Speaker 1: Welcome to the Bloomberg Penel podcast on Paul Swing You.
Speaker 1: Along with my co host Lisa Brahmas, each day we
Speaker 1: bring you the most noteworthy and useful interviews for you
Speaker 1: and your money. Whether at the grocery store or the
Speaker 1: trading floor. Find a Bloomberg Penl podcast on Apple podcast
Speaker 1: or wherever you listen to podcasts, as well as at
Speaker 1: Bloomberg dot com. As we sit here and we track
Speaker 1: the spread of the coronavirus, there is a realization that
Speaker 1: even if developed nations are cracking down on trade, the
Speaker 1: world is still getting more global, at least when it
Speaker 1: comes to people and viruses moving around, and there's a
Speaker 1: growing concern that we are ill equipped to handle another pandemic.
Speaker 1: Joining us now is Robert Langrith, healthcare reporter for Bloomberg News,
Speaker 1: who are an incredibly interesting and frightening, frankly story for
Speaker 1: Bloomberg Business Week about a potential pandemic. I just want
Speaker 1: to start with this quote from the World Health Organization.
Speaker 1: Epidemics in the century are spreading faster and farther than ever.
Speaker 1: Outbreaks that were previously localized can now become global very rapidly. Robert,
Speaker 1: why is that well? That's absolutely true. We just have
Speaker 1: a world with much more population, is much more interconnected
Speaker 1: than ever before. And even that, you may remember, one
Speaker 1: of the first scary emerging viruses, Stars, one of the
Speaker 1: last ones to come out of China, killed killed about
Speaker 1: eight hundred people in two thousand three. Uh And now
Speaker 1: UH dis coronavirus is the next emerging virus to come
Speaker 1: out of China, and the differences that's spreading you know,
Speaker 1: much faster because even since two thousand and three, there's
Speaker 1: just so many more uh discount plane flights and so
Speaker 1: many more high speed trains, so people just from all
Speaker 1: over China and Southeast Asia travels so much more than
Speaker 1: they used to. So a virus that emerges, you know,
Speaker 1: somewhere out in the world just gets all around the world,
Speaker 1: you know, much more quickly than it that it used to.
Speaker 1: And it probably is the case that you know, years
Speaker 1: and decades ago, we had a lot of you know,
Speaker 1: emerging viruses that hit some obscure city out out in
Speaker 1: the developing world somewhere and just didn't spread that far
Speaker 1: and kind of died out before we even kind of
Speaker 1: heard of it. Now, these things that spread every around
Speaker 1: the world, Robert just you know, given I know we're
Speaker 1: early days of this coronavirus, but kind of what's the
Speaker 1: um thought out there in the health community about the
Speaker 1: China's response to this coronavirus. Well, the problem is, I mean,
Speaker 1: obviously China is doing very aggressive response now and it's
Speaker 1: basically locked down the whole city, the whole province of
Speaker 1: sixty million people. Uh, you know, it's sort of an
Speaker 1: unprecedented quarantine or there. The problem is that in the
Speaker 1: kind of key early weeks of the virus spreading, you know,
Speaker 1: it didn't it didn't really communicate much what was going on,
Speaker 1: you know, internally, and and the big response that didn't
Speaker 1: begin until like several weeks into it because apparently because
Speaker 1: you know, local officials are waiting for the top level
Speaker 1: communist parties for what to do and what they could say,
Speaker 1: and so that basically allowed it to spread, you know,
Speaker 1: before people really knew what a big deal what it
Speaker 1: was for you know, two or three weeks before like
Speaker 1: a heavy, heavy response. And that's the sort of that's
Speaker 1: sort of the key period in sort of are you
Speaker 1: gonna need to slow these things down right away and
Speaker 1: nipped them in the bud. And when that doesn't happen
Speaker 1: that allows them to escape the headline of the of
Speaker 1: the piece that you're over the magazine man versus microbe.
