Raphael Stevens

Chains like Chipotle Mexican Grill and Chili’s are struggling to attract customers, but fast-food chains haven’t had the same issue.
McDonald’s and Yum Brands have reported solid U.S. demand as inflation-weary customers trade down to fast food.
The likes of Red Lobster and Applebee’s have turned to offering deep discounts or spending big bucks on advertising.

A girl waiting in line to pick up an order at a McDonald’s restaurant.
Oleksii Chumachenko | SOPA Images | Lightrocket | Getty Images

Fast-food chains are looking like the big winners in the fourth quarter — and beyond — as fast-casual and casual-dining restaurants struggle to attract customers.
Many publicly traded restaurant companies haven’t reported their latest quarterly results yet, but for those that have, a pattern is emerging. Inflation-weary customers pulled back their restaurant spending during the holiday season, just as they spent less than expected at retailers. Savvy fast-food chains appealed to those consumers with value menus and enticing promotions, drawing in customers across the income spectrum.

Generally, the fast-food sector fares better than the rest of the industry during times of economic uncertainty and downturns.
Take McDonald’s, for example. The fast-food giant said U.S. same-store sales climbed 10.3%, helped in part by low-income consumers returning more frequently than they had for the prior two quarters. Executives also credited the success of its Adult Happy Meal promotion and the annual return of the McRib for its strong sales growth. Its U.S. traffic increased for the second consecutive quarter, bucking the industry trend.
Likewise, rival Yum Brands reported solid U.S. demand. Taco Bell’s domestic same-store sales climbed 11%, boosted by increased breakfast orders, the return of Mexican Pizza and its value meals. Pizza Hut’s U.S. same-store sales grew 4%, while KFC’s ticked up 1% as it faced tough year-ago comparisons.
More fast-food earnings are on deck in the coming weeks. Burger King owner Restaurant Brands International is slated to announce its fourth-quarter results on Tuesday, while Domino’s Pizza will post its earnings Feb. 23.

‘We just didn’t see that pop’

In contrast to McDonald’s and Yum’s strong results, Chipotle Mexican Grill on Tuesday reported quarterly earnings and revenue that fell short of Wall Street’s estimates for the first time in more than five years. CEO Brian Niccol maintained that the burrito chain’s price hikes haven’t led to “meaningful resistance” from customers.

Instead, Chipotle executives presented a laundry list of reasons why its performance disappointed: bad weather, the underperforming launch of Garlic Guajillo Steak, tough comparisons to the previous year’s brisket launch and seasonality.

Customers order from a Chipotle restaurant at the King of Prussia Mall in King of Prussia, Pennsylvania.
Mark Makela | Reuters

“As we got around the holidays, we just didn’t see that pop, that momentum, that we normally see … frankly, we started the quarter soft, and we ended the quarter soft,” Chipotle Chief Financial Officer Jack Hartung said on the company’s conference call, comparing the decline in December to weaker retail sales at that time.
Chipotle said that traffic turned positive in January. However, the chain is facing easy comparisons to a year earlier, when Omicron outbreaks forced Chipotle and other chains to shutter early or temporarily close locations. And Bank of America analyst Sara Senatore noted in a research note on Wednesday that January’s unseasonably warm weather has been supporting demand for the broader industry.
Rival fast-casual chains haven’t reported their fourth-quarter earnings yet. Shake Shack is set to share its results on Feb. 16. However, in early January, it announced preliminary same-store sales growth that fell short of Wall Street’s estimates. Sweetgreen is slated to report its results on Feb. 23, while Portillo’s is scheduled for March 2.

Casual-dining concerns

Fast-casual restaurants’ struggles are an even worse sign for the casual-dining segment.
For more than a decade, casual-dining restaurants have struggled to attract customers as Chipotle, Sweetgreen and Shake Shack have stolen their customers. So the likes of Red Lobster and Applebee’s have turned to offering deep discounts or spending big bucks on advertising.
Soaring inflation has compounded the issue, particularly for restaurant companies like Brinker International, which is trying to turn around Chili’s Grill and Bar.

