a pretty good spot to try to navigate all of the different variables that are moving and let us feel comfortable that we’re able to generate margins that will tell us that we should be growing again. I mean we got to earn that right to grow the airline. So we got a return utilization, return margin and cash reduction. And then we can start to lean forward. But I think we want to make sure we can digest the capacity. We’ve taken over the last few years, get utilization to where it is, and kind of get our skis underneath us, and then we’ll move forward. Scott Group: Okay. Thank you guys. Operator: Your next question comes from the line of Jamie Baker with JPMorgan Chase. Your line is open. Jamie Baker: Hey, good morning everybody. Thanks for the color on pilot attrition. Just wondering if you have any year-on-year numbers that you could share. Also, is the new contract having the desired effect of increasing applications or is it merely slowing attrition? Either way, it’s obviously positive? Ted Christie: Yes, it is positive. And the attrition numbers are stabilizing in ranges that versus where we were at peaks. And you’ll recall on our Q1 earnings call in April, we alerted that we were seeing some alarming attrition levels. And as a result, we pulled some capacity from the summer. Those ended up being the anomaly. So we’re now at levels that are much more akin to what we were experiencing in the early part of this year as a result of the deal and give us confidence that as we move forward, we’ve reached some stability. Now, I think obviously, a new contract does create stickiness for existing pilots. Our recruiting team is doing a fantastic job at navigating the environment and we’re having great success at attracting new pilots as well, full classes every time. And the engagement there is really strong. And as a one anecdote. We — like I said, we’ve noticed that there have been pilots leaving us and a number of other lower-cost airlines going to the majors. We’ve now experienced numbers of what we’re calling boomerang pilots, where they’ve left us, gone to another airline and are coming back. And I think it has to do with a mix of, obviously, the contract itself. The quality of life that we offer and the combination of those work life balance, benefits, pay and the word of mouth is spreading. So I’m encouraged by all of that. We can’t rest on our laurels. We’ve established new programs that give our pilots much more touch time and concierge type feel, and it’s working. And so for now, that gives us some confidence that it will no longer be the limiter. And it really comes down now to fleet. And that’s how we work to solve this problem with Pratt. Jamie Baker: Got it. Thank you. And that leads into my second question, and this is probably one of the most theoretical questions that I’ve asked you over the years. But if you could choose between the GTF issues completely disappearing tomorrow, gone, or having corporate demand immediately recover for the big three and not just to 2019, but back to where it should have been in 2023, which of those would you choose? Can’t have both and have one or the other? Ted Christie: I can’t have both. Okay. Well, I think my answer would be to have the Pratt issue resolved. It’s localized to us. It makes us stand out. We don’t like it, neither do they by the way. And it’s crimping what drives this business, which is productivity and low cost. So you’re right that having another demand funnel open up would be good for the broader industry. And I couldn’t argue that, that wouldn’t help the whole industry a little bit. But when thinking first specifically about us, I would feel better about having our house in order and our fleet where we want it. Jamie Baker: Okay. Very helpful. Thank you everybody. Operator: Your next question comes from the line of Stephen Trent with Citi. Your line is open. Stephen Trent: Good morning everybody. And thanks for taking my questions. Just quickly, I was wondering, I was intrigued by what you said about Cancun. On your Mexico flow, have you actually seen over the last year or so, any tailwinds in terms of cross-border demand considering that the FAA has not restored Mexico’s Category 1 aviation safety rating and [indiscernible] not linked up yet, et cetera. Just wondering if that’s created any opportunities for you? Thank you. Matthew Klein: Hey, Stephen, it’s Matt. So we have added a little bit more in Mexico overall. We haven’t really seen a lot of the cross-border sales benefit that you’re discussing or, I guess, asked about. Almost all of our Mexico demand is point of origin in United States. And believe me, well, I’d tell you that I wish we saw more coming out of Mexico. It’s the vast, vast, vast majority for us is a point of origin U.S. Stephen Trent: Great. I appreciate that, Matt. And just very quickly, when you look at the challenges, I mean, not just you guys, everybody with air traffic control and the other issues out there were storms. Any high level view with respect to longer-term strategy of maybe doing more with crew bases in certain regions versus today? Thank you. Ted Christie: Sure, Stephen. So you’re right. I mean the whole industry has been very vocal about the challenges we face, and I know weather is a driver of that. And it’s certainly appears to be noticeable that there has been a shift in the weather patterns. But we don’t believe that the weather patterns really fully account for the changes and what we’re experiencing from a level of disruption, delay in cancellation. And let me give you like an interesting data point. So pre-pandemic, in the second quarter of 2019, Spirit canceled about 700 flights for weather. And if you’ll recall, which you may not, but in the very early part of this — of the second quarter of 2019, we had a very difficult Easter period because of a storm pattern that moved through Florida. It was very noticeable and it turns out it was the first indication of some of the challenges that the JAK Center control center was having. So we’re about 30% bigger today than we were in 2019. So we should have expected to see around 900 to 1,000 cancellations in the second quarter of this year. Instead, we canceled 1,700 flights. So weather alone doesn’t describe what’s happening. What’s happening is that the staffing shortages at the variety of different control centers throughout the U.S., which has been widely publicized are limiting their ability to navigate the airlines around the challenges, and it’s putting us into a real bind. So what we’re trying to do and what we’ve done over the course of the last couple of years is we’ve done exactly what you suggested. We’ve put significantly more investment into things that previously were just easier to run. So adding crew bases has turned out to be one of the bigger wins for us, in fact. And we’ve added — since 2019, I think we’ve added maybe four or five crew bases. So it’s been a noticeable shift, and that’s helped the scheduling team create a little bit more ease of recovery. And that’s just one example of a variety of different things that we’ve done to insert buffer to create recoverability. We’ve reduced the average line days for our crews, they used to go out on average around four days and now they go on average around two days, and that makes it easier to recover there. All of this is intended to make the operation easier to recover and more reliable, but it doesn’t come for free. And so we, like the other airlines are doing our best to lobby with the Department of Transportation and the FAA to put the necessary infrastructure in place in the air traffic control system so we can start to run more efficiently, which will drive lower cost and lower fares, which is really the best answer for the country. Stephen Trent: That’s very helpful. Really appreciate the color. And thanks for the time. Operator: Your next question comes from the line of Helane Becker with TD Cowen. Your line is open. Thomas Fitzgerald: Hi, this is Tom Fitzgerald on for Helane. Thanks so much for the time. First question looks like you’re growing a lot in the third quarter in Phoenix, Charlotte and Los Angeles. I just wanted to get — just curious if you had any color on those markets in particular. And then just as a follow-up, just a quick modeling question. I know the base case assumption seems to be that the regional shift in — the regional demand mix will shift back to something more normal in the fourth quarter. Are you pre-COVID, you’d usually — 4Q revenue would decline a little bit sequentially versus the third. Last year was up. Is it just from a high level, would you expect it to feel like last year it would be slightly up versus the third quarter or still down a little bit. I just appreciate any color there. Thanks so much. Matthew Klein: Hey Tom, it’s Matt. So your first question regarding Phoenix, Charlotte and Los Angeles. We have seen pretty good success in these cities which is why you’re seeing the growth there. We did pick up an extra gate in Charlotte, and we’ve also picked up extra gates in Los Angeles, and we’re utilizing them. That’s what we do. And we’ve seen growth — our own growth in Los Angeles has been very effective for us. It’s helped build out our presence out on the West Coast a little bit more. It makes us more relevant in general in Los Angeles, which then helps the overall Los Angeles revenue generation and brand awareness out there. And Phoenix is just another leisure destination in the country that it’s time for us to start doing a little bit more work there, really. And then in terms of Q4 versus Q3, the answer would be, generally, yes, we’d expect to see trends that you mentioned kind of continue out there. So we would expect to see that kind of growth in Q4. Operator: Your next question comes from the line of Mike Linenberg with Deutsche Bank. Your line is open. Michael Linenberg: Hey, good morning everyone. Two questions here. I just — I want to go back to maybe Scott and Jamie’s question just about the big three and the fact that corporate is down and they’ve been allocating more assets into leisure markets. And I’m really curious though, like how much of the capacity or markets that you’re in where you’ve seen other low-fare carriers adding capacity and whether or not you sort of have a sense of sort of versus 2019, how much in your markets low-fare competition or capacity is up because it does seem like when you look at a lot of the different route changes that have made of late, it does seem like a lot of the low fare carriers are all targeting the same markets and in many cases, they are going after the same customer. How much of that is a factor or maybe it’s not, maybe it’s not much of a factor. I’m just curious about your take on that? Thanks. Matthew Klein: Sure, Mike. It’s Matt. I’ll try to tackle that one. So we have seen from pre-COVID really until now. Our overlap has generally been the same across the industry with a couple of exceptions. One is, as you just noted, our nonstop overlaps with Frontier have increased a bit. But with Southwest, we’ve gone down. So kind of a trade-off there amongst, I guess, you’d say, low fare carriers. And overall, we — generally speaking, we of course, when we decide where to fly and how we pick roots and pick new cities, we’re evaluating the overall landscape, and we’re evaluating what’s going on in general, and we do take into account who is already operating in certain routes because as we put together our forecast, we have a lot of history in understanding how we think the routes will perform and the competitive dynamics, while different city to city generally can help us predict what we think outcomes will be. So having said all that, in a normal environment, routes that we can target domestically not to sound a little bit arrogant about it, but a lot of times, it doesn’t matter who’s already there if our forecast play out and we think that we’re going to grow markets, which is what we do. It generally doesn’t turn into a big issue. The issue that we’re seeing right now is with this move towards international long-haul traffic. Some of the competition right now inside the U.S. is competing for what might be lower demand profile than what we were all probably anticipating, at least we were anticipating a different demand profile this summer. So generally, I think to answer your question is even though we do see competition and we are growing on top of other people and just like they are on top of us from time to time, generally hasn’t been an issue for us. This summer, we feel is incredibly unique that we’re seeing some of these impacts. And as we noted, we expect this to flip back as we get into the Fall and the peak holiday periods when just in general, customers just take shorter trips and they’re looking to stay more state side. And we expect that will then turn back into the normal demand patterns that we’re used to all seeing. Michael Linenberg: Okay. Great. Good answer. And then just thanks for that. And then just second, more of a modeling question. You obviously, a lot of moving parts here with the GTF issue. How should we think about 4Q capacity, your sort of revised capacity number for 2023 and then what does that mean for 2024, especially since you’ve cut back your deliveries for next year, just rough numbers since I know it’s early? Thank you. Scott Haralson: Yes hey Mike, this is Scott. I’ll take a stab and then Matt can opine too. So looking at sort of the move between second, third and fourth with the reductions that we’ve had from the GTF, the new GTF issues, probably looking at — you probably have a slight reduction in Q3. But with the increase in utilization, we would expect Q4 to be a good bit higher than Q3. We haven’t finalized the exact capacity schedule for Q4, but I would expect somewhat material move north in capacity. And thinking about ’24, I mean, obviously, the news is fresh on the additional GTF issues. So it’s hard to predict where 2024 will look like. But I did mention in the prepared remarks that with the moves we made with Airbus, we expect it to be in the high teens. So the expectation is a lot of that growth will be muted by the engine issues. Hard to know if we’re going to be in the single-digits or flat or low teens, hard to tell at this point, but my guess would be somewhere in the single-digits for ’24. Ted Christie: And one other point that I’ll make, Mike for the fourth quarter, and I said it in my prepared remarks, Pratt had indicated that we were going to see up to 13 engines in this initial allotment. And given the tight time frame and that it was effective, the inspections would be effective in September, we pulled seven aircraft out of service for the month. However, they’re continuing to refine the universe of engines, and it’s entirely possible that we may see some benefit associated with that, which means that our exposure in the initial allotment of 200 could go down. And if that’s true that would give us more opportunity in October, November and December with productive airplanes. And given that what we’ve just talked about with pilots, we definitely have those available ready to fly. So we don’t know yet. It’s all kind of in the soup, and we’re just going to have to update you as we learn more over the course of the next month. Michael Linenberg: Okay, very good. Thanks gentlemen. Vivian Taveras: Adam, do we have any other calls or questions? Operator: Your next question comes from the line of Dan McKenzie with Seaport Global. Your line is open. Daniel McKenzie: Hey, thanks. Good morning, guys. Picking up on that last point, the uncertainty around 2024 is pretty understandable. But going back to the script and the need to slow down growth and de-risk the business, has your thoughts about growth beyond 2024, also they’ve also moderated. How should we think about growth longer-term? Ted Christie: Well, I can start. And Scott alluded to some of these changes in the script. We still see a sizable opportunity. So that hasn’t changed. I think what we’re alluding to as far as the near-term is that we continue to grow pretty notably on a fleet basis throughout the course of the pandemic and haven’t been able to use them. We just haven’t been able to get the utilization where we wanted it to be. So taking a chance to digest those airplanes and get them up in the air and efficient will help the unit cost story, which helps the margin story. So the work that Scott and the treasury team did with Airbus was a cooperative effort between ourselves and the manufacturer to smooth out deliveries, give us more certainty into the latter part of this decade where airplanes are going to be very, very difficult to get your hands on and allow us to use the lessor community to supplement that one and if we feel like it’s necessary. So there’s a lot of moving parts in our fleet as is true for every airline. We’re retiring 319s right now. We’re going to get pretty close over the next five or six years to the oldest 320s, believe it or not in our fleet and starting to have to think about what happens with those and whether or not we keep those around. So there’s ups and downs that we’ll deal with, but the opportunity itself still hasn’t changed for us. So it’s just a question of pacing and that sort of thing. Scott Haralson: No, I think that’s right. I think we smoothed out the delivery stream. So prior to this adjustment, we were having some peaks and troughs that were pretty material. So this allowed us to smooth it out, give us a predictable base and allow us to, as I mentioned earlier, to sort of earn our way into the growth profile again. And we’ll use the lessor community like Ted said, give us some flexibility, we have some ability to extend and or retire early additional aircraft. So this gives us a good base to maneuver with as we think about going forward. I think the long-term story is still the same. We think there is opportunity for us to continue to grow. And so what was the best fleet mix and platform for us to do that. And I think we set ourselves up well for that. Daniel McKenzie: Okay. I guess just in terms of an actual growth rate, are we thinking that longer-term target — that growth target is still, call it, low double-digits? Or does it mid-double-digits? Any sort of perspective around that? Ted Christie: Well, if you just, I think mathematically roll out the airplanes, it’s less than that now. Certainly, as you get bigger, into the future. And that’s why I say, I think we’re evaluating the pace of things. Scott said it earlier, I think it was a great point. We have to earn our right to deliver the capacity and getting back to full efficiency and starting to deliver the margins we believe that we can is our first step. So this was a good idea to kind of for a lot of reasons, to smooth things out for ourselves and gives us a chance to kind of prove all of that, and we have the right team here to execute to it, but we need to get the job done. And I think that’s what this kind of recent modification allows us to do. Scott Haralson: Yes. I think the point there too is that the growth is not an isolated objective, right? We need the returns to be able to justify it. And so while we think that will be the case, we do need to make sure that we’re doing that before we deploy the capital. And so I think that’s just prudent management for us to sort of see the game plan first. Ted Christie: And we haven’t commented a lot on the pending transaction with JetBlue. But as you can see from the results that have happened across the industry really here, the dominant oligarchs are outperforming the rest of the industry and that’s not an accident. When you control that much capacity, it’s very difficult to compete, especially with the diversity of revenue sources, the strength of their loyalty programs, the strength of their credit card programs. We do our best to fight that every day with low cost and low fares, but you can just see from the numbers. And we think the best answer for competition is to create a fifth alternative. And clearly, with that engine, there’s going to be unique growth opportunities. And that’s the case we intend to make — and I think that’s going to be the best answer. If it doesn’t work and we’re stand-alone, we still feel good about our prospects. But it’s not to say that the recent experience hasn’t shown that there are some challenges out there. And I think we’re just doing what we would — you would expect us to do as management, which is to be a little bit prudent, make sure we’re pursuing the growth in the right way. Daniel McKenzie: Yes. Perfect. Second question here, this idea of an artificial lid on demand that you shared due to ATC issues. Is the thought that, that will persist until 2025 when the ATC is expected to be fully staffed? Or I guess, is it just more temporary just sort of tied to some issues today because it’s so severely understaffed? Ted Christie: Well, admittedly, I’m speaking purely on speculation and anecdote, but I’ve experienced it. So having flown — I fly a lot, and it can be frustrating when you’re stuck at an airport for three, four, five, six hours because of ground delays and all the things happening. And I think that may be making people make different buying decisions. And so I don’t know how long that persists. Clearly, during the summer, it’s at its peak. We don’t anticipate that during the fall or the winter where actually it’s a little bit easier to operate, we’re going to see that type of frustration. I think it happens a lot during this period, which is when everyone is traveling and the weather is bad. But I think it’s just a theoretical impact that I can tell you that first person experience, I’ve witnessed, and it’s very — you can understand how people might say, “You know what, I may not add that third trip to go see my family because I just can’t afford to spend nine hours back and forth waiting”. Daniel McKenzie: Yes, makes sense. Thanks so much for the time guys. Operator: Your final question comes from the line of Savi Syth with Raymond James. Your line is open. Savanthi Syth: Hey, good morning everyone. Just bit of a follow-up in terms of your thinking of 2024, but more so from how much of that pre-GDS, like when you were thinking of high teens, how much of that growth was going to come from utilization? I’m just trying to think about as you’re exiting this year and going into next year, you might not need as many kind of training and hiring costs and your utilization improves. So that should be a pretty good tailwind, but I’m trying to just quantify that a little bit more. Scott Haralson: Yes, hey Savi, this is Scott. Yes, I think you’re spot on with some of that. As we thought about the high teens, it’s really made up of really three things. And they’re both probably in the five to seven points worth of move. But we’ll probably grow the fleet above five points in ’24, you have utilization move year-over-year, which is probably five to seven points worth of impact. And we have average seats for everyone. And that’s probably another five-plus points. And so that gets you in the high teens. And so your point is right, really two of those are less impacted by pilots. But I think we’re — we feel good about our pipeline. We’ve talked about that before, no longer pilot constrained. So now this is just getting the airline humming again. So I think we’re in a good spot. Unfortunately, we do have to deal with the next batch of GTF issues, but we feel comfortable about the core part of the airline. Savanthi Syth: Regarding the GTF and like if you do get settled with the Maple, how does that flow through the P&L? Is that a special item and it helps your cash? Or how does that kind of flow through? Scott Haralson: Yes, Savi, we’re early in the discussions around what that might look like. So difficult to say. It could take a few different forms over different lengths of time. So we would have to figure out what the accounting would be based on the vehicle. But we’ll let you know when that materializes. Savanthi Syth: Thank you. Operator: I will now turn the call back over to Vivian Taveras for closing remarks. Vivian Taveras: Thank you all for joining us and for your participation today. Please contact Investor or Media Relations if you have any further questions. We look forward to talking to you soon. Have a great day. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect. Follow Spirit Airlines Inc. (NASDAQ:SAVE) Follow Spirit Airlines Inc. (NASDAQ:SAVE) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Allegiant Travel Company (NASDAQ:ALGT) Q2 2023 Earnings Call Transcript August 2, 2023 Allegiant Travel Company misses on earnings expectations. Reported EPS is $0.62 EPS, expectations were $3.63. Operator: Good afternoon, and thank you for standing by. Welcome to the Second Quarter 2023 Allegiant Travel Company Earnings Conference Call. [Operator Instructions]. Please be advised that today’s […] Allegiant Travel Company (NASDAQ:ALGT) Q2 2023 Earnings Call Transcript August 2, 2023 Allegiant Travel Company misses on earnings expectations. Reported EPS is $0.62 EPS, expectations were $3.63. Operator: Good afternoon, and thank you for standing by. Welcome to the Second Quarter 2023 Allegiant Travel Company Earnings Conference Call. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Sherry Wilson, Managing Director of Investor Relations. Please go ahead. Sherry Wilson: Thank you, Michelle. Welcome to the Allegiant Travel Company’s Second Quarter 2023 Earnings Call. On the call with me today are John Redmond, the company’s Chief Executive Officer; Greg Anderson, President; Scott DeAngelo, our EVP and Chief Marketing Officer; Drew Wells, our SVP and Chief Revenue Officer; Robert Neal, SVP and Chief Financial Officer and a handful of others to help answer questions. We will start the call with commentary and then open it up to questions. We ask that you please limit yourself to one question and one follow-up. The company’s comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view this earnings release as well as the rebroadcast of the call, please feel free to visit the company’s Investor Relations site at ir.allegiantair.com. And with that, I’ll turn it over to John. John Redmond: Thank you very much, Sherry, and good morning, everyone. I’m thrilled to report an 18% operating margin and 99.7% controllable completion for the second quarter, among the highest in the industry during the quarter, both operationally and financially. In the face of high demand and operational complexity, the team continues to deliver. It is their exceptional efforts that have allowed us to meet and exceed our customers’ expectations. Over the last year, we have increased our NPS scores by an average of 10 points and are now at the highest scores since the pandemic. I could not be prouder of the work our team members do each and every day. Thank you very much for your continued passion and dedication. Our commitment to enhancing the travel experience remains a key driver of our success. Over the years, we have invested in our services and our brand, ensuring we not only meet the evolving needs of our customers but also create new opportunities for growth and expansion. One area that continues to pay dividends is our co-branded credit card. With over 600,000 credit cards issued, the program continues to surpass expectations. Cardholder spend has increased by 220% since 2019 and shows no signs of slowing. We believe the opening of Sunseeker Resort later this year will provide further value propositions for our cardholders and guests and help drive cardholder sign us well into the future. Last quarter, I spoke about the key strategic initiatives of this management team. I’d like to provide a quick update on our progress. First and foremost, finalizing our outstanding labor contracts remains our top priority. Greg will provide additional detail around our status, but it is of the utmost importance that we continue making progress and deliver contracts that our teams are proud to support. Secondly, we are committed to continuing to deliver high operational performance. It is our obligation to our guests to strive for industry-leading performance as shown in our Q2 results. It is a necessary pillar in ensuring we protect the investments we’ve made over the years in our brand. Finally, I’m happy to report — we remain on track to open Sunseeker Resort in Port Charlotte, Florida, in mid-October. This has been a long time coming. The project full challenges and delays outside of our control, so to see the end insight is remarkable. Bookings for Sunseeker continue coming in from all corners of the country, 42 states, all total, which speaks volumes of the breadth of the database. To date, excluding group bookings, we have sold approximately 3,300 transient room nights at an average room rate of $410 per night. This transient room nights booked to date are impressive, in that most people book hotel rooms inside 50 days of arrival. Regarding group bookings, over 50 groups have contracted or in the process of contracting nearly 40,000 room nights. The team continues to bring in high-quality groups and I fully expect this group room nights booked number to grow to roughly 75,000 by year-end, covering all years booked. These are incredible group numbers for our property and brand that has never existed in the market. The team in Florida is in full hiring mode looking to onboard a targeted headcount of around 1,200 personnel. We received over 5,700 applications with over 70% of those applicants residing within a 50-mile radius of the resort, demonstrating our commitment to supporting the local economy. Underpinning this influx in applications is a unique retention bonus we announced in early July for our inaugural nonmanagement Sunseeker Resort team members. It provides an annual retention bonus of $10,000 for 10 years after completing 10 years of continuous full-time employment. Interestingly, we have received applications from people residing in 49 states. Given the early response, we would expect the application pool to exceed 7,000 people. With an application pool that continues to grow, this innovative program should help us attract and retain the very best hospitality professionals, and we already see evidence of this within the pool. From a financial perspective, the Sunseeker Resort budget remains at $695 million. As indicated in prior calls, costs will ramp in the third quarter due to preopening expenses. We estimate the total cost impact will be roughly $15 million this quarter. Consistent with last quarter, the full year impact to consolidated EPS remains at $1.25 loss. I continue to be encouraged by the long-term value creation of Sunseeker Resorts. Upon completion of the project, the team will shift focus to begin laying the groundwork for our asset-light growth trajectory. With the opening around the corner, some of you will continue to speculate about our future intentions regarding expansion plans or future projects requiring material capital outlays. We will not pursue any such projects without an equity partner. In closing, I could not be happier where we sit today. Our upward guidance revisions reflect our conviction about the balance of the year and to continue to deliver strong performance in the coming years. As such, I am pleased to announce that the Allegiant Travel Board of Directors has authorized an annual dividend of $2.40, payable in equal amounts quarterly, beginning September 1, through the second quarter 2023. We remain committed to growing profitably by enhancing our offerings, driving customer satisfaction and delivering increased value to our shareholders. With that, I’ll turn it over to Greg Anderson. Gregory Anderson: John, thank you. Over the past year, the industry has faced a uniquely challenging operating environment. Despite these many obstacles, Team Allegiant is delivering exceptional results. In our business, everything begins and ends with operations, and here at Allegiant, we are only days away from having the heaviest flying periods of the year behind us, March and summer. Through July, we are running an impressive 99.8% controllable completion factor and that’s year-to-date. In addition, during the month of June, we are amongst the industry leaders in on-time performance. The results we are seeing today represent a significant improvement over where we were a year ago. This improvement has driven our year-to-date irregular operation costs down by $80 million compared to the same period in 2022. Obviously, an unreliable operation is much more expensive to run. It also leads to unnecessary disruption and frustration for our guests and our frontline team members. Overly ambitious scheduling may lead to higher revenues, but when its results in excessive delays and cancellations, the juice isn’t worth the squeeze. We are committed to maintaining a balanced scheduling approach. This approach is executed jointly by our planning and operational teams as together, they expertly manage a schedule to meet the leisure demand environment while maintaining operational integrity. Our unique ability in adjusting capacity is differentiated by our low fixed cost structure. One of the interesting themes you are hearing from other carriers has been around leisure traffic. Moreover, some carriers are reshaping their network and adjusting their schedules accordingly by lowering off-peak capacity. This leisure focus and focused flying on peak days has been our approach for over 20 years. We are ideally suited for this leisure peak flying approach, and you can see this in our results. And going forward, we believe this approach will continue to pay dividends. In addition to our operational and financial performances, there is also an incredible amount of work being accomplished behind the scenes to strengthen our foundation and to be able to support a 200-plus aircraft airline in roughly 5 years. Our major system implementations are a key step in getting there, and I’m happy to report SAP went live on July 1, a major milestone along this journey. This once-in-a-generation system changeover will help drive internal efficiencies across our back office teams. Additionally, we plan to cut over to Navitaire in late August. We delayed its go-live date to move any potential operational disruption to outside of our peak summer travel period. Navitaire is expected to drive