Speaker 1: We're not ready for the next global virus outbreak, and
Speaker 1: I'm wondering whether we can glean any insights from the
Speaker 1: spread of the coronavirus and extrap played out Why is
Speaker 1: this the case? Why are we unprepared well? One of
Speaker 1: the problems that happens is that, you know, we have
Speaker 1: lots of scientific smarts, and there has been real progress
Speaker 1: and better better testing and drug development, uh and you know,
Speaker 1: new gene sequencing technology, so we know exactly what's in
Speaker 1: this coronavirus very quickly. But kind of what's missing really
Speaker 1: is a long term focus. You know, every time you know,
Speaker 1: you know, they call it the cycle of panic and neglect.
Speaker 1: You know, every time there's a new outbreak is global panic,
Speaker 1: but there's momentary resolved and then kind of that a
Speaker 1: few years later, we kind of forget about it fades away,
Speaker 1: and that kind of gives away to kind of in action.
Speaker 1: And the problem is we're only uh as as prepared
Speaker 1: as our weakest lengths. So it doesn't matter. The CDC
Speaker 1: is a great job inside the United States if we
Speaker 1: haven't provided support to developing countries so they have some
Speaker 1: first responders that can identify emerging outbreaks right away. What
Speaker 1: does it mean to be prepared? Is it just the
Speaker 1: in terms of the sanitary equipment and testing kids? How
Speaker 1: can you be prepared for something if you don't even
Speaker 1: know what the virus is. Well, there's like two different
Speaker 1: things here, you know. One one is that well, i'll
Speaker 1: give you an example of the Ebola outbreak in West
Speaker 1: Africa and two fourteen or so that killed more than
Speaker 1: eleven thousand people. But it's not that Ebola was an
Speaker 1: unknown virus. What happened there was it took literally the
Speaker 1: thing was brewing in Guinea for three full months and
Speaker 1: expanding before the wider world knew uh. And that allowed
Speaker 1: it a chance to reach cities. So if there had
Speaker 1: been some you know, first responders, some some better little
Speaker 1: bit of better infrastructure there not a lot, but just
Speaker 1: enough to recognize and do tests right away, we could
Speaker 1: have nipped that in the bottom. That wouldn't have killed
Speaker 1: anywhere near you as many people. So that's the one thing.
Speaker 1: Another thing is that you know, that's a real problem,
Speaker 1: and people think that one of the places where this
Speaker 1: coronavirus originated or spread to people, isn't uh one of
Speaker 1: these uh These food markets in China and Southeast Asia
Speaker 1: called wet markets, and that's where live animals and freshly soltered,
Speaker 1: unrated beat kind of commingle with lots of shoppers and
Speaker 1: and the and they've live animals there, and cages often
Speaker 1: stacked and top each other, different types of live animals,
Speaker 1: so they're very unsanitary of their team with germs. Are
Speaker 1: these perfect breeding grounds are deadly pathogens And a lot
Speaker 1: of the health experts we talked to said, these really
Speaker 1: need to be shut down. That's just not safe, not
Speaker 1: in the not in the new interconnected world, and that
Speaker 1: just provides too much opportunity for the emerging virus that
Speaker 1: kind of mixed around the different animals and then spread
Speaker 1: onto people. And that's what we think probably happened with
Speaker 1: the virus from Uhan. So, Robert, one of the areas
Speaker 1: of focus has been on kind of the healthcare industry,
Speaker 1: big pharma, the ability to come up with maybe antidotes
Speaker 1: or just vaccines or something like that for something that
Speaker 1: pops up. Is that a fair criticism? Do you think
Speaker 1: big pharma should respond better or more quickly. Well, the
Speaker 1: problem is, you know, for emerging virus, they're they're kind
Speaker 1: of you know, is not it's not a regular market.
Speaker 1: There is an a regular market for you know, disease
Speaker 1: it doesn't exist yet, or a vaccine like this, where
Speaker 1: we just you know, don't know what the market could.
