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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Let's switch to the airline industry. We heard from Delta

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Speaker 2: Airlines today. They gave a better than expected forecast and

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Speaker 2: that's despite saying, hey, they took a four hundred million

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Speaker 2: dollars of increased fuel charge in the month of March,

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Speaker 2: reflecting what's going on in the world. So let's check

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Speaker 2: in with somebody who follows this stuff. Sid Phillip Bloomberg,

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Speaker 2: chief correspondent for Global Aviation Joint. Just here, what did

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Speaker 2: we learned from from Delta today, said Morning Polt.

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Speaker 3: So, Delta Airlines is talking about how they've managed to

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Speaker 3: raise their ticket prices and that sort of helped them

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Speaker 3: offset the increase in jet fuel prices. I mean, we've

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Speaker 3: seen jet field prices so almost double more than bubble

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Speaker 3: since the war and Iran began, and that's really the

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Speaker 3: biggest chunk of costs for airlines. And what airlines are

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Speaker 3: talking about is saying that they've managed to pass on

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Speaker 3: those cost increases to the customers in the form of

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Speaker 3: higher ticket prices, and that's really helped them sort of

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Speaker 3: continue to weather the crisis and be able to sort

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Speaker 3: of manage a ramp up bookings. I mean, Delta talked

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Speaker 3: about how in the last in the last since the

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Speaker 3: war began, they've had five of their ten biggest sale days,

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Speaker 3: and that sort of really shows that consumers are sort

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Speaker 3: of locking in their travel at the moment.

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Speaker 4: That's great if you have the pricing power like a

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Speaker 4: Delta Airlines, but what if you are a discount carrier

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Speaker 4: that relies on low ticket prices to get your passengers,

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Speaker 4: to get consumers to sign up. I mean, it's a

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Speaker 4: different story, isn't it.

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Speaker 5: It is?

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Speaker 3: And so Delta Airlines obviously has a predominance of premium

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Speaker 3: heavy travelers, so they sort of talk about how they're

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Speaker 3: targeting businesses and corporate travel, which is sort of continue

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Speaker 3: to see growth. They're also talking about how premium leisure

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Speaker 3: travelers are continuing to buy tickets, but at the lower

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Speaker 3: end of the spectrum, I mean, the Spirit Airlines and

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Speaker 3: the others they might see their consumers that have balk

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Speaker 3: at higher ticket prices and they may put off those trips.

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Speaker 3: Although we are sort of seeing Jet Blue. We heard

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Speaker 3: from Jet Blue earlier today and they talked about how

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Speaker 3: they are also seeing people continuing to book. So it

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Speaker 3: does look like consumers are trying to sort of get

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Speaker 3: ahead of future price increases by locking in travel for

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Speaker 3: the summer and the rest of the year early.

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Speaker 2: So what's about the visibility. What are the airlines saying

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Speaker 2: about the visibility of their bookings. I mean, that's also

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Speaker 2: a metric that I know kind of gives you a

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Speaker 2: sense of how confident they are in their business.

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Speaker 3: So at the moment, the airlines say that the bookings

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Speaker 3: look visibly healthy, at the other end of the spectrum,

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Speaker 3: I mean, they're still talking about how they're not quite

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Speaker 3: sure where jet fuel prices will settle, and that's sort

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Speaker 3: of really key in terms of bookings as well as

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Speaker 3: the jet fuel prices. So that's sort of those two

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Speaker 3: things go hand in hand and determine how profitable the

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Speaker 3: airlines will be, because remember, if they're able to sort

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Speaker 3: of pass on higher ticket prices, but jet fuel prices

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Speaker 3: continue to grow higher than those ticket prices, that's when

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Speaker 3: the airlines start feeling the pain because then sort of

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Speaker 3: not being able to keep up with their costs. On

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Speaker 3: the other hand, if they can sort of dick the

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Speaker 3: higher prices and see costs come down, that'll sort of

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Speaker 3: help them boost their profitability.

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Speaker 4: So one thing that you and your colleagues point out

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Speaker 4: and your reporting is that US carriers, unlike those in Europe, don't.

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Speaker 6: Hedge fuel prices.