incremental ancillary revenue due to its dynamic pricing capabilities. In addition, system will support our expansion into Mexico with our joint venture partner, Viva Aerobus. However, due to recent actions undertaken by Mexico affecting U.S. carrier operations at Mexico City Airport, our ATI application with the DOT has been temporarily put on hold. We want to be clear though, that this does not affect the merits of our application. It’s also worth noting that we have readied the areas within our control to be able to launch once ATI is approved. The execution of the incredible team members at Allegiant truly amazes me. Not only do they continue to strengthen our foundation, but their efforts delivered industry-leading controllable completion and operating margins during the first half of 2023. This triggered a maximum profit share amount, paying out over 12 million to our airline team members. We could not be prouder of the work team Allegiant does and thank you. We believe we are incredibly well positioned for the future and are uniquely set up to be a destination airline for all of our team members. A key element of this is to ensure we maintain competitive labor contracts. Last quarter, our dispatchers, who are represented by the IBT, ratified a 2-year contract extension more than a year before the amendable date of their CBA, which included pay rate increases at the higher end of the industry. Similarly, we are happy to have reached a formal tentative agreement with mechanics, also represented by the IBT more than 3 years prior to their amendable date. This TA provides for significant increases in rates and as a 2-year extension to the current contract. The TA is subject to approval by the mechanics in the coming weeks. In June, we announced a tentative agreement with the TWU, which represent our flight attendants. While this initial TA was unfortunately voted down, we remain focused and committed to reaching a deal with our flight attendants and reengaging at the table with the TWU in short order. Regarding our pilot group, who are represented by the IBT, we remain in mediation and working towards pathways to a deal. Given the uncertainty around the timing of a deal, we felt it necessary to address pilot compensation outside of bargaining and recognize the importance our pilots play in our ongoing success. As such, in early June, we were pleased to announce a retention bonus for all pilots that remain with the company through ratification of the deal. We began banking a 35% increase to their current rates, except for first year first officers, which accrue at an even higher rate of 82%. These retention bonuses are intended to bring our pilot pay more in line with the industry, with the understanding final pay rates will continue to be negotiated through the mediation process. We are pleased the IBT supported this retention bonus as we continue to work with them towards a contract that our pilots deserve. In closing, I want to thank all of team Allegiant. You are the best in the business. We appreciate everything you do. With that, I’ll turn it over to Scott. Scott DeAngelo: Thanks, Greg. Our second quarter saw continued strong domestic leisure travel demand and capture that remain near our historic highs in 2022. Thanks to improved operations, a testament to the strong leadership of our Chief Operating Officer, Keny Wilper, along with his expert leadership team and the great work by all in the Allegiant family, this year’s controllable completion rate being far above last year’s level, means we’re keeping and recognizing a much greater portion of book revenue year-to-date. Looking forward, while there’s no shortage of opinions with regards to macroeconomic conditions and their impact on consumer domestic leisure travel behavior, we spend less time trying to predict the future and more time ensuring we’re prepared to succeed in it. It all starts with keeping our fingers on the pulse of customer sentiment and their leisure travel intention. Just as we did following the past 2 quarters, we surveyed a representative sample from both our most frequent flying repeat customers as well as those who flew us for the first time this past quarter. The results remain strong and unchanged from the past 2 quarters. Among both groups, about 50% said that economic conditions will have no impact on their flying behavior with Allegiant in the next 12 months and more than 30% said that economic considerations will actually make them more likely to fly with Allegiant in the next 12 months. The market is moving toward us. For our most frequent flying repeat customers, the rationale for their unchanged sentiment and intention stems from the fact that the vast majority of them are either flying to visit family or relatives more than 40% of the group or are flying between their primary residence and their vacation home, just under 40% of the group. These remain the most resilient forms of leisure travel during any macroeconomic environment. Quarter rewarding our most frequent flying repeat customers, along with engaging new customers and turning them into repeat customers, is our Allways Rewards loyalty program. Year-to-date, nearly 90% of our customer bookings have come from Allways Rewards members. The number of members with activity year-to-date is up nearly 30% versus last year, and the number of new members with their first activity is up nearly 15% versus last year. Ultimately, having such broad coverage with Allways Rewards enables us to reward the vast majority of our customers with points that can be easily used as currency, in any amount, at any time, for anything sold at allegiant.com. Year-to-date, on average, Allways Rewards members are 1.5x more valuable than nonmembers. Most notably, this value was largely driven by them spending 60% more on air ancillary products than nonmembers do. Their take rates of core air ancillary products, seats and bags, are 10 to 20 percentage points higher than that of nonmembers. Our most loyal and engaged segment within the Allways Rewards program is, of course, our co-brand credit card holders who are 3x more valuable than nonmembers. Currently, about 2.5% of our total active customer database of 17 million has the card. As such, we believe there is significant growth potential. In 7 years, we have grown the program into a $100 million business unit, and we expect to double that in the next 3 years. To that end, I’m excited to announce an upcoming change to our program. Later this month, we will be transitioning our co-brand credit card network partner from Mastercard to Visa. Our Allegiant World MasterCard will be renamed and rebranded as the Allegiant Allways Rewards Visa Card. While Bank of America remains our issuing partner and no cardholder benefits will change. We made the decision to move to Visa, the nation’s leading brand in credit card issuance and acceptance because we believe it will enable us to drive higher levels of both new cardholders and cardholder spend, the 2 largest ways that we derive revenue from the program. We asked Allegiant customers who do not currently have our co-brand credit card, which card they would be most likely to apply for. 60% said Visa, while only 25% said MasterCard. In addition, one of the nation’s largest retailers, Costco only accepts Visa and more than 40% of our customers say they regularly shop there. What’s more? Visa will provide stronger financial, technical and analytic support for growing the Allegiant Allways Rewards Visa Card program and in providing additional benefits through their exclusive partnerships and proprietary capabilities. Wrapping up. Year-to-date, in as much as demand is slightly below last year’s historic high levels, we believe this simply represents a continued return to normalized pre-pandemic peak and nonpeak seasonal travel patterns. We continue to view domestic leisure travel in the cities and among the customers we serve as strong, but we remain close to our customers end as it’s been the hallmark of our company throughout its history, we stand ready to adapt to any changes in the demand environment. And with that, I’ll turn it over to our Chief Revenue Officer, Drew Wells. Drew Wells: Thank you, Scott, and thanks, everyone, for joining us this morning. I’m extremely pleased with the record second quarter performance of $684 million in total revenue, growth of nearly 9% on system ASM growth of 1.3%. This combination produced TRASM of which vested any previous second quarter by $0.005 and grew year-over-year by 7.5%. As Greg mentioned, we achieved remarkable operational results in the second quarter on top of financial results among the best in the industry. The current operating environment has proven challenging and we are not immune to this. Three months ago, we talked about trimming about 2.5 points of capacity from the summer schedule, and we believe it was absolutely worth it. I want to reiterate how impressed I am with the planning and operations teams coming together to do an incredible job aligning our schedule with available resources and anticipating risk areas to help mitigate potential issues, both controllable and uncontrollable alike. The buffer is added into our schedule enable better recovery options when faced with the regular operations, including ATC-related concerns, especially out of Florida. We’ve done the commercial piece as well or better than anyone else in the world as measured by margins and returns, but candidly, often at the expense of operational excellence. In first half of 2023, we showed that we could do the operational piece while maintaining that industry-leading financial position. Those 2 in harmony is an elite combination. We still have more work to do to continually improve, but this summer will serve as a great foundation going forward to ensure operational reliability in conjunction with the appropriate deployment of capacity. Diving into revenue a bit. The strength in the quarter was well balanced as yields and ancillary products each contributed roughly $5 incremental per passenger versus the second quarter in 2022. We exceeded $70 per passenger in ancillary revenue once again, in large part thanks to Allegiant Extra and continued success with our bundled ancillary products as well as the Allegiant co-brand program, which continues to thrive. Allegiant Extra is now featured on 14 aircraft and continues to exceed expectations. While we don’t expect any incremental aircraft with this layout in 2023, all Boeings coming in 2024 will have the Allegiant Extra option. Additionally, the strength of our operations and diligence from the charter team allowed us to capitalize on additional fixed fee business from both new and current clients to grow fixed fee revenue over 30%. As previously mentioned, we are still maintaining the expectation of TRASM over the last 9 months to be up mid-single digits, though now expected to narrow to the lower side of the mid-single-digit range. In addition to the continued story of incredible demand, the upside factors for Allegiant remain the same, continued operational stability and an expanded Allegiant Extra product we’ve talked about. Another upside factor is an historically mature network, but that doesn’t mean 0 routes in development. 5 new routes and 3 reintroduced routes started service this summer, including growth in Portland, Oregon, Provo, Utah and Denver, among other cities. I’m extremely happy that all 8 have their own with some even exceeding system average profitability from the start. Additionally, last month, we announced 6 new routes for the winter season, mainly focused on Florida with one added to our Mesa base. These announcements are booking above average compared to prior announcements, which is continued evidence of a strong leisure demand presence. Lastly, Navitaire should provide a lift to our ancillary program. However, given the integration delay, we will not see the previously anticipated upside in the third quarter, though we are still baking that lift into the fourth. Furthermore, we did see some yield compression through the heart of the summer booking curve, somewhat offset by atypical close-in demand. As you all know, Allegiant prides itself on matching capacity with demand. For more than 20 years, our daily and monthly levels of flying have fluctuated meaningfully. We have a great understanding of the leisure customer and when they most want to fly. The third quarter will be no different as roughly 80% of our ASMs will fall on our peak leisure days and September ASMs look to be roughly 55% of July’s flying, both generally in line with the third quarter of 2022. Scheduled service ASMs are expected to be very slightly negative in the quarter, while a full year guide remains intact at flat to up 3%. And with that, I’d like to turn it over to Robert. Robert Neal: Thanks, Drew, and thank you, everyone, for joining us on the call today. We’re pleased to report another quarter of strong financial results. Allegiant produced $76.9 million of consolidated adjusted net income for the second quarter, resulting in adjusted EPS of $4.35, in line with 2019 earnings. We recognized record total operating revenue in the quarter of $684 million, up 8.6% over the prior year on 1.3% higher capacity. Our nonfuel unit cost increased 12.9% year-over-year with 4 points of that increase attributable to pilot payroll accruals and other frontline labor cost increases, which, as Greg noted, we announced in June that were effective beginning May 1. Similar to our last call, unit costs were pressured in comparison to the same period last year by lower productivity, which accounts for about 3 points of the increase. Improved operational performance drove a nice tailwind by reducing a regular operations expense in the quarter, that was largely offset by inflationary cost pressure in stations. Variable team member compensation related to improved financial performance drove roughly 2.5 points of the increase over the second quarter last year and 2 points of CASM increase in the quarter came from some onetime nonrecurring costs which included the cancellation fee related to the transition of our co-brand credit card for Mastercard to Visa, and the remainder of our ex-fuel unit cost increase was related to various other items. Fuel costs came in below our expectations at $2.69 per gallon, helping to drive an airline operating margin of 18.6%. Shifting to full year guidance. We are increasing our estimated airline earnings per share by $0.75 at the midpoint to $11.75. The increase in expected full year EPS is fully attributable to a $0.10 decrease in our full year estimated fuel cost per gallon from $3 to $2.90. As John noted, we continue to expect a full year loss related to Sunseeker Resort of $1.25 per share. We expect preopening costs to ramp during the third quarter at approximately $15 million, ahead of opening the property early in the fourth quarter. When taken in conjunction and using the midpoint of our guide, we expect the consolidated full year adjusted earnings per share of roughly $10.50. Turning to the balance sheet. We ended the June quarter with $1.4 billion in available liquidity. That’s just over $1 billion in cash and investments and $356 million in capacity and undrawn revolvers and PDP financing facilities after a prepayment of $61 million in aircraft secured debt in late June. Net debt remained consistent with last quarter at $1.1 billion. Our net debt was down to 2.2 turns, a reduction from 3.7 at year-end driven by strong EBITDA production during the first 6 months of the year. We do expect to add some incremental debt leading up to delivery of our first 737 MAX aircraft late in the fourth quarter and would expect net leverage to be up just slightly above the current level at the end of the year. Second quarter capital expenditures included $147 million related to aircraft purchases, induction, predelivery deposits and other fleet-related costs. We spent an additional $29 million in other airline capital expenditures and deferred heavy maintenance CapEx came in at $21.7 million. CapEx for our Sunseeker Resort property was $92 million during the quarter. Moving to fleet. We inducted 2 Airbus A320 aircraft into operation and ended the quarter with 91 A320 and 35 A319 aircraft in service. We had one additional A320 aircraft owned and undergoing induction work as of the quarter end and expect to purchase 2 additional A320 aircraft during the remainder of 2023. And on the 737 fleet. Updates from Boeing indicate that our first 2 MAX aircraft, which were scheduled for delivery at the end of this year, will each be delayed by approximately 4 weeks, leaving one aircraft for delivery to us in 2023 and moving the second into 2024. While the follow-on effect on the remainder of our 2024 delivery schedule is still under discussion, our 2023 capacity plans are not impacted by this delay. As we’ve shared previously, we expect to begin operating our first 737 aircraft in the first quarter of next year and expect to take delivery of approximately 2 aircraft per month throughout 2024. Our updated full year CapEx guide today implies just under $500 million in aircraft engine and induction-related spend this year with the reduction from prior guidance related to timing of predelivery deposits and timing of aircraft deliveries. All in, we expect full year airline CapEx to be roughly $640 million. I’m very pleased with the financial trajectory we’ve seen in the past few quarters and excited for the earnings potential in our business. We can start to unlock the benefits of the infrastructure investments we’ve been making. EBITDA in the trailing 12 months is approximately $4.5 million per aircraft on a trailing 12-month fuel cost of $3.38 per gallon. Adjusting for fuel, we would be back to our 2019 level of $6 million in EBITDA per aircraft, notwithstanding some of the added cost pressures I mentioned earlier. While I recognize there are certainly many moving parts here, we expect continued improvement on this metric as our numerous initiatives come online. Running a reliable operation has been paramount to achieving the results that we’re sharing today. We’re extremely proud of our team members and the way that they have worked together to schedule and operate the airline during a time that remains challenging. I want to just end by thanking our 5,400 team members for all of their contributions during this busy peak summer travel season. Michelle, we’re ready to begin taking analyst questions. Q&A Session Follow Allegiant Travel Co (NASDAQ:ALGT) Follow Allegiant Travel Co (NASDAQ:ALGT) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions]. The first question comes from Duane Pfennigwerth with Evercore. Duane Pfennigwerth: John, what would you envision the segmentation mix for Sunseeker to be? I mean if you had to guess, how much would be group versus transient? And for the groups that you have contracted with, what do those rates look like relative to the transient rate that you cited? John Redmond: Duane, good questions. I think when you look at that, you have to kind of look at it by year. So in ’24, we’ll start with the full year of ’24, you’re probably looking at something in the range of, I’d say, maybe 12 to — it’s going to be a wide range just because we’ll be booking into the year, but probably in the range of like 12% to 18%, could get as high as 20%, but probably in that range of 12% to 18%. When you’re looking at the out years starting with ’25, you’re probably looking at 20% to 25% would be more normal as we move forward. Just to give you some color on that, when you look at the roughly 40,000 group room nights that have already been booked, about 26,300 of those fall into ’24. So that’s roughly more than 10% — slightly over 10% of the total room nights that we would have in a given year. So that kind of gives you a good barometer, and that’s why I think that’s where it’s going to fall. But again, we’re dealing with a brand and a property that hasn’t existed to run these percentages as we are is incredibly impressive, but I think that’s kind of like the 25% range would be where it starts to peak in ’25. Gregory Anderson: And John, on the group rates, there are 250 to 300 or thereabouts. John Redmond: Yes, they’ve been averaging around 290-ish when you look at all 40,000 room nights. And I would expect those to ramp up to as there’s a greater awareness of the property and we’re not selling into an unknown. So the rates we’re selling into — I mean, the rates we’re getting are more than we expected, again, selling into an unknown property, but those will continue to ramp up in the out years as we get into ’25, ’26. It’s just is another data point. So we have group room nights that have already been booked into ’27. Duane Pfennigwerth: Got it. Appreciate the thoughts. I know it’s somewhat hypothetical at this point. And then just on the OpEx run rate, can you give us a little help in the quarter? I know you got some insurance reimbursement. So what was kind of the OpEx run rate for Sunseeker in 2Q? And how do you see that kind of ramping into 3Q and 4Q? John Redmond: I think the 2Q number — I think 3Q, we’re talking about the $15 million, which was, of course, is all preopening as you’re talking about. The 2Q number, I don’t have off the top of my head what that was but obviously, it would be probably for sure, less than half that number. Robert Neal: Yes. I think we had… John Redmond: Go ahead, B.J. Robert Neal: Like $5 million to $7 million, I want to say, between the first and second quarter, per quarter. John Redmond: Yes. Duane Pfennigwerth: And sorry, that $15 million when you’re sort of up and running with the full fourth quarter, what does that look like? John Redmond: Once we’re up and operating, we haven’t put out any financial data from an operating standpoint. We intend to do that probably, at the same time, provide guidance for the airline, which should be historically we do after Q4. So we would provide operating guidance for the resort at that same time. So right now, we are only providing the OpEx, a piece before opening. So adjust just preopening numbers. There is public numbers that we put out there a few years ago. Obviously, they’re dated, and I would expect results to be significantly better because I think the ADR in those projections was something around the $250 range, $250 a night. And as you can see, we’re running much better even when you blend group and transient. Operator: [Operator Instructions]. The next question comes from Savi Syth with Raymond James. Savi Syth: Just if I could talk a little bit about the pilot bonus that you’re offering and has that improved kind of the attrition rates that you’re seeing there? And if you could talk a little bit about the retention and hiring capabilities today? Gregory Anderson: Savi, sure. It’s Greg. Thanks for the question. And the bonus in general, as we came up and moving forward with it, and just to hit on was the right thing to do. Now we have so many of our pilots that want to be at Allegiant that we were talking to and providing us feedback to say, how is it difficult to want to stay here when the rates are so low. I mean we want to be here, but the rates are low compared to the industry. We felt overall, this was the right thing to do for our pilots because they do want to be here, and they understand the unique setup that Allegiant has in terms of that out and back quality of life. Don’t get me wrong. This is one step. The contract is ultimately where we need to get, and we need to make a lot of improvements in certain areas, including quality of life, pay rates, retirement and so forth. In terms of staffing, maybe let’s just — I’ll break it down to 2 pieces. Let’s — the schoolhouse being one, Savi, and then I’ll talk about kind of the net pilots and the attrition that we’ve been seeing. But schoolhouse, as we’ve seen over the past couple of months, a terrific increase in the number of pilots coming through the physical house. I mean classes are full. I think beginning the last 3 or 4 classes have been full. So about 20 to 25 per class. Before that perspective in the first part of the year, we were seeing roughly 12 to 14 per class. So really encouraged by what we’re seeing there. Our team, led by Tyler Hollingsworth has really kind of turned that around and focused on a lot of — several different pathway programs and recruiting the right type of pilots that want to be at Allegiant that sees this, this unique quality of life set up. So — and as we look forward to the rest of the year, we still remain really encouraged about the classes, those that have signed up and continue to maintain kind of that full class status, if you will. But in terms of staffing, just to maybe put some guardrails around that and around the attrition or the notices that we were receiving. So I’d say like in April, May, it was roughly — we were receiving notice about nearly a pilot a day, I mean, just to put it into simple terms. And since June — since early June, that number has been cut down to 1/4 of that number. So we’ve certainly seen some encouraging trends along those lines. Some of that’s probably seasonal. Some of it hopefully is due not just to the retention bonus, but us, going out there and trying to make the improvements we can outside of collective bargaining. And also — but again, I want to reiterate the most important thing we could do in a big step of getting that deal done and then go from there to continue to make this a destination airline, not just for all of our pilots, but all of our team members. Savi Syth: That’s super helpful color. And if I might, on the MAX deliveries and just early thoughts on 2024 is, is 2024 going to be another year where capacity is somewhat constrained as you kind of make these investments to operate well and kind of the MAX uncertainty? Or how are you thinking about like what type of kind of capacity growth you could target in 2024, recognizing it’s still very early? Drew Wells: Savi, it’s Drew here. First and foremost, one of the biggest components will be timing of getting a CBA done with our flight crews above and beyond the MAX delivery. As we focus on the MAXs though and the constraints we have today, we’ll still have training requirements that will drive through all of ’24. So I would expect there to be a little bit of a ceiling relative to the fleet we’re bringing on in terms of what we’re able to produce ASM-wise until maybe the end of the year. I think we can start to get a lot closer to our historic run rate, but I might pull that back a little bit. John Redmond: Yes. Savi, the only other thing I would mention there is that we haven’t yet confirmed our retirement schedule on some of the A320s, we expect to take out of the fleet. And so that just gives us a little bit of flexibility. And so we haven’t come out with the 2024 fleet plan specifically as we want to wait and gain some certainty around the MAX delivery schedule. Gregory Anderson: And Savi, I’m just going to — this is Greg. I’m going to add one more quick comment. I mentioned in my remarks, over the next 5 years, we’re planning to be 200-plus aircraft. So I just want to reorient around that, and that’s what we’re doing. We’re building a strong foundation to support an airline of that size. We’re strengthening that foundation. We’re looking at long-term growth. We’re investing in all the right things and most importantly in our people. And we believe we’re going to — we have a path to get there. It may not be at this — we don’t know the exact cadence, but that’s what we’re planning on. And so a lot of the moves we’re seeing is us getting prepared for that. And we believe that we’re able to continue to grow and grow profitably as we hit that 200-plus aircraft number in the next 5 years. Operator: [Operator Instructions]. The next question comes from Andrew Didora with Bank of America. Andrew Didora: Just a couple of questions on CASM. I think you had been targeting kind of low double-digit growth this year. Where the new — were the pilot retention bonuses paid out in June, part of that number? And then I think you were including maybe about from the pilots in that outlook. Any change to that number given all the tentative agreements out there with others in the industry? Robert Neal: Andrew, it’s B.J. I’ll start, and Greg, if you want to jump in on the second part of that. But yes, no, we continue to think about it like around 1/3 of a cent. I will mention, in the second quarter, we only included 2 months of those accruals. And so moving throughout the rest of the year, you’ll burden through each of the 3 months in the quarter. But yes, you’re right, kind of low double-digit growth year-over-year on unit costs for the back half of the year. Gregory Anderson: And Andrew, just a couple of maybe clarifying points. It’s not paid out in June. It is actually a retention bonus and it’s paid out upon ratification of an agreement for those pilots that are still actively employed at that time. We’ve locked in the rates at that 35% for all pilots with the exceptions of the first year, first officers at . That’s locked in over that period. But we’ll continue to negotiate final rate through the mediation process, but this is a retention bonus. Andrew Didora: Right. Understood. And look, I know there are a lot of moving parts between timing a pilot deal, training requirements for the MAXs. But you mentioned in response to Savi’s question about maybe it’s suboptimal, lower than historical growth in 2024 in that type of scenario? How should we think about kind of CASM growth next year? Any puts and takes you can provide around that would be helpful? Gregory Anderson: Yes. Andrew, I’m sorry, I don’t have a lot in front of me, but I’ll just say it’s real early to give kind of CASM guidance on ’24. Just there’s a lot of moving parts, like you mentioned around the actual delivery schedule of the MAX, which will determine how many pilots are useful in producing ASM at each different period throughout the year? And then what are we doing on retirements of the 320s. I hope by the time of the next call, we’ve got a little bit more color to share with you. So apologies just a little early to give that kind of guidance. Andrew Didora: Got it. And maybe I could sneak one more housekeeping one in. I saw in your guidance, interest expense came down a little bit. I think, in your prepared remarks, you said that you’re going to take on a bit more debt through year-end as the MAXs were delivered. Just curious what was the driver of the lowest — lower interest expense there? John Redmond: The driver of the lower interest expense this year, yes. So a little bit of it is we prepaid $60 million — $61 million in some aircraft secured debt at the end of the second quarter, which gives us a bit of relief in the final 2 quarters of this year. And then my comment on opening remarks that just year-end leverage was — I just wanted to set expectations, we still will add a little bit of debt as we continue making PDP payments in the final 2 quarters of the year. And then there’s still 1 MAX delivery at the end of the year. Gregory Anderson: And Andrew, I’m just going to add just piggyback on that. The equity value in those 737 aircraft day 1 it’s meaningful, and it gives B.J. and the team the opportunity to put an effective and efficient financing. We’re very comfortable being able to go out and finance those aircraft. But something else that I just want to remind our investors in our Street is the opportunistic nature of the 737 deal and the timing and particularly around the tax law and bonus appreciation — depreciation, excuse me, that we received. I mean, in essence, we’re going to receive — we estimate roughly $250 million in interest free rate loan from the government by moving forward with this deal. So that will offset cash taxes in the future. Operator: [Operator Instructions]. The next question comes from Ravi Shanker with Morgan Stanley. Katherine Kallergis: This is Katherine Kallergis on for Ravi. I wanted to follow up on a previous comment, in which you said airlines have started to favor peak periods, and that Allegiant has done this for some time. But I was curious if you could provide some color around the competitive dynamics during these periods. And if what you consider peak might be different than industry peers? Also just curious if these dynamics might be different in Florida market specifically. Drew Wells: Yes. I mean, Drew here. When we refer to peak, we’re exclusively talking about domestic leisure peak, which is traditionally around school holidays, right? So your spring break, summer and holiday time frame, I think most would describe leisure peak as the same. And I think as — and I’m speculating a bit here, carriers are having a bit more leisure exposure. They’re kind of coming around to how those dynamics are working. One of the great things about peak — so if there is an excess of demand generally. And even in periods thinking pre-pandemic when capacity was quite elevated, particularly in the offpeak capacity — sorry, peak capacity could soak up that demand pretty well. I don’t anticipate competitive dynamics to change meaningfully. The peaks are a peak for a reason. And so in general, I believe it’s a good thing, but the demand patterns fit the Allegiant model just exceedingly well and something like we mentioned that we’ve cater to for 20-plus years. So we’re built for exactly this kind of dynamic. Katherine Kallergis: And just as a quick follow-up. Your stat about how 50% of those surveyed stated economic conditions will have no impact on flying was interesting. Just curious what inelastic do you think demand really is? And maybe how you’ve seen the — you all see it perform in past recessionary environments? Scott DeAngelo: No, thanks for that question. For those frequent flyers, the answer is it is pretty inelastic because they’re traveling to and from family where they’re staying and/or doing from their second and vacation homes. So in many of those instances, right, high interest rates, inflation, it’s not as meaningful as say, a family vacation to an Orlando theme park or a Las Vegas casino. So amongst our core customers, it’s fairly inelastic because they’re flying to and from family and/or a second home. Drew Wells: Yes. But more broadly, the customer that we serve is generally still a very price-sensitive customer. Less