Speaker 1: But we don't know is this is going to be
Speaker 1: doing a year from now, whether it's going to disappear entirely,
Speaker 1: whether it's still going to be here with us but
Speaker 1: it's contained in China, whether it's going to be something
Speaker 1: you know, that's endemic in the population, and we need
Speaker 1: to like vaccinevaccidate, like influenzo. So that means it's just
Speaker 1: kind of not a regular market for drug companies to
Speaker 1: go after. And and people, you know, top thinkers like
Speaker 1: Bill Gates says, we need to treat this possibility pandemics,
Speaker 1: you know, more likely prepare for war kind of as
Speaker 1: a national security threat. And we don't really do that
Speaker 1: we need because Robert just real quickly here, I'm wondering
Speaker 1: about the Chinese doctor who initially was sanctioned for warning
Speaker 1: about the deadly Wuhan coronivor virus outbreak and that was
Speaker 1: in December, and there is a concern that perhaps this
Speaker 1: was spreading for a lot longer within China and there
Speaker 1: was a political incentive not to really disclose it because
Speaker 1: of the ongoing trade negotiations. Have you heard any discussion
Speaker 1: to that effect or is that just a conspiracy theory
Speaker 1: and rumor at this point, Well, I don't know what
Speaker 1: the link to the trade negotiations in particularly, I don't
Speaker 1: know that, but certainly there is a concern that for
Speaker 1: whatever reason, the Chinese of provision provincial officials were trying
Speaker 1: to keep talking about this down, you know, not not
Speaker 1: say a lot about this, you know, they didn't they
Speaker 1: you know, it certainly seems like I think that, you know,
Speaker 1: they didn't announce there was definite human to human transmission
Speaker 1: until just one or two or a few days before
Speaker 1: they kind of locked down the whole city. And it
Speaker 1: certainly seems like looking back at it, there's pretty clear
Speaker 1: evidence and they should have known well before that there
Speaker 1: was human to human transmission. So so certainly there does
Speaker 1: appear to be been an effort to underplay this or
Speaker 1: at least minimize this, uh, for you know, several weeks,
Speaker 1: and it's just not clear was that because officials and
Speaker 1: the province were timid and they kind of wait for
Speaker 1: Beijing to tell them what to do. It's really not
Speaker 1: clear what was going on there. The information coming out
Speaker 1: of China now is so kind of murky and confusing
Speaker 1: and hard to know. You know what's true and you
Speaker 1: know what's not true. Even with the death of this doctor,
Speaker 1: you know, first we heard it was dead, then they
Speaker 1: started to retract it there talking and we're gonna have
Speaker 1: to leave it there. Thank you so much for that.
Speaker 1: Robert lang Greth, healthcare reporter for Bloomberg News. With this
Speaker 1: latest it's actually a Bloomberg Business Week cover story, man
Speaker 1: versus micro very timely look at pathogens and the disease
Speaker 1: in the case of the Corona virus. This is Bloomberg
Speaker 1: trying to check in with Bloomberg Opinion returned by opinion
Speaker 1: columnists A. Lisa Mark Tinouzi. She covers all things finance
Speaker 1: for Bloomberg Opinion based in London, Alsa, thanks so much
Speaker 1: for joining us boys. Some more news at Credit Swiss
Speaker 1: t gent Tim ousted as CEO. What happened? Well, it's
Speaker 1: been um a long time coming in that you've had,
Speaker 1: you know, a bank that has been tarred by a
Speaker 1: series of embarrassing league for the last four or five
Speaker 1: months or so um starting with the revelation that one
Speaker 1: of their former employees who had just jumped trip to
Speaker 1: to rival ubs, had been tailed by a contractor for
Speaker 1: the bank, and that that triggered a sequence of events.
Speaker 1: There was an internal probe that found that the CEO
Speaker 1: wasn't aware that it was actually the c O who
Speaker 1: had you know, orchestrated this um and and then subsequently
Speaker 1: another another incidence of corporate um um surveillance of one
Speaker 1: of the employees, and you know, and you know, continuing
Speaker 1: um to be followed by news about you know, internal warfares, etcetera, etcetera,
Speaker 1: And and this came to a head really in the
Speaker 1: last week where it appeared, you know, it was reported
Speaker 1: that the chairman was about to ounced the CEO. Investors
Speaker 1: weighed in backing the CEO, and it's you know, today's
Speaker 1: the outcome of that boardroom battle sees T and TM
Speaker 1: leave to be succeeded by the first Swiss born CEO
Speaker 1: in almost twenty years, atop the Swiss farm initially shares
Speaker 1: of credits we traded in Switzerland down UH they still
Speaker 1: are down, but much less than they were initially, now
Speaker 1: down just for tense of a percent. Do we have
Speaker 1: any sense of the new path forward? Was this an
Speaker 1: issue with t gent TM strategy or a culture clash
Speaker 1: or perhaps something personal? Well, I think, you know, you've
Speaker 1: had a strategy that he put in place, and this
Speaker 1: this structuring which basically saw the bank shrink and and
Speaker 1: shift more of the business towards wealth management and away
Speaker 1: from UM invest and banking and volatile trading, that hasn't
Speaker 1: really yet delivered as much of of the fruits as
Speaker 1: t and would have liked. By now that was starting
Speaker 1: to come through, and I think we'll see some strong
Speaker 1: numbers on the fourth quarter when their report next week. UM.
