WEBVTT - Deep Dive: US Airlines

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<v Speaker 1>Bloomberg Audio Studios podcasts, radio news, The.

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<v Speaker 2>Stock Movers podcast, your roundup of companies making moves in

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<v Speaker 2>the stock market, harnessing the power of Bloomberg Data.

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<v Speaker 3>I'm Lise Matteo alongside Paul Sweeney. United Airline now it

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<v Speaker 3>it's profit range for the rest of the year, but

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<v Speaker 3>they do expect travel demand to continue to rise. Now

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<v Speaker 3>CEO Scott Kirby, he sat down with Bloomberg's Lisa Brahmins

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<v Speaker 3>and they talked about United's earnings and also their outlook

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<v Speaker 3>for the rest of twenty twenty five.

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<v Speaker 4>This year, a lot of uncertainty in the first half

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<v Speaker 4>of the year at Macro uncertainty and that led to

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<v Speaker 4>an impact on bookings and demand at United across the

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<v Speaker 4>whole industry. But it felt like there was a turning

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<v Speaker 4>point at the end of June where the tax bill

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<v Speaker 4>passed and the situation in the Middle East was calmer

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<v Speaker 4>and tariffs, while not certain, yet narrowing the range, and

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<v Speaker 4>it really felt like people felt enough confidence or enough

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<v Speaker 4>lower level of uncertainty that they kind of came off

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<v Speaker 4>the sidelines and were unfrozen.

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<v Speaker 2>All right.

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<v Speaker 3>That was United CEO Scott Kirby. Let's bring in the

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<v Speaker 3>expert on all this, George Ferguson. He's Bloomber Intelligence senior Aerospace,

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<v Speaker 3>defense and airlines analysts. George, thanks for joining us. Scott Kirby,

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<v Speaker 3>he seemed pretty confident, did he?

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<v Speaker 1>He does, but I guess he always sounds confident, right.

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<v Speaker 1>I think he's counting on some capacity cuts here in

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<v Speaker 1>the second half, and he talked about some of the

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<v Speaker 1>uncertainty going away, So I think it's a it'll get

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<v Speaker 1>better story. But yeah, too cu for him and for

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<v Speaker 1>Delta didn't look that great.

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<v Speaker 5>George, where's business travel today?

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<v Speaker 1>I'd like to tell you what the airlines try to

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<v Speaker 1>hide that, but you know, everything we can parse out

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<v Speaker 1>of sort of Delta and United earnings makes it sound

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<v Speaker 1>like it's lagging the leisure rebound and maybe back to

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<v Speaker 1>twenty nineteen levels, but that would again sort of still

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<v Speaker 1>be lagging. And so the sense I get is that

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<v Speaker 1>it hasn't come back as strongly as leisure, and these

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<v Speaker 1>airlines are more pointing to high end leisure as the

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<v Speaker 1>driver of their of their profitability.

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<v Speaker 4>George.

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<v Speaker 3>I have to point out Newark Airport because I'm a

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<v Speaker 3>frequent visitor. There are a lot of issues there right

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<v Speaker 3>construction Newark Liberty, there were outages, delays. When they asked,

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<v Speaker 3>you know, Scott Kirby about it, he said he was

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<v Speaker 3>kind of, you know, optimistic about it, but he also

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<v Speaker 3>pointed out JFK would love to get in there. Has

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<v Speaker 3>this been kind of a sticking point for United Newark for.

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<v Speaker 1>Sure, right because Newark they've got a strong concentration of

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<v Speaker 1>flights out of there. You know, he started the call,

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<v Speaker 1>and you know, he was sort of alluding what was going

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<v Speaker 1>on at Newark Airport, and so, you know, I think

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<v Speaker 1>it's I think we're starting to put behind us the

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<v Speaker 1>FAA problems, but Newark is always a challenging airport. It

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<v Speaker 1>has a lot of activity, you know, he said, the

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<v Speaker 1>FAA and the constituents there have gotten real about the

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<v Speaker 1>amount of throughput they could put around Newark. That would

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<v Speaker 1>be good because essentially Newark suffers from a whole lot

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<v Speaker 1>of throughput that's trying to get through that airport. And

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<v Speaker 1>then you get in the middle of summer and you

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<v Speaker 1>just have these weather events thunderstorms, which we've been having

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<v Speaker 1>i think every day now in New Jersey, which sort

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<v Speaker 1>of royal the whole deal. So he sounded optimistic that

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<v Speaker 1>they've got a lot of the fix in place for

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<v Speaker 1>the airport.

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<v Speaker 5>George Ware, are we on air traffic controllers? I mean, now,

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<v Speaker 5>hard can this be? To staff this whole system up here?

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<v Speaker 5>I just don't get it.