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Speaker 4: Once upon a time, some of them did, but most

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Speaker 4: of them don't anymore. Why the change And do you

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Speaker 4: think that because of what we're seeing in around, because

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Speaker 4: of what we're seeing with the volatility the uncertainty around

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Speaker 4: oil prices, that airlines might start to hedge those fuel

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Speaker 4: prices again.

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Speaker 3: So the airlines have typically not hedge. I mean, famously,

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Speaker 3: during COVID, a lot of airlines got stuck with hedges

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Speaker 3: that were sort of in the wrong direction when jet

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Speaker 3: field prices crashed, when demand plummeted, and so at at

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Speaker 3: the moment, we haven't yet heard from airlines talking about

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Speaker 3: returning to the hedging policies. But Delta does point out

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Speaker 3: that they own a refinery and that gives them somewhat

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Speaker 3: of a natural hedge, and essentially they expect that to

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Speaker 3: help them whether the increase in jet field prices.

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Speaker 2: He said, what are the airlines saying about the state

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Speaker 2: of TSA today? A lot of We've seen a lot

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Speaker 2: of stories, a lot of video plasts a week or

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Speaker 2: so of really long lines at airports. Do they have

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Speaker 2: an opinion on how this might play out?

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Speaker 3: I mean, the airlines, including the industry groups that Airlines

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Speaker 3: for America has been talking about how there needs to

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Speaker 3: be a deal that would basically allow DSA staff to

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Speaker 3: get paid and basically start reducing those lines, because essentially

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Speaker 3: the problem is that while it's not a safety or

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Speaker 3: flight issue like the previous shutdown when the FAA had

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Speaker 3: to sort of cancel flights into forty airports because of

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Speaker 3: concerns about safety, this time it is sort of affecting

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Speaker 3: the comfort of passengers and causing those long life we've

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Speaker 3: seen in various airports acrowns the country, And essentially the

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Speaker 3: airlines have been saying that this will get worse as

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Speaker 3: we get into the peak summer travel season, and so

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Speaker 3: they're hoping for early resolution and a return to somewhat

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Speaker 3: normal as they go into the busy travel peaks.

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Speaker 4: Yeah, speaking of the busy travel season, of the summer.

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Speaker 4: Also at this conference, a lot of industry executives were

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Speaker 4: making the point that if the strait of her moves

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Speaker 4: were not secured by Memorial Day, that would be a

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Speaker 4: key timeframe in which consumers might start to see ticket

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Speaker 4: prices really go up even more than perhaps they already have.

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Speaker 3: Exactly that would sort of take the long That would

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Speaker 3: basically mean that higher fuel prices are here to stay

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Speaker 3: for the slightly longer term, or we're not really sure

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Speaker 3: when those fuel prices start coming down, and that's when

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Speaker 3: consumers will.

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Speaker 5: Say, Hey, do I.

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Speaker 3: Really need to take three trips? Maybe I can just

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Speaker 3: do with two, or I can sort of not fly

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Speaker 3: at all the summer.

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Speaker 6: Stay with us. More from bloomberk Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube

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Speaker 1: through some.

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Speaker 2: Other company news here Today, our friends at Craft Hindes

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Speaker 2: they were going to.

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Speaker 6: Split up, right, Yeah, but now they called it off. Yeah,

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Speaker 6: they called it off.

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Speaker 2: This They have a new CEO and I think he

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Speaker 2: feels like can invest in some of these brands and

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Speaker 2: drive growth that way, which is a different strategy than

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Speaker 2: what we've seen from some other consumer products companies, because,

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Speaker 2: let's face it, they're under pressure here. I think a

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Speaker 2: lot of people like me are have traded down, our

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Speaker 2: trading down some of the store brand, the private label brands,

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Speaker 2: private label brands. That's putting pressure on some of those

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Speaker 2: brands that they've spent generations trying to create these brand

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Speaker 2: values through advertising in other ways. Christina Peterson joins US

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Speaker 2: food industry reporter for Bloomberg News. Christia talk to us

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Speaker 2: about what's going on at Craft Hines. What's the latest

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Speaker 2: news there.