Speaker 1: So you had a you know, some questions over strategy
Speaker 1: just because it's taken so long for that to translate
Speaker 1: into better shareholder returns. UM. On the other hand, yes,
Speaker 1: you've had this huge damage to the bank's franchise and
Speaker 1: reputation UM over what appears to be you know, quite
Speaker 1: a bitter internal UM internal warfare and and and certainly
Speaker 1: it's put a spotlight on on the culture but also
Speaker 1: on the governance of the bank. UM. You know, the
Speaker 1: CEO claiming not to know about what his CEO was
Speaker 1: up to, and the board equally being in the dark
Speaker 1: about what its leadership was up to. It all points to,
Speaker 1: you know, certain concerns of controls and governance right across
Speaker 1: the farm. Well. Attentioning to me a Lisa about this
Speaker 1: whole saga was that some just recently in the less
Speaker 1: several days, some big shareholders of Credit Source came out
Speaker 1: in support of the austed CEO TM yet the board
Speaker 1: still moved to ausked him from the company. What's the
Speaker 1: situation there? But of course, you know, these were three
Speaker 1: large shareholders, but they're not the only shareholders. You know,
Speaker 1: Bloomberg is reporting that other investor does, including the Guitars.
Speaker 1: We're backing the chairman on this. Um. I think, um,
Speaker 1: you see, you have to you have to bear in
Speaker 1: mind that what we're seeing is not, you know, necessarily
Speaker 1: everything that's going on behind the scenes. Um. But I
Speaker 1: think what's what's significant is really that from what I'm
Speaker 1: picking up and what I'm reading and from one of
Speaker 1: what we're hearing, is that this doesn't necessarily bring closure
Speaker 1: to this chapter. There's still an investigation on going by
Speaker 1: the local regulator. Into governance and controls. And you have
Speaker 1: a CEO now who will take over from t J
Speaker 1: and t M um who who's you know, whose remate
Speaker 1: is a little bit unclear because in a year's time
Speaker 1: the chairman will definitely go. He's confirmed that he's only
Speaker 1: going to serve out maximum another year. Um. And that
Speaker 1: leads to potential questions as to whether this is really
Speaker 1: a permanent CEO succession or whether it's you know, an
Speaker 1: interim step towards you know, further strate teacher reviews further
Speaker 1: down the line, and perhaps a new management at least.
Speaker 1: So I'm just wondering, what do you think that Credit
Speaker 1: Suite needs to do in order to bolst their profitability. Well,
Speaker 1: I think we'll learn a little bit more, um, you
Speaker 1: know this coming um, these coming elearnings next week. In
Speaker 1: terms of how how successful that restructuring has been. I
Speaker 1: think there's been a very strong shift towards UM lending
Speaker 1: in particularly in the wealth management business and particularly in Asia.
Speaker 1: And of course we've we've seen, um, you know, what's
Speaker 1: been happening in Hong Kong and the repercussions in the
Speaker 1: economy from from the coronavirus both you know, in China
Speaker 1: and Hong Kong. There are some questions as to whether this,
Speaker 1: you know, very excessive growth in Asia driven really by
Speaker 1: top line targets is going to um you know, it's
Speaker 1: going to lead to potential more difficulty in delivering those
Speaker 1: shareholder returns. A Lisa Martin News thank you so much
Speaker 1: for being with us. A Lisa Martin News is a
Speaker 1: columnist covering finance for Bloomberg Opinion. Joining us from London.