A customer walks towards the entrance of a Brinker International Inc. Chili’s Grill & Bar restaurant in San Antonio, Texas.
Callaghan O’Hare | Bloomberg | Getty Images

At the start of the month, Brinker reported that Chili’s traffic fell 7.6% for the quarter ended Dec. 28. Brinker CEO Kevin Hochman, the former head of KFC’s U.S. business, told analysts on the company’s conference call that the decline was expected as it tries to shed less profitable transactions. Chili’s has hiked its prices and cut down on coupons as part of the strategy.
More full-service restaurants are expected to report their results later this month. Outback Steakhouse owner Bloomin’ Brands is slated to make its announcement on Feb. 16.

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Space companies like SpaceX and Blue Origin are launching more rockets than ever, ratcheting up competition for air space.
The FAA managed U.S. airspace for a record-breaking 92 space missions in 2022, up 33% from the year prior, and is working to mitigate delays and disruptions.
The demand is particularly strained in Florida, which is already crowded with travelers and comes with unique challenges.

The SpaceX launch pad is seen from the window of Air Force One at Kennedy Space Center, Wednesday, May 27, 2020, in Cape Canaveral, Fla.
Evan Vucci | AP

WASHINGTON — Space companies are launching more rockets than ever, ratcheting up competition for air space just as travelers return to flying in droves — and leaving the Federal Aviation Administration in the middle to keep things moving.
The FAA has long been responsible for overseeing U.S. airspace, mitigating air travel disruptions due to weather, military events or technical glitches. Add in the rapidly expanding space launch market, and the complicated puzzle-work of making room in the skies gets all the more delicate.

Some of the agency’s strategies for addressing the growing demand include minimizing the time airspace is closed and expanding beyond popular travel spots like Florida to launch sites as far away as Alaska.
“Space is cheap now. Operators can get to space and it’s not just nation states, it’s now private companies — that’s a huge change in the paradigm,” said Duane Freer, manager of the FAA’s Air Traffic Organization Space Operations office.
“We’ve made significant strides in lessening the impact and managing the airspace much more efficiently for launch and reentry missions,” Freer told CNBC. “It wasn’t that long ago that SpaceX was a new company and these were all notional ideas.”
The FAA managed U.S. airspace for a record-breaking 92 space missions in 2022, up 33% from the year prior, and it expects to top that this year. That number includes both rocket launches and capsule reentries, and has been steadily climbing.
Most of last year’s missions launched from Florida, straining airspace in a state that already has a unique air traffic control challenge: the Sunshine State has drawn more and more travelers in recent years and faces frequent thunderstorms several months a year.

Airlines operated 722,180 flights to, from and within Florida last year, marking a faster recovery to pre-pandemic flying levels in the state than the national average. Miami International Airport announced 2022 was a record-breaking year for passengers.

That airline volume means a rocket launch, even one that’s routine and on schedule, can pose a significant challenge to passenger airlines. Disrupting airspace out of Florida affects routes over the Atlantic Ocean, Freer said, calling those flights the “really big, heavy hitters.”
That can swing the airspace priority tug-of-war in the airlines’ favor: In one instance, Freer recalled, his office talked down the National Aeronautics and Space Administration when the space agency was considering an attempt to launch its lunar Artemis I mission in the days immediately before and after Thanksgiving. 
“We worked very collaboratively with NASA on mitigating those impacts and actually eliminating those launch opportunities, because the impact to aviation would have been far too great,” Freer said.

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And the need to balance the influx of spaceflights against the needs of airlines isn’t letting up. Even if airspace is closed briefly, travel delays could last much longer as the impact cascades to congested airports and crews time out for the day.
The FAA has spent the last five years debuting new tools and modernizing systems for its teams and controllers. It met with airlines last year to discuss initiatives to alleviate congestion in Florida, and its Space Collaborative Decision Making committee, which works to integrate space operations into the national airspace system, will meet with airline executives at Southwest Airlines’ headquarters next month, the FAA said.

Competing priorities

The majority of last year’s space missions were by Elon Musk’s SpaceX – which set a new annual launch record for the company of 61 in 2022. It’s kicked off this year at a blistering pace, too, with a launch every four days.
The rest of last year’s launches were made up of missions by NASA, Rocket Lab, United Launch Alliance, Blue Origin, Astra, Virgin Orbit, Northrop Grumman, Boeing and Firefly.
Freer’s office acts as a liaison between space companies, ranges or spaceports, and air traffic controllers, though the FAA also plays a role in licensing and regulating launches. Crucially, the FAA talks regularly with the airlines, to closing wide swaths of airspace leading up to, during, and after a launch.
“Generally the impact to the aviation community is in reroutes,” Freer said. “We don’t see the traditional delays – with ground delay programs or ground stops – associated with launches.”