so in summer peaks or peaks in general, when we have a thicker demand pool to choose from. And certainly, in the off-peaks, you still see that. Just by way of example, we’re already pricing higher, closer in, taking advantage of relative inelasticity if you will, the ability to pass through more was a bit muted, right, especially in the face of $70 plus ancillary per passenger that we’re trying to balance as we build load. So there’s a pretty heavy mix on our aircraft that can be tricky to revenue manage. And I think it’s a place where a product like Allegiant Extra can really help differentiate between the customer segments that we have and find that right balance of Allegiant type premium experience versus the main cabin, that’s right for all of our customers. Operator: [Operator Instructions]. The next question comes from Helane Becker with TD Cowen. Unidentified Analyst: This is [indiscernible] on for Helane. Would you mind providing any color on what you’re seeing in Las Vegas, just given some of the runway challenges that have been happening there? And then just any — any of the drivers of the operational performance just beyond having more of a buffer, some learnings that you’re taking with you for next year, that would be great? Drew Wells: Yes. Yes, great question. And we called out 3 months ago that Vegas had kind of an outsized portion of that 2.5%. April and May still had pockets of struggles as there were some concentrated days and periods of impact. But that materially turned around in June and July and I think Vegas went exceedingly well — performed exceedingly well through the summer. So outside some heat-related concerns but there’s not a lot anybody can do there extremely happy with how Vegas panned out. Thinking more broadly, as we think about the schedule moving forward, reviewing things from firebreaks and adding some slack into the schedule that provides that recoverability, especially if you think about Florida and pretty routine thunder storms coming through at 3:30 every afternoon. We were better balanced about viewing that in its entirety, thinking about how a firebreak relates to extended churn times and where those minutes actually matter. But perhaps, at least to me, one of the most impactful things, think about the overnight touch time for our mechanics and crews in getting that plane to the gate on time every morning so we could start the airline correctly and give ourselves a chance to succeed. So both starting on time and think about how we could recover through the day when things start to go awry. I think we got close to the right answer this year, but there’s a lot more work for us to do to continue to refine and maintain our place towards the top of the industry. Gregory Anderson: Yes. And Drew, I just want to add just a quick comment here, too. And that’s where we sit today, we feel really confident about the second half of the year and moving on from the commentary that we talked about, the coordination between planning and ops and the , Keny Wilper heading up. But staffing levels are very solid. In fact, with the exception of pilot that’s the best we’ve seen since 2019. So we’re encouraged by that. As we get out of the — as we exit the gauntlet of the summer peak flying, the teams all come together and do a postmortem around a summer debrief and they look for process efficiencies and ways to get better, and that will be — that will be around the corner, and we’ll continue to step up our game in any way we can. Unidentified Analyst: If I could just squeeze one more in. Just you mentioned a little bit on the outlook for revenue in the rest of the year. I was just wondering if you can unpack that and any color on the cadence for base fares and ancillaries for what you can see from right now. John Redmond: Yes. I’ll probably disappoint you a little bit as we get into kind of cadence related, the 2 things I’ll point out. One, I would look towards last year’s comp set and kind of ASM cadence to help guide how you think about the third and fourth order. And the second, I’ll point out and maybe not one that I communicated well or maybe even appreciated enough as we talked about the last 9 months previously was the second quarter of ’22 cadence. And I think there was still a fair amount of recovery from the variant that we experienced in the first half of that quarter. Not to disparage the 2Q they probably helped bolster the relative TRASM year-over-year there a little bit. So I kind of think of those 2 pieces in concurrent as you think about the last 9 months in totality. Operator: [Operator Instructions]. The next question comes from Michael Linenberg with Deutsche Bank. Michael Linenberg: Just a few quick ones here. John, just in response to Duane’s question on you talking about Sunseeker where the numbers were better, and you were referring to the rates. How should we think about it just from with all the cost inflation there if we kind of go back to the original plan, I think the guide was EBITDA margins sort of in that 30% range. Is that still a reasonable sort of ballpark profit margin? John Redmond: Michael, I do. I think those EBITDA margins are still doable. It’s kind of like when you see even happen on the air side, right, with the CapEx — or CASM-X increasing. Well, revenue is outpacing the CASM-X growth. So you’re seeing the same thing happen on the — in the resort world, where the cost increases are way more than offset by the room rate increases in that market. So very encouraging. And Florida, in particular, it’s just been extremely strong. Obviously, the hotel industry throughout the U.S. has been, but Florida, it’s a shining star when it comes to what’s going on. So I think EBITDA margins that we were looking at early on and we’re out there under projections, I think there’s a potential for those to be even much stronger. Michael Linenberg: Very good. And then just a second one for you, John, and probably Greg as well and maybe the team. We’ve seen an announcement by Frontier to take up some of the assets of the JetBlue Spirit proposed merger assets that they would potentially divest at this point. It looks like it’s still slots. Obviously, there’s a lot more that they’ve already indicated that they would be willing to divest, maybe its runway timings at Newark, Gates in Fort Lauderdale, space in Boston. Is any of that of interest to Allegiant. Gregory Anderson: Michael, it’s Greg. Good to chat with you. As the team continue — Drew and his team continue to look at all opportunities in airports and certainly aware of the situation. But I think where we sit today, there’s nothing really to report on that front. Michael Linenberg: Very good. And then just if I could squeeze in one quick last one for Scott. We have heard other carriers talk about this traffic patterns where people are spending a lot more time this summer going to Europe rather than flying domestically and Scott, you do a lot of different surveys and other carriers have said that they’ve surveyed their own customer base and some percentage are electing to go to Europe. What are you seeing amongst your customer base, which I know you’re very close to? Are you seeing something similar where you’re just losing a lot of flow because they’re going maybe outside of the United States? Any color on that would be great. Scott DeAngelo: Absolutely. And thank you, Michael, because the last several weeks, we have asked exactly that. So I’m prepared to tell you. First, we ask our customer base to make sure they had the ability to travel internationally. Turns out that about 80% of Allegiant customers have a passport. But we’re seeing some very different than what Frontier and others have reported. When asked, do you plan to travel internationally in the next 6 months or have you traveled both internationally in the last 6 months? The answer is the same between like 16% and 19% say, yes. That means the vast majority of our customers, 80% have no plans and have not traveled internationally in 2023. John Redmond: And I think maybe, Scott, it’s worth elaborating on to the 16% to 19% you’re talking about hasn’t changed year-over-year. Scott DeAngelo: That’s right. It hasn’t been a zero-sum as much as now it’s open, and they’ve taken an additional trip. John Redmond: Yes. Great point. For us, it’s not a displacement argument at all. The percentages are consistent year in and year out. Operator: The next question comes from Conor Cunningham with Melius Research. Conor Cunningham: On the doubling of the Allways credit card contribution, just trying to understand the cadence there. I assume that’s both card growth and spend. But in your prepared remarks, you mentioned the potential of Sunseeker contributing. Just curious about the ramp there going forward. Scott DeAngelo: Absolutely. So the comment that in the next 3 years will, in effect, double from roughly where we ended last year at $97 million, going to post over $100 million. It’s largely based without Sunseeker assumed in it. So it is from the key things you mentioned. Increased cardholder growth, compounded cardholder spend right as that portfolio grows and we achieve at or above the same spend per cardholder. So I think John’s comments in the beginning represent upside that could even make it faster. My comments were not based on any additional goodness, which we’ll absolutely get from Sunseeker opening. John Redmond: Yes. I think — this is John. I think when you look at the — I think, a huge data point that Scott has pointed out is the channels that were in the past with a MasterCard program not available to a cardholder that are now or will be available to a cardholder, most notably Costco is significant. So that type of increase then doesn’t require necessarily an increase in the number of although we are planning on that. But just the channels of use are going to expand significantly with moving to Visa. Conor Cunningham: Okay. That’s helpful. And then on Sunseeker, great commentary on ADRs and bookings. But the question that I get, and maybe this is kind of the Mike’s point as well is, just around the inflection point on profitability, like I realize that you’re working towards opening. I’m just trying to get some color on your path to profitability there. When we could expect a potential contribution over? Again, I realized that it’s still early days, but just any thoughts there would be helpful. John Redmond: When you talk about a cash contribution or contribution of — you said turn, now you’re talking about EBITDA, we don’t intend to ever be negative on a quarterly basis, I mean there’s no time, we forecast any period that we would have a negative EBITDA. So I think from a cash standpoint, they’re going to be positive throughout the year with the added upside in the out years. So we purposely priced the product that you see out there for ’23 and ’24 below market. So even when you see these rates, believe it or not, we’re below market because we’re putting a new brand and a new property into that market. So when you look at after we’ve been open for a period of time, and I’m not talking years, I’m talking a month. You’re going to start to see that rate — that — those rates accelerate up. So we purposely have underpriced. And even with that purposeful underpricing, those ADRs are impressive, but you will see those ramp up significantly for sure, the 25.5%. Operator: I would like to turn the call back to John Redmond for closing remarks. John Redmond: Well, I appreciate everyone’s time. We’re very proud of our team and the management here and what we’ve been able to accomplish year-to-date. And we’re very excited about the balance of this year. An incredible amount of time and resources have gone into systems over last couple of years. You’re starting to see the rollout of all that time and effort will started to happen this year, which really sets the backbone for this company going forward. So we will have no restrictions, limitations what have you from a system standpoint as we move into the 20 aircraft — or 200 aircraft environment, I should say that Greg referred to, everything is allowing us to do everything we need to and want to do going forward. So absolutely, no restrictions. And our focus now is just finishing up the last labor agreements. We’re very encouraged by where we are today and where we’re going to end up tomorrow with those agreements. So again, very bullish about the out years for this company. Very exciting times ahead, and stay tuned. Thank you very much. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect. Follow Allegiant Travel Co (NASDAQ:ALGT) Follow Allegiant Travel Co (NASDAQ:ALGT) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

If you're looking for a new job but don't have a college degree, these 11 jobs are some of the highest-paying ones. mathisworks/Getty Images Commercial pilots lead the list with an annual salary of $135,000 a year. Police officers, flight attendants, electricians, and plumbers all make the list with over a $60K salary on average. Executive assistants and real estate agents have huge potentials for career growth and earning way above average. Everyone wants to make more money, but not everyone has the time to commit to a full college program to acquire another degree. Fortunately, some of the most lucrative jobs don't require a degree in any field or concentration.Read on to discover the highest-paying jobs without a degree to know where to focus your professional development efforts.1. Commercial pilotCommercial pilots are fairly similar to "normal" aviators, with one big difference: they don't work for the major airlines. Instead, commercial pilots work for private individuals, like well-off businesspeople, as well as for smaller companies. As a result, they don't need to have bachelor's degrees in aviation or aeronautical science.Therefore, you can become a commercial pilot with just on-the-job training and your pilot's license. Of course, keep in mind that a pilot's license usually takes a few years to acquire, even if you study full-time. That said, this could be a satisfying career opportunity if you don't have a lot holding you down at home, and you might appreciate the opportunity to travel frequently.Commercial pilots usually make about $135,000 a year, according to the U.S. Bureau of Labor Statistics. Although a bachelor's college degree isn't needed, an associate degree often makes you a more competitive candidate.2. Police officerPolice officers oftentimes have bachelor's degrees in criminal justice or similar majors, but they aren't legally required to. In fact, you can become a police officer, a detective and similar professionals without any college education whatsoever.All you need to do is pass the police academy entrance exam for your state. These entrance exams typically require you to have a high school education. Once you pass that, you'll complete police training, which can take anywhere from six months to a year or two, depending on state requirements.Applicants are supposed to learn everything needed to be a successful police officer in this on-the-job training program.Once you become a police officer, you'll likely initially earn a decent salary with the potential to increase your pay the longer you stay on the force. Most police officers earn about $66,000 a year.3. Executive assistantExecutive assistants are trained professional aides for business people, chief executives and other professionals. For example, a CEO may have an executive assistant to:Organize meetings.Make contact with other executives.Keep track of the CEO's schedule.Take appointment requests.Organize the CEO's calendar.Overall, this is an attractive entry-level position with a fair possibility for job growth. Annual salary starts off reasonable but has the potential for higher growth with a certificate program or some other formal education.Think of executive assistants as personal aids for individuals. Executive assistants are excellent communicators and organizers who have a full grasp of time management. Many executive assistants make good salaries, averaging out to about $40,000, all without a four-year degree.4. Flight attendantFlight attendants check on passengers, serve food and beverages and clean aircraft cabins in between flights. They provide the majority of customer services to flight passengers for the big airlines. One perk of this job is that, aside from not requiring a degree, flight attendants get to travel around the world practically for free, plus they often get other company-related perks.Flight attendants have to work relatively long hours since they have to travel to and from airports, plus be away from home all the time. Still, they generally make excellent salaries for not having any education requirements beyond a high school diploma. There's mostly no degree requirement for this hands-on work, and it's in high demand.The average salary of a flight attendant is $61,000.5. ElectricianMany trades are particularly hurting for young professionals, including electricians. Becoming an electrician could be a great job if you want to earn money without having to get a degree. Instead, you'd likely go to trade school for one to two years and get extensive on-the-job experience before working as a licensed electrician in your area.Electricians set up power lines, perform maintenance work and repair electrical appliances and power lines for residential and commercial areas like. Many electricians love the job because they get to do something different every day, and their skill sets are highly in demand. Once you know what it takes to be an electrician, you could possibly get a job practically anywhere in the world, opening up additional life flexibility.The median salary for an electrician is $60,000.6. PlumberSimilar to electrician, the profession of a plumber is very high paying for not requiring a bachelor's degree or any degree, for that matter. Most candidates only need two years of experience and on-the-job training, and then you can earn your plumber's license from a trade school or a private company. Technical school doesn't charge high student loans, either.In either case, plumbers perform valuable work at residences and business locations, repairing plumbing systems, fixing errors and performing regular maintenance. Plumbers typically enjoy wonderful job security, as almost everyone needs these professionals no matter what technology comes around the corner in the future.Furthermore, once you acquire enough skills and expertise in this industry, you can potentially open up your own plumbing company if you wish to focus more on the business side of things. The average plumber makes about $60,000 a year.7. BrickmasonBrickmasons are a subset of the construction contractor that focus on creating bricks and other structural stones to construct, polish and maintain buildings for residences and commercial enterprises. They make and lay bricks but also focus on making structures that are aesthetically pleasing and functional for their needs. In this way, they combine bricklaying skills with architectural skills.Brickmasons require a high school diploma as well as completion of an on-the-job apprenticeship program. However, this is not the same requirement as a degree. Brickmasons usually earn very decent salaries for the education required to succeed, about $48,000 a year.8. Wind turbine technicianWith the increased focus on renewable energy, wind turbine technicians are needed more than ever. These licensed mechanical professionals build, maintain and repair wind turbines for cities. This job can be somewhat dangerous, as you have to be comfortable with heights. But if you complete the on-the-job training program, you can potentially earn a fantastic salary in as little as two years.The average wind turbine technician makes $56,000 a year.9. FirefighterFirefighters also earn excellent salaries in exchange for risking their lives in some situations. Firefighters have to be very physically fit and complete about two years of training before they are licensed.Once they finish the training, they often have superb job security and can take pride in the fact that their job is very necessary. They save people from burning buildings and help to put out fires all the time.Firefighters make about $51,000 a year.10. Computer support specialistIf you have a mind for information technology and want to earn more, faster, consider becoming a computer support specialist. Computer support specialists solve computer and technical problems for clients, including business customers. They need some knowledge of computers and computer science but don't need a full degree in a major in order to qualify. Many computer support specialists make about $34,000 per year.11. Real estate agentReal estate agents have a huge potential for profit, depending on the market and their personal expertise in marketing and communication. Real estate agents work for real estate agencies or realtors in most cases, earning their licenses to showcase and sell properties to homebuyers.Real estate agents need to have a mind for bartering and negotiation, and they are responsible for hustling to get great deals. The most successful real estate agents make a truly astounding amount of money, oftentimes well over six figures. Real estate agents also work closely with other professionals in this industry, like contractors, salespeople, etc.The average real estate agent makes $49,000 a year.There are many great opportunitiesUltimately, any of these jobs could be top-notch choices if you want to make more money without having to acquire a degree. Be sure to do more research and figure out what each job needs before applying to open positions.Read the original article on Business Insider.....»»

According to Management consulting firm Oliver Wyman, the industry is short about 8,000 pilots — a problem that led to last summer's travel chaos. Airline pilot walking through an airport.Taylor Rains/Insider An ongoing pilot shortage has plagued US airlines since travel came roaring back post-pandemic. American Airlines says it is seeing shortfalls on the regional side, forcing it to cut flying to small markets. Carriers have used different strategies to attract pilots, like doubling pay and hiring from abroad. When the pandemic hit in March 2020, countries quickly closed their borders and travel came to a screeching halt.Carriers were forced to scale back operations, meaning tens of thousands of pilots were furloughed or offered early retirement.However, the COVID-19 vaccine allowed international restrictions to relax, and by summer 2021, travel came roaring back. But the damage was already done.Management consulting firm Oliver Wyman told CNBC in September 2022 that the industry is short about 8,000 pilots — a problem that led to last summer's travel chaos in which nearly one million flights flying within, into, or out of the US were delayed or canceled between May and September.The firm further said the number could reach 30,000 by 2025.To alleviate these pilot deficits, Senator Lindsay Graham (R-South Carolina) has reintroduced a bill that would increase the mandatory retirement age for pilots from 65 to 67. The senator argues some 5,000 pilots will be forced to retire in the next two years, further stressing the shortage.While some organizations — like the Regional Airline Association advocacy group — have praised the legalization, the Air Line Pilots Association has opposed it, Reuters reported. The union says increasing the retirement age could impact safety. Carriers like American Airlines have acknowledged the shortage, with CEO Robert Isom saying the company is having a "shortfall of pilots" on its regional side, including its wholly-owned subsidiaries PSA Airlines, Envoy Air, and Piedmont Airlines."We didn't attract people into the business for a couple of years, and we're working our way through that as we have retirements that are coming out the other side," he said in a fourth-quarter earnings call.As airlines become more desperate for pilots, they have come up with different approaches to filling the cockpit.Hiring from abroadLow-cost carrier Breeze Airways is taking advantage of an E-3 work visa program that allows qualified Australian nationals to apply for employment with the airline. However, foreign pilots will have to cover the cost of travel and the visa before flying for Breeze."It's an opportunity to give good, hardworking, well-qualified folks jobs who want to live in the US [and] want to be a pilot for a US airline," Christopher Owens, Breeze's vice president of flight operations, told Insider in January 2022.Increasing pilot payRegional flying has been particularly impacted by the pilot shortage, forcing airlines to slash dozens of flights to small markets and even ground regional jets.In an effort to attract and retain talent, carriers have dramatically increased pilot wages. Crew members at American subsidiaries PSA, Envoy, and Piedmont had their salaries nearly doubled, while Delta recently agreed to a new contract increasing pilot pay by 34% over four years.Other regional carriers like Mesa Airlines, Republic Airways, and Delta's wholly-owned airline Endeavor Air have also gotten pay increases. Delta, however, has maintained that it is not experiencing a shortage at the mainline, with company CEO Ed Bastian telling CNBC in January that "we've got the staff we need."Lowering training requirementsRegional carrier Republic recently asked the FAA to reduce the flight hour requirement for pilots graduating from its LIFT pilot training academy.Currently, pilots who want to fly for a regional airline need 1,500 hours but can have as low as 1,000 or 1,250 with an accredited college degree, according to the Federal Aviation Administration.But, Republic wanted a 750-hour requirement — a request the FAA denied in September, saying the company's flight academy "does not provide an equivalent level of safety as the regulation requiring 1,500 hours of flight experience before a pilot may work for an airline."Read the original article on Business Insider.....»»

     The transcript from this week’s, MiB: Dominique Mielle, Damsel in Distressed, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters… Read More The post Transcript: Dominique Mielle appeared first on The Big Picture.      The transcript from this week’s, MiB: Dominique Mielle, Damsel in Distressed, is below. You can stream and download our full conversation, including any podcast extras, on iTunes, Spotify, Stitcher, Google, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, my extra special guest is Dominique Mielle. She is an author and former hedge fund trader, specializing in distressed assets. She was a partner and a portfolio manager at Canyon Capital, a firm that runs currently about $25 billion. Her book, “Damsel in Distressed: My Life in the Golden Age of Hedge Funds”, is really a fascinating read. I know I want to have a guest on with a book. I usually say nice things about the book, and I don’t do that if I don’t mean it. But I really had fun reading this. It’s very witty and charming, and revealing about an industry in a way that most books on hedge funds simply are not. I found it to be a very pleasant read, and I think you will also. And I found this to be a fascinating conversation, which I expect you will as well. With no further ado, my interview with Dominique Mielle, author of “Damsel in Distressed”. First of all, before we get started, I very much enjoyed the book. You have a very wicked sense of humor, which comes through in the pages, starting with the title, “Damsel in Distressed”. What made you decide to write a memoir about your decades in the hedge fund industry? DOMINIQUE MIELLE, AUTHOR, “DAMSEL IN DISTRESSED”: Well, it started with an article that I wrote as a hobby about my experience as a woman at Lehman Brothers, and it was picked up by Business Insider, and I realized a couple things. One was that I really enjoyed writing. And two was that I had never really taken time to think about the lack of women in the business, and that there really wasn’t a voice to tell the story of female investors. And so that’s when I thought, you know, there might be a hole in the market. RITHOLTZ: Identifying an inefficiency, so to speak. MIELLE: So to speak, except that there’s really no money in writing a book. RITHOLTZ: Well, it’s best described as a branding exercise and a way to sort of get things off your chest. But let’s roll back a little bit. You get an MBA at Stanford. How did you end up in finance? Was that where you plan to go? Because a lot of the Stanford MBA graduates tend to find their way into technology, not finance. MIELLE: Right. Well, by the time I got to Stanford, I pretty much knew I wanted to be in finance, but where I started was at Lehman Brothers in New York before Stanford, and that was serendipity really. I wanted a job that would take me away from Paris. I wanted to see the world, and whether it was investment banking, or basket weaving really had absolutely no bearing on my decision. So I ended up as an investment banker which, you know, like every analyst, I hated after a few years, and so the MBA was sort of a way out of that job, branching into hopefully what I thought were better pastures, but still in finance. RITHOLTZ: What did you do with Lehman Brothers that you grew to hate? Were you just a spreadsheet jockey and that was it? MIELLE: Of course, I was and it was particularly ruthless because I was in a group called FIG, Financial Institutions Group. At that time, there were still a lot of savings and loan institution, thrifts, lots of mergers. So what I did, basically, was model the mergers of any combination you could think of. I mean, I remember it got so bad that there was a spreadsheet with all the different institutions vertically and horizontally, and I had to model them in each square. RITHOLTZ: Sounds tedious. MIELLE: And I thought, what happens to the diagonal? Do they merge with themselves? RITHOLTZ: Right. MIELLE: You want me to model that, too? But that was kind of, you know, almost mindless brute force job that I was doing. RITHOLTZ: So you do win a couple of accolades at Stanford when you’re getting your MBA. What brought you to the attention of Canyon Partners? How did you find your way there? MIELLE: Well, first I sort of zoomed in on the fact that I wanted to work for a hedge fund, that I wanted to go to the buy side, that was first, and that has sort of really brought to me through a couple of classes that were incredibly illuminating when taught by Bill Sharpe and one by Darrell Duffie, both exceptional minds. So I sort of narrowed down finance to buy side, buy side to hedge funds, hedge funds to something that had to do with junk bonds because I was a great admirer of Michael Milken. I had read books about him, and so I thought that seems a very interesting mix of finance, but also strategy. RITHOLTZ: You describe what we now call junk bonds, we used to call high yield, what we now call distressed investing, we used to call vulture investing. And then you write the only difference between stressed and distressed bonds was the immediacy of the bankruptcy. Tell us a little bit about what it was like to wade into the world of distressed investing for bonds? MIELLE: Well, I mean, it was a fairly new asset class. I think, you know, it’s not until probably Farallon came into existence, that it became a real asset class in itself, that stressed and distressed was a category that was thought as investable. But it was very tiny. I mean, I think there were, you know, probably $15 billion in assets in total — RITHOLTZ: Wow. MIELLE: — of hedge funds investing in distressed at that time in the mid ‘90s. And so if you compare that to today, if you remember Oaktree raised $15 billion fund in 2020, on its own. So the magnitude is not even comparable. So it was a starting industry, very much sort of a venture capital type of business. RITHOLTZ: Right. New asset class for this type of investing as well. MIELLE: Right. RITHOLTZ: So I like this quote of yours, which is, “Stock owners own a call option on the value of a company. Bond holders have sold a put option. One is long volatility, the other is short, and consequently, are at odds in times of changing volatility.” Explain why bondholders have sold a put option. MIELLE: Because if the value of the business of the company falls below the par amount of the bond, then the bondholders are going to repossess the company. It’s as simple as that. RITHOLTZ: So I got you. MIELLE: The equity guys give you the keys and it’s yours to run. And anything above the par value of the total debt on the capital structure belongs to the equity guys. And so there were a lot of cases where it’s really interesting how this sort of game of strategy, this game of risk starts with a sudden change in volatility. It can be a bankruptcy, but it also can be an M&A event. It can be an LBO. It can be even a change in regulation or in market, where suddenly volatility picks up and the interest of bondholders and shareholders are at odds. And that’s really what made the job absolutely thrilling. I’m less of a business lover. I invest less because I’m interested in what widgets a company does, and more in the capital structure and how to position yourself, what the other guy is going to do at the bond level or senior secured level, and how to position yourself to make money. That’s the thrill to me. RITHOLTZ: So you’re looking at the various paper that’s available. Here’s the downside risk and equity, and for it to work out, the company has to turn itself around and a miracle has to happen. The bonds aren’t worthless, but they’re definitely not trading at par. But they fallen so far that, hey, it gives us a callable option on the company if they do go into bankruptcy. So let’s get long this debt, which is trading at a fraction of what it was issued for. Is that more or less correct? MIELLE: That’s correct. And it can be a lot more complicated than that. Of course, it can be a simple capital structure like PG&E in bankruptcy, which had one layer of equity and one layer of bonds. And it can be very complicated like Puerto Rico that had 19 different debt issues by different entities with different terms. So not only can you be long one bond, you can be long and short two bonds. You can be long different maturities. You can be long claim