Speaker 1: You could read our columns Bloomberg dot com, Slash Opinion
Speaker 1: or O P I and go on the Bloomberg. Interesting
Speaker 1: to see the market response to the credit suit. Snoo
Speaker 1: is t G and TM after joining the bank as
Speaker 1: chief executive officer in two thousand and fifteen to parting
Speaker 1: being pushed out ousted after a battle in the boardroom.
Speaker 1: We got the latest US jobs report out this morning.
Speaker 1: It was a blowout number two thousand jobs added that
Speaker 1: was compared to estimates of economist survey by Bloomberg of
Speaker 1: a hundred and sixty five. The market's response negative. It
Speaker 1: took it as bad news. Joining us now to talk
Speaker 1: about the actual underlying market and why there could be
Speaker 1: such a negative response. Tom gimbal He his chief executive
Speaker 1: officer of global staffing company LaSalle Network. Tom, can you
Speaker 1: give us a sense was there anything in this report
Speaker 1: that was anything other than positive? Well, I think people
Speaker 1: are always looking for there to be a bigger increase
Speaker 1: in wages. They're always looking to have a jump in
Speaker 1: participation rate. UM. What I always call the chicken little
Speaker 1: effect that that the better it gets, the more people
Speaker 1: are waiting for the sky to fall. And so there's
Speaker 1: there's that situation. But you know, when you're when you're
Speaker 1: talking about the market and how they're seeing it, sometimes
Speaker 1: it is just serendipitous that the market goes down based
Speaker 1: on whatever the number is. Tom, I know that you
Speaker 1: guys talked to a lot of companies out there. Are
Speaker 1: you finding are the companies out there finding It's really
Speaker 1: hard to find talent and keep talent. It is extremely
Speaker 1: hard to find town when you're looking at a three
Speaker 1: point five percent unemployment radio ticked up at tentsive a
Speaker 1: point to three point six percent UM. It's really hard
Speaker 1: to find people. So what companies are doing is they're
Speaker 1: hiring a lot more recent college graduates, they are transitioning people,
Speaker 1: They're spending a lot more money on training and development
Speaker 1: is one of the leading areas that companies are investing in.
Speaker 1: And then also, um, you're getting people to move. But
Speaker 1: the act of people, even executives, leaving one job for another,
Speaker 1: there's a little bit of hesitancy because they don't want
Speaker 1: to be the low man on the totem pole if
Speaker 1: the bottom does followut this is interesting because we're hearing
Speaker 1: the job gains are coming at the lower end of
Speaker 1: the totem poll when it comes to wages and skills
Speaker 1: in the jobs market. So if that's the case, and
Speaker 1: that's where we're seeing the additional jobs and the wage increases,
Speaker 1: why aren't we seeing them more at the top where
Speaker 1: skills are are sort of more necessary. The people don't exist, right,
Speaker 1: So so the factory if you will, of producing people
Speaker 1: is always going to be in college graduates and unskilled
Speaker 1: uh labor if you will call centers and customer service
Speaker 1: uh people doing hospitality and service jobs. So when you
Speaker 1: have that, that's where it's going to be there there
Speaker 1: you don't just find a surplus at three point five
Speaker 1: percent unemployment of DYR people. Which is the question again
Speaker 1: about capital expenditure, about why we're not seeing a company
Speaker 1: spend more on training people and getting up the skills
Speaker 1: UH to fill these jobs. If there just aren't the people,
Speaker 1: why aren't we seeing more of that? Well, I think
Speaker 1: we are. It takes time. So you know, every Fortune
Speaker 1: five hundred companies, different small the medium sized companies have
Speaker 1: always been the engine for UH for growth in this
Speaker 1: country and so, but they're not going to have full
Speaker 1: huge UM training and development when you get the Fortune
Speaker 1: five companies to implement something like that at the level
Speaker 1: of jobs that it needs to be there, there just isn't.
Speaker 1: If you look at where the skills gap exists, the
Speaker 1: majority of jobs that people that companies need on the
Speaker 1: medium to bigger size companies are where there aren't people.
Speaker 1: You can't train somebody who's been a construction worker to
Speaker 1: be a data scientist. You can't take a salesperson turn
Speaker 1: them into an accountant. So the aspect of training is
Speaker 1: very different for UM training and acclimating them for a
Speaker 1: job going up on a vertical level versus horizontal movement
Speaker 1: into a totally different category. And if someone's brain isn't
Speaker 1: programmed to be an engineer, you can't turn them into one.