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<v Speaker 1>Yeah, So, I mean, it just takes a long time

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<v Speaker 1>to train in air traffic control, longer than I would

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<v Speaker 1>have expected. I mean, the last numbers I've heard were

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<v Speaker 1>sort of over over a year. I think, I want

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<v Speaker 1>to say it was like a year and a half,

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<v Speaker 1>but I have to go back and check my numbers

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<v Speaker 1>exactly on that one. You know, during the pandemic, you know,

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<v Speaker 1>we had people that probably not too jazzed about entering

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<v Speaker 1>that business because it was one of those where you

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<v Speaker 1>couldn't work from home. I think that worked from home

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<v Speaker 1>world is fading a bit now. But back again, during

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<v Speaker 1>the pandemic, it didn't seem that exciting. And I think

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<v Speaker 1>it has the problem that every other industry in America,

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<v Speaker 1>especially the older industries have, and that is there's a

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<v Speaker 1>bunch of baby boomers inside it. They're approaching retirement and

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<v Speaker 1>actively retiring at this point, and the backfill. Again, it's

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<v Speaker 1>not the most exciting industry. I guess to go into

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<v Speaker 1>the backfill has been harder. Recruitment has been harder, and

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<v Speaker 1>when you get behind the recruitment and training takes a

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<v Speaker 1>certain amount of time, it takes a while to fill.

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<v Speaker 1>And so we're still in that attempt to refill phase again.

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<v Speaker 1>I think it's getting better as the economy, maybe as

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<v Speaker 1>some of the labor market is not as white hot

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<v Speaker 1>as it was coming out of the pandemic. But we're

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<v Speaker 1>still behind the curve a bit, all right.

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<v Speaker 3>So we heard from United, We've also heard from Delta.

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<v Speaker 3>You know all the numbers, But for me, what does

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<v Speaker 3>it mean for airline fares? Am I gonna have to

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<v Speaker 3>pay more for a ticket coming out? You know?

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<v Speaker 1>I think that there's going to be a stabilization affairs here.

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<v Speaker 1>But when we look at the second half, we see

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<v Speaker 1>capacity growth coming down. We still see capacity growth though,

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<v Speaker 1>and I think we've seen it sort of around GDP,

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<v Speaker 1>and we kind of think that around GDP levels of

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<v Speaker 1>capacity growth doesn't firmfares and it doesn't cut fares, and

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<v Speaker 1>so I think you've seen some cuts recently. I think

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<v Speaker 1>you'll see this level of fair going through the back

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<v Speaker 1>half of the year unless airlines cut more capacity, which

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<v Speaker 1>would help them firmfares a bit more, but again, we

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<v Speaker 1>see growth that's right around GDP growth, and so it

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<v Speaker 1>doesn't look to me like a scenario where you're going

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<v Speaker 1>to see strong growth in fares for the airlines.

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<v Speaker 5>George can't let you go without talking about Boeing because

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<v Speaker 5>for me, it's just kind of my quintessential great American company,

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<v Speaker 5>great engineering company, great manufacturing company, Seattle, Washington, won great

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<v Speaker 5>parts of the of the United States. Where are they

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<v Speaker 5>with their seven thirty seven deliverables? Because you've told us

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<v Speaker 5>time and time again over the years that that's really

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<v Speaker 5>a key metric for this company.

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<v Speaker 2>Yeah.

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<v Speaker 1>So I think one of the great other American companies

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<v Speaker 1>gave us a little bit of insight this morning, and

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<v Speaker 1>that was GE. Right, and GE supplies the engines to Boeing,

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<v Speaker 1>and GE kind of guided down a bit on margins

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<v Speaker 1>for the back half of the year here, I mean

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<v Speaker 1>guided down like they're nice. Their commercial businesses are like

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<v Speaker 1>operating margins in the high twenties, right, which is really

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<v Speaker 1>super and they guided down to sort of mid twenties.

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<v Speaker 1>And that's a function of getting new engine deliveries into

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<v Speaker 1>Boeing engines for the triple seven engines, for seven thirty seven.

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<v Speaker 1>Boeing has done a better job of delivering. That's all

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<v Speaker 1>about how they're going to win, and from what I

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<v Speaker 1>heard from Ge today, that's going to persist through the

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<v Speaker 1>back half of the of the year, which is I

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<v Speaker 1>think a strong positive for Boeing. Again, a little bit

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<v Speaker 1>of an eb for Ge, but a strong positive for Boeing.

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<v Speaker 5>George, thanks so much, appreciate it as always. George Ferguson,

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<v Speaker 5>Senior Aerospace, Defense and Airlines analysts for Bloomberg Intelligence. All right,

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<v Speaker 5>lista a big question for you, and this is going

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<v Speaker 5>to tell me a lot about who you are as

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<v Speaker 5>a person. Oh, boy Isle or window seat on the plane.

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<v Speaker 3>Oh, I'll me too, Yes, no, because I know. But

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<v Speaker 3>then if people have to get up and go to

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<v Speaker 3>the bathroom, back and forth, that's kind of a pain.

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<v Speaker 2>But yeah. The Stock Movers podcast from Bloomberg Radio. Check

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