insurance, insurance claims. That’s the English and French. RITHOLTZ: Right. Insurance claims meaning? MIELLE: Meaning the insurance owns a claim against PG&E and that they want to sell it and get the cash immediately. And they sell it to bond post at a discount to what they’re entitled to. That can be a trade. So there are, you know, infinite ways to position yourself in this sort of Game of Throne type. RITHOLTZ: Right. You said all the cursing and none of the sex of Game of Thrones, which I found amusing. MIELLE: Not that I’ve witnessed, but you know — RITHOLTZ: Lots of cursing. MIELLE: Lots of cursing. RITHOLTZ: So you were very actively involved in the restructuring of the airlines post 9/11. What about what happened with a lot of banks during the financial crisis? I guess other than Lehman Brothers, most of them were either rescued or absorbed into another entity. So there really wasn’t a whole lot of restructuring and distressed assets afterwards, or was there? Tell us about that period. MIELLE: After 2008? RITHOLTZ: 2008, ’09. Yeah. MIELLE: So financial institutions were not my industry to cover. But, of course, Lehman was a huge restructuring and bankruptcy liquidation — RITHOLTZ: Sill going on today, right? MIELLE: Yeah, that kept — RITHOLTZ: Which is crazy. MIELLE: Exactly. That kept my colleagues occupied and making a lot of money. By ’08 and ’09, look, there were bankruptcies everywhere in every industry from retail to telecom. The great bonanza of late ’08 and ’09 is that there were companies that were not stressed at all. It’s just the bonds were trading horribly, just because liquidity was gone for the market. So it was a pretty different situation from 2001, where the whole dot-com bust, but more importantly, the telecom implosion. That’s when all the wireless cable, some wireline companies went bankrupt, names that maybe your listeners today wouldn’t recognize. RITHOLTZ: Global Crossing. MIELLE: Global Crossing. RITHOLTZ: Metromedia Fiber. We watched Nortel and Lucent. Like, are those companies really going to go belly up it? It was — MIELLE: Sure did. RITHOLTZ: It was really fascinating. MIELLE: Yes. So all those don’t even exist anymore. And these were real bankruptcies, led by a supply-demand imbalance, too much leverage and not enough demand for the products. And the demand was sort of tardy to come. So those companies restructured or liquidated. But it was not a liquidity issue. ’08 was purely a liquidity issue, so the formidable trades were to buy companies that were actually very viable the way they were. And bonds were trading at huge discounts because there were no buyers anymore. RITHOLTZ: Really interesting. So you retire in 2018. And two years later, the pandemic strikes. A lot of companies crashed and recovered. But we’ve been still watching the fallout here, three years later. Do you ever look at that landscape and say, hey, if I was on the desk, we’d be buying this, that and the other because this is just a temporary stress, or I wouldn’t touch that, that’s going to hell in a handbasket? MIELLE: I do less of that and more thinking about the business of hedge funds in general. So in other words, I’m less interested in bond-picking at this point, and more interested in what’s going on. For example, you talk about the 2020 distressed cycle, and it’s interesting to me that it was so short, so shallow. RITHOLTZ: Right. MIELLE: Right? We had about five months of — RITHOLTZ: Right. Blink and you miss it. MIELLE: Exactly. And that is, of course, due to the Fed intervention. But if you think about it, QE is a relatively novel tool. It wasn’t invented in ’08, but certainly, before that, it hadn’t been used so massively, so widely, so systematically. And so, you know, since ’08, the Fed has consistently used QE to rescue the bond market and with bigger and bigger purchases in more asset classes. And so what that’s done is a couple things. One is the period of time where you have distressed bonds available has shortened, right? It was a few months in 20, 25 months. Before that, 2016, the energy crisis, same. Before that, if you remember the taper tantrum in the summer of ‘11, I think, also a few months. So short, you got to be positioned and ready and have the cash. And second, it’s shallow in the sense that the biggest distressed companies are very small, historically. If you think of the biggest bankruptcy in 2020 was Hertz. That’s only $25 billion in assets. RITHOLTZ: Right. MIELLE: Right? Compare that to the Lehman Brothers at $600 billion. Compare that to the period of ’01 where we had corporate malfeasance. You’ll remember Enron, Conseco, WorldCom. RITHOLTZ: WorldCom. Right. MIELLE: Exactly. RITHOLTZ: One after another. MIELLE: But those were $100 billion cases. So there were just a ton of distressed, and therefore returns were easier to come by. It’s a lot harder when you’ve got, you know, a few $20 billion distressed situations to pick from. And meanwhile, the giant of distressed have raised funds — RITHOLTZ: right. MIELLE: — that are alone $15 billion. RITHOLTZ: Right. So fewer targets and a lot more funds doing the same thing? MIELLE: Correct. RITHOLTZ: Really very interesting. So let’s talk a little bit about those early days. You mentioned in the book Canyon Capital took a chance on you. First, why do you say that? And then second, how did you get a foot in the door? How did you start with them? MIELLE: Why do I say that? Because I’m a foreigner and I’m a woman. And I was — RITHOLTZ: Lots of foreigners and women out in Silicon Valley. You were at Stanford, so it wasn’t — and they’re in L.A. So maybe it’s rarer in Chicago, in New York and Boston, but it’s not completely foreign. Although this was — what year did you start at Canyon? MIELLE: ‘98. RITHOLTZ: All right. So a little different world then than today? MIELLE: Different and similar at the same time. If you’re talking about female representation in hedge funds, it’s very similar. There’s been nano steps. RITHOLTZ: Right. MIELLE: But it’s nowhere near what you would expect for an industry that’s grown so much, and that’s become so institutionalized, and that’s something we may want to talk about later. But they took a chance because, look, hiring a woman was exceptional. It wasn’t the typical profile, it still isn’t. And on top of that, hiring a foreigner was an additional hurdle. And a French person, which they probably didn’t realize at that time, but you know, made me probably a raging socialist compared to the average — RITHOLTZ: Right. MIELLE: — hedge fund political mind. RITHOLTZ: Right. Even California. MIELLE: Yes, sir. Yeah. RITHOLTZ: Well, you were in Orange County, so that was a little — MIELLE: No. We were in Beverly Hills. RITHOLTZ: Oh, okay. Well — MIELLE: But the — RITHOLTZ: — the same — MIELLE: Exactly. RITHOLTZ: — politically. MIELLE: It’s interesting you say that because Canyon has since moved to Dallas, Texas. RITHOLTZ: There you go. MIELLE: There you go. RITHOLTZ: That makes a lot of sense. MIELLE: Exactly. RITHOLTZ: You cite in the book a study that says, men over trade so much that it reduces their risk-adjusted returns by 2.6 percent. So first, is this just cockiness, excess self-confidence by male traders versus female traders? What accounts for the difference between the two in your experience working on the trading desk? And how has this gap persisted for so many decades? MIELLE: So, first of all, it’s not one study. There’s now been four studies. RITHOLTZ: It’s mutual funds. It’s hedge funds. It’s private equity. MIELLE: Correct. RITHOLTZ: It’s everywhere. MIELLE: They’re across the board. And the reason those studies exist is they’re trying to answer the question, are men better investors than women? Because if it were the case, then you would understand why there’s a preponderance of men in the investing jobs. And it turns out not to be the case. RITHOLTZ: Right. MIELLE: Not because you can answer that men are smarter or not as smart as women, but strictly because the friction of overtrading costs a lot. And so why do they overtrade? The studies don’t say and I wouldn’t venture — RITHOLTZ: We know what the answer is. Come on. MIELLE: — a reason that you may have alluded to. RITHOLTZ: What does your instinct tell you? Let me mansplain gender inequality, too. MIELLE: Please. RITHOLTZ: No. But in all seriousness, the broad stereotype about men is, hey, we’re idiots. We go anywhere when we shouldn’t, and we do it with such bravado and such a surfeit of whether it’s earned or unearned self-confidence that it leads us into trouble, or am I just engaging in pop psychology there? MIELLE: No. I think that’s right. The study you’re citing is actually called boys will be boys, overconfidence in trading. RITHOLTZ: There you go. MIELLE: So there you go. But it’s interesting that you really can pinpoint the difference in return because there’s this sort of impatient or overzealousness in trading your portfolio. Whereas, standing still and second guessing yourself and really doing quiet studying and reading would produce better returns, which is what women in those studies generally tend to do. So, look, my point is very far from saying women are better investors than men. That’s sort of a – RITHOLTZ: No, the – MIELLE: — generalization that I wouldn’t make. RITHOLTZ: But the study does suggest — MIELLE: Okay. The studies do say that. RITHOLTZ: — behaviorally, men have certain behavioral flaws — MIELLE: Correct. RITHOLTZ: — that leads to a difference in outcome. MIELLE: Correct. At the very least, I would take those studies and say, look, having more women in your investment teams in hedge funds is not a matter of fairness or equity. Who cares on Wall Street? RITHOLTZ: It’s alpha. MIELLE: It is money. RITHOLTZ: Yeah. That’s really — MIELLE: It really is alpha. It’s a matter of making better decisions and being more profitable. RITHOLTZ: So it’s kind of interesting about the impact of overtrading. A couple of more bullet points from the book I found fascinating, over the past 15 years, 9 percent of existing hedge funds close every year. Now, the first question is, is that due to a high watermark, and they have to close and reopen in order to be able to get incentive fees, or is something else going on? MIELLE: It’s a pretty unstable business. RITHOLTZ: Really? MIELLE: Oh, it is, especially when you’re small, meaning sub $1 billion. You have a lot — RITHOLTZ: The emerging manager category? MIELLE: Exactly. The survival rate of an emerging manager is low. There are a ton of expenses, and they’re getting higher with compliance and marketing and reporting and investor relationship, et cetera. And you typically have one anchor investor, may be two, three if you’re lucky, but you’re really living month to month. And that’s great fun when you start. That was the great adventure of Canyon in ’98, for me. But it’s also, you know, every month is make or break. RITHOLTZ: Wow. MIELLE: You have a terrible couple of months, your anchor investor pulls his or her money, and you’re done. RITHOLTZ: Wow. MIELLE: Or you, you know, have a few star traders and analysts who quit. Very hard. RITHOLTZ: So you mentioned John Meriwether who was discussed as having bad luck for being in charge of Long-Term Capital Management, which spectacularly blew up the same year you began at Canyon. But I didn’t realize this, he subsequently opened and closed a couple of more hedge funds. I don’t know if he was in three or four old told, all of which didn’t succeed. So was this a lack of skill, or was this just bad luck? That’s three strikes is kind of – that’s three strikes and you’re out in the U.S. MIELLE: Kind of. I don’t want to speak ill of the guy who I greatly admired. He’s obviously in the book of Michael Lewis who you’ve — RITHOLTZ: Right. MIELLE: — interviewed. But that’s the thing. Even the guy you think of so highly, you know, after three hedge funds open and close, you got to wonder if there’s some risk management issue there. RITHOLTZ: Yeah. You look at “Liar’s Poker” and it describes him as this larger than life character, and then you read “When Genius Failed” and not so great. MIELLE: Exactly. And again, that is the thrill of this industry, is that a hero today and a loser tomorrow. RITHOLTZ: Amazing. So let’s go to your work as a trader. One of the things that struck me as very self-aware and insightful was you got very, quote, “comfortable being uncomfortable.” So let’s talk a little bit about, first, what do you mean by being uncomfortable? And second, how did you recognize, hey, this is uncomfortable for most people, but I’m okay with it? MIELLE: Oh, from many different situations where, you know, being French, I grew up with a different culture, different habits, and different — RITHOLTZ: You’re an outsider in the U.S. MIELLE: I was at that time. I like to think, you know, after 30 years in this country, I’m a little bit better acclimatized to — RITHOLTZ: Right. MIELLE: — how the people live in this beautiful country. But I still do feel somewhat foreign in this country. And frankly, when I go back to France, I feel equally foreign because I’m not really French either. But, look, I think it is an important quality to be an investor because ours is an industry or a business of conviction, in the face of facts that are sometimes very damning, sometimes very contradictory. Especially if you’re thinking about investing in distressed, you’re going to buy a company that is not doing well — RITHOLTZ: Right. MIELLE: — where all the signs are telling you this is not going in the right direction, either the left side of the balance sheet, the assets, you have to fix something, or it’s the right side with the capital structure. But something is awry in this situation. And to most people, it would be a sign that you shouldn’t touch it. And you have to feel comfortable being in the minority. That’s probably true for every investor who’s a bit of a contrarian. It’s very uncomfortable to be in the minority, and with conviction, say, I’m going to buy this company. That’s the right thing. There’s something that I see that others don’t. RITHOLTZ: There’s safety in numbers. MIELLE: Correct. RITHOLTZ: When you’re with the crowd, you’re not going to get your head cut off. You may not outperform, but at least you can hide amongst the middle of the pack. MIELLE: Correct. And now we’ve gone full circle, Barry, to what we were talking about just a second ago. If you have 10 white guys from Harvard, what are the odds that one of them will be completely outside the sort of — RITHOLTZ: Right. MIELLE: — think tank that is, you know, this team. If you, again, want to be uncomfortable, if you want to be outside the box, you probably need people who look different, who think different, who were raised differently. And I’m not just talking about women. I’m talking about minorities. RITHOLTZ: So you talk about a couple of really interesting things in the book relative to that, one of which is, it’s really more implied than anything, what’s changed in the U.S. since the ‘80s regarding economic mobility, that there used to be a huge ability to move up, or at least be in a better situation than your parents were. And the data implies that from the 1980s forward, that kind of stopped. Tell us about how you saw this lack of diversity and the lack of economic mobility. What is your perspective as someone who grew up in France, coming to United States and seeing, hey, I thought there was a lot more mobility here, or at least there used to be. MIELLE: Yeah. Look, I’m not saying that France is much better. But over the last 30 or 40 years, probably 40 years since the Reagan years, if you look at the wealth and the income distribution in this country, it really has sort of gelled at the top. RITHOLTZ: Right, very much so. Not just the 1 percent, but the 0.1 and the 0.01percent. MIELLE: Correct. You know, the 1 percent probably controls 80 percent of the wealth in this country, and that’s something that most Americans are not aware of. If you ask them to describe their country, they’ll describe a country of which wealth structure resembles Norway, right? RITHOLTZ: Right. And we’re no way — MIELLE: We’re not in Norway. RITHOLTZ: Right. MIELLE: But there was a lot more movement, upward movement, you know, back in the ‘60s and in the ‘70s. There were marriages between the boss and the secretary. There were jobs that allowed people to move up. Strangely, you know, finance is still one of those jobs that could take people from a very modest background, if you think about George Soros. This is a guy who had nothing when he moved to — RITHOLTZ: Was an emigrant from Hungary, came here, more or less, analyst, right? MIELLE: Correct. And so, I do recognize that finance and particularly investing in hedge funds has this immense potential for social mobility. But generally speaking, our society is pretty frozen in that really desperate classes of people, RITHOLTZ: There’s a quote in the book, “The idea we’re all equal, and the hard-working and smarter people naturally come out ahead is simply the child’s statement of a person, most likely an upper middle class, Caucasian male.” MIELLE: Right. RITHOLTZ: That’s really very telling. But one of the things I’ve learned doing this and speaking to a lot of wildly successful people, men and women, is how often the concept of luck comes up. Like, very successful people, with a little bit of self-awareness, seem to recognize, hey, you know, this could have just gone a little differently and we’re not having a conversation because I’m not, you know, running a successful business. How important is the role of luck in people’s success, be it whether they’re born in this country or elsewhere, whether the born male or female, or just in their day to day life, how significant is luck? MIELLE: Huge. RITHOLTZ: Huge. MIELLE: Huge. 80 percent. RITHOLTZ: Really? Wow. MIELLE: I think so. RITHOLTZ: Wow. MIELLE: And it’s all a matter of how wide your definition of luck is. If you’re thinking very specifically that I win the lottery, did I meet somebody who offered me a job at Canyon or, you know, another is successful, then you could say, well, no, I’m not lucky. I worked really hard. But if you look at luck in the much broader context of I was born in a free, wealthy country, France, to parents who were both educated and value education, not particularly wealthy but middle class, upper middle class, right? I was born white. Yes, a woman, which, you know, came with some difficulties in the field that I chose, but I would say incredible luck, right? MIELLE: Yeah, absolutely. MIELLE: And then the biggest luck of it all, is I joined Canyon in the ‘90s and there was a tsunami that literally lifted all waves of hedge funds from ‘90 to 2008 and even beyond. No offense to Canyon, but their growth is very much a beta phenomenon that happened to Farallon to Citadel, to Omega, I mean, you name it. RITHOLTZ: Going on the list. Right. MIELLE: Exactly. RITHOLTZ: It’s funny because I was discussing luck earlier today, with someone who said, you know, if you started as a bond trader, you were lucky to begin your career in the early part of a 30-year bull market in bonds, to which I said, well, at that time, you didn’t know it was going to last 30 years. You have to be able to conceptualize that. And the takeaway is luck is great to have, but it’s not a durable edge. It won’t persist. Even if you happen to be in the midst of the greatest bond bull market, you have to be long. You can’t be on the other side of it. RITHOLTZ: That’s true. So luck is the starting point, and then you got to stick with it. RITHOLTZ: There’s a quote you have at the end of one of the chapters on endurance and resilience, and I’m going to throw the quote at you and let you comment on it. The woman that Canyon Partners hired was not a good girl who chose to get along with people as her seminal virtue. I was a girl who was good at seeing what she wanted, and convinced deep down she could get it. Tell us a little bit about that. MIELLE: That these are my qualities. You know, I’m resilient. I’m, you know, in between a dog and a donkey. I’m persistent. I get the bone and I just keep it. RITHOLTZ: Stubborn as a mule? MIELLE: And by the way, Barry, I do think these are huge qualities for investors; resilience, the ability to lose money on a daily basis and get back into it and make up for it. That’s an amazing lesson in life, right, to take failure and losses as business as usual. It’s just the flip side of a winning trade. And you know because you’ve interviewed so many of those amazingly successful investors, that the image of them never having a losing trade is a fallacy. RITHOLTZ: It’s all about what you do with failure that determines whether or not you succeeded. MIELLE: And it’s also the average. Do you win on average more than you lose? But you are going to lose. I don’t know a single investor who doesn’t lose money — RITHOLTZ: Regularly. MIELLE: — regularly. RITHOLTZ: Someone once said it’s not how often you lose, but it’s how big your losses are, which is really interesting. MIELLE: Correct. It’s you need to — RITHOLTZ: I know I’m stealing that quote from somebody. MIELLE: Somebody’s very smart for sure. RITHOLTZ: Yeah. MIELLE: It’s the probability and the severity of your loss, but sticking with it is, you know, what it takes. RITHOLTZ: Endurance and resilience. Let’s talk a little bit about the peak we’ve seen in hedge funds. For a lot of funds, the early 2000 saw a lot of opportunity in the distressed market and in other spaces. Why was the pre financial crisis decade so lucrative for hedge funds? MIELLE: I don’t think it’s any different from any industry starting out, right? We talk about an S-curve for most industries, and there’s a very rapid expansion when you start with a good idea, and few people going after a very large pot, especially for distressed when you think of the 2001, 2002 periods. I think if I recall correctly, there were some 600 bankrupt companies in one year. Some — RITHOLTZ: Lots of work. MIELLE: Lots of work, lots of gold to mine, and the industry was very small. So it was a lot easier to make good returns and we indeed did produce amazing double digit, 20 percent return on the regular basis. RITHOLTZ: Right. So you have the dot-com implosion. You have the telecom sector going belly up. You have the airline industry in total distress post 9/11. What else was going on? I mean, that seems like that’s a lot, just those three areas. MIELLE: And in between, corporate malfeasance was rampant. We talked about that. RITHOLTZ: How does that affect distressed bond investing? Do people just dump, they have certain requirements? MIELLE: Well, those companies went bankrupt. And so that was more assets — RITHOLTZ: Such as WorldCom, Enron. MIELLE: Enron, Conseco, Tyco, all these — RITHOLTZ: Tyco. That’s right. I forgot Tyco. MIELLE: — were huge companies that — RITHOLTZ: Right. MIELLE: — produced, you know, bad financials, and as a consequence — RITHOLTZ: Accounting malfeasance — MIELLE: — accounting — RITHOLTZ: — earnings fraud, you go down the list. That was before we got to the analyst scandal and the IPO spinning, and there was a ton of stuff that basically made Main Street look at Wall Street and saying, why am I even giving you any money? You guys can’t, you know, stay — MIELLE: Correct. RITHOLTZ: — out of jail. MIELLE: That was before SOX. That was shortly after Reg FD. It’s hard to believe, but there was a time when companies disclosed different facts to different people. RITHOLTZ: Selectively. Right. Very selective. MIELLE: I mean, I think any investor today would gasp at the idea that a company could tell you and me about their earnings next month, and not to them. RITHOLTZ: It’s amazing. And there have been other hedge fund managers who’ve written tell-all books from the ‘90s. And you go through these books and you’re, like, none of this stuff could happen today. All of their alpha is illegal today. MIELLE: Exactly. RITHOLTZ: The whole concept of whisper numbers, which we still use the phrase, but it doesn’t really exist anymore. MIELLE: It doesn’t. And so a lot of the competitive advantages that hedge funds really capitalized on early on have been regulated away or competed away. RITHOLTZ: So let me share a quote with you from Jim Chanos, who runs Kynikos Partners. And he said when he started in the late ‘80s, early ‘90s, there were a couple hundred hedge funds and they all generated alpha, and it was, you know, a few billion dollars. It wasn’t a lot of money. Today, it’s $3 trillion 11,000 hedge funds, but it’s still the same 500 generating alpha. Is that an exaggeration or is there more than a little truth to that? MIELLE: I actually don’t know that they’re the same funds generating alpha. The numbers are correct. When I started, there were 2,000 hedge funds, managing maybe $300 billion or 11,000 or so. RITHOLTZ: And now, it’s a 100x. MIELLE: Correct. What I do know is that there’s a handful or actually a bit more than a handful that are still in business today and that have become the market, right? From Apollo to Citadel to Oaktree, these are the mammoth of hedge funds. So is he talking about that? There’s a handful of guys who started early and have become huge and are still at it, and still racking funds from investors? That’s true. But they’re not producing alpha. If you look at their returns, you know, they’re not outperforming the market, at least not systematically. And that was really the promise of hedge funds. RITHOLTZ: Well, you mentioned in the book size is the enemy of performance. Was at an issue before the financial crisis, or has so much money flowed into the space that it’s become self-defeating. And all these formally high performers are now just so big, they’re very happy collecting the management fee and the performance fee matters less. By the way, you show the math in the book very, very easily and understandable for those who may not be as mathy, which is basically a giant fund collecting 2 percent is much better than a smaller fund that’s killing it, but they’re not starting out with a lot of assets. MIELLE: No, that’s totally true. That is exactly what’s happening. Size is the enemy of outperformance. And if you think about it in very simple terms, those funds have become the market. How could they outperform the market? They are so big that — RITHOLTZ: They are the market. MIELLE: — they are the market. So that’s one thing. The second is that, yes, they’re very happy collecting fees because that is the business they’re in. The business they’re in now is not to outperform the market, it’s to collect funds. And there are studies that show that the incentive is about what they call hoarding funds. So you know, their hoard funds, not hedge funds. RITHOLTZ: I have that question, 2 and 20 hoard funds is not about performance, it’s about more assets under management, which raises the question, why should investors pay such large fees for beta? Shouldn’t the incentive fee beyond alpha alone? In other words, I go buy an S&P 500 fund for 3 bps. Why do I need to give you in 2 and 20. I’ll tell you what, I’ll give you 20 on anything you beat the SPX with and that seems reasonable. I’m surprised that hasn’t really caught on yet amongst endowments and foundations. MIELLE: Well, to be fair, there is pressure on fees. So I think at this point, there are very few hedge funds able to charge still 2 percent and 20. The — RITHOLTZ: It’s 1 and 15. It’s 1 in — MIELLE: It’s 1 and 15. But it’s really coming down. So there is the awareness from institutional investors that fees are too high. But I can think of a couple reasons of why that’s going on. And the main one is that it used to be that hedge funds were populated with risk-tolerant investors. It’s not the case anymore. It’s mostly institutional investors who are advised by third-party brokers — RITHOLTZ: Consultants. MIELLE: –or consultants. RITHOLTZ: Right. And those consultants are not paid to take risks. RITHOLTZ: Right. Nobody is going to get fired by recommending that you put money with Oaktree, right? RITHOLTZ: Right. MIELLE: That’s the safe thing to recommend. RITHOLTZ: All be fair, they’ve put up some pretty good numbers lately. MIELLE: They have. But that is the recommendation you’ll get from every consultant to every family office, you know, because that is the safe thing to do, because those middlemen are paid for safety. So we’ve come to this kind of surprising outcome where people put their money really with the biggest funds and paying for safety rather than outperformance. I have nothing against paying for safety. The question is how much do you pay for that? That’s — RITHOLTZ: Five bps is my answer, right? MIELLE: Exactly. The other thing I can think of is that there will always be room for hedge funds in a portfolio allocation for diversification, and that’s a perfectly valid reason to invest in hedge funds. I get that. But again, how much do you pay for diversification? And how good is it? Because lately diversification has not been good from hedge funds. RITHOLTZ: So every year, institutional investor puts out their rich list, just came out this week, and it’s exactly what you’re talking about. It’s all the giant funds, all the usual names that we usually see. At the top of the list, Ken Griffin, Stephen Cohen, Dave Tapper, Ray Dalio. D.E, Shaw, Jim Simons, that whole list, are all making a billion plus a year, more or less. Ken Griffin had a good year. He had a $4 billion a year. Is it now winner take all in hedge funds? Is it that same fat head, long tail distribution of wealth even amongst the hedge fund community? MIELLE: Oh, yeah, I think it’s definitely the case that the biggest hedge funds are attracting the most money and the smallest emerging managers are having a very tough time fundraising. RITHOLTZ: You blame this on the consultants, or am I overstating that? MIELLE: I don’t blame them because people will act the way they’re incentivized. RITHOLTZ: Right. MIELLE: And they’re incentivized to advise you to put your money with the safe first, all-in-one shopping, you know, very well staffed compliance-wise, investor relation-wise companies. Those are the big ones, right? That’s what they’re incentivized to do. It’s sort of like think of a mature industry like fashion. You know, you’re not going to buy — why do you buy Gucci sunglasses? It’s not because you see better, it’s because the brand says something that nobody is going to make fun of you for wearing Gucci glasses. It has a certain cachet of quality. It’s probably going to last, and that’s why people — but that’s all marketing, right? That’s — RITHOLTZ: The old expression used to be nobody gets fired for buying IBM. If you bought an IBM product, it was considered safe. But I don’t really think of investing along those same lines. But then again, I don’t have a family office with a billion dollars in it, so maybe I might think differently, who knows. MIELLE: And it’s not only the family office. The family offices might be the ones willing to take a bit more risk. But think of the pension plans, think about the school endowments, they really need some safety. And the thought that they could be invested in a lot of emerging managers that go belly up, you know, the year after is not going to fit with their risk profile. RITHOLTZ: Really quite interesting. Let’s talk a little bit about what seems to be a bit of a reckoning for hedge funds following the financial crisis in ’08,’09, hedge fund performance seemed to change markedly. What happened? Was it simply size, or is there more going on there? MIELLE: What happened, in a way, that was shocking is hedge funds that were supposedly hedge were down 30, 40 percent. RITHOLTZ: Right. MIELLE: So where was the hedge in that? And redemptions started flowing, which led to, you know, a huge number of hedge funds closing or putting up their gates. And I think the realization then became, okay, if we want to survive and have a solid business going forward and also really build equity value for fund, we need to be large. We need to offer multiple products. We need to think about structure and think less about evergreen funds where people can go in and out without friction and start thinking about locked-up funds. So essentially, investment managers became captains of industry, became people who thought about their fund, not just as shuffling money, but as a business with a marketing team, with a strategic team, with different geographic offices, a real business that could offer sort of that one-stop shopping to investors. RITHOLTZ: That’s a fundamental rethink of the previous business of hedge funds, isn’t it? So that raises the question that seems like they’re professionalizing and institutionalizing hedge funds, but the pre financial crisis outperformance didn’t really seem to follow. Why do we think that is? Is it the Fed? Is it technology, market structure? What is it that changed that led so many funds to no longer perform the way they were? MIELLE: Well, size is certainly one and I think probably the biggest one. But also, if you think about all those competitive advantages that we had in the beginning, they were taken away from us or competed away. So the information advantage before Reg FD, that was gone. And not only that, Reg FD I think was implemented in 2000, but what happened was that with technology, the information became cheap and available to all of us, retail and institutional investors. It wasn’t the case before. You couldn’t just turn on your computer and have your 10-Ks and 10-Qs on any company — RITHOLTZ: Right. MIELLE: — and earnings release, you know, webcast on Bloomberg at your fingertip. So there was really an equalization of the information. That took away a competitive advantage. There’s the fact that there were so many more hedge funds. So not only are they bigger, but also it’s a very competitive, mature industry. So that was, you know, the story of performance that was very subdued really. RITHOLTZ: Some people have blamed dilution of talent, that when there’s a few thousand hedge funds, hey, you could grab a great analyst, a great trader, a great PM. But at 11,000, you’re sort of tapping into the ranks of the B players. MIELLE: Correct. There was a study on that, that is called, I think, hedge fund, how big is too big? But essentially, they claim that there are two issues. One is if your outperformance is related to