Speaker 1: Tom are you seeing any regional you know differences and
Speaker 1: across the US in terms of job demand job creation
Speaker 1: is it's still the you know, the sun Belt is
Speaker 1: kind of the growth area for example. No, I'm seeing
Speaker 1: a lot more of the coast springing in higher volume
Speaker 1: jobs into the Midwest. Uh So, what we're seeing is
Speaker 1: is that the cost of living and the cost of
Speaker 1: salaries on both coasts have gotten so high, and for
Speaker 1: for non technology driven jobs, non developer, non engineers, a
Speaker 1: lot of those jobs can be done from the Midwest.
Speaker 1: So you're starting to see uh, kind of not a
Speaker 1: rebirth but for lack of a better phrase, in Chicago,
Speaker 1: in St. Louis, I think it'll end up going into Detroit,
Speaker 1: UM and you're seeing more that Dallas continues to be
Speaker 1: a big, big hub of companies and then obviously the
Speaker 1: Austin of the second Silicon Valley s type of environment.
Speaker 1: But you're gonna see a lot more in the Midwest
Speaker 1: and continue to see that flourish. Is that at the
Speaker 1: expense of the workforce in the big cities on the coasts. No,
Speaker 1: because the companies that are air still have huge hubs,
Speaker 1: whether it's San Francisco with with LinkedIn and Oracle and
Speaker 1: what Exist and Apple obviously, and Facebook and what's there.
Speaker 1: They have so many huge companies out there and on
Speaker 1: the East Coast with the financial services of Fidelity and
Speaker 1: Goldman and and what have you in financial services, that
Speaker 1: those are still going to be there. But you know,
Speaker 1: if you look at uh it's not necessarily the Midwest,
Speaker 1: but Salt Lake City is a huge hotbed for hiring
Speaker 1: right now, has been probably the last half decade. And
Speaker 1: Goldman SAX has a huge office in uh IN in
Speaker 1: Salt Lake City. Tom Gimble, thank you so much for
Speaker 1: joining us. Tom as a founder and CEO of LaSalle
Speaker 1: Network based in Chicago, helping us breakdown the jobs numbers today.
Speaker 1: Five thousand jobs added in the latest month, wages up
Speaker 1: about three point one percent, So and uh it just
Speaker 1: some continued strength in the job sector, driving continued strength
Speaker 1: in the US consumer, driving continued strength in the US economy.
Speaker 1: That has been the story that continues to be the
Speaker 1: story in the US. Looking at the markets here the
Speaker 1: SMP down six, down down one seventy three, uh NASDAC
Speaker 1: down six here to end the week. Looking at the
Speaker 1: treasury market up fifteen thirty seconds, pushing a ten year
Speaker 1: yield down to one point five eight percent. But we're
Speaker 1: about two thirds of the way through earning season, and
Speaker 1: we've heard a whole host of CEOs from a whole
Speaker 1: host of industries talking about the impact of the coronavirus
Speaker 1: on their businesses, and none more so than the global
Speaker 1: travel business. To get a sense of what's going on
Speaker 1: with the US airlines, we welcome Mary Slangenstein. She's a
Speaker 1: US airlines reporter for Bloomberg News, joining us on the
Speaker 1: phone from our Dallas bureau. Mary, thanks so much for
Speaker 1: joining us on. I want we want to get that
Speaker 1: Jet Blue story they're launching a new low cost airline,
Speaker 1: but first I just want to get your thoughts kind
Speaker 1: of what you're seeing right here right now as it
Speaker 1: relates to the US airlines and maybe how they're being
Speaker 1: impacted by the coronavirus. Well, the US carriers UM that
Speaker 1: fly to China have pretty much suspended their flights to
Speaker 1: mainland China. UM they've also suspended or are suspending Hong
Speaker 1: Kong routes, but on a little bit different time frame.
Speaker 1: For example, American Airlines UM is only suspending DFW to
Speaker 1: Hong Kong to February, and UM United is suspending Hong
Speaker 1: Kong also to February twenty so there that's a little
Speaker 1: bit shorter suspension of flights than to mainland China. UM.