A Falcon Heavy rocket launches the USSF-67 mission on January 15, 2023 from NASA’s Kennedy Space Center in Florida.

Rerouting means flying additional miles, which increases costs to airlines. Some airline CEOs have called out rocket launches as an additional obstacle in airspace that’s already crowded with flights, as well as military activity.
“Every time there’s a new change or a wrinkle, say, we’re dealing with many more rocket launches and satellite launches out in the Florida coast … that impacts airspace,” American Airlines CEO Robert Isom said at a U.S. Travel Association conference in September.
“Air space is going to be a critical, critical issue,” Isom said, calling on new industries to contribute to the cost of air traffic control.
Airlines kick in funding for the federal agency through air ticket and fuel taxes. General aviation also contributes through fuel taxes. The space industry doesn’t have a formalized system for supporting air traffic control.
United Airlines CEO Scott Kirby last month, in discussing a recent FAA pilot-alert system outage that halted U.S. departures for several hours, said the agency has been stretched thin by the added workloads of dedicating resources to space launches, drones and aircraft certification.
“They’ve had to rob Peter to pay Paul,” Kirby said on his company’s earnings call last month. “They were asked to do more, and they’re doing it with less money.”

Reducing disruptions

Freer said the FAA doesn’t track know how many flights are rerouted due launches, saying “it’s impossible to determine” due to a variety of potential factors, such as weather, military activity, or an airline’s own decisions.
Since 2018, the FAA has cut airspace closures in half for launches: From an average of more than 4 hours to just over 2 hours today – even as short as 30 minutes in some cases – with airspace reopened as quickly as three minutes after a rocket travels through the closed area. The agency has recovered an average of 127 minutes per launch, Freer said.
The FAA is also increasingly licensing launches in more geographical areas. In 2022, the agency licensed 50 space launches from Florida, 13 from California, nine from New Zealand, four from Texas, two from Virginia and one from Alaska.

A graph of FAA-licensed or permitted commercial space launches (excludes launches licensed by other U.S. government agencies, such as NASA or the Department of Defense).

Among a number of variables, there are two significant time-sucks the FAA has to manage when it comes to rocket launches: Windows and scrubs.
Both may be rocket lingo, but they represent considerations that are just as important as a liftoff itself. A launch window refers to a period of time, often several hours long, during which a rocket needs to get off the ground in order to reach its intended destination in space. A scrub represents when a countdown is postponed, and often leads to delays of a day or more.
Together they create a moving target for space launches and the commercial airlines eyeing the same air space.

A traffic situation display showing both aircraft, blue, and a airspace closure area for a rocket launch, red and yellow.

Over the last five years, the FAA implemented eight major efforts to improve airspace closure efficiency around launches. It’s introduced systems to help reroute as few aircraft as possible — only those that are flying into the planned flight path of a rocket — to reduce the time that airspace is closed on either end of the window, and to highlight key mission triggers, such as when rocket fuel is loaded, to better know when to close and open airspace.
Short of a successful launch, scrubs can be just as disruptive to air traffic. A rocket countdown can be postponed or canceled up until the final moments.
In 2022, the FAA counted 61 scrubs, which it defines as a launch that is canceled within 24 hours of an intended liftoff time. But overall, the on-time performance of launches improved in 2022 – at 76%, up from 62% three years prior, according to the FAA.
Two years ago the FAA debuted one of its most helpful tools yet: the “Space Data Integrator.” It tracks a rocket in near real-time, through data shared by the launch operator, and keeps the FAA updated in real time on the health of the rocket.

A demonstration of the Space Data Integrator tracking a rocket launch.

SDI “was a big step forward for us,” Freer said, noting in the case of a rocket failure his teams can hit a malfunction button and instantly create a debris area to keep aircraft away.
“We now have the [rocket’s] position on that same piece of glass with our aircraft … that’s a significant step forward for air traffic, and that really points us to the future where we’re truly integrating,” Freer said.
SpaceX currently participates in the FAA’s SDI to mitigate disruptions, and Freer emphasized that “a lot of newer operators are working through that process.” Blue Origin and Firefly are part of an onboarding process, he said, and are likely to joining the program next.