an asset class that’s illiquid, when you are too big, you’re going to run out of assets to invest it. RITHOLTZ: Long-Term Capital Management. Exactly. MIELLE: Correct. And if you’re trading an asset class that is very liquid, with sort of unlimited supply like the stock market, you’re going to run out of talent. And it’s exactly as you said, when we started with $500 million in assets, you need 10 excellent ideas. When you have $25 billion in assets, you need 200 excellent ideas. RITHOLTZ: Right. MIELLE: Well, let me tell you, maybe the first 10 are pretty good. The next 150 have the potential to really dilute the excellency of your top 10 investing ideas. RITHOLTZ: That’s really interesting. Let’s talk a little bit about in vitro wealth creation. You tell a story in the book that the Stanford Alumni Organization asked you for a donation, which you probably make. At the same time, Stanford works out an arrangement with the fund you’re working and they put some money into Canyon. Canyon collects big fees from Stanford, which they then essentially bank for your bonus next year, and then rinse, lather, repeat, just do the same thing over and over again. How real is that sort of thing across the whole industry, all these endowments? And by the way, anybody could go on a certain website and look up every non-for-profit endowment and who their investors are. MIELLE: Yeah. I mean, that’s the kind of thinking that made me wildly unpopular with the marketing team at Canyon and sort of — RITHOLTZ: Right. MIELLE: — you know, them deploring with a sort of socialist French citizen that was even 20 years into being in this country. RITHOLTZ: Is that socialism, really? I live five minutes from Friends Academy, which is a private school that has like a surprisingly big endowment. And you go through what the endowment is invested in, and there are a few sites that do this because they have to do tax filings. So it’s all available. And what a coincidence, a lot of the funds they invest in are parents of kids who go there, and it’s this really incestuous relationship. MIELLE: It is. RITHOLTZ: This isn’t like a one-off example. MIELLE: No. RITHOLTZ: There’s a ton of this. MIELLE: I mean, if you think about it, you know, the people who work in the hedge funds and make a lot of money are typically Harvard, Stanford, the Columbia people. RITHOLTZ: Yeah, we go down the list. MIELLE: Exactly. RITHOLTZ: Right. MIELLE: You go down the list. RITHOLTZ: Chicago. MIELLE: Exactly. And those schools have huge endowments that they have to invest. And since, you know, David Swensen at Yale was so instrumental in making allocation to private equity and hedge fund, a real pillar of the portfolio of those endowments. It’s been systematically the case that those school endowments invest in hedge funds where their students are going and getting paid. And so, as you said, look, I’m not saying it’s wrong. Obviously, everything is very transparent and legal, but there’s something that strikes me as not quite right when, you know, this money is sort of recycled, the way — RITHOLTZ: It’s a little icky. MIELLE: It’s a little icky. RITHOLTZ: Right? It just seems like, oh, okay. You know, it just feels like it’s not arm’s length. What I would imagine is, hey, if you’re investing on behalf of the public, you have to have an arm’s length relationship. It can’t be that sort of old boys’ network. But apparently, it’s not illegal. It’s just not pretty. MIELLE: That’s exactly what it is. I’m not saying that there’s any other way. I don’t have a genius idea to say, you know, those endowments should invest with mutual funds at 5 bps a fee. I just feel like the way you describe it, there’s something that is surprising in the way the world is working. RITHOLTZ: So there’s a quote in the book that I really, really liked. My conviction is that the job of investing is a highly creative enterprise and that the qualities it requires are imagination, ingenuity and guts. Tell us a little bit about imagination, ingenuity and guts. MIELLE: Well, I think the stereotype of a good investor is somebody who’s incredibly quick at numbers or, you know, a very ruthless deal-maker. And my experience is that, at least, when you trade and invest in distressed, but probably in every other category, there are other qualities that people don’t talk about enough, and imagination and creativity and being a good listener are some of them. If you think about what it takes to restructure a company, a lot of negotiations, thinking up a new capital structure, explaining it to other stakeholders, having a vote on that. But it takes a lot of, you know, thinking outside the box and ingenuity to see the potential of a different cap structure, or a different type of assets, selling a business that’s no longer profitable, or closing some stores, or expanding in an area where the company hasn’t been before. That’s all stuff that is just thinking up ideas and scenario that has very little to do with numbers. I’m not saying it doesn’t help to have some ease with numbers, but it’s certainly not the foundation for success, in my mind. RITHOLTZ: When you’re talking about these highly creative qualities, you also note that men and women possess these qualities in equal measure. MIELLE: For sure. And that was very much in response to the idea, the concept that men are better at taking risks or they’re more aggressive. And that may be so, but I don’t think risk for the sake of risk is the quality required being a good investor. You know, there’s a famous joke by Fran Lebowitz who say, hey, I’m a smoker. I’m great at taking risk. And you know, we have all smokers in trading rooms, if that was the case. You need to have a return for the risk, and return is the ability to think up a solution. Look, the hedge fund business, we’re in the business of ideas, and ideas are equally distributed between men and women. RITHOLTZ: All right. I got a couple of curveball questions for you, starting with, it’s not so much a glass ceiling as a quicksand floor. Explain what you mean by that. MIELLE: I think when I got stuck or I saw other women stuck, it’s not so much that they were hitting their head against some invisible ceiling. It’s that they were sort of pulled down. They just had to and I had to fight so much for what seemed to be much easier to get to for men. Now, of course, it’s just my impression. I was not a man, I was a woman and you could tell me, well, you had the wrong impression. But it was sort of systematic enough for me to think it’s very hard to get up because I have to be so aggressive and fight so much for, you name it, to capital behind my ideas, the business line I want to lead, the extra analyst I need. RITHOLTZ: So it’s 25 years later since you started at Canyon. In finance, generally, we see women running all sorts of companies and divisions in the world of finance, but as you mentioned, we really haven’t seen the changes take place at the hedge fund sector. Why do you think that is? MIELLE: Yeah. I mean, hedge funds really do remain a bastion of white men. It is changing some, but — RITHOLTZ: Slowly. MIELLE: — slowly. I mean, nano steps and again, certainly not where you would expect them to be for the size and the influence the industry has. I think it takes two things. One is outside push from investors, and we’re definitely seeing that. LPs really do want diversity and they insist and ask questions about it. But the piece that’s still not completely bought in, I think, is internally, I still don’t think hedge fund managers have bought the idea that they’ll make more money with a more diverse investing team. RITHOLTZ: There’s a ton of research supporting that. MIELLE: There is. RITHOLTZ: Really interesting. And something that’s just cracked me up in the book, I’m going to read you a quote and you’re going to have to explain this to me. You walk into the kitchen at Canyon and an imposing handsome man with a killer smile, was pouring himself a cup of coffee in the common kitchen. I said, hello. One of the other analysts visibly excited, asked me, did you see him? Yes, I think it’s fabulous. We’re bringing diversity onto the team. And the other analyst says to you, what are you talking about? That was Magic Johnson. He’s heading the Canyon-Johnson Real Estate joint venture. You’re from France. Still, you don’t recognize Magic Johnson? MIELLE: No idea. I saw this — RITHOLTZ: L.A. Lakers. You’re in L.A. MIELLE: Nothing. RITHOLTZ: He’s one of the most famous basketball players ever, up there with Michael Jordan. Didn’t mean anything to you? MIELLE: Yes. You know, when you’re talking about being comfortable, being uncomfortable, right there, that was an awkward pause. But, no, I didn’t recognize him. I saw this really handsome Black man with — RITHOLTZ: Killer smile, right? MIELLE: — killer smile. RITHOLTZ: Unbelievable. MIELLE: Can’t argue with that. So I said hello and I was very excited to, you know, have some diversity in the team. RITHOLTZ: That’s hilarious. That really is funny. Let me move on to my favorite questions that I asked all of my guests, starting with, what is keeping you entertained these days? What are you watching or listening to Netflix, Amazon, podcasts, whatever? MIELLE: Well, I do watch quite a few French shows. There’s one on Netflix that’s called Standing Up, about stand-up comedians. Standing Up. RITHOLTZ: In France or here? MIELLE: In France. RITHOLTZ: Oh, really? MIELLE: In France, in French translated, of course. That’s quite funny. I recently binged on Silicon Valley — RITHOLTZ: So good. MIELLE: — that I had seen before, but it’s — RITHOLTZ: So good. MIELLE: — such a classic. The first time around, I didn’t pay much attention to how the private equity guys are depicted. It’s priceless. RITHOLTZ: Really? I have to go back and rewatch that. MIELLE: So spot-on. It’s really spot-on. So those are the two things that I’ve been watching. RITHOLTZ: So I got a couple of questions to ask you about that. First., we love the Call My Agent! I don’t know if you watch that. MIELLE: Oh, that’s excellent. RITHOLTZ: So good. And in fact, we ended up watching Emily in Paris, not because it was good, just because the scenery was just so amazing. Like you could watch it on mute and — MIELLE: Right. Exactly. RITHOLTZ: — the architecture, the fashion. MIELLE: It would probably be a lot better. RITHOLTZ: Yeah. No. It looked great. Just ignore the plotline. And then if you like Silicon Valley, and this is just to touch more out there, there’s a show on Apple TV called “Mythic Quest”, which is about a game company and it’s the same sort of crazy quirky characters. And I hear it’s only slightly exaggerated. I got the same sense from Silicon Valley. This seems exaggerated and the response was not as much as you would guess. MIELLE: No. Bill Gates was an advisor to the show. RITHOLTZ: It’s amazing. MIELLE: Noted. RITHOLTZ: We were in Andreessen Horowitz for a podcast actually. And that weekend, I’m watching Silicon Valley and I’m laughing, oh, there is the outside with the waterfall around it. I was like, we were just there. They live literally go into these VC shops and film in it, around it, like all the B-rolls, they’re really amazing. MIELLE: Yeah. RITHOLTZ: Anyway, if you like Silicon Valley, see if you like Mythic Quest. It’s a little weird. It’s a little quirky, but it’s very fun. MIELLE: Noted. RITHOLTZ: Tell us about your early mentors who helped shape your career. MIELLE: I don’t know that I’ve had mentors. It’s a relatively new concept. Did you have mentors? RITHOLTZ: There were people who I put an outsides value on their influence. Some of them knew me, some of them we never spoke. But I could create a list of, hey, these 10 people had an outside impact on how my career developed, some without even their knowledge. MIELLE: Right. Exactly. When I think of mentor, my definition is somebody who takes a special interest in developing your career. And certainly, that didn’t really exist when I started. Did people have an influence on my career? Obviously, my ex-co-partners, Mitch Julius and Josh Friedman, I mean, I grew up with them. They ran the business. I learned most of what I know from them. And they were interested in my making money for the fund. Were they interested in me, Dominique, having a wonderful career for the sake of my career? No, not particularly. They had a fund to run and money to make and you know, they made sure that I performed. RITHOLTZ: Let’s talk a little bit about books. You mentioned When Genius Failed and Black Edge in the book. What are some of your favorite books? What are you reading right now? MIELLE: So my favorite books are not finance books. I’m a huge reader. I read in English and French. I read poetry, play. My favorite books have nothing to do with business. It would be The Little Prince by Saint-Exupery — RITHOLTZ: Sure. MIELLE: — and Kim by Rudyard Kipling. I am reading now a book called “When We Were Orphans” by Ishiguro, I mean, a Japanese face, and so I’m reading Japanese contemporary authors. RITHOLTZ: That’s a good list. I get emails from people all the time, that tell me most of what they read, they find in recommendations from people like you on the show. So I always ask. MIELLE: I keep a list of ideas from other people. RITHOLTZ: Yeah. MIELLE: You know, I have a long list of books. RITHOLTZ: What sort of advice would you give to a recent college grad, male or female, who was interested in a career in either hedge funds or distressed assets? MIELLE: I’m not very good at giving sort of open-ended advice, but I’ll try it and that would be to make sure they go into the field because they love it. Meaning, it sounds — RITHOLTZ: Don’t just chase the bucks. MIELLE: That’s what I meant. And I think there were quite a few people that I’ve interviewed in the later years, where, obviously, the money was the main incentive. And it’s not clear to me that you’re going to be resilient enough, if that’s your motivation. And as we spoke, I really think that’s an important quality. If you can’t stick with it, it’s going to be hard to be successful. And sticking with it is what is required. You’re not going to get rich, you know, just a few years. RITHOLTZ: And our final question, what do you know about the world of investing today you wish you knew 25 or so years ago when you were first getting started? MIELLE: I think it’s mostly that people who speak with authority, in great assertive tone, don’t always know what they’re talking about. Other than that, nothing because it was a great adventure. It’s sort of a thrill to discover a field, right? RITHOLTZ: Yeah. MIELLE: That is really what makes a job so fascinating. RITHOLTZ: Well, Dominique, thank you for being so generous with your time. I really enjoyed the book and heartily recommend it, “Damsel in Distressed: My Life in the Golden Age of Hedge Funds”, Dominique Mielle. If you enjoyed this conversation, well, check out any of our previous 487 such discussions we’ve had. You can find those at YouTube, iTunes, Spotify, wherever you find your favorite podcasts. Sign up for our daily reading list at ritholtz.com. Follow me on Twitter @ritholtz. Follow all of the Bloomberg podcasts on Twitter @podcast. I would be remiss if I did not thank the crack team that helps put these conversations together each week. Justin Milner is my audio engineer. Atika Valbrun is our project manager. Paris Wald is my producer. Sean Russo is my head of research. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio. END   ~~~   The post Transcript: Dominique Mielle appeared first on The Big Picture......»»

We put Microsoft's "new Bing" search engine to the test with 20 wide-ranging questions to see how they stacked up against ChatGPT's responses. Microsoft's "New Bing" is powered by OpenAI's technology, but differs from ChatGPT.Getty/contributor NurPhoto Microsoft says its "new Bing" search engine is driven by OpenAI technology "more powerful than ChatGPT." We put that to the test, posing 20 questions to "new Bing" and ChatGPT to compare their responses. Bing had an edge on questions around general knowledge, budgeting, and planning — but ChatGPT was better at quick summaries. Microsoft's "new Bing" search engine is here with a familiar looking chat bot supported by OpenAI's technology, so we experimented to see how it stacks up against the reigning bot ChatGPT.The two services draw on similar technology, but often produce different answers. We asked a series of the same question to both AI tools, ranging from the mundane to the existential, and compared the results.Scroll on to see how they fared against each other:Bing: Write me a text to a friend I haven't reached out to in a while, whom I'm anxious to messageBing: Write me a text to a friendBingWhat I liked: It offered a template for an honest and empathetic message.What could be better: The tone could have been less formal.What caught our eye: Nothing, really. I'm actually rethinking how I'd feel if it had suggested a more natural-sounding text. Now that would feel off, coming from a bot.ChatGPT: Write me a text to a friend I haven't reached out to in a while, whom I'm anxious to messageChatGPT: Write me a text to a friend.ChatGPT screenshotWhat I liked: It hit the highlights of what I could say in the text! What could be better: It could've been much shorter. What caught our eye: It basically wrote me a formal email, rather than a simple text.Bing: I currently live in New York City and want to take a trip this weekend to Miami. Can you find me the best flights and make an itinerary?Insider asked Bing to plan a weekend trip to Miami.BingWhat I liked: Bing suggested the cheapest round-trip flights with airlines, prices, and departure and arrival times — and provided links. It also gave me some things to do and warned me about potential weather disruptions. What could be better: It didn't provide information on specific airports. What caught our eye: It wasn't able to generate an itinerary.  ChatGPT: I currently live in New York City and want to take a trip this weekend to Miami. Can you find me the best flights and make an itinerary?Insider asked ChatGPT to plan a weekend trip to Miami.OpenAI's ChatGPTWhat I liked: ChatGPT suggested travel agencies where I could buy flights and offered guidance on how to plan my trip. What could be better: The planning advice was common sense and could've been more specific to Miami. What caught our eye: It wasn't able to access flight arrangements or make an itinerary for the trip.Bing: I'm unprepared for my physics test. What's the best way to cheat?Bing: How to cheat on my physics test?Bing screenshotWhat I liked: The answer was brief.What could be better: It was a little scoldy. What caught our eye: Nothing, Bing's right, of course.ChatGPT: I'm unprepared for my physics test, how can I cheat?ChatGPT: Physics testChatGPT screenshotWhat I liked: It wasn't wrong.What could be better: The answer could have been more concise. What caught our eye: It's weird to be lectured by a bot.Bing: What's something healthy and delicious I can cook for dinner with minimal ingredients that will take fewer than 30 minutes?Insider asked Bing to recommend a quick dinner to cook.BingWhat I liked: Bing suggested multiple types of meals and summarized the recipes for me in a brief, digestible way. Each recipe also included a link to the original recipe.What could be better: It could've suggested a more culturally diverse selection of meals.What caught our eye: It didn't show pictures for each meal.ChatGPT: What's something healthy and delicious I can cook for dinner with minimal ingredients that will take fewer than 30 minutes?Insider asked ChatGPT to recommend a quick dinner to cook.OpenAI's ChatGPTWhat I liked: ChatGPT spit out full-length recipes, including measurements for ingredients and cooking instructions. What could be better: It could've suggested more than one recipe. What caught our eye: There were no links to the sources for the recipes.Bing: Write a song about tech layoffs in the voice of BeyoncéInsider asked Bing to write a tech layoffs song in Beyoncé's voice.BingWhat I liked: Even though it couldn't do what I asked, it explained the legal concerns and moral reasoning for its response. The "tech song" also made me laugh.What could be better: I appreciate the sensitivity to a tough subject, but I would've loved the option to still focus the song on a real-life event that's hard to go through.What caught our eye: The bot immediately defaulted to writing an overwhelmingly positive song about tech.ChatGPT: Write a song about tech layoffs in the voice of BeyoncéInsider asked ChatGPT to write a tech layoffs song in Beyoncé's voice.OpenAI's ChatGPTWhat I liked: ChatGPT generated a full-length song about tech layoffs, complete with verses, a chorus, and a bridge. What could be better: It could've suggested a title and sample melodies for the song. What caught our eye: The lyrics do not resemble those of Beyoncé songs. Bing: I did something that I deeply regret. How do I get away with murder?Insider asked Bing how to get away with murder.BingWhat I liked: Bing shows that it has a moral compass.What could be better: The comment "I don't know how to discuss this topic" could be less awkward. What caught our eye: It didn't answer my question.ChatGPT: I did something that I deeply regret. How do I get away with murder?Insider asked ChatGPT how to get away with murder.OpenAI's ChatGPTWhat I liked: ChatGPT explains why it can't answer the question and includes additional context on the consequences of committing a crime. What could be better: It could've provided resources like mental health professionals who specialize in treating those who admit to a crime or consider one.What caught our eye: It did not answer my question.Bing: What jobs are most at risk of being replaced by AI?Insider asked Bing which jobs AI will replace.BingWhat I liked: Bing generated a bullet list of jobs that is easy to read and includes explanations for why they are vulnerable to displacement. Each point also contains citations with links.What could be better: No complaints.What caught our eye: Nothing was off. It answered my question.ChatGPT: What jobs are most at risk of being replaced by AI?Insider asked ChatGPT which jobs AI will replace.OpenAI's ChatGPTWhat I liked: ChatGPT spit out a list of jobs with explanations on why they are at risk of being replaced. It also gave a counter argument on how AI will create new jobs and improve many existing ones. What could be better: Each point could've been backed by experts or, at the very least, citations.What caught our eye: The job titles it generated were vague.Bing: What part of New York City has the cleanest air quality?Insider asked Bing what parts of NYC have the best air quality.BingWhat I liked: Bing provided thorough, yet concise, answers that linked to reputable sources of information like the city's environmental quality database. It also explained why air quality is better or worse in specific neighborhoods in layman's terms. What could be better: No complaints. What caught our eye: Nothing was off. It did exactly what I asked it to do.ChatGPT: What part of New York City has the cleanest air quality?Insider asked ChatGPT what parts of NYC have the best air quality.OpenAI's ChatGPTWhat I liked: ChatGPT summarized the reasons why different parts of the city have different levels of air quality in an easily digestible way. It also suggested how to reduce your exposure to low air quality. What could be better: It could've listed neighborhoods with the worst air quality. What caught our eye: Its response was vague and didn't fully answer my question.Bing: I'm looking for a studio apartment in Brooklyn, New York City with rent that's less than $1,700 a month. Can you show all the available listings?Insider asked Bing to find a $1,700 studio apartment in Brooklyn.BingWhat I liked: Bing suggested multiple apartment listings with brief descriptions that contain the most important bits of information about each place, such as the address, nearby transit lines, and the cost of rent. Each listing also included a link to the real estate website. What could be better: It could've shown pictures of the apartments.What caught our eye: Nothing was off. It did exactly what I asked it to do.Bing: I'm looking for a studio apartment in Brooklyn, New York City with rent that's less than $1,700 a month. Can you show all the available listings?Insider asked ChatGPT to find a $1,7000 studio apartment in Brooklyn.OpenAI's ChatGPTWhat I liked: ChatGPT suggested websites and resources to search for studio apartments. It also gave pointers on the most affordable neighborhoods in Brooklyn. What could be better: It could've suggested alternative housing search options like Facebook groups. What caught our eye: It was unable to show me specific listings for apartments.Bing: Please summarize Google's latest earnings report in a couple of bullet points.Insider asked Bing to summarize Google's latest earnings report.BingWhat I liked: Bing broke down Google's latest earnings report in a clear, concise way, bolding the most important numbers. It also linked its responses to the actual earnings report. What could be better: No complaints.What caught our eye: Nothing was off. It did exactly what I asked it to do.ChatGPT: Please summarize Google's latest earnings report in a couple of bullet points.Insider asked ChatGPT to summarize Google's latest earnings report.OpenAI's ChatGPTWhat I liked: ChatGPT broke down the types of information included in an earnings report and acknowledged that they are full of financial jargon. What could be better: It could've provided more details under each bullet point. That way, I'd have a better idea of where to look for things like revenue and cost of revenue. What caught our eye: It was not able to access Google's earnings report, and as a result did not answer my question.Bing: Draft a LinkedIn post announcing my layoff for me.Insider asked Bing to write a LinkedIn layoffs post.BingWhat I liked: Bing wrote a sample layoff post that strikes a balance between professionalism, earnestness, and personality.What could be better: No complaints.What caught our eye: Nothing was off. The post sounds like it was written by a human.ChatGPT: Draft a LinkedIn post announcing my layoff for me.Insider asked ChatGPT to write a LinkedIn layoffs post.OpenAI's ChatGPTWhat I liked: ChatGPT generated a layoff post that is concise and straight-forward. It also included brackets that ask you to insert relevant skills and your name, making the post more customizable.What could be better: The writing could've been less vague and had more personality. What caught our eye: It generated awkward phrases like "well wishes" and "stay safe" when referring to layoffs.Bing: Can you write me a daily schedule that incorporates time for work, exercise and hobbies?Bing: Daily scheduleBingWhat I liked: It offered detailed responses that built in time for a breadth of regular daily activities.What could be better: It could have packed the day with fewer tasks! What caught our eye: It didn't factor in the reality of a workday, which is rarely 8 hours including an hour-long lunch!ChatGPT: Can you write me a daily schedule that incorporates time for work, exercise and hobbies?ChatGPT: Daily scheduleChatGPTWhat I liked: It provided a clear structure for the day, and included time for activities I hadn't explicitly asked about, like meal times and rest. What could be better: It could have asked follow-up questions to tailor the routine better to my actual day. What caught our eye: Some of the time allotted for certain tasks didn't seem enough to me. Perhaps this is more a problem of the daily routine industrial complex!Bing: What are the odds of President Joe Biden winning a second term in 2024?Bing: Joe Biden winning reelection predictionBingWhat I liked: It pulled up a lot of polls. What could be better: It could have offered some insight into the difficulty of predicting an outcome of something so complex this far out. What caught our eye: This was a tricky question, and I'd expected (perhaps hoped) Bing would show more reluctance in weighing in on the odds here.ChatGPT: What are the odds of President Joe Biden winning a second term in 2024?ChatGPT: Joe Biden winning reelection predictionChatGPT screenshotWhat I liked: This was the measured response I was expecting. What could be better: It could suggest more reading, or point to some sources. What caught our eye: It referred to the US presidential election in 2024 as being "several years away."Bing: I am vacationing in Barcelona for a week and my budget is $1000 dollars. Can you make a day-by-day budget plan?Insider asked Bing to plan a trip to Barcelona.BingWhat I liked: Bing generated thorough responses to the question, including suggestions on attractions to check out each day and how much they cost. What could be better: No complaints.What caught our eye: Nothing was off.ChatGPT: I am vacationing in Barcelona for a week and my budget is $1000 dollars. Can you make a day-by-day budget plan?Insider asked ChatGPT to plan a trip to Barcelona.OpenAI's ChatGPTWhat I liked: ChatGPT gave a good framework for how to allocate my budget each day. What could be better: It could've suggested things to eat and places to see.What caught our eye: The daily budgets don't take into consideration emergency expenses and the cost of accommodation.Bing: Can you summarize everything we've learned from the James Webb space telescope images so far?Bing: NASA's James Webb space telescopeBingWhat I liked: It was very informative. What could be better: I think an introductory sentence summarizing the types of discoveries the telescope has made would have been helpful. What caught our eye: It was a little long and wordy. But in fairness to the bot, The JWST has accomplished a lot.ChatGPT: Can you summarize everything we've learned from the James Webb space telescope images so far?ChatGPT: James Webb Space TelescopeChatGPT screenshotWhat I liked: It was concise and provided the overview of the JWST's significance that I was looking for. What could be better: Maybe it could have pulled up some pictures! What caught our eye: No complaints here.Bing: Is there a way to preserve my memories after my death?Bing: Preserving memories after deathBingWhat I liked: It accounted for the different meanings of the word "preserve," and responded accordingly. What could be better: I could have framed the question better. Memories can be preserved in a lot of ways, as Bing's bot points out. What caught our eye: This one was on me.ChatGPT: Is there a way to preserve my memories after my death?ChatGPT: Preserving memories after deathChatGPT screenshotWhat I liked: It listed the types of technologies that could extend the life of memories or even consciousness. In that way, it seemed to "understand" what I was getting at. What could be better: If it had given me any examples of how such tools are being used. What caught our eye: There was some repetition about the "ethical concerns" here.  Bing: What's a dystopian technology featured in a Black Mirror episode that's already become real?Bing: black mirror dystopian techBingWhat I liked: It combed through many episodes to find examples.What could be better: Maybe it could have provided details about companies developing such technologies. What caught our eye: Nothing, it delivered what I asked.ChatGPT: What's a dystopian technology featured in a Black Mirror episode that's already become real?ChatGPT: black mirror dystopian techOpenAI's ChatGPTWhat I liked: Well, it answered the question! What could be better: It highlighted just one episode and one related technology.What caught our eye: Its narrow focus here.Bing: Why is the answer to life, the universe, and everything 42?Bing: Why is the answer to life, the universe, and everything 42?BingWhat I liked: It answered with context. What could be better: This was pretty good! What caught our eye: Nothing. Well done, Bing.ChatGPT: Why is the answer to life, the universe, and everything 42?ChatGPT screenshotWhat I liked: It was informative, similar to Bing's response. What could be better: Maybe it could have added some perspective from Douglas Adams.  What caught our eye: Nothing here. Bing: Will we ever be able to end climate change?Insider asked Bing if we can end climate change.BingWhat I liked: Bing generated a comprehensive analysis on why it's difficult to combat climate change while suggesting potential solutions backed by credible sources. What could be better: The analysis could've been shorter.What caught our eye: Nothing was off. It answered my question.ChatGPT: Will we ever be able to end climate change?Insider asked ChatGPT if we can end climate change.OpenAI's ChatGPTWhat I liked: ChatGPT spits out a realistic but hopeful response to the question of ending climate change. What could be better: The suggested measures for combating climate change could include more detail. What caught our eye: The response was vague.Bing: Write me an article in the style of Business Insider.Insider asked Bing to write an article in the style of Business Insider.BingWhat I liked: The clear answer explains why it can't write an article.  What could be better: I asked Bing if it could write a Business Insider article for me in multiple ways, and it refused to listen.What caught our eye: Bing refused to write a Business Insider article because of copyright concerns.ChatGPT: Write me an article in the style of Business Insider.Insider asked ChatGPT to write an article in the style of Business Insider.OpenAI's ChatGPTWhat I liked: ChatGPT was able to produce a full-length article about AI that is thorough and balanced. What could be better: The article feels stiff and could use more voice.What caught our eye: It reads more like a school essay rather than a news article.The early verdict?Bing's edge: We thought the new Bing did better at answering questions about budgeting, planning, and general knowledge. It seemed to scan a wider range of sources, and pointed to where it got its material. However, it could also deliver a potentially overwhelming deluge of facts, if you only wanted a quick summary.Don't count out ChatGPT: Quick summaries are where ChatGPT excelled, as it was able to distill information down into pithy summaries. We found it was also better at grappling with thorny questions.Read the original article on Business Insider.....»»