Speaker 1: They aren't really talking yet about monetary damages or monetary
Speaker 1: losses related to the suspensions of flights, Mary, so we'll
Speaker 1: keep watching to see whether there's any kind of financial impact.
Speaker 1: But interesting to see, UH, that they are suspending some
Speaker 1: of these flights. In the meantime, you wrote a story
Speaker 1: that got our attention because it seems like a time
Speaker 1: of consolidation in the airline industry, and yet the founder
Speaker 1: of Jet Blue is trying to launch a new airline.
Speaker 1: It's on track to start flying this year, and it
Speaker 1: will focus on routes that primarily don't have anyone currently
Speaker 1: operating in them. Can you explain what this is sure, UM.
Speaker 1: David Neilman, who founded Jet Blue and has founded several
Speaker 1: other airlines, including Ausul in Brazil, has decided he wants
Speaker 1: to get back into the US aviation market, and so
Speaker 1: he's founding UM an airline called Breeze Airways. And what
Speaker 1: Neilman says he's done is he's been able to go
Speaker 1: through look at routes and pull out five hundred potential
Speaker 1: city pairs, So that's you know, flying from city A
Speaker 1: to CITYB that don't have any NonStop competition, and those
Speaker 1: are the routes that he wants to focus on with
Speaker 1: this new airline, and he's planning to operate on midsize
Speaker 1: cities that may be lost NonStop service as larger airlines
Speaker 1: combined and then started to focus on building up there
Speaker 1: already established hubs. Mary, I mean, I'm always fascinating when
Speaker 1: I see people getting into the airline business. It seems
Speaker 1: like such a brtally tough business with competition and the
Speaker 1: unions and jet fuel and all those type types of things.
Speaker 1: Is a tough, tough business. What's his cost advantage going
Speaker 1: to be to, you know, go up against some of
Speaker 1: these bigger players. Well, Newman claims that, you know, he's
Speaker 1: going to be excuse me, get a big cost advantage
Speaker 1: from the size of the aircraft that he's gonna fly.
Speaker 1: He's smalling flying smaller planes. And also the fact that
Speaker 1: he's not gonna fly, um every day of the week
Speaker 1: to every location, and there may even be times of
Speaker 1: the year where he doesn't fly. He's gonna fly only
Speaker 1: on peak days periods of peak demand. Um that's a
Speaker 1: very similar model to what Allegiant Airline flies and they've
Speaker 1: been very successful with it. How much room is there
Speaker 1: for another airline, um, you know, there's probably room for
Speaker 1: another airline. UM. It's hard to tell from this, you know,
Speaker 1: this date, at this point in time, how successful Neilman
Speaker 1: will be. He's certainly been successful in the past with
Speaker 1: um West Jet in Canada and then Jet Blue he
Speaker 1: founded Jet Blue here in the United States, So he's
Speaker 1: been able to work some magic in the past, and
Speaker 1: we'll have to see if he's able to do that again.
Speaker 1: It's interesting, you know, I certainly have I'm aware that
Speaker 1: a lot of midsized cities have lost a lot of
Speaker 1: capacity here, but I often think that it's because of
Speaker 1: the Uniteds of the worlds are the Deltas of the
Speaker 1: worlds have said it's just not economical to fly there,
Speaker 1: given the load factors and whatnot. So is it really
Speaker 1: all about the fact that he's gonna fly different planes,
Speaker 1: maybe less union workforce? Is that kind of his business model? Yeah,
Speaker 1: he's probably initially not going to have any unions working
Speaker 1: at the airline as they get started, which was the
Speaker 1: situation of Jet Blue for quite some time. But then
Speaker 1: he also is saying that he's going to have a
Speaker 1: lot of this stuff linked to technology, so that people
Speaker 1: will be able to do almost everything on an app. Right,
Speaker 1: So maybe they won't have to have people standing at
Speaker 1: counters in the in the airport, or you know, there'll
Speaker 1: be other ways that they can reduce the requirement for personnel. UM.
Speaker 1: So I think he's going to count on technology a lot.