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Speaker 7: Yeah, as you guys mentioned that they halted their plans

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Speaker 7: to split. Their new CEO, Steve Kaling, is trying a

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Speaker 7: new tactic by investing six hundred million dollars in their

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Speaker 7: research and development. They're marketing, lowering some of their prices,

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Speaker 7: and as part of that effort to restore growth in

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Speaker 7: the company, they are unveiling some new healthier products and

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Speaker 7: some of the brands that have really struggled but are

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Speaker 7: showing some signs of growth. So we are going to

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Speaker 7: be able to purchase a higher protein version of Kraft

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Speaker 7: mac and Cheese later this month, and then in April

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Speaker 7: they are unveiling a pre sun lower sugar hydration beverage

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Speaker 7: and a snack sized version of Lunchables. So these are

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Speaker 7: some of the brands that craft Higns has been weighed

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Speaker 7: down by. But when they are investing in some money,

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Speaker 7: they've seen a little bit of growth coming into those brands.

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Speaker 4: Okay, adding protein makes sense given the shift among consumers

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Speaker 4: towards more protein packed foods. But isn't the bigger shift

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Speaker 4: about people wanting to avoid food that is seen as

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Speaker 4: perhaps not as healthy as fresh food. I mean, we're

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Speaker 4: still talking about packaged goods, right.

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Speaker 7: Yeah, I mean I think that is the sort of

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Speaker 7: inherent risk here. I asked the CEO about this, and

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Speaker 7: he said he thinks people are leaving the center aisles

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Speaker 7: of the store where you buy package food because they

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Speaker 7: want better for you options, and that as a packaged

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Speaker 7: food company, what they can do is try and do

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Speaker 7: better for you through a shorter ingredient list what food

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Speaker 7: companies called clean labels, by adding more of these kind

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Speaker 7: of trendy macronutrients, leaning into protein, leaning into fiber, but

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Speaker 7: You're right, no one's going to confuse this for Kale.

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Speaker 7: So they're betting that there are times when convenience and

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Speaker 7: taste will win over consumers.

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Speaker 2: That's the only thing that drives me. I don't know

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Speaker 2: what they're talking about here, but I understand.

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Speaker 7: You're all Kale all the time.

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Speaker 2: Oh yeah, exactly, Christina. What's the specifically for Craft Highs.

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Speaker 2: I mean a lot other companies in the package goods

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Speaker 2: industries have pursued separation plans. Is there a sense within

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Speaker 2: the industry whether that's a good strategy not a good strategy.

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Speaker 2: Maybe Craft finds things they can be a little bit

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Speaker 2: smarter about it.

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Speaker 7: I think that there was a general agreement that splitting

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Speaker 7: Craft Hinds into two separate companies at that moment in

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Speaker 7: time did not actually make a lot of sense because

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Speaker 7: both halves were seen as somewhat weak. If you had

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Speaker 7: one company that was doing really well and one half

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Speaker 7: of the company that was struggling, then you could siphon

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Speaker 7: that off and protect the stronger half. But in this instance,

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Speaker 7: I think people thought it did make sense to pump

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Speaker 7: the brakes on that and see if you could restore

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Speaker 7: growth and at least part of the company before splitting

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Speaker 7: them apart. So even if you know Oscar Meyer Meets

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Speaker 7: or Maxwell Hoouse Coffee can't be restored, maybe some of

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Speaker 7: the other parts of the business can be. And then

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Speaker 7: if they were to pursue a sale down the road,

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Speaker 7: a split down the road, that would make more sense.

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Speaker 7: So just trying to like bring the company back to

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Speaker 7: life before you auction it off.

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Speaker 4: Well, you mentioned a couple of brands there, mac and

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Speaker 4: Cheese being something that Craft Times is willing to invest in.

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Speaker 4: The Lunchible's brand is also something that they're kind of

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Speaker 4: beefing up, and Caprice Son as well, which I think

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Speaker 4: we all remember from packing our kids lunchboxes and having

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Speaker 4: them ourselves, but also the other brands within its portfolio,

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Speaker 4: including Maxwell Hooll's Coffee and Oscar Meyer Delli Needs. Like

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Speaker 4: those are things that has a company largely given up

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Speaker 4: on it and if they're not going to refresh those.

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Speaker 6: Does that mean that they are for sale? For sure?

