Margin Call Newsletter | It's Way Too Hot Outside 🥵🔥

The Margin Call : Travel, Markets and Strong Opinions Newsletter

Aug 04, 2026

Be First —

I spent some time viewing the flight cancellations from last week occurring in the Midwest and the East Coast of the U.S. Why? Well, as a New Yorka, we witnessed one of the worst thunderstorms of the summer. This caused safety concerns for folks on ground and air. Flight cancellations were piling up, the numbers are staggering. However, I want to shift our attention ever so slightly where we can see why the storms are growing more aggressive — heat. More than 165M people were under a heat warning in the U.S. The mechanics are not a simple physics but as I best understand it ~ thinner hot air reduces lift, forcing airlines to delay departures. Hashtag notaphysicist if hashtags are still a thing. Economically, can we infer that heat is also trimming payloads, as for example, ramp crews can't safely work scorching tarmac? Less hours, less earnings, higher insurance coverages at airports, higher fees, higher prices and soon, the dominoes begin to play their part. Let’s not forget about the actual environment, you know the trees and the bees. My cautious read: just as aggressive as these storms are, our industry needs to be equally aggressive and first in addressing climate change, it’s only for our best. At this current rate — let’s track and see how this cancellation to heat index correlation trends over the next year. Who knows, we might be find the magic data point to spark change.

Be Smarter —

Kevin Warsh assumed the FED chair in May 2026. It was a bit of a theatrical transfer when changing seats from Jerome Powell. Warsh may be a Trump install however Warsh’s actual boss are the markets and the monthly governmental data reports. Last week, Warsh held interest rates at 3.5% - 3.75% announced at the July 29 meeting in a 9-3 vote. If this is already boring you — trust me, I’ll make it interesting soon, hang in there with me. FED rates matter and the meetings should be marked on all of our calendars — especially us lovers of the sector. Similar to last week when I brought up BNPL products / behaviors for consumers. Lets now focus on the lowest tier of our industry which also runs on debt. Airlines carry heavy debt loads for aircraft purchases and leases, and hotels finance construction and renovations. Higher-for-longer rates raise the cost of that capital, which can slow fleet expansion, delay new routes, or get passed through as higher fares and room rates. Higher interest rates costs squeeze corporate cash flow, and travel budgets are a common target for cuts. You still there? — cause this is where I think it gets truly interesting. Our Fed policy is a major driver of the dollar's value. A stronger dollar — often tied to higher US rates relative to other countries which makes international trips cheaper for Americans traveling abroad, but makes the US pricier for inbound foreign visitors — a real factor for US tourism-dependent cities and airlines with international routes. See where I’m driving to? — by raising or holding interest rates helps fight inflation but can cool demand, more specifically travel demand (inbound & outbound). And lowering interest rates, is not much of help to fighting inflation although it stimulates spending — something our industry heavily relies on (inbound & outbound). So what’s the smart move? I’m not sure just yet but I am surely open to hearing your thoughts. Trading economics has an interactive tool for tracking the interest rates, I’m sure we can use this to help us draft some unique correlations or speculations. And for anyone wondering, the next FED meeting is September 16th at 2pm EST. Mark your calendars!

Bond Yields at 19-Year High Send Warsh Credibility Warning - Bloomberg — *Current FED chair, Kevin Warsh*

Or Cheat —

SkyMiles members are back to earning 1 mile per $1 at Starbucks beginning August 5th — the same flat rate the partnership debuted with in 2022, before Delta got fancy with reload tiers nobody wanted to do math for. The catch: you now need to have actually flown Delta in the past 12 months to keep the miles flowing, because nothing says loyalty like a coffee habit with a milage test. The fine print shows that lapsed flyers get a grace period through October 5th. It’s a neat cheat move for both brands, truly — Starbucks already owns the pre-flight caffeine monopoly at practically every major US airport ~ O'Hare alone has 14 locations ~ so pairing that captive audience with a mileage carrot keeps travelers reaching for the green cup instead of wandering off to Dunkin' out of spite. I honestly like the move even though it doesn’t benefit me — I fly United.