Major Hiring - how will it play out?
05-13-2021, 09:44 AM
#55
Perennial Reserve
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Joined APC: Jan 2018
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Inflation warning...
For those who either never knew or have forgotten, Larry Summers is an economist who was a leading financial advisor to Both Presidents Clinton and Obama. He was formerly Chief Economist for the World Bank and later Secretary of the Treasury. Currently a Professor and Center Director at Harvard’s Kennedy school of Government, he has begun sounding the alarm over fears of upcoming inflation.
The significance of this is that despite the federal assistance, most airlines went deeper into debt during the pandemic and rising inflation would quickly lead to rising interest rates and debt service, costing them the available cash flow they will need to service those debts (and ultimately pay them down).
People have been hoping the recent spike in prices is just that - a spike that will come back down. Summers is warning that it might not.
The significance of this is that despite the federal assistance, most airlines went deeper into debt during the pandemic and rising inflation would quickly lead to rising interest rates and debt service, costing them the available cash flow they will need to service those debts (and ultimately pay them down).
People have been hoping the recent spike in prices is just that - a spike that will come back down. Summers is warning that it might not.
05-13-2021, 02:19 PM
#57
Perennial Reserve
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Joined APC: Jan 2018
Posts: 11,480
Originally Posted by SonicFlyer
LOL yeah that ship has sailed... serious inflation is here and has been for a while now... the only question is whether it jumps into hyperinflation.
https://www.marketwatch.com/story/u-...ws-11620823628
Realistically though, it would be difficult to believe that this will be a Weimar Republic style hyperinflation. But if you have to refinance a billion dollar bond tranche for 5-6% coupon that you originally had financed at 2.5%, that’s another $25-30 million a year you need to make just to break even. Multiply that by a total debt of $30-40 Billion and - if the rates stay up that long - it eventually starts to be some serious coin...
05-13-2021, 02:23 PM
#58
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Joined APC: Jan 2006
Position: Engines Turn Or People Swim
Posts: 39,211
Originally Posted by Excargodog
Time will tell.
https://www.marketwatch.com/story/u-...ws-11620823628
Realistically though, it would be difficult to believe that this will be a Weimar Republic style hyperinflation. But if you have to refinance a billion dollar bond tranche for 5-6% coupon that you originally had financed at 2.5%, that’s another $25-30 million a year you need to make just to break even. Multiply that by a total debt of $30-40 Billion and - if the rates stay up that long - it eventually starts to be some serious coin...
https://www.marketwatch.com/story/u-...ws-11620823628
Realistically though, it would be difficult to believe that this will be a Weimar Republic style hyperinflation. But if you have to refinance a billion dollar bond tranche for 5-6% coupon that you originally had financed at 2.5%, that’s another $25-30 million a year you need to make just to break even. Multiply that by a total debt of $30-40 Billion and - if the rates stay up that long - it eventually starts to be some serious coin...
05-13-2021, 04:16 PM
#59
Perennial Reserve
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Joined APC: Jan 2018
Posts: 11,480
Originally Posted by rickair7777
I think the plan is that the economy will outgrow the debt. That's why your realistic politicians don't go all-in for policies which will crush business and economic activity... they need something to tax, and growth to keep a lead on the debt bear.
“realistic politicians...”
Now THAT is an endangered species if ever I saw one...
05-20-2021, 03:50 AM
#60
Gets Weekends Off
Joined APC: Feb 2008
Posts: 19,259
Originally Posted by Excargodog
COVID was truly a black swan, but it is what it is. Resumption of international flying depends on the lowest common denominators and some countries will be a couple of years getting people immunized. And I don’t think IATA is wrong when they think it’s going to be 2023 or 2024 before we see international flying where it was in 2019. And if these countries aren’t going to let their airlines do international flying, they aren’t going to let ours do it either. Likewise, business flying is in the crapper for awhile, and may be a long time returning to 2019 levels.
Right now the Big Three are stuck with their most expensive aircraft parked, and their most well paid crew non-productive. Some of their pilots are furloughed - or at least pending furlough when the PSP runs out. While nobody is in great shape, the least bad off are Alaska, SWA, and the ULCCs.
But I don’t see Alaska or SWA doing any hiring until Hawaii flying comes back at a minimum and - when it does come back - some of Alaska’s hiring is obligated to Horizon through some secret handshake deal. SWA will take applicants from anywhere but their preference for fixed wing military pilots is well known. NK just green-lighted the hiring icon on their profile and F9 just had a hiring window and both have Airbuses on order and inbound - NK recently pulled later orders up into 2022 and F9 has A321 XLRs on order that will be arriving about the time that international flying resumes in earnest.
Black swan or not, the table is tilted - for at least the next 2-4 years, toward companies with a single aircraft (or aircraft family) type, perhaps why Alaska is dumping their Airbus leases and why SWA just put in a big MAX order although that will be mostly one for one replacement of older 737s.
Bottom line seems to me that the Big Three aren’t going to be hiring much the next 2-3 years and the growth - if they can carry it off - seems to be at the ULCCs and possibly SWA. Despite the number of retirements they once had (many of whom took early buy-outs) there will be a few years stagnation in Big Three hiring.
Just my opinion, and you are welcome to disagree.
Right now the Big Three are stuck with their most expensive aircraft parked, and their most well paid crew non-productive. Some of their pilots are furloughed - or at least pending furlough when the PSP runs out. While nobody is in great shape, the least bad off are Alaska, SWA, and the ULCCs.
But I don’t see Alaska or SWA doing any hiring until Hawaii flying comes back at a minimum and - when it does come back - some of Alaska’s hiring is obligated to Horizon through some secret handshake deal. SWA will take applicants from anywhere but their preference for fixed wing military pilots is well known. NK just green-lighted the hiring icon on their profile and F9 just had a hiring window and both have Airbuses on order and inbound - NK recently pulled later orders up into 2022 and F9 has A321 XLRs on order that will be arriving about the time that international flying resumes in earnest.
Black swan or not, the table is tilted - for at least the next 2-4 years, toward companies with a single aircraft (or aircraft family) type, perhaps why Alaska is dumping their Airbus leases and why SWA just put in a big MAX order although that will be mostly one for one replacement of older 737s.
Bottom line seems to me that the Big Three aren’t going to be hiring much the next 2-3 years and the growth - if they can carry it off - seems to be at the ULCCs and possibly SWA. Despite the number of retirements they once had (many of whom took early buy-outs) there will be a few years stagnation in Big Three hiring.
Just my opinion, and you are welcome to disagree.
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