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Speaker 7: They have said that they will invest in order to

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Speaker 7: protect their market share, but they are not as far

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Speaker 7: as we know now, thinking a lot of resources in

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Speaker 7: to get new consumers there to grow their market share.

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Speaker 7: The CEO has said that he would not rule anything

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Speaker 7: out in terms of a sale or divestment, and they

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Speaker 7: are you in the portfolio kind of broadly speaking, to

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Speaker 7: see what works and what isn't working. He said they're

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Speaker 7: not actively engaged and looking for buyers for those brands,

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Speaker 7: but that they would not rule anything out.

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Speaker 2: What's the market's feedback on this new CEO or has

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Speaker 2: been there's too soon to really hear anything.

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Speaker 7: Well, you know, it's a tricky time. Shares of craft

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Speaker 7: higns have been down since the split was paused, but

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Speaker 7: it's also been a tough time for the food industry.

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Speaker 7: Just in general. Consumers are strapped. The conflict in the

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Speaker 7: Middle East has sent oil prices rising. There are concerns

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Speaker 7: that that will stress already strapped consumers out further. In general,

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Speaker 7: the large food companies have been selling less food, so

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Speaker 7: there is just concern broadly in the market. So I

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Speaker 7: think people are willing to give Steve Kaylene a shot.

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Speaker 7: And in general, you know, he is not highly of

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Speaker 7: He presided over the split of Kellogg, so I think

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Speaker 7: there was initially an expectation that he do the same

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Speaker 7: with Kraft Times. I think people are interested to see

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Speaker 7: if his gamble works but there is some skepticism that

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Speaker 7: these are the brands that will be able to be

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Speaker 7: perceived as better for you. That seems a little.

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Speaker 5: Make a little bit of a lift.

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Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am. He's done on Apple, Cocklay, and

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Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand

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Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

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Speaker 2: A little m and a trade on the tape here Today,

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Speaker 2: the MasterCard will acquire the stable point infrastructure startup bv

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Speaker 2: NK for as much as one point eight billion dollars.

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Speaker 2: Have no idea what that is, so I'm going to

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Speaker 2: go to somebody who does. Catherine Chiglinsky, US finance team

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Speaker 2: leader for Bloomberg News, joining us Lacker in our Bloomberg

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Speaker 2: Interactive Brokers studio. Katherine, what is MasterCard buying? What is

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Speaker 2: bv nk.

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Speaker 8: Well, it really does a lot of the stable coin infrastructure,

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Speaker 8: So I think that's been a huge bet for them.

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Speaker 8: Right Like MasterCard and its rival Visa have long dominated

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Speaker 8: the payment infrastructure world, and this deal with bvank and MasterCard.

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Speaker 8: I think really just allows MasterCard to actually boost its

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Speaker 8: sort of digital payments operation without actually having to build

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Speaker 8: the truct some of the technology itself, which I think

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Speaker 8: is a real boon for it.

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Speaker 4: There's also, you know, kind of this strategy that MasterCard

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Speaker 4: has taken over the last few weeks, few months, because

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Speaker 4: earlier this month they launched a what they call a

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Speaker 4: global partnership network with a whole bunch of digital asset

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Speaker 4: crypto related firms for more collaboration. It sounds like, you know,

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Speaker 4: they're moving in that direction, but I don't know what

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Speaker 4: it really means in terms of what changes for consumers.

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Speaker 8: Yeah, well, I don't think a ton will change for consumers,

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Speaker 8: because I think MasterCard is still very much wedded to

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Speaker 8: the idea that like regular payments are its bread and butter.

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Speaker 8: I do think, though, that they want to be a

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Speaker 8: player in all these different markets, and especially as we

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Speaker 8: see the adoptions of digital currencies increase, you know, I

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Speaker 8: think they want to have at least the back end

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Speaker 8: so that they can handle a lot of that. So

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Speaker 8: I think those partnerships and this BV and K deal

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Speaker 8: really are helping them sort of toggle both end so

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Speaker 8: that they can get bigger with the growing market and

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Speaker 8: have that technology ready so that as it continues to

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Speaker 8: grow and they can really seize on it.