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President Joe Biden called on Congress during the State of the Union to cap insulin prices at $35 for all diabetes patients.
The Inflation Reduction Act capped insulin prices for Medicare recipients at $35 per month, but people with private insurance or without insurance were left out.
Biden’s proposal is unlikely pass the narrowly divided Congress.
Senate Republicans killed a proposal last year to cap out-of-pocket costs at $35 for people with private insurance.

President Joe Biden delivers the State of the Union address to a joint session of Congress on Feb. 7, 2023
Pool | Getty Images

President Joe Biden used the bully pulpit during the State of the Union address this week to call for a universal price cap on insulin for all diabetes patients but the proposal is very unlikely to pass the current Congress.
Biden’s signature legislative achievement, the Inflation Reduction Act, has capped insulin prices for Medicare recipients at $35 per month but the law does not shield younger diabetes patients with private insurance or without insurance from higher prices.

“Let’s finish the job this time. Let’s cap the cost of insulin for everybody at $35,” Biden told Congress Tuesday night.
As the president spoke, Sen. Jeanne Shaheen, D-N.H., called on Congress to pass the Insulin Act which would expand the $35 price cap to people with private insurance. Shaheen co-sponsored the bipartisan legislation with Sen. Susan Collins, R-Maine, last July.
The average price of insulin in the U.S. in 2018 was 10 times higher than the average price in other wealthy nations, according a report from the Rand Corp. in 2021.
Though there’s some bipartisan support for a universal insulin price cap, the proposal will face a tough battle and is unlikely to pass in a narrowly divided Congress where Democrats hold a slim majority in the Senate and Republicans have tenuous hold on the House.
Even when Democrats controlled both chambers last summer, Senate Republicans managed to kill a measure that would have capped insulin prices at $35 a month for people with private insurance. Should the Senate pass the Insulin Act, it would still face a House that’s now in GOP hands.

Rep. Cathy Rodgers of Washington, the Republican chair of the House Energy and Commerce Committee, wasted no time dismissing Biden’s proposal in real time, decrying government price caps on insulin across the board as “socialist” and a “federal mandate” that hurts competition.
“It’s time for the President to abandon his socialist price-schemes and work across the aisle to make insulin products more affordable without jeopardizing insulin competition and innovation,” Rodgers said in statement released during the president’s address Tuesday night.  

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Lisa Murdock, chief policy officer at the American Diabetes Association, acknowledged that extending the insulin price cap to people with private insurance will be an uphill battle in the current Congress. But Murdock noted that seven Republicans voted for the cap in the previous Senate.
“We’ve seen Republicans step out and step up in support of taking this action, so I don’t want to say that we think it’s unachievable — we’re still very committed to working with members on both sides of the aisle to do this,” Murdock said.
The insulin market is dominated by Eli Lilly, Novo Nordisk and Sanofi. Industry reaction to Biden’s proposal was mixed.
Lilly supports extending the $35 price cap to all Americans, said spokesperson Kristiane Bello. The company has a program to provide insulin to patients for $35 or less a month regardless of their insurance status, Bello said.
Sanofi also supports a universal $35 price cap on insulin and already provides the medication to the uninsured at that price through a savings program, a company spokesperson said.
Novo Nordisk is concerned the government setting drug prices will ultimately reduce patient access to new therapies, said spokesperson Nicole Araujo.
Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, called insulin cost caps “a band-aid on a broken system that’s forcing people to pay more for medicines than health insurers and pharmacy benefit managers pay.”
Last month, California sued insulin manufacturers and pharmacy benefit managers CVS Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum alleging they are leveraging their market power to overcharge patients.
CNBC has reached out to the pharmacy benefit managers for comment on the president’s remarks.
About 40% of people with diabetes have private insurance and 5% are uninsured, according to the American Diabetes Association. One in 5 diabetes patients with private insurance are paying more than $35 per month for insulin, according to a survey from the Kaiser Family Foundation.
Although insulin prices vary depending on a patient’s insurance policy, Murdock said in some cases people are paying hundreds of dollars per month for medication they need to survive.
Among people taking insulin with insurance through their employer, about 9% of them were paying more than $200 out of pocket in 2019, according to an analysis from the Health Care Cost Institute. These individuals were spending $403 per month on average, according to the analysis.
An estimated 1.3 million adults in the U.S. had to ration their insulin in 2021 due the price, according to a Harvard study published in the Annals of Internal Medicine. Patients rationed by skipping doses, taking less insulin, or delayed buying the injections to save money.
States have been taking matters into their own hands in the absence of a federal price cap on insulin across all forms of insurance. So far, 22 states and Washington, D.C., have capped the price of insulin. The cap ranges from $25 in Connecticut for a month’s supply to $100 in other states.