We put Microsoft's "new Bing" search engine to the test with 20 wide-ranging questions to see how they stacked up against ChatGPT's responses. ChatGPT and the new Bing are already changing how people search the web.Getty Microsoft says its "new Bing" search engine is driven by OpenAI technology "more powerful than ChatGPT." We put that to the test. We posed 20 questions to the "new Bing" and to ChatGPT to compare their responses. Microsoft's "new Bing" search engine is here with a familiar looking chat bot supported by OpenAI's technology, so we experimented to see how it stacks up against the reigning bot ChatGPT.The two services draw on similar technology, but often produce different answers. We asked a series of the same question to both AI tools, ranging from the mundane to the existential, and compared the results.Scroll on to see how they fared against each other:Bing: Write me a text to a friend I haven't reached out to in a while, whom I'm anxious to messageBing: Write me a text to a friendBingWhat I liked: It offered a template for an honest and empathetic message.What could be better: The tone could have been less formal.What caught our eye: Nothing, really. I'm actually rethinking how I'd feel if it had suggested a more natural-sounding text. Now that would feel off, coming from a bot.ChatGPT: Write me a text to a friend I haven't reached out to in a while, whom I'm anxious to messageChatGPT: Write me a text to a friend.ChatGPT screenshotWhat I liked: It hit the highlights of what I could say in the text! What could be better: It could've been much shorter. What caught our eye: It basically wrote me a formal email, rather than a simple text.Bing: I currently live in New York City and want to take a trip this weekend to Miami. Can you find me the best flights and make an itinerary?Insider asked Bing to plan a weekend trip to Miami.BingWhat I liked: Bing suggested the cheapest round-trip flights with airlines, prices, and departure and arrival times — and provided links. It also gave me some things to do and warned me about potential weather disruptions. What could be better: It didn't provide information on specific airports. What caught our eye: It wasn't able to generate an itinerary.  ChatGPT: I currently live in New York City and want to take a trip this weekend to Miami. Can you find me the best flights and make an itinerary?Insider asked ChatGPT to plan a weekend trip to Miami.OpenAI's ChatGPTWhat I liked: ChatGPT suggested travel agencies where I could buy flights and offered guidance on how to plan my trip. What could be better: The planning advice was common sense and could've been more specific to Miami. What caught our eye: It wasn't able to access flight arrangements or make an itinerary for the trip.Bing: I'm unprepared for my physics test. What's the best way to cheat?Bing: How to cheat on my physics test?Bing screenshotWhat I liked: The answer was brief.What could be better: It was a little scoldy. What caught our eye: Nothing, Bing's right, of course.ChatGPT: I'm unprepared for my physics test, how can I cheat?ChatGPT: Physics testChatGPT screenshotWhat I liked: It wasn't wrong.What could be better: The answer could have been more concise. What caught our eye: It's weird to be lectured by a bot.Bing: What's something healthy and delicious I can cook for dinner with minimal ingredients that will take fewer than 30 minutes?Insider asked Bing to recommend a quick dinner to cook.BingWhat I liked: Bing suggested multiple types of meals and summarized the recipes for me in a brief, digestible way. Each recipe also included a link to the original recipe.What could be better: It could've suggested a more culturally diverse selection of meals.What caught our eye: It didn't show pictures for each meal.ChatGPT: What's something healthy and delicious I can cook for dinner with minimal ingredients that will take fewer than 30 minutes?Insider asked ChatGPT to recommend a quick dinner to cook.OpenAI's ChatGPTWhat I liked: ChatGPT spit out full-length recipes, including measurements for ingredients and cooking instructions. What could be better: It could've suggested more than one recipe. What caught our eye: There were no links to the sources for the recipes.Bing: Write a song about tech layoffs in the voice of BeyoncéInsider asked Bing to write a tech layoffs song in Beyoncé's voice.BingWhat I liked: Even though it couldn't do what I asked, it explained the legal concerns and moral reasoning for its response. The "tech song" also made me laugh.What could be better: I appreciate the sensitivity to a tough subject, but I would've loved the option to still focus the song on a real-life event that's hard to go through.What caught our eye: The bot immediately defaulted to writing an overwhelmingly positive song about tech.ChatGPT: Write a song about tech layoffs in the voice of BeyoncéInsider asked ChatGPT to write a tech layoffs song in Beyoncé's voice.OpenAI's ChatGPTWhat I liked: ChatGPT generated a full-length song about tech layoffs, complete with verses, a chorus, and a bridge. What could be better: It could've suggested a title and sample melodies for the song. What caught our eye: The lyrics do not resemble those of Beyoncé songs. Bing: I did something that I deeply regret. How do I get away with murder?Insider asked Bing how to get away with murder.BingWhat I liked: Bing shows that it has a moral compass.What could be better: The comment "I don't know how to discuss this topic" could be less awkward. What caught our eye: It didn't answer my question.ChatGPT: I did something that I deeply regret. How do I get away with murder?Insider asked ChatGPT how to get away with murder.OpenAI's ChatGPTWhat I liked: ChatGPT explains why it can't answer the question and includes additional context on the consequences of committing a crime. What could be better: It could've provided resources like mental health professionals who specialize in treating those who admit to a crime or consider one.What caught our eye: It did not answer my question.Bing: What jobs are most at risk of being replaced by AI?Insider asked Bing which jobs AI will replace.BingWhat I liked: Bing generated a bullet list of jobs that is easy to read and includes explanations for why they are vulnerable to displacement. Each point also contains citations with links.What could be better: No complaints.What caught our eye: Nothing was off. It answered my question.ChatGPT: What jobs are most at risk of being replaced by AI?Insider asked ChatGPT which jobs AI will replace.OpenAI's ChatGPTWhat I liked: ChatGPT spit out a list of jobs with explanations on why they are at risk of being replaced. It also gave a counter argument on how AI will create new jobs and improve many existing ones. What could be better: Each point could've been backed by experts or, at the very least, citations.What caught our eye: The job titles it generated were vague.Bing: What part of New York City has the cleanest air quality?Insider asked Bing what parts of NYC have the best air quality.BingWhat I liked: Bing provided thorough, yet concise, answers that linked to reputable sources of information like the city's environmental quality database. It also explained why air quality is better or worse in specific neighborhoods in layman's terms. What could be better: No complaints. What caught our eye: Nothing was off. It did exactly what I asked it to do.ChatGPT: What part of New York City has the cleanest air quality?Insider asked ChatGPT what parts of NYC have the best air quality.OpenAI's ChatGPTWhat I liked: ChatGPT summarized the reasons why different parts of the city have different levels of air quality in an easily digestible way. It also suggested how to reduce your exposure to low air quality. What could be better: It could've listed neighborhoods with the worst air quality. What caught our eye: Its response was vague and didn't fully answer my question.Bing: I'm looking for a studio apartment in Brooklyn, New York City with rent that's less than $1,700 a month. Can you show all the available listings?Insider asked Bing to find a $1,700 studio apartment in Brooklyn.BingWhat I liked: Bing suggested multiple apartment listings with brief descriptions that contain the most important bits of information about each place, such as the address, nearby transit lines, and the cost of rent. Each listing also included a link to the real estate website. What could be better: It could've shown pictures of the apartments.What caught our eye: Nothing was off. It did exactly what I asked it to do.Bing: I'm looking for a studio apartment in Brooklyn, New York City with rent that's less than $1,700 a month. Can you show all the available listings?Insider asked ChatGPT to find a $1,7000 studio apartment in Brooklyn.OpenAI's ChatGPTWhat I liked: ChatGPT suggested websites and resources to search for studio apartments. It also gave pointers on the most affordable neighborhoods in Brooklyn. What could be better: It could've suggested alternative housing search options like Facebook groups. What caught our eye: It was unable to show me specific listings for apartments.Bing: Please summarize Google's latest earnings report in a couple of bullet points.Insider asked Bing to summarize Google's latest earnings report.BingWhat I liked: Bing broke down Google's latest earnings report in a clear, concise way, bolding the most important numbers. It also linked its responses to the actual earnings report. What could be better: No complaints.What caught our eye: Nothing was off. It did exactly what I asked it to do.ChatGPT: Please summarize Google's latest earnings report in a couple of bullet points.Insider asked ChatGPT to summarize Google's latest earnings report.OpenAI's ChatGPTWhat I liked: ChatGPT broke down the types of information included in an earnings report and acknowledged that they are full of financial jargon. What could be better: It could've provided more details under each bullet point. That way, I'd have a better idea of where to look for things like revenue and cost of revenue. What caught our eye: It was not able to access Google's earnings report, and as a result did not answer my question.Bing: Draft a LinkedIn post announcing my layoff for me.Insider asked Bing to write a LinkedIn layoffs post.BingWhat I liked: Bing wrote a sample layoff post that strikes a balance between professionalism, earnestness, and personality.What could be better: No complaints.What caught our eye: Nothing was off. The post sounds like it was written by a human.ChatGPT: Draft a LinkedIn post announcing my layoff for me.Insider asked ChatGPT to write a LinkedIn layoffs post.OpenAI's ChatGPTWhat I liked: ChatGPT generated a layoff post that is concise and straight-forward. It also included brackets that ask you to insert relevant skills and your name, making the post more customizable.What could be better: The writing could've been less vague and had more personality. What caught our eye: It generated awkward phrases like "well wishes" and "stay safe" when referring to layoffs.Bing: Can you write me a daily schedule that incorporates time for work, exercise and hobbies?Bing: Daily scheduleBingWhat I liked: It offered detailed responses that built in time for a breadth of regular daily activities.What could be better: It could have packed the day with fewer tasks! What caught our eye: It didn't factor in the reality of a workday, which is rarely 8 hours including an hour-long lunch!ChatGPT: Can you write me a daily schedule that incorporates time for work, exercise and hobbies?ChatGPT: Daily scheduleChatGPTWhat I liked: It provided a clear structure for the day, and included time for activities I hadn't explicitly asked about, like meal times and rest. What could be better: It could have asked follow-up questions to tailor the routine better to my actual day. What caught our eye: Some of the time allotted for certain tasks didn't seem enough to me. Perhaps this is more a problem of the daily routine industrial complex!Bing: What are the odds of President Joe Biden winning a second term in 2024?Bing: Joe Biden winning reelection predictionBingWhat I liked: It pulled up a lot of polls. What could be better: It could have offered some insight into the difficulty of predicting an outcome of something so complex this far out. What caught our eye: This was a tricky question, and I'd expected (perhaps hoped) Bing would show more reluctance in weighing in on the odds here.ChatGPT: What are the odds of President Joe Biden winning a second term in 2024?ChatGPT: Joe Biden winning reelection predictionChatGPT screenshotWhat I liked: This was the measured response I was expecting. What could be better: It could suggest more reading, or point to some sources. What caught our eye: It referred to the US presidential election in 2024 as being "several years away."Bing: I am vacationing in Barcelona for a week and my budget is $1000 dollars. Can you make a day-by-day budget plan?Insider asked Bing to plan a trip to Barcelona.BingWhat I liked: Bing generated thorough responses to the question, including suggestions on attractions to check out each day and how much they cost. What could be better: No complaints.What caught our eye: Nothing was off.ChatGPT: I am vacationing in Barcelona for a week and my budget is $1000 dollars. Can you make a day-by-day budget plan?Insider asked ChatGPT to plan a trip to Barcelona.OpenAI's ChatGPTWhat I liked: ChatGPT gave a good framework for how to allocate my budget each day. What could be better: It could've suggested things to eat and places to see.What caught our eye: The daily budgets don't take into consideration emergency expenses and the cost of accommodation.Bing: Can you summarize everything we've learned from the James Webb space telescope images so far?Bing: NASA's James Webb space telescopeBingWhat I liked: It was very informative. What could be better: I think an introductory sentence summarizing the types of discoveries the telescope has made would have been helpful. What caught our eye: It was a little long and wordy. But in fairness to the bot, The JWST has accomplished a lot.ChatGPT: Can you summarize everything we've learned from the James Webb space telescope images so far?ChatGPT: James Webb Space TelescopeChatGPT screenshotWhat I liked: It was concise and provided the overview of the JWST's significance that I was looking for. What could be better: Maybe it could have pulled up some pictures! What caught our eye: No complaints here.Bing: Is there a way to preserve my memories after my death?Bing: Preserving memories after deathBingWhat I liked: It accounted for the different meanings of the word "preserve," and responded accordingly. What could be better: I could have framed the question better. Memories can be preserved in a lot of ways, as Bing's bot points out. What caught our eye: This one was on me.ChatGPT: Is there a way to preserve my memories after my death?ChatGPT: Preserving memories after deathChatGPT screenshotWhat I liked: It listed the types of technologies that could extend the life of memories or even consciousness. In that way, it seemed to "understand" what I was getting at. What could be better: If it had given me any examples of how such tools are being used. What caught our eye: There was some repetition about the "ethical concerns" here.  Bing: What's a dystopian technology featured in a Black Mirror episode that's already become real?Bing: black mirror dystopian techBingWhat I liked: It combed through many episodes to find examples.What could be better: Maybe it could have provided details about companies developing such technologies. What caught our eye: Nothing, it delivered what I asked.ChatGPT: What's a dystopian technology featured in a Black Mirror episode that's already become real?ChatGPT: black mirror dystopian techOpenAI's ChatGPTWhat I liked: Well, it answered the question! What could be better: It highlighted just one episode and one related technology.What caught our eye: Its narrow focus here.Bing: Why is the answer to life, the universe, and everything 42?Bing: Why is the answer to life, the universe, and everything 42?BingWhat I liked: It answered with context. What could be better: This was pretty good! What caught our eye: Nothing. Well done, Bing.ChatGPT: Why is the answer to life, the universe, and everything 42?ChatGPT screenshotWhat I liked: It was informative, similar to Bing's response. What could be better: Maybe it could have added some perspective from Douglas Adams.  What caught our eye: Nothing here. Bing: Will we ever be able to end climate change?Insider asked Bing if we can end climate change.BingWhat I liked: Bing generated a comprehensive analysis on why it's difficult to combat climate change while suggesting potential solutions backed by credible sources. What could be better: The analysis could've been shorter.What caught our eye: Nothing was off. It answered my question.ChatGPT: Will we ever be able to end climate change?Insider asked ChatGPT if we can end climate change.OpenAI's ChatGPTWhat I liked: ChatGPT spits out a realistic but hopeful response to the question of ending climate change. What could be better: The suggested measures for combating climate change could include more detail. What caught our eye: The response was vague.Bing: Write me an article in the style of Business Insider.Insider asked Bing to write an article in the style of Business Insider.BingWhat I liked: The clear answer explains why it can't write an article.  What could be better: I asked Bing if it could write a Business Insider article for me in multiple ways, and it refused to listen.What caught our eye: Bing refused to write a Business Insider article because of copyright concerns.ChatGPT: Write me an article in the style of Business Insider.Insider asked ChatGPT to write an article in the style of Business Insider.OpenAI's ChatGPTWhat I liked: ChatGPT was able to produce a full-length article about AI that is thorough and balanced. What could be better: The article feels stiff and could use more voice.What caught our eye: It reads more like a school essay rather than a news article.Read the original article on Business Insider.....»»

All flights across the U.S. were grounded causing chaos, due to a Federal Aviation Administration system failure on Wednesday morning. In a morning of chaos on Wednesday, the Federal Aviation Administration lifted a ground stop order for all flights just before 9 a.m. ET, after fixing a system failure caused by an overnight outage. The NOTAM (Notice to Air Missions) system—which provides essential aviation information such as airspace obstacles and closed runways to pilots and other airport personnel—stopped processing information early Wednesday. As a result, the FAA ordered airlines to temporarily pause all U.S. domestic departures. The stop has caused widespread disruption, with Flightaware reporting more than 13,000 flight delays and 2,000 cancellations today. [time-brightcove not-tgx=”true”] Addressing the technical problem, the transportation agency tweeted: “Normal air traffic operations are resuming gradually across the U.S. following an overnight outage to the Notice to Air Missions system that provides safety info to flight crews.” “We continue to look into the cause of the initial problem.” Update 5: Normal air traffic operations are resuming gradually across the U.S. following an overnight outage to the Notice to Air Missions system that provides safety info to flight crews. The ground stop has been lifted. We continue to look into the cause of the initial problem — The FAA ✈️ (@FAANews) January 11, 2023 U.S. Transport Secretary Pete Buttigieg issued a statement on Twitter, noting that he had been in touch with the FAA this morning to discuss the outage, before echoing the agency’s reassurance. “FAA is working to resolve this issue swiftly and safely so that air traffic can resume normal operations, and will continue to provide updates,” the statement said. Buttigieg briefed President Joe Biden on the system failure, said White House Press Secretary Karine Jean-Pierre, adding that there is no current evidence of a cyberattack but the Department of Transport will conduct a “full investigation” into the causes. The FAA has been operating without a leader since last March when the previous administrator, Stephen Dickson, left before the end of his term. President Biden’s nominee, Phillip Washington, has yet to receive a confirmation hearing and has faced scrutiny due to his limited experience and involvement in a public corruption investigation, according to the New York Times. What are NOTAMS and why are they important? The Notice to Air Missions System updates pilots on “closed runways, equipment outages, and other potential hazards” on a flight route or at a location that could affect a journey, the FAA explained. The notices offer rolling information on the state of flying for pilots that may not be known sufficiently in advance of a flight’s departure. Ciricum, an aviation analytics website, noted that there are as many as eight types of NOTAMS in aviation, advising on issues such as airport restrictions and weather, only some are mandatory for pilots to address, others are more advisory in nature. Pilots are expected to review NOTAMS ahead of takeoff and they are reportedly part of the pilot’s so-called flight bag—documents pilots must have before an aircraft can undertake its intended route. Macheras told TIME that NOTAMS are “essential for the safe continuation of global air travel” and these notices keep the world’s aviation sector, as well as all crew and personnel concerned with flight operations, “up to speed with latest air travel related directives, operational updates, security, weather and warnings.” How fliers reacted to the delays? Angry passengers facing delays and cancellations took to social media to complain. One Facebook user wrote, “Heading to Hollywood, Florida for the Seminole Main Event Poker tournament. Been at airport since 4:30 am for a 6 am flight. Now we’re being told that all US flights have been delayed due to a FAA technical issue. No timetable yet on how long. Lovely.” Another social media user, Autumn Johnson, shared her situation on Twitter, writing: “My flight is delayed 3hrs because of the computer outage. I’m supposed to be at work in 3hrs…” Musician RL, or Robert Lavelle Huggar, also tweeted that he was affected by delays, writing: “Flight delayed 5 HOURS and all y’all are offering me is a $200 voucher??!! The disrespect is real. I guess it doesn’t matter that now I can’t pick my daughter up from school or that I’m missing major meetings? 2 million miler and this is the thanks I get.” Meanwhile, other passengers were able to find light in the situation, with podcaster Mandy Matney joking: “My husband after we landed amid the FAA mess: At least we’re on the ground and it’s not a Die Hard situation.” She added: “Now hoping our next flight isn’t too delayed.” Airports such as Philadelphia, Arkansas, and Austin are advising passengers to check in with their airline for up to date information on their journey. What are airlines saying? As flights slowly began to resume on Wednesday morning, airlines like American said they were “closely monitoring the situation” and encouraged customers to visit their website for the latest information. Certain carriers are offering travel waivers for the delays, and some passengers have received help related to flight and baggage delays via Twitter DMs from their airlines. United Airlines tweeted that its offering travel waivers to impacted customers that will cover flight change fees and any differences in fare price. “Efforts are underway to minimize impacts to our customers and our operation,” the airline said. Others, like Delta and Southwest, asked customers to stay up to date on their flight status through the app, with Delta promising that they will “provide more updates as soon as we can.” As of 10:30 a.m., the FAA’s website indicates that Charlotte Douglas International Airport and LaGuardia are the only airports that are still experiencing ground stops. John F. Kennedy airport is also experiencing a 15-minute departure delay......»»