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Speaker 2: You know, when I first started learning about fintech, one

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Speaker 2: analyst said, just buy Visa, Mastercret. I mean, no matter

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Speaker 2: what the technology is, it's going to flow on their

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Speaker 2: platforms to some degree. How is that playing out? How

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Speaker 2: is how are our mass card en Visa and maybe

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Speaker 2: even A. Do they feel like they're participating in this

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Speaker 2: transition to financial technology and digital in many ways?

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Speaker 8: Yes, Like I do think that they have been, you know,

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Speaker 8: seeking different ways to get there, to establish footholds in

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Speaker 8: these markets. In other ways, you are still seeing deals

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Speaker 8: like you're still seeing them by BV and K. I

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Speaker 8: think there is still room for them to grow. But

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Speaker 8: in the end, yes, will they find a way to

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Speaker 8: sort of have their how have their fingers in all

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Speaker 8: these different markets? I one hundred percent belief, so just

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Speaker 8: because yeah, it really is this benefit of even if

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Speaker 8: you know most of our markets are still relying on

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Speaker 8: sort of regular payment systems, they want to be you know,

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Speaker 8: intertwined with sort of this digital asset.

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Speaker 4: Push has MasterCard clarified what its M and A strategy is.

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Speaker 4: I mean there's partnerships that it's formed with this you

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Speaker 4: know network, this global partnership network that it announced, and

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Speaker 4: then there's actual M and A. At what point do

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Speaker 4: they buy something wholesale versus just form a partnership.

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Speaker 8: Yeah, well, I think there's a careful divide obviously. I

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Speaker 8: think it has a lot has to do with price

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Speaker 8: these days for these assets, especially when you think about

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Speaker 8: how hyped up sort of the digital asset space is.

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Speaker 8: So I assume, you know, like many companies are going

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Speaker 8: to be pretty careful about exactly which ones they buy

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Speaker 8: and which ones they partner with. You know, I think

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Speaker 8: some of their partnerships have also been really to expand

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Speaker 8: it widely. And I think but with like BV and K,

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Speaker 8: I think they're getting you know, specific data infrastructure that's

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Speaker 8: going to help sort of beef up their back end.

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Speaker 2: Well, it's the stock prices performed just about in lockstep

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Speaker 2: Visa and MasterCard over the trailing five years on a

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Speaker 2: compounded annual basis, their stocks up about seven percent per year.

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Speaker 5: Both of them.

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Speaker 2: But that's laggings and people that's our thirteen percent, So

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Speaker 2: a little bit of an issue there. Performing kind of

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Speaker 2: in lockstep with each other. Catherine, thank you so much.

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Speaker 1: Appreciate that.

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Speaker 2: Kathryn Chiglinsky, US Finance team leader, Bloomberg News talk to

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Speaker 2: us about MasterCard buying in a little bit more into

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Speaker 2: that fintech space here.

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Speaker 5: Stay with us.

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Speaker 2: More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: We've been following this office market really since the pandemic,

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Speaker 2: as you talk about an industry that was really hit

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Speaker 2: hard by the pandemic and it's still recovering as we

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Speaker 2: think about getting back to the offices, and different companies

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Speaker 2: have different policies, but from a real estate invest perspective,

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Speaker 2: what's the story these days?

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Speaker 5: What's check out?

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Speaker 2: With Jeff Langbam, Senior US RIAT analyst FRO Bloomberg Intelligence. Jeff,

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Speaker 2: I know you guys and your team did some research

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Speaker 2: on kind of the current state of the office market

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Speaker 2: in the US. What did you guys find?

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Speaker 9: Yeah, not just the US, We actually did a survey

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Speaker 9: of cities in the US and Europe and Asia and Australia,

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Speaker 9: and the story was largely the same in all of

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Speaker 9: these major cities, which is, companies want people back in

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Speaker 9: the office and the way to get them back is

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Speaker 9: to offer high quality new space and highly amenditized space

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Speaker 9: and adjacent to transportation. And if you do that, then

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Speaker 9: the people will come. And then the other takeaway, which

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Speaker 9: is interesting I think, is that as of right now,

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Speaker 9: at least so far, employees sitting in office buildings view

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Speaker 9: AI as an expansion opportunity, less so of a and

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Speaker 9: less so a threat to office demand.

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Speaker 4: Okay, that that seems kind of counterintuitive. Explain why that is.