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Lucid will offer buyers of certain trims of its Air luxury sedan a $7,500 “credit”, similar to the EV tax credits offered by the U.S. goverment.
The discounts apply to certain upscale trims of the Air purchased by March 31.
The move follows discounts by EV rivals Tesla and Ford.

Courtesy: Lucid Motors

Lucid Group said Thursday that buyers of certain versions of its pricey Air electric luxury sedan will be eligible for a $7,500 “credit.”
But that credit will be paid by Lucid, not the U.S. government.

Lucid said that customers who buy Air Touring and Air Grand Touring models in “certain configurations” before March 31 will be eligible for the $7,500 discount.
The novel twist on discounting follows price cuts by EV rivals Tesla and Ford Motor. Both cut prices to make more of their EVs eligible for new federal tax credits, which are available on certain U.S.-built electric cars under $55,000 and electric trucks and SUVs priced under $80,000. (Tesla slightly increased some of its prices last week after the government clarified the credit rules.)
Analyst have expressed concerns that an EV price war could be brewing in the wake of the moves by Tesla and Ford.
The Lucid Air is built in Arizona, but at a starting price of $87,400 it’s far too expensive to qualify for the federal tax credits. The trims that Lucid is discounting are even pricier: The Air Touring starts at $107,400; the Air Grand Touring at $138,000.
“We think our customers still deserve a $7,500 credit for choosing an EV,” said Zak Edson, Lucid’s sales chief.

But Lucid’s true motivation might be more about clearing out inventory. As of Thursday morning, company’s website listed 15 Air Grand Tourings and seven Air Tourings available for immediate delivery.
Lucid will report its fourth-quarter and full-year results after the U.S. markets close on Feb. 22. The company’s stock is up more than 68% so far this year, giving it a market value of about $19.38 billion.

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Southwest’s COO plans to apologize before the Senate panel and express confidence in technology improvements and its own schedule after the holiday meltdown.
The Southwest pilots union’s president will also testify and plans to say the carrier ignored warning signs about its operation.

Passengers check in for a Southwest Airlines Co. flight inside Terminal 1 at Los Angeles International Airport (LAX) in Los Angeles, California, on August 10, 2022.
Patrick T. Fallon | AFP | Getty Images

Southwest Airlines’ chief operations officer is scheduled to face questions from a Senate panel on Thursday over the carrier’s December meltdown that stranded thousands of passengers over the holidays.
Andrew Watterson plans to apologize for the travel chaos before the Senate Commerce Committee. The president of the Southwest Airlines Pilots Association, Casey Murray, will tell the panel that the carrier ignored warning signs about its operation, according to written testimony reviewed by CNBC.

Southwest has said it canceled more than 16,700 flights between Dec. 21 and Dec. 31. The issues started with severe winter weather around the U.S. but the carrier lacked the technology to keep pace with the numerous flight changes, prompting the airline to scrap most of its schedule for several days to reset its operation.
The chaos pushed Southwest to a loss in the last quarter, costing it $800 million in pretax earnings.
The incident capped a year of chaotic travel for many passengers as airlines struggled to ramp up to meet a rebound in demand. Pressure on the industry has grown over the last year while some lawmakers and the Biden administration are seeking stronger consumer protection.
The pilots union, which is in contract negotiations with the company, as well as the flight attendants’ union, have warned about scheduling problems for years.
“Warning signs were ignored. Poor performance was condoned. Excuses were made. Processes atrophied. Core values were forgotten,” Casey Murray said in written testimony ahead of Thursday’s hearing.

Southwest’s COO plans to defend technology improvements since the debacle in December and others in the works. Its executives have said its crew rescheduling software wasn’t designed to handle so many cancellations that occurred in the past, but its provider, General Electric said it has delivered updates to Southwest that the airline is testing.
The hearing is scheduled to begin at 10 a.m. ET, but a Senate briefing on the Chinese balloon that the U.S. shot down last weekend will likely delay questioning.

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