Speaker 1: He's going to count on um. These new Airbus A
Speaker 1: two twenty aircraft that he's ordered, Um, they're they're very
Speaker 1: fuel efficient, they're very popular new aircraft. He's also flying
Speaker 1: some used planes from his airline in Brazil. UM, but
Speaker 1: he's saying he's going to be able to make good
Speaker 1: use of those and even if he only has fifty
Speaker 1: or sixty people on them, that they'll be able to
Speaker 1: be profitable. When I hear Mary fuel efficient, I think
Speaker 1: of a box with nothing else in it, and you're
Speaker 1: basically foisted into the corner. It's and a little sardine
Speaker 1: in the corner. Because that seems to be where we're
Speaker 1: heading in terms of economy travel. I'm wondering is there
Speaker 1: any pushed back by consumers at this point with respect
Speaker 1: to the comfort of the seats that they have, or
Speaker 1: is it entirely a cost basis um. You know, for
Speaker 1: the people whose primary concern is the cost of flying, um,
Speaker 1: you know, they will buy the basic economy seats, which
Speaker 1: doesn't always translate to less leg room. It's just less,
Speaker 1: you know, addition all things that are included in the
Speaker 1: fair UM, and people continue to fly on Spirit Air,
Speaker 1: which you know has a very little leg room. UM.
Speaker 1: It just depends on what you value when you fly,
Speaker 1: and certainly if you value more leg room, that option
Speaker 1: is available for you on all the big carriers. You know,
Speaker 1: they have sections that have more leg room cost you more.
Speaker 1: But if that's what's important to you, then you know
Speaker 1: they seem to be having a lot of success with it.
Speaker 1: Mary Schlangenstein lang in Stein, thank you so much for
Speaker 1: being with us. Mary s Langenstein, us airlines reporter for
Speaker 1: Bloomberg News, joining us on the phone from Dallas. I
Speaker 1: have to say I've flown Spirit and I will say, um, well,
Speaker 1: I mean you have to pay for for absolutely everything.
Speaker 1: Everything's all a cart. Now, everything's all a cart, and
Speaker 1: you have to wonder whether at a certain point it
Speaker 1: all adds up to the same price yeah, absolutely, I'm
Speaker 1: I'm just looking at the airline stock sort of trailing
Speaker 1: twelve months, decidedly mixed again, United down ten percent, America
Speaker 1: down on Delta up seven team. So it's just a
Speaker 1: brutal business. There's kind of a double way I mean
Speaker 1: though here going on, because on one hand you have
Speaker 1: reduced travel because as the spread of the coronavirus. In
Speaker 1: the other hand, you have oil prices coming down, and
Speaker 1: that cap is actually a huge tail wind to the
Speaker 1: airlines because this is one of the biggest expenses. So
Speaker 1: interesting to see how both of this will will affect
Speaker 1: the industry at a time when in general travel is
Speaker 1: getting hit pretty hard. Meanwhile, and markets were looking at
Speaker 1: losses of the really clawing back from earlier declines. We're
Speaker 1: seeing the NASTAC down less than two toenns of a
Speaker 1: percent now, the SMPH down three tons of a percent,
Speaker 1: thirty three thirty six on the SNP, and we're looking
Speaker 1: at the NASTAC seven. Interesting to see how people are
Speaker 1: interpreting the signs of whether the FED will cut or not.
Speaker 1: After they released this report saying they're worried about the coronavirus,
Speaker 1: people now saying, oh, maybe they'll just cut rates a
Speaker 1: couple of times. Yeah. Absolutely, And you mentioned fuel as
Speaker 1: it relates to the airlines. Looking at w t I
Speaker 1: crewd here fifty dollars sixty seven cents barrel. Here. We
Speaker 1: broke below fifty a couple of days ago, So oil
Speaker 1: down on lower global demand expectations. Yeah, and just a
Speaker 1: few weeks ago it was treading above sixty three dollars
Speaker 1: a barrel at the beginning of the year, So down
Speaker 1: dollars so far this year. And Lisa bramwe's with Paul Sweeney.
Speaker 1: This is Bloomberg Markets. Thanks for listening to the Bloomberg
Speaker 1: pen L podcast. You can subscribe and listen to interviews
Speaker 1: at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney,
Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa abram Woyit's
Speaker 1: I'm on Twitter at Lisa abram woits one before the podcast.
Speaker 1: You can always catch us worldwide on Bloomberg Radio.