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Speaker 4: Why is it an expansion opportunity?

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Speaker 5: Well, a couple of different reasons.

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Speaker 9: Well, the first, I guess the most obvious, as as

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Speaker 9: it relates to leasing, is all these growing and forming

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Speaker 9: AI companies need someplace to.

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Speaker 5: Have their headquarters.

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Speaker 9: So there was a lot of tech leasing happening in

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Speaker 9: some of these big CDs that is directly related to

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Speaker 9: this AI wave.

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Speaker 5: So that's one thing.

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Speaker 9: But as it relates to the survey itself, you know,

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Speaker 9: a lot of the a lot of the jobs that

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Speaker 9: may be deemed irrelevant from AI or maybe back office.

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Speaker 5: They don't. They don't.

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Speaker 9: They're not the jobs that are sitting in the high

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Speaker 9: rise towers in New York.

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Speaker 5: And London and Hong Kong.

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Speaker 9: And maybe, you know, if companies can find incremental business opportunities,

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Speaker 9: you know, by making themselves more efficient, there's actually a

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Speaker 9: need to expand their space in those types of buildings

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Speaker 9: to take advantage of that opportunity, even if it does

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Speaker 9: mean some job redundancy elsewhere.

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Speaker 2: Jeff, I think I know an A quality office building

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Speaker 2: when I see on simply because I work in an

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Speaker 2: A plus quality building here. Bloomberg seven thirty one les

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Speaker 2: what percentage of the inventory office inventory in the US

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Speaker 2: would you say is a quality?

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Speaker 5: It's pretty low.

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Speaker 9: And what's interesting is there is such a need for

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Speaker 9: more of it that even though there are a lot

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Speaker 9: of empty or mostly empty older office buildings, there is

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Speaker 9: now new building new construction starting to come out of

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Speaker 9: the ground and being earmarked for new construction coming out

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Speaker 9: of the ground. And because there's no big blocks of

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Speaker 9: available high end new space, and you know, we've got

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Speaker 9: a couple of new buildings that are getting ready to

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Speaker 9: start in New York and you know, you look back

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Speaker 9: at two years or so ago, and that would have

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Speaker 9: been crazy. Nobody would have thought that was that was possible.

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Speaker 9: But that's where we are because there's just not the

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Speaker 9: space that people want to lease.

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Speaker 5: There is no availability, all right.

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Speaker 2: So let's say like eighty percent is B and C.

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Speaker 2: What happens all that stuff in every city?

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Speaker 9: Well, the hope is that a lot of it turns

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Speaker 9: to residential and there is some of that, and there's

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Speaker 9: increasingly more of that, but that's going to be a

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Speaker 9: slow burn and and you know, it's going to take

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Speaker 9: time for those buildings to convert, but as they do,

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Speaker 9: that reduces inventory of office which is helpful and also

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Speaker 9: helps ease the housing affordability and lack of availability crisis

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Speaker 9: in some of these cities. So that's that's one thing

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Speaker 9: that will take, you know years. The other thing is that,

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Speaker 9: you know, knock one down and build a new office building.

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Speaker 9: You know, we're going to see some of that over

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Speaker 9: the next couple of years as well.

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Speaker 4: Wouldn't it be easier to turn those B or C

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Speaker 4: grade office buildings into A grade office buildings? I mean,

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Speaker 4: assuming you have the location, you kind of got, you know,

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Speaker 4: share out the interior and rebuild it.

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Speaker 9: Yeah, so obviously the location is is paramount, but you know,

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Speaker 9: depending on what age building you're talking about, the ability

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Speaker 9: to retrofit to what is really required now for a

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Speaker 9: high end, high tech, environmentally friendly, you know, all of

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Speaker 9: those things. I mean, it's it's an expensive proposition and

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Speaker 9: in some cases just structurally challenging to do. And in fact,

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Speaker 9: you know, if you're if you've got a building that's

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Speaker 9: largely vacant and you can get it cheap enough, you

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Speaker 9: probably are buying it for effectively the land cost anyway,

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Speaker 9: and so knocking it down, you know, really ends up

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Speaker 9: being probably cheaper and easier in some ways than entirely

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Speaker 9: retrofitting it.

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