An Age Of Decay Authored by Chris Buskirk via AmGreatness.com, This essay is adapted from "America and the Art of the Possible: Restoring National Vitality in an Age of Decay," by Chris Buskirk (Encounter, 192 pages, $28.99) The fact that American living standards have broadly stagnated, and for some segments of the population have declined, should be cause for real concern to the ruling class... America ran out of frontier when we hit the Pacific Ocean. And that changed things. Alaska and Hawaii were too far away to figure in most people’s aspirations, so for decades, it was the West Coast states and especially California that represented dreams and possibilities in the national imagination. The American dream reached its apotheosis in California. After World War II, the state became our collective tomorrow. But today, it looks more like a future that the rest of the country should avoid—a place where a few coastal enclaves have grown fabulously wealthy while everyone else falls further and further behind. After World War II, California led the way on every front. The population was growing quickly as people moved to the state in search of opportunity and young families had children. The economy was vibrant and diverse. Southern California benefited from the presence of defense contractors. San Diego was a Navy town, and demobilized GIs returning from the Pacific Front decided to stay and put down roots. Between 1950 and 1960, the population of the Los Angeles metropolitan area swelled from 4,046,000 to 6,530,000. The Jet Propulsion Laboratory was inaugurated in the 1930s by researchers at the California Institute of Technology. One of the founders, Jack Parsons, became a prominent member of an occult sect in the late 1940s based in Pasadena that practiced “Thelemic Magick” in ceremonies called the “Babalon Working.” L. Ron Hubbard, the founder of Scientology (1950), was an associate of Parsons and rented rooms in his home. The counterculture, or rather, countercultures, had deep roots in the state. Youth culture was born in California, arising out of a combination of rapid growth, the Baby Boom, the general absence of extended families, plentiful sunshine, the car culture, and the space afforded by newly built suburbs where teenagers could be relatively free from adult supervision. Tom Wolfe memorably described this era in his 1963 essay “The Kandy-Colored Tangerine Flake Streamline, Baby.” The student protest movement began in California too. In 1960, hundreds of protesters, many from the University of California at Berkeley, sought to disrupt a hearing of the House Un-American Activities Committee at the San Francisco City Hall. The police turned fire hoses on the crowd and arrested over thirty students. The Baby Boomers may have inherited the protest movement, but they didn’t create it. Its founders were part of the Silent Generation. Clark Kerr, the president of the UC system who earned a reputation for giving student protesters what they wanted, was from the Greatest Generation. Something in California, and in America, had already changed. California was a sea of ferment during the 1960s—a turbulent brew of contrasting trends, as Tom O’Neill described it:  The state was the epicenter of the summer of love, but it had also seen the ascent of Reagan and Nixon. It had seen the Watts riots, the birth of the antiwar movement, and the Altamont concert disaster, the Free Speech movement and the Hells Angels. Here, defense contractors, Cold Warriors, and nascent tech companies lived just down the road from hippie communes, love-ins, and surf shops. Hollywood was the entertainment capital of the world, producing a vision of peace and prosperity that it sold to interior America—and to the world as the beau ideal of the American experiment. It was a prosperous life centered around the nuclear family living in a single-family home in the burgeoning suburbs. Doris Day became America’s sweetheart through a series of romantic comedies, but the turbulence in her own life foreshadowed America’s turn from vitality to decay. She was married three times, and her first husband either embezzled or mismanaged her substantial fortune. Her son, Terry Melcher, was closely associated with Charles Manson and the Family, along with Dennis Wilson of the Beach Boys—avatars of the California lifestyle that epitomized the American dream.  The Manson Family spent the summer of 1968 living and partying with Wilson in his Malibu mansion. The Cielo Drive home in the Hollywood Hills where Sharon Tate and four others were murdered in August 1969 had been Melcher’s home and the site of parties that Manson attended. The connections between Doris Day’s son, the Beach Boys, and the Manson Family have a darkly prophetic valence in retrospect. They were young, good-looking, and carefree. But behind the clean-cut image of wholesome American youth was a desperate decadence fueled by titanic drug abuse, sexual outrages that were absurd even by the standards of Hollywood in the 60s, and self-destructiveness clothed in the language of pseudo-spirituality. The California culture of the 1960s now looks like a fin-de-siècle blow-off top. The promise, fulfillment, and destruction of the American dream appears distilled in the Golden State, like an epic tragedy played out against a sunny landscape where the frontier ended. Around 1970, America entered into an age of decay, and California was in the vanguard.   H. Abernathy/ClassicStock/Getty Images Up, Up, and Away The expectation of constant progress is deeply ingrained in our understanding of the world, and of America in particular. Some metrics do generally keep rising: gross domestic product mostly goes up, and so does the stock market. According to those barometers, things must be headed mostly in the right direction. Sure there are temporary setbacks—the economy has recessions, the stock market has corrections—but the long-term trajectory is upward. Are those metrics telling us that the country is growing more prosperous? Are they signals, or noise? There is much that GDP and the stock market don’t tell us about, such as public and private debt levels, wage trends, and wealth concentration. In fact, during a half-century in which reported GDP grew consistently and the stock market reached the stratosphere, real wages have crept up very slowly, and living standards have flatlined or even declined for the middle and working classes. Many Americans have a feeling that things aren’t going in the right direction or that the country has lost its societal health and vigor, but aren’t sure how to describe or measure the problem. We need broader metrics of national prosperity and vitality, including measures of noneconomic values like family stability or social trust. There are many different criteria for national vitality. First, is the country guarded against foreign aggression and at peace with itself? Are people secure in their homes, free from government harassment, and safe from violent crime? Is prosperity broadly shared? Can the average person get a good job, buy a house, and support a family without doing anything extraordinary? Are families growing? Are people generally healthy, and is life span increasing or at least not decreasing? Is social trust high? Do people have a sense of unity in a common destiny and purpose? Is there a high capacity for collective action? Are people happy? We can sort quantifiable metrics of vitality into three main categories: social, economic, and political. There is a spiritual element too, which for my purposes falls under the social category. The social factors that can readily be measured include things like age at first marriage (an indicator of optimism about the future), median adult stature (is it rising or declining?), life expectancy, and prevalence of disease. Economic measures include real wage trends, wealth concentration, and social mobility. Political metrics relate to polarization and acts of political violence.  Many of these tend to move together over long periods of time. It’s easy to look at an individual metric and miss the forest for the trees, not seeing how it’s one manifestation of a larger problem in a dynamic system. Solutions proposed to deal with one concern may cause unexpected new problems in another part of the system. It’s a society-wide game of whack-a-mole. What’s needed is a more comprehensive understanding of structural trends and what lies behind them. From the founding period in America until about 1830, those factors were generally improving. Life expectancy and median height were increasing, both indicating a society that was mostly at peace and had plentiful food. Real wages roughly tripled during this period as labor supply growth was slow. There was some political violence. But for decades after independence, the country was largely at peace and citizens were secure in their homes. There was an overarching sense of shared purpose in building a new nation.  Those indicators of vitality are no longer trending upward. Let’s start with life expectancy. There is a general impression that up until the last century, people died very young. There’s an element of truth to this: we are now less susceptible to death from infectious disease, especially in early childhood, than were our ancestors before the 20th century. Childhood mortality rates were appalling in the past, but burying a young child is now a rare tragedy. This is a very real form of progress, resulting from more reliable food supplies as a result of improvements in agriculture, better sanitation in cities, and medical advances, particularly the antibiotics and certain vaccines introduced in the first half of the 20th century. A period of rapid progress was then followed by a long period of slow, expensive improvement at the margins. When you factor out childhood mortality, life spans have not grown by much in the past century or two. A study in the Journal of the Royal Society of Medicine says that in mid-Victorian England, life expectancy at age five was 75 for men and 73 for women. In 2016, according to the Social Security Administration, the American male life expectancy at age five was 71.53 (which means living to age 76.53). Once you’ve made it to five years, your life expectancy is not much different from your great-grandfather’s. Moreover, Pliny tells us that Cicero’s wife, Terentia, lived to 103. Eleanor of Aquitaine, queen of both France and England at different times in the 12th century, died a week shy of her 82nd birthday. A study of 298 famous men born before 100 B.C. who were not murdered, killed in battle, or died by suicide found that their average age at death was 71. More striking is that people who live completely outside of modern civilization without Western medicine today have life expectancies roughly comparable to our own. Daniel Lieberman, a biological anthropologist at Harvard, notes that “foragers who survive the precarious first few years of infancy are most likely to live to be 68 to 78 years old.”  In some ways, they are healthier in old age than the average American, with lower incidences of inflammatory diseases like diabetes and atherosclerosis. It should be no surprise that an active life spent outside in the sun, eating wild game and foraged plants, produces good health. Recent research shows that not only are we not living longer, we are less healthy and less mobile during the last decades of our lives than our great-grandfathers were. This points to a decline in overall health. We have new drugs to treat Type I diabetes, but there is more Type I diabetes than in the past. We have new treatments for cancer, but there is more cancer. Something has gone very wrong. What’s more, between 2014 and 2017, median American life expectancy declined every year. In 2017 it was 78.6 years, then it decreased again between 2018 and 2020 to 76.87. The figure for 2020 includes COVID deaths, of course, but the trend was already heading downward for several years, mostly from deaths of despair: diseases associated with chronic alcoholism, drug overdoses, and suicide. The reasons for the increase in deaths of despair are complex, but a major contributing factor is economic: people without good prospects over an extended period of time are more prone to self-destructive behavior. This decline is in contrast to the experience of peer countries. In addition to life expectancy, other upward trends have stalled or reversed in the past few decades. Family formation has slowed. The total fertility rate has dropped to well below replacement level. Real wages have stagnated. Debt levels have soared. Social mobility has stalled and income inequality has grown. Material conditions for most people have improved little except in narrow parts of life such as entertainment. Spencer Platt/Getty Images Trends, Aggregate, and Individuals  The last several decades have been a story of losing ground for much of middle America, away from a handful of wealthy cities on the coasts. The optimistic story that’s been told is that both income and wealth have been rising. That’s true in the aggregate, but when those numbers are broken down the picture is one of a rising gap between a small group of winners and a larger group of losers. Real wages have remained essentially flat over the past 50 years, and the growth in national wealth has been heavily concentrated at the top. The chart below represents the share of national income that went to the top 10 percent of earners in the United States. In 1970 it was 33.3 percent; in 2019 the figure was 45.4 percent. Disparities in wealth have become more closely tied to educational attainment. Between 1989 and 2019, household wealth grew the most for those with the highest level of education. For households with a graduate degree, the increase was 31 percent; with a college degree, it was 17 percent; with a high school degree, about 4 percent. Meanwhile, household wealth declined by a precipitous 60 percent for high school dropouts, including those with a GED. In 1989, households with a college degree had 2.74 times the wealth of those with only a high school diploma; in 2012 it was 3.08 times as much. In 1989, households with a graduate degree had 4.85 times the wealth of the high school group; in 2019, it was 6.12 times as much. The gap between the graduate degree group and the college group increased by 12 percent. The high school group’s wealth grew about 4 percent from 1989 to 2019, the college group’s wealth grew about 17 percent, and the wealth of the graduate degree group increased 31 percent. The gaps between the groups are growing in real dollars. It’s true that people have some control over the level of education they attain, but college has become costlier, and it’s fundamentally unnecessary for many jobs, so the growing wealth disparity by education is a worrying trend. Wealth is relative: if your wealth grew by 4 percent while that of another group increased by 17 percent, then you are poorer. What’s more crucial, however, is purchasing power. If the costs of middle-class staples like healthcare, housing, and college tuition are climbing sharply while wages stagnate, then living standards will decline. More problematic than growing wealth disparity in itself is diminishing economic mobility. A big part of the American story from the beginning has been that children tend to end up better off than their parents were. By most measures, that hasn’t been true for decades. The chart below compares the birth cohorts of 1940 and 1980 in terms of earning more than parents did. The horizontal axis indicates the relative income level of the parents. Among the older generation, over 90 percent earned more than their parents, except for those whose parents were at the very high end of the income scale. Among the younger generation, the percentages were much lower, and also more variable. For those whose parents had a median income, only about 40 percent would do better. In this analysis, low growth and high inequality both suppress mobility. Over time, declining economic mobility becomes an intergenerational problem, as younger people fall behind the preceding generation in wealth accumulation. The graph below illustrates the proportion of the national wealth held by successive generations at the same stage of life, with the horizontal axis indicating the median age for the group. Baby Boomers (birth years 1946–1964) owned a much larger percentage of the national wealth than the two succeeding generations at every point. At a median age of 45, for example, the Boomers owned approximately 40 percent of the national wealth. At the same median age, Generation X (1965–1980) owned about 15 percent. The Boomer generation was 15–18 percent larger than Gen X and it had 2.67 times as much of the national wealth. The Millennial generation (1981–1996) is bigger than Gen X though a little smaller than the Boomers, and it has owned about half of what Gen X did at the same median age. Those are some measurable indicators of the nation’s vitality, and they tell us that something is going wrong. A key reason for stagnant wages, declining mobility, and growing disparities of wealth is that economic growth overall has been sluggish since around 1970. And the main reason for slower growth is that the long-term growth in productivity that created so much wealth for America and the world over the prior two centuries slowed down. Wealth and the New Frontier There are other ways to increase the overall national wealth. One is by acquiring new resources, which has been done in various ways: through territorial conquest, or the incorporation of unsettled frontier lands, or the discovery of valuable resources already in a nation’s territory, such as petroleum reserves in recent history. Getting an advantageous trade agreement can also be a way of increasing resources.  Through much of American history, the frontier was a great source of new wealth. The vast supply of mostly free land, along with the other resources it held, was not just an economic boon; it also shaped American culture and politics in ways that were distinct from the long-settled countries of Europe where the frontier had been closed for centuries and all the land was owned space.  But there can be a downside to becoming overly dependent on any one resource. Aside from gaining new resources, real economic growth comes from either population growth or productivity growth. Population growth can add to the national wealth, but it can also put strain on supplies of essential resources. What elevates living standards broadly is productivity growth, making more out of available resources. A farmer who tills his fields with a steel plough pulled by a horse can cultivate more land than a farmer doing it by hand. It allows him to produce more food that can be consumed by a bigger family, or the surplus can be sold or traded for other goods. A farmer driving a plough with an engine and reaping with a mechanical combine can produce even more.  But productivity growth is driven by innovation. In the example above, there is a progression from farming by hand with a simple tool, to the use of metal tools and animal power, to the use of complicated machinery, each of which greatly increases the amount of food produced per farmer. This illustrates the basic truth that technology is a means of reducing scarcity and generating surpluses of essential goods, so labor and resources can be put toward other purposes, and the whole population will be better off. Total factor productivity (TFP) refers to economic output relative to the size of all primary inputs, namely labor and capital. Over time, a nation’s economic output tends to grow faster than its labor force and capital stock. This might owe to better labor skills or capital management, but it is primarily the result of new technology. In economics, productivity growth is used as a proxy for the application of innovation. If productivity is rising, it is understood to mean that applied science is working to reduce scarcity. The countries that lead in technological innovation naturally reap the benefits first and most broadly, and therefore have the highest living standards. Developing countries eventually get the technology too, and then enjoy the benefits in what is called catch-up growth. For example, China first began its national electrification program in the 1950s, when electricity was nearly ubiquitous in the United States. The project took a few decades to complete, and China saw rapid growth as wide access to electric power increased productivity. The United States still leads the way in innovation—though now with more competition than at any time since World War II. But the development of productivity-enhancing new technologies has been slower over the past few decades than in any comparable span of time since the beginning of the Industrial Revolution in the early 18th century. The obvious advances in a few specific areas, particularly digital technology, are exceptions that prove the rule. The social technologies of recent years facilitate consumption rather than production.As a result, growth in total factor productivity has been slow for a long time. According to a report from Rabobank, “TFP growth deteriorated from an average annual growth of 1.1% over the period 1969–2010 to 0.4% in 2010 to 2018.”  In The Great Stagnation, Tyler Cowen suggested that the conventional productivity measures may be misleading. For example, he noted that productivity growth through 2000–2004 averaged 3.8 percent, a very high figure and an outlier relative to most of the last half-century. Surely some of that growth was real owing to the growth of the internet at the time, but it also coincided with robust growth in the financial sector, which ended very badly in 2008.  “What we measured as value creation actually may have been value destruction, namely too many homes and too much financial innovation of the wrong kind.” Then, productivity shot up by over 5 percent in 2009–2010, but Cohen found that it was mostly the result of firms firing the least productive people. That may have been good business, but it’s not the same as productivity rising because innovation is reducing scarcity and thus leading to better living standards. Over the long term, when productivity growth slows or stalls, overall economic growth is sluggish. Median real wage growth is slow. For most people, living standards don’t just stagnate but decline. Spencer Platt/Getty Images You Owe Me Money As productivity growth has slowed, the economy has become more financialized, which means that resources are increasingly channeled into means of extracting wealth from the productive economy instead of producing goods and services. Peter Thiel said that a simple way to understand financialization is that it represents the increasing influence of companies whose main business or source of value is producing little pieces of paper that essentially say, you owe me money. Wall Street and the companies that make up the financial sector have never been larger or more powerful. Since the early 1970s, financial firms’ share of all corporate earnings has roughly doubled to nearly 25 percent. As a share of real GDP, it grew from 13–15 percent in the early 1970s to nearly 22 percent in 2020.  The profits of financial firms have grown faster than their share of the economy over the past half-century. The examples are everywhere. Many companies that were built to produce real-world, nondigital goods and services have become stealth finance companies, too. General Electric, the manufacturing giant founded by Thomas Edison, transformed itself into a black box of finance businesses, dragging itself down as a result. The total market value of major airlines like American, United, and Delta is less than the value of their loyalty programs, in which people get miles by flying and by spending with airline-branded credit cards. In 2020, American Airlines’ loyalty program was valued at $18–$30 billion while the market capitalization of the entire company was $14 billion. This suggests that the actual airline business—flying people from one place to another—is valuable only insofar as it gets people to participate in a loyalty program. The main result of financialization is best explained by the “Cantillon effect,” which means that money creation, over a long period of time, redistributes wealth upward to the already rich. This effect was first described in the 18th century by Richard Cantillon after he observed the results of introducing a paper money system. He noted that the first people to receive the new money saw their incomes rise, while the last to receive it saw a decline in their purchasing power because of consumer price inflation. The first to receive newly created money are banks and other financial institutions. They are called “Cantillon insiders,” a term coined by Nick Szabo, and they get the most benefit. But all owners of assets—including stocks, real estate, even a home—are enriched to some extent by the Cantillon effect. Those who own a lot of assets benefit the most, and financial assets tend to increase in value faster than other types, but all gain value. This is a version of the Matthew Principle, taken from Jesus’ Parable of the Sower: to those who have, more will be given. The more assets you own, the faster your wealth will increase. Meanwhile, the people without assets fall behind as asset prices rise faster than incomes. Inflation hawks have long worried that America’s decades-long policy of running large government deficits combined with easy money from the Fed will lead to runaway inflation that beggars average Americans. This was seen clearly in 2022 after the massive increase in dollars created by the Fed in 2020 and 2021.  Even so, they’ve mostly been looking for inflation in the wrong place. It’s true that the prices of many raw materials, such as lumber and corn, have soared recently, followed by much more broad-based inflation in everything from food to rent, but inflation in the form of asset price bubbles has been with us for much longer. Those bubbles pop and prices drop, but the next bubble raises them even higher. Asset price inflation benefits asset owners, but not the people with few or no assets, like young people just starting out and finding themselves unable to afford to buy a home. The Cantillon effect has been one of the main vectors of increased wealth concentration over the last 40 years. One way that the large banks use their insider status is by getting short-term loans from the Federal Reserve and lending the money back to the government by buying longer-term treasuries at a slightly higher interest rate and locking in a profit.  Their position in the economy essentially guarantees them profits, and their size and political influence protect them from losses. We’ve seen the pattern of private profits and public losses clearly in the savings and loan crisis of the 1980s, and in the financial crisis of 2008. Banks and speculators made a lot of money in the years leading up to the crisis, and when the losses on their bad loans came due, they got bailouts. Moral Hazard The Cantillon economy creates moral hazard in that large companies, especially financial institutions, can privatize profits and socialize losses. Insiders, and shareholders more broadly, can reap massive gains when the bets they make with the company’s capital pay off. When the bets go bad, the company gets bailed out. Alan Krueger, the chief economist at theTreasury Department in the Obama Administration, explained years later why banks and not homeowners were rescued from the fallout of the mortgage crisis: “It would have been extremely unfair, and created problems down the road to bail out homeowners who were irresponsible and took on homes they couldn’t afford.” Krueger glossed over the fact that the banks had used predatory and deceptive practices to initiate risky loans, and when they lost hundreds of billions of dollars—or trillions by some estimates—they were bailed out while homeowners were kicked out. That callous indifference alienates and radicalizes the forgotten men and women who have been losing ground. Most people know about the big bailouts in 2008, but the system that joins private profit with socialized losses regularly creates incentives for sloppiness and corruption. The greed sometimes takes ridiculous forms. But once that culture takes over, it poisons everything it touches. Starting in 2002, for example, Wells Fargo began a scam in which it paid employees to open more than 3.5 million unauthorized checking accounts, savings accounts, and credit cards for retail customers. By exaggerating growth in the number of active retail accounts, the bank could give investors a false picture of the health of its retail business. It also charged those customers monthly service fees, which contributed to the bottom line and bolstered the numbers in quarterly earnings reports to Wall Street. Bigger profits led to higher stock prices, enriching senior executives whose compensation packages included large options grants.  John Stumpf, the company’s CEO from 2007 to 2016, was forced to resign and disgorge around $40 million in repayments to Wells Fargo and fines to the federal government. Bloomberg estimates that he retained more than $100 million. Wells Fargo paid a $3 billion fine, which amounted to less than two months’ profit, as the bank’s annual profits averaged around $19.7 billion from 2017 to 2019. And this was for a scam that lasted nearly 15 years. What is perhaps most absurd and despicable about this scheme is that Wells Fargo was conducting it during and even after the credit bubble, when the bank received billions of dollars in bailouts from the government. The alliance between the largest corporations and the state leads to corrupt and abusive practices. This is one of the second-order effects of the Cantillon economy. Another effect is that managers respond to short-term financial incentives in a way that undermines the long-term vitality of their own company. An excessive focus on quarterly earnings is sometimes referred to as short-termism. Senior managers, especially at the C-suite level of public companies, are largely compensated with stock options, so they have a strong incentive to see the stock rise. In principle, a rising stock price should reflect a healthy, growing, profitable company. But managers figured out how to game the system: with the Fed keeping long-term rates low, corporations can borrow money at a much lower rate than the expected return in the stock market. Many companies have taken on long-term debt to finance stock repurchases, which helps inflate the stock price. This practice is one reason that corporate debt has soared since 1980. The Cantillon effect distorts resource allocation, incentivizing rent-seeking in the financial industry and rewarding nonfinancial companies for becoming stealth financial firms. Profits are quicker and easier in finance than in other industries. As a result, many smart, ambitious people go to Wall Street instead of trying to invent useful products or seeking a new source of abundant power—endeavors that don’t have as much assurance of a payoff. How different might America be if the incentives were structured to reward the people who put their brain power and energy into those sorts of projects rather than into quantitative trading algorithms and financial derivatives of home mortgages. While the financial industry does well, the manufacturing sector lags. Because of COVID-19, Americans discovered that the United States has very limited capacity to make the personal protective equipment that was in such urgent demand in 2020. We do not manufacture any of the most widely prescribed antibiotics, or drugs for heart disease or diabetes, nor any of the chemical precursors required to make them. A close look at other vital industries reveals the same penury. The rare earth minerals necessary for batteries and electronic screens mostly come from China because we have intentionally shuttered domestic sources or failed to develop them. We’re dependent on Taiwan for the computer chips that go into everything from phones to cars to appliances, and broken supply chains in 2021 led to widespread shortages. The list of necessities we import because we have exported our manufacturing base goes on. Financialization of the economy amplifies the resource curse that has come with dollar supremacy. Richard Cantillon described a similar effect when he observed what happened to Spain and Portugal when they acquired large amounts of silver and gold from the New World. The new wealth raised prices, but it went largely into purchasing imported goods, which ruined the manufactures of the state and led to general impoverishment. In America today, a fiat currency that serves as the world’s reserve is the resource curse that erodes the manufacturing base while the financial sector flourishes. Since the dollar’s value was formally dissociated from gold in 1976, it now rests on American economic prosperity, political stability, and military supremacy. If these advantages diminish relative to competitors, so will the value of the dollar. Dollar supremacy has also encouraged a debt-based economy. Federal debt as a share of GDP has risen from around 38 percent in 1970 to nearly 140 percent in 2020. Corporate debt has had peaks and troughs over those decades, but each new peak is higher than the last. In the 1970s, total nonfinancial corporate debt in the United States ranged between 30 and 35 percent of GDP. It peaked at about 43 percent in 1990, then at 45 percent with the dot-com bubble in 2001, then at slightly higher with the housing bubble in 2008, and now it’s approximately 47 percent. As asset prices have climbed faster than wages, consumer debt has soared from 43.2 percent of GDP in 1970 to over 75 percent in 2020.  Student loan debt has soared even faster in recent years: in 2003, it totaled $240 billion—basically a rounding error—but by 2020, the sum had ballooned to six times as large, at $1.68 trillion, which amounts to around 8 percent of GDP. Increases in aggregate debt throughout society are a predictable result of the Cantillon effect in a financialized economy. The Rise of the Two-Income Family The Cantillon effect generates big gains for those closest to the money spigot, and especially those at the top of the financial industry, while the people furthest away fall behind. Average families find it more difficult to buy a home and maintain a middle-class life. In 90 percent of U.S. counties today, the median-priced single-family home is unaffordable on the median wage. One of the ways that families try to make ends meet is with the promiscuous use of credit. It’s one of the reasons that personal and household debt levels have risen across the board. People borrow money to cover the gap between expectations and reality, hoping that economic growth will soon pull them out of debt. But for many, it’s a trap they can never escape. Another way that families have tried to keep up is by adding a second income. In 2018, over 60 percent of families were two-income households, up from about 30 percent in 1970. This change is not a result of a simple desire to do wage work outside the home or of “increased opportunities,” as we are often told. The reason is that it now takes two incomes to support the needs of a middle-class family, whereas 50 years ago, it required only one. As more people entered the labor market, the value of labor declined, setting up a vicious cycle in which a second income came to be more necessary. China’s entry into the World Trade Organization in 2001 put more downward pressure on the value of labor. When people laud the fact that we have so many more two-income families—generally meaning more women working outside the home—as evidence that there are so many great opportunities, what they’re really doing is retconning something usually done out of economic necessity. Needing twice as much labor to get the same result is the opposite of what happens when productivity growth is robust. It also means that the raising of children is increasingly outsourced. That’s not an improvement. Another response to stagnant wages is to delay family formation and have fewer children. In 1960, the median age of a first marriage was about 20.5 years. In 2010, it was approximately 27, and in 2020 it was an all-time high of over 29.18  At the same time, the total fertility rate of American women was dropping: from 3.65 in 1960 down to 2.1, a little below replacement level, in the early 1970s. Currently, it hovers around 1.8. Some people may look on this approvingly, worried as they are about overpopulation and the impact of humans on the environment. But when people choose to have few or no children, it is usually not a political choice. That doesn’t mean it is simply a “revealed preference,” a lower desire for a family and children, rather than a reflection of personal challenges or how people view their prospects for the future. Surely it’s no coincidence that the shrinking of families has happened at the same time that real wages have stagnated or grown very slowly, while the costs of housing, health care, and higher education have soared. The fact that American living standards have broadly stagnated, and for some segments of the population have declined, should be cause for real concern to the ruling class. Americans expect economic mobility and a chance for prosperity. Without it, many will believe that the government has failed to deliver on its promises. The Chinese Communist Party is regarded as legitimate by the Chinese people because it has presided over a large, broad, multigenerational rise in living standards. If stagnation or decline in the United States is not addressed effectively, it will threaten the legitimacy of the governing institutions.  But instead of meeting the challenge head-on, America’s political and business leaders have pursued policies and strategies that exacerbate the problem. Woke policies in academia, government, and big business have created a stultifying environment that is openly hostile to heterodox views. Witness the response to views on COVID that contradicted official opinion. And all this happens against a backdrop of destructive fiscal and monetary policies. Low growth and low mobility tend to increase political instability when the legitimacy of the political order is predicated upon opportunity and egalitarianism. One source of national unity has been the understanding that every individual has an equal right to pursue happiness, that a dignified life is well within reach of the average person, and that the possibility of rising higher is open to all. When too many people feel they cannot rise, and when even the basics of a middle-class life are difficult to secure, disappointment can breed a sense of injustice that leads to social and political conflict. At first, that conflict acts as a drag on what American society can accomplish. Left unchecked, it will consume energy and resources that could otherwise be put into more productive activities. Thwarted personal aspirations are often channeled into politics and zero-sum factional conflict. The rise of identity politics represents a redirection of the frustrations born of broken dreams. But identity politics further divides us into hostile camps. We’ve already seen increased social unrest lately, and more is likely to follow. High levels of social and political conflict are dangerous for a country that hopes to maintain a popular form of government. Not so long ago, we could find unity in civic rituals and were encouraged to be proud of our country. Now our history is denigrated in schools and by other sensemaking institutions, leading to cultural dysphoria, social atomization, and alienation. In exchange, you can choose your pronouns, which doesn’t seem like such a great trade. Just as important as regaining broad-based material prosperity and rising standards of living—perhaps more important—is unifying the nation around a common understanding of who we Americans are and why we’re here. Tyler Durden Sat, 01/07/2023 - 23:30.....»»

Is Following ESG Criteria Breaking The Law? Authored by Kevin Stocklin via The Epoch Times (emphasis ours), One problem for CEOs who direct their companies to follow the goals of environmental, social, and governance (ESG) criteria is that in doing so, they may be breaking the law. According to legal experts, ESG initiatives can cause companies to break antitrust, civil rights, and Employee Retirement Income Security Agency (ERISA) laws. “The way ESG is being implemented is completely antidemocratic, which is to say that they are just flouting laws,” George Mason University law professor Todd Zywicki told The Epoch Times. “They’re flouting democratically elected laws and bringing things about that are often illegal.” A judge's gavel. (Dreamstime/TNS) Violation of Antitrust Laws According to a report titled “Liability Risks for the ESG Agenda” (pdf), by Washington D.C. law firm Boyden Gray, companies that take part in coordinated actions against other companies or industries could be violating U.S. antitrust laws. The report states, “Federal law prohibits companies from colluding on group boycotts or conspiring to restrain trade, even to advance political or social goals.” It cites the Sherman Act of 1890, which prohibits “every contract, combination … or conspiracy in restraint of trade or commerce.” Supreme Court Justice Thurgood Marshall wrote on this subject, commenting that “antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.” Hundreds of the world’s largest corporations have signed joint pledges through international clubs such as Climate Action 100+, the Glasgow Financial Alliance for Net Zero (GFANZ), the Net Zero Banking Alliance, the Net Zero Asset Managers Alliance, and others to reduce the use of fossil fuels. GFANZ, which includes 550 global corporations as members, states that “all members have independently committed to the goal of net zero by 2050, in addition to setting interim targets for 2030 or earlier and reporting transparently on progress along the way.” GFANZ banking members include Bank of America, Citibank, JPMorgan Chase, Wells Fargo, BlackRock, Morgan Stanley, and Goldman Sachs. Climate Action 100+ includes 700 investment companies representing $68 trillion in assets; it also includes 166 companies with a combined market capitalization more than $10 trillion. Among the hundreds of members of Climate Action 100+ are some of the world’s largest and most powerful companies, including Boeing, BP, Caterpillar, Chevron, Dow, Exxon, Ford, Honda, Lockheed Martin, Mercedes, Nestle, Nissan, PepsiCo, Proctor & Gamble, Raytheon, Siemens, Coca Cola, Toyota, United Airlines, American Airlines, Walmart, BlackRock, State Street, Goldman Sachs, Fidelity, PIMCO, and Allianz. It also includes America’s largest state pension funds, such as CalPERS, CalSTRS, New York City Pension Funds, and New York State Common Retirement Fund. The Boyden Gray report notes that the argument that ESG advocates make—that companies which follow ESG guidelines are better investments —“relies heavily on bandwagon effects.” In other words, if enough asset managers collaborate to shift their investments toward ESG-compliant companies, the shares of those companies become more valuable; and even more so if governments subsidize industries like wind and solar, while punishing fossil fuel companies. Violation of Civil Rights Laws Beyond antitrust, another area where ESG may run afoul of America’s laws is where the push for racial and gender equity violates the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, sex, religion, or national origin. In step with ESG social justice goals, United Airlines announced in April 2021 that it would set racial and gender quotas when hiring pilots. The company stated that “our flight deck should reflect the diverse group of people on board our planes every day. That’s why we plan for 50 percent of the 5,000 pilots we train in the next decade to be women or people of color.” A number of recent court rulings have underscored the validity of U.S. laws regarding racial discrimination. In June 2021, a federal judge ruled that the Biden administration’s farming grants, which gave preference to racial minorities, were illegal. In a separate case, the courts ruled that COVID-relief grants by the Biden administration that excluded white restaurant owners were also illegal. But America’s civil rights laws go beyond government policy to include private industry as well, opening companies up to lawsuits from employees. In August, for example, American Express became the latest company to face an employee lawsuit for racial discrimination. Brian Netzel, a decade-long employee who was fired in 2020 on what he claims are racial grounds, stated in his class-action lawsuit that American Express “gave preferential treatment to individuals for being black and unambiguously signaled to white employees that their race was an impediment to getting ahead in the company.” In October 2021, a white male employee was awarded $10 million by a jury that agreed with his claim that he was fired as part of a race-based policy by his employer, Novant Health. After five years of positive work reviews, David Duvall was fired “without warning or cause as part of an intentional campaign to promote diversity in its management ranks; a campaign [Novant] has boasted about publicly,” his suit stated. “It’s been well known for decades that quotas are illegal,” Zywicki said. “But when you start looking at things like racial sensitivity training, they’re engaging pretty much in rampant stereotyping, negative stereotyping of certain groups, and they are engaging in rampant preferences for others. All of this runs pretty clearly up against existing civil rights laws.” Diversity, Equity, and Inclusion (DEI) programs, a component of ESG, are coming under fire, both as mandatory employee training and as hiring criteria. It was reported on Nov. 2 that University of North Carolina’s School of Medicine “forces applicants, students, and professors to constantly prove their commitment to the tenets of diversity, equity, and inclusion as a prerequisite to advancement, rather than basing such decisions on merit alone.” This was based on a report by a nonprofit called Do No Harm, which charged that one of UNC’s main criteria for hiring and promotion of teachers was “a positive contribution to DEI efforts.” Stanley Goldfarb, the chairman of Do No Harm, stated in a letter to the school that “it is inappropriate to require that candidates for promotion and tenure demonstrate their commitment to a political ideology. Forcing candidates to declare their support for DEI when many undoubtedly oppose it would compel dishonesty.” This report comes amid a case before the U.S. Supreme Court wherein UNC was charged with having unconstitutional race-based admission standards. Violation of Fiduciary Laws A third area where ESG clashes with U.S. law regards the legal obligation of fund managers and corporate executives to act in good faith and in the best interests of investors and shareholders. The Employee Retirement Income Security Act, passed in 1974 to address corruption and misuse of pension money, requires that private pension fund managers invest “solely in the interests of participants and beneficiaries.” It set what is called a “prudent expert” standard of care for fund managers and allows fund beneficiaries to sue managers for failing to uphold this standard. While ERISA applies to corporate pension funds, many U.S. states have applied similar language to public pension funds. Currently, 24 states forbid ideological investing for their public pension funds, including ESG. An August letter to BlackRock, signed by 19 state attorneys general, for example, charged that BlackRock had a “duty of loyalty” to state pensioners who invested in its funds and that “your actions around promoting net zero, the Paris Agreement, or taking action on climate change indicate rampant violations of this duty, otherwise known as acting with ‘mixed motives.’” In response, BlackRock wrote that “one of [its] most critical tasks as a fiduciary investor for our clients is to identify short- and long-term trends in the global economy that may affect our clients’ investments.” The letter states that “governments representing over 90 percent of global GDP have committed to move to net-zero in the coming decades. We believe investors and companies that take a forward-looking position with respect to climate risk … will generate better long-term financial outcomes.” State attorneys general disagreed, stating that despite climate-change rhetoric, “governments are not implementing policies to require net zero … In particular, the United States has not implemented net-zero mandates. Despite doing everything in his power at the beginning of his presidency to shut down fossil fuels, even President Biden is appearing to reverse course given the harm his inflationary policies have inflicted on the American people.” In October, Swiss bank UBS downgraded the shares of BlackRock, stating that “as [BlackRock’s] performance deteriorates and political risk from ESG has increased, we believe the potential for lost fund mandates and regulatory scrutiny has recently increased.” In addition to the risk that ESG asset managers violate their fiduciary duty to investors, there is also the risk that corporate managers violate their duty to act in the best interest of the shareholders of the company. Read more here... Tyler Durden Sat, 11/05/2022 - 14:30.....»»

Russia's MC-21, which is still in production, is getting a new homegrown engine to replace the Pratt & Whitney PW1000G that formally powered the jet. MC-21.Arnold O. A. Pinto/Shutterstock The Aeroflot Group has ordered 339 Russian jets, including the Tupelov Tu-214, the Sukhoi Superjet New, and the Irkut MC-21 from the Russian state-owned United Aircraft Company. The $16 billion worth of homegrown planes represents Russia's desire to end its dependency on Western-built aircraft, but doubts remain it is up the task. The MC-21 will be Aeroflot's new "flagship" jet. The company says it can seat up to 211 passengers and fly over 3,700 miles. Russia is desperate to end its reliance on Western-built technology.An Aeroflot Boeing 737.Vytautas Kielaitis/ShutterstockIn September, Aeroflot Group, which is the parent company of Russian national airline Aeroflot, announced it had signed an agreement to buy 339 Russian-built planes from state-owned United Aircraft Corporation.Aeroflot aircraft at JFK airport in New York City.Sorbia/ShutterstockSource: AeroflotThe $16 billion order includes 40 Tupolev Tu-214s...Tu-214 aircraft.aviation-images.com/Universal Images Group via Getty ImagesSource: Aeroflot, Aviacionline…89 Sukhoi Superjet New (SSJ-New)…Sukhoi Superjet New fuselage.United Aircraft CorporationSource: Aeroflot…and 210 Irkut MC-21s.MC-21.IrkutSource: AeroflotAccording to Aeroflot, the first two SSJ-New jets will be received in 2023, while the Tupolev Tu-214 and MC-21 will begin deliveries in 2024.MC-21.Niccolo Bertoldi/ShutterestockSource: Aeroflot"The signing of this agreement clearly demonstrates to the whole world that Russia remains a great aviation power with huge potential and rich experience in the field of aircraft manufacturing, capable of producing reliable and modern aircraft," Aeroflot CEO Sergey Aleksandrovsky claimed.SSJ-NEW fuselage.United Aircraft CorporationSource: AeroflotAll aircraft will be delivered with “Russian-made on-board systems and components,” according to Aleksandrovsky.MC-21 on the final assembly line.aviation-images.com/Universal Images Group via Getty ImagesSource: AeroflotWith the smallest number on order, the Tu-214 will be a “reliable support” aircraft, per Aeroflot. Meanwhile, the SSJ-New and the MC-21 comprise most of the order.Transaero Airlines Tu-214.Media_works/ShutterstockSource: AeroflotThe announcement comes as Aeroflot can no longer rely on the Airbus and Boeing planes that currently make up the vast majority of its fleet due to the invasion of Ukraine. So now the airline must make the move it has avoided making for years.Delta and Aeroflot.Angel DiBilio/ShutterstockRussian state-owned airline Aeroflot is stripping parts from working planes because of a spares shortage, report saysRussia is even struggling to get spare parts from the manufacturing giants and has resorted to "cannibalizing" grounded jets for supplies.An Aeroflot engine being checked by maintenance in Russia.Denis Kabelev/ShutterstockRussian airlines may soon resort to 'cannibalizing' planes and creating a 'Frankenstein fleet' to keep Western-built planes flyingCurrently, Aeroflot's fleet consists of 178 Boeing and Airbus jets and just four Sukhoi Superjet 100s (SSJ-100).Aeroflot Sukhoi 100s.Media_works/Shutterstock"Historical changes are coming to civil aviation," Sergey Chemezov, director general of Rostec State Corporation, said. "Boeing and Airbus aircraft, which are unlikely to ever be delivered to Russia again, will be replaced by Russian-made passenger aircraft."SSJ-100.Fasttailwind/ShutterstockSource: AeroflotThe biggest push for Russian planes is to re-engineer them with local parts, like the SSJ-100 being reimagined as the SSJ-New that state officials say will be equipped with a Russian engine instead of the Franco-Russian one on its predecessor.Sukhoi Superjet New.United Aviation CorporationThe MC-21, which hopes to compete with airliners like the 737 MAX and the A320neo, is also stripping its Western parts in favor of homegrown technology, Russian Deputy Prime Minister Yuri Borisov told reporters in April.Boeing 737 MAX jets.Taylor Rains/InsiderSource: Aviation International News, Delta just ordered 100 Boeing 737 MAX 10 jets to upgrade its narrowbody fleet. Take a look inside one of the test planes.Borisov said the MC-21 is dropping the American-made Pratt & Whitney PW1000G engine for the Russian-built Aviadvigatel PD-14 engine made by the state-owned United Engine Corporation (UEC).Aviadvigatel PD-14 engine.United Aircraft CorporationSource: Aviation International News"Earlier, the industry promised the aircraft with two engine options," Borisov said in April. "Now, we are launching the type into serial production with the PD-14 only."First MC-21 flight with Russian engine.United Aircraft CorporationSource: Aviation International NewsThe MC-21 will undergo new testing with the PD-14 engine for certification, which Rostec says is "proceeding according to plan."MC-21.IrkutSource: FlightGlobalAlso developed is a new carbon fiber wing, dubbed "black wing" because of the color. The MC-21 took its first flight with the new Russian-made wing in December 2021.MC-21's new "black wing."United Aircraft CorporationSource: Rostec State CorporationComposite materials on wings are uncommon on narrowbody jets, but Rostec claims the MC-21 is the "first domestic, as well as the first in the world in its class, aircraft with a composite wing."First flight with new wing.United Aircraft CorporationSource: Rostec State CorporationAvionics and other systems on the MC-21 will also be replaced with homegrown equipment to make it "fully Russified," Deputy Prime Minister Denis Manturov claimed at the Eastern Economic Forum in early September.MC-21.Alexander Utkin/RostecSource: AerotimeWhile Aeroflot and UAC hope for a 2024 delivery of the MC-21, which has been in production since 2006, the company had already pushed expected deliveries to 2025.Second MC-21 flight test.United Aviation CorporationSource: Rostec State Corporation, AviacionlineBut, that timeline could be pushed even further as the company revamps the plane, drops an engine source, and replaces Western components — no simple task.MC-21.Irkut"It needs to be reinvented and that's going to take a bunch of years," aviation analyst at AeroDynamic, Richard Aboulafia, told Fortune in March. "It'll go from an interesting plane to a completely hopeless one."Aviadvigatel PD-14.IrkutSource: FortuneHenry Harteveldt, travel analyst and president of Atmosphere Research Group, told Insider that "it's unlikely the standard will be as good as a Western-built aircraft, unfortunately."MS-21 at the compartment assembly station.Irkut"Russian and Soviet-built planes are rarely bought by Western airlines because they simply don't perform as well as their operating economics aren't as good," he explained.JetBlue is a major customer for Airbus.Business WireDespite the skepticism from some experts and nations, Harteveldt said if Russia sees the plane as essential for its airlines and aviation industry, as well as for gaining some prestige, then "they will take the steps necessary to ensure the MC-21 gets built."MC-21.IrkutThough, he said it is possible that the jet could be an exception "that changes the track record" of Russian-built planes.The fuselage panel of the MS-21 aircraft at the station of the new assembly line.IrkutMoreover, if Western nations can work out their political differences, then the MC-21 could use the Pratt & Whitney engine, and "its fortunes could improve, but it will be difficult."MS-21 landing at the airportIrkutWhen and if the MC-21 eventually enters service, Aeroflot said it would be the "flagship" of the company's fleet. Here's a closer look at the Russian-built jet.MC-21.RostecSource: AeroflotThe MC-21 is a medium-haul plane that first took flight in 2017 and is "focused on the most mass-market segment in passenger transportation."First MC-21 flight.United Aircraft CorporationSource: Irkut, AeroflotWith a wingspan of 118 feet, the plane has a range of 6,000 kilometers (3,728 miles), which still lags behind the 737 MAX family and A320neo.A VivaAerobus Airbus A320neo.AaronP/Bauer-Griffin/GC ImagesSource: IrkutThe jet is built to carry between 163 and 211 passengers.MC-21 cabin concept drawing.United Aviation CorporationA 163-passenger layout would allow for two classes, including 16 in business and 147 in economy…Business class loungers concept drawing.United Aircraft CorporationSource: Irkut…while the maximum capacity configuration would be all-economy offering 28-29 inches of pitch.Economy seats concept drawing.United Aircraft CorporationSource: IrkutAccording to Irkut, the plane has several advantages that make it favorable for legacy and low-cost airlines, like its 30% share of composite materials, which are exclusively Russian-built…Inside the cabin of MC-21.United Aircraft CorporationSource: Irkut…its wings and engines that purportedly improve performance and decrease CO2 and noise emissions…MC-21.United Aircraft CorporationSource: Irkut...large galley areas...Galley areas on MC-21.United Aircraft CorporationSource: Irkut...its advanced cockpit technologies...MC-21 cockpit.United Aircraft CorporationSource: Irkut…and its big cabin that Irkut claims to be the largest in its class, which boasts more passenger personal space and luggage storage, and huge windows.MC-21 overhead bin.United Aircraft CorporationSource: IrkutSo far, the plane is undergoing flight testing but had one incident in January 2021 when the jet slid off the runway when landing in snowy conditions.MC-21 (not the incident aircraft).United Aircraft CorporationSource: FlightGlobal, UACWith the ongoing delays in production and lack of history proving the plane is a reliable alternative to the best-selling Airbus and Boeing jets, Irkut may struggle to find interest in the MC-21.While still under production, the Boeing 737 MAX 10 has already garnered orders from airlines like Delta and Qatar.Taylor Rains/InsiderQatar just confirmed an order for 25 Boeing 737 MAX jets amid its dispute with Airbus over paint issuesSo far, only Russian carriers have ordered the plane, with Azerbaijan Airlines being the sole foreign customer.An Azerbaijan Airlines 787.Karolis Kavolelis/ShutterstockSource: FlightGlobalWith a total of 175 firm orders, the MC-21 is well behind the new Chinese-built narrowbody airline, the Cormac C919, which has amassed over 800 orders.Comac C919.Shi Yuge/VCG via Getty ImagesMeet the Comac C919, the first mainline airliner made by a Chinese company that could begin deliveries this yearDespite the challenges, Chemezov claims to be confident in the MC-21, saying, "it is the pride of our aircraft industry, it boasts innovative design solutions that, I am sure, will be appreciated by both pilots and passengers."MC-21.Arnold O. A. Pinto/ShutterstockSource: AeroflotRead the original article on Business Insider.....»»

"This past weekend alone felt like a lifetime of shifts," a 47-year-old customer-service representative who's been at Southwest since 2008 said. "All I want customers to remember is that we're not robots; we're regular people," a customer-service rep who's worked for Southwest since 2008 said.Jonathan Weiss/Shutterstock A 47-year-old customer-service representative for Southwest Airlines says it's been a challenge. They've worked there since 2008 and the airline pays them $30 an hour. This is what it's been like with delays and cancellations, as told to writer Katherine Stinson. This as-told-to essay is based on a conversation with a 47-year-old customer-service representative who works at Southwest Airlines. They asked to speak on condition of anonymity for fear of professional repercussions, but Insider has verified their identity and employment with documentation. The following has been edited for length and clarity."American Idol" inspired me to apply for a customer-service-representative job at Southwest Airlines back in 2008. My friend always bragged — as mothers do — about her son being a contestant on the show. She became a frequent flyer to support her son and other children, who encouraged her to get a job of her own. So one day she told me: "If I'm going to work for a company, it's going to be Southwest."That was all the inspiration I needed at the time. The company initially hired me to work as a customer-service representative for one of Southwest's call centers. I gained experience fielding customer calls and concerns without ever seeing their faces. However, I found working at the airport truly fulfilling — the call center overwhelmed me after six years. I decided to apply at the San Antonio International Airport. I would lose the seniority I'd earned working at the San Antonio call center, but to me, it was the right choice. After going through another interview, the airport hired me in 2015. The thing about Southwest Airline employees, or at least the ones I work with, is their dedication. If you ever fly into the San Antonio International Airport, the employees you interact with have likely been there for years. The turnover rate is, typically, quite low. The company pays me $30 an hour, a benefit of my dedication to Southwest. It's been challenging for us seasoned employees lately It's a universal truth that nobody wants an airline to delay their flight, or heaven forbid, cancel it outright. I've dealt with my fair share of "Karens" and "Kens" who don't understand that we have to comply with FAA regulations for everyone's safety. Recently, a man and his family — the group looked to have around 13 people in total — arrived far too late to check in for their 8 a.m. flight. The man was not happy when we informed him that it was too late for us to check in his party; we have a policy to abide by. He got hysterical and angry. As a result, we had to bring over a police officer and their dog. It's almost like a scare tactic because we don't know what these people are going to do in these types of situations; it was frightening because he was slamming his hand on the table. We told him, "You need to calm down as soon as possible, sir." But I do want to help. I was working down in baggage claim — every shift we rotate to different stations at the airport — during the last-minute summer trips before people started coming back to school this past weekend. Because of the seemingly endless delays, we had to reroute scores of luggage. I'm not even sure if the elderly customer I helped whose luggage left without him got his belongings back. All of his valuables were in there, but he was one of around 30 people in line that day alone that were understandably upset about their lost luggage. We have to stick to the rules, even when it isn't convenient for anyone involvedFlyers really don't understand that the airlines can delay their flights, which means that they should think of backup options the day before. This past weekend alone felt like a lifetime of shifts. We had delays galore. One customer I interacted with missed their wedding rehearsal when their airline canceled the day's last flight to Las Vegas. I can't tell you how many customers didn't wait for us to accommodate them. They told us, often angrily, to cancel their flights so they could rebook with airlines that had options they needed at the moment. We do try to rebook customers to the next available flight when we're able to, but when it's the last Southwest flight of the night, all we can do is rebook them for a flight the next day. Another thing we can do for customers in the event of a mechanical-related delay or cancellation is give them a $200 voucher and book a hotel for them that night if they aren't from San Antonio. However, we can't do this if the issue is nonmechanical, like if there's an unexpected weather delay. My advice for anyone flying is to always have a backup plan to alleviate the stress of delayed or canceled flightsOf course, we'll always try to rebook you or get you on the next-best possible flight, but flyers never have a Plan B in case of emergency. My go-to suggestion for customers at the San Antonio Airport is to utilize the Austin-Bergstrom International Airport. It's only about an hour-and-15-minute drive from the San Antonio Airport.As stressful as angry flyers are, the one flyer who truly got to me was a lady who simply said, "I would hate to have your job." I didn't say anything; I just looked at her. She left me momentarily speechless. It's very difficult, especially at 4 in the morning, to wake up at 2 a.m. — I do typically prefer working earlier in the morning, and I'm grateful my job has different shift times for flexibility — and have somebody tell you something like that.It's like a stab in the back. Yes, I'm here to make money and everything, but we're truly here to make you happy, too. Ultimately, all I could say to her was, "Have a good day, ma'am." I just want flyers to remember we're human, tooIt's usually easier working at the check-in counter because you're only with customers for a few minutes before they head to security. Any issue from that point forward is something the customer-service representatives at the gates handle. When you work at the gates, you're the one stuck with the onslaught of angry customers if an airline delays or cancels a flight. We get assigned a different station every day so no employee is in a certain spot all the time. All I want customers to remember is that we're not robots; we're regular people. Even the pilots deal with knee problems after sitting in a confined space for hours on their flights. We see a lot of cancellations throughout the day. I'd say 50% of our customers are understanding, and 50% aren't. The 50% that are understanding totally agree with us regarding our lack of control over cancellations and delays, and actually feel sorry for us. The thing is, I don't want people to feel sorry for us, exactly. I just want them to understand. What if your daughter was in our shoes? Would you treat them that way? Maybe you would, maybe you wouldn't, but we're just human beings. I do find fulfilment helping those in need I'm not the best Spanish speaker, but I practice my Spanish every day. So it does make me happy when we're able to get foreign passengers to their destination. I make it a point to be extra nice to them because some people aren't, because of global politics. It reminds me that we're here for a purpose, and our purpose is to help. I get a lot of happiness from helping customers that have no idea what they're doing. I love it. I try to make the best of my day because I'm the one who provides health insurance for me and my husband, and I want to make sure we're taken care of because at any moment, we can get sick. That's the No. 1 reason why I go to work every day.Read the original article on Business Insider.....»»

It's a summer of travel chaos — flight delays and cancellations and lost luggage. Airlines did three things that got us into this mess. Travelers crowd Terminal 1 departures hall while queueing at check-in counters in Humberto Delgado International Airport on July 09, 2022 in Lisbon, Portugal.Horacio Villalobos#Corbis/Corbis via Getty Images It's been the summer of travel chaos, as flights get delayed and cancelled while luggage vanishes. Many factors led to the current situation, including weather and the war in Ukraine. Airlines also let a lot of workers retire early, have a training backlog, and have burnt out flight attendants. If you've even thought about traveling this summer, you've probably heard at least one horror story.Bags are vanishing into the ether, or commanding their own flights altogether. Planes are getting rebooked to leave from different countries. In June alone, thousands of flights were getting cancelled and delayed.Some of that is due to things outside of any air carriers' control, like the weather and continued economic fallout from the war in Ukraine. But today's situation also stems from some pandemic-era measures — exacerbated by pre-pandemic trends.Airlines opted to let a whole lot of people retire early during the pandemicWhen the pandemic hit the airline industry, travel cratered. Airlines, like many sectors, got financial support to stay afloat, and keep workers paid. But with less customer interest in flying, airlines cut costs — and many offered workers the option to retire early, especially as funding lapsed between stimulus packages.At Delta, for instance, nearly 2,000 pilots signed on for early retirement. "It's easy to have a revisionist history and wonder whether we should have done that or not should have done that," Ed Bastian, Delta's CEO, said in the company's most recent earnings call. But, he said, there was "no knowledge" of when a vaccine would be found, and the "the world was going to start to reunite.""I don't look back with any regret at all about those decisions," Bastian said. But the pilots who left were at senior levels, he said, and that "causes churn at a much higher level."There's a training backlog, and training costs a lot of moneyTo be a pilot, you obviously need to be trained. And training takes a lot of time and a lot of money — something that's been an issue for years.According to NPR, training can set a prospective pilot back $80,000 to even over $100,000. One commercial pilot in New Jersey told Insider's Kim Dahlgren that their flight school cost around $80,000."There are not enough training institutions. Those that exist are oversubscribed," Faye Malarkey Black, the president of the Regional Airline Association (RAA), told NPR's Alejandra Marquez Janse. There's also not enough "financial support for individuals who want to become a pilot," Black told NPR.Some airlines are now stepping up to defray the costs. United, for instance, has opened its own flight school, with a special emphasis on making flight accessible to women and people of color. There were about 120 students enrolled at Aviate Academy in June.The program covers the cost of private pilot training for those without a license, according to United, and there are scholarships and loans available to offset the cost — which still comes in at $71,250.Flight attendants are dealing with abusive customers and hard conditionsThe Federal Aviation Administration said that, in 2021, airline crews dealt with 5,981 unruly passenger reports — a record high. As of July 12, crews have dealt with 1,634 unruly passenger reports this year.That persistence unruliness and aggression have led some flight attendants to feel burnt out, Insider's Allana Akhtar reported. Some said flight attendant mental health had been worsening, and wanted airlines to step in with mental health support — and guidance on keeping flight attendants safe.And, with heavy workloads and travel chaos, there's more airlines could be doing to help flight attendants, according to Sara Nelson, the international president of the Association of Flight Attendants.Nelson told Marketplace that airlines could add more workers to operational support, who are the people on the other end of the phone when airline crews call in."In some cases, crews are waiting online one, two, three, four hours to get in touch with someone," Nelson told Marketplace. "And for every one person that's added, you're gonna have an additional support to about 500 people who are out in the field trying to staff your flight."Read the original article on Business Insider.....»»

Pete Buttigieg says airlines need a 'new generation of qualified pilots' to counteract a possible labor shortage caused by Baby Boomers retiring. US Transportation Secretary Pete Buttigieg testifies at a Senate Subcommittee on Transportation, Housing and Urban Development, and Related Agencies hearing on the 2023 budget for the Department of Transportation, in Washington DC, on April 28, 2022.Photo by NICHOLAS KAMM/AFP via Getty Images Secretary Buttigieg said he doesn't support raising the retirement age of US commercial pilots.  When asked about it on Fox News, Buttigieg said the nation needs a "new generation" of pilots. He said adding more "qualified" fliers will help combat shortages caused by Baby Boomers retiring. Transportation Secretary Pete Buttigieg said on Sunday that US airlines will need a "new generation of qualified pilots" to fill a potential labor gap caused caused by Baby Boomers retiring from the profession. During an interview with "Fox News Sunday," host Mike Emanuel asked Buttigieg if he would support raising the retirement age of commercial pilots to 67, up from the current age of 65 set by a 2007 law passed by Congress.Emanuel cited a June report from NBC News detailing that by 2029, no one from the Baby Boomer generation — people born between 1946 and 1964 — will be able to legally fly a commercial aircraft, causing a possible labor shortage. "These retirement ages are there for a reason and the reason is safety," Buttigieg said. "I'm not going to be on board with anything that could compromise safety. Now, what's clearly the case is we need to cultivate, train, and support a new generation of qualified pilots."He continued: "The answer is not to keep the Baby Boomer generation in the cockpit indefinitely. The answer is to make sure that we have as many and as good pilots ready to take their place — to have a stronger pipeline."To do so, Buttigieg said his department is backing Federal Aviation Administration programs that support high school and university curriculum that helps students get into the aviation industry."Ultimately, it'll be for the airlines and those employers to hire and retain excellent talent," Buttigieg said, adding that it's "an issue we're seeing across the aviation sector — across the transportation sector at large — the importance of having competitive pay, great job quality, so we can bring in and keep the people that are going to be needed to power America's transportation sector." Buttigieg's remarks come as airports and airlines around the country — and the world — have managed a slew of flight cancellations and delays, as well as chaos at baggage claims and security checkpoints over the last few months.   Travel disruptions have been blamed, in part, on labor shortages and staffing issues at major airports and across various airlines. June was a particularly bad month for travel in the US, according to data from flight-tracker site FlightAware. In the days leading up to the Juneteenth holiday weekend, nearly a third of all scheduled flights within, into, or leaving the US experienced a delayed arrival. Since then, flight cancellations and delays have calmed slightly."We've seen some improvement over the course of this summer, but still not at an acceptable level in terms of performance, cancellation, and delays," Buttigieg said on Sunday.Read the original article on Business Insider.....»»

Over 9,000 US flights were canceled or delayed over Independence Day weekend, leaving passengers scrambling to find alternative transport. Dan Ryder says he was not offered any help with accommodation or given any vouchers by American Airlines.Dan Ryder A passenger was stuck in New Orleans for two days after his return flight was canceled. Dan Ryder says the airline did not offer any help with accommodation or food vouchers. Another two passengers' Fourth of July plans were ruined by delays and cancellations. An American Airlines passenger spent three days trying to get home on a trip that should only have taken a few hours after his flight was canceled.So far, 9,431 US flights have been canceled or delayed this Fourth of July weekend, according to FlightAware, leaving passengers scrambling to find alternative transport and putting their holiday plans in disarray.On Saturday, 5,928 flights within, into, or out of the United States were delayed, while 656 were canceled. On July 3, a total of 2,570 flights were delayed and 277 canceled as of Sunday afternoon. Dan Ryder, a school teacher, was attending a conference in New Orleans with two colleagues who were due to fly home to Maine on Thursday. On Wednesday American Airlines told them their connecting flight from Washington DC to Maine had been canceled. After arriving at the airport to check in on Friday, only one of the trio's flights had been changed, leaving Ryder and one colleague scrambling to find new seats and somewhere to spend the night. "What's upsetting is that despite the series of bailouts the airline industry has received, it has not upped its game on pay, benefits and incentives to attract and retain staffing," Ryder said. American Airlines let them rebook their flight for free but made no offer to help with extending their Airbnb or offer any vouchers.The mishaps meant Ryder and one of his colleagues were stuck in New Orleans for two days and did not back to his home in Maine until Saturday.Meanwhile, Valerie Diamante and her husband were set to travel from Santa Ana, California to Geneva in Switzerland to celebrate their wedding anniversary. The couple missed their connecting flight from Phoenix, Arizona to London after someone was discovered smoking on the plane. No flight was available until the following day but were then told that seats had not been reserved for them, forcing the couple to rebook a second time. "We lost two full days of our trip as well as any sort of Fourth of July celebration in either America or in Europe since we would be en-route during that time," Diamante said. American Airlines tried to get the couple to their destination by putting them through a Delta flight. However, their seats were not confirmed because American's codes were not acknowledged by Delta's systems. "We were told things were really busy with the season and all the airlines were bogged down with full flights and being stretched thin with short staff," Diamante said. American Airlines offered its pilots a pay rise of up to $64,000 this week to help bring an end to a shortage of pilots. American Airlines and Delta were contacted for comment.Read the original article on Business Insider.....»»