WEBVTT - Delta Airlines More Upbeat for First Quarter Amid March Bookings 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.920 --> 0:00:27.280 Let's switch to the airline industry. We heard from Delta 0:00:27.320 --> 0:00:30.480 Airlines today. They gave a better than expected forecast and 0:00:30.560 --> 0:00:33.320 that's despite saying, hey, they took a four hundred million 0:00:33.360 --> 0:00:36.240 dollars of increased fuel charge in the month of March, 0:00:36.280 --> 0:00:39.120 reflecting what's going on in the world. So let's check 0:00:39.159 --> 0:00:41.599 in with somebody who follows this stuff. Sid Phillip Bloomberg, 0:00:41.640 --> 0:00:44.960 chief correspondent for Global Aviation Joint. Just here, what did 0:00:45.000 --> 0:00:48.520 we learned from from Delta today, said Morning Polt. 0:00:48.520 --> 0:00:51.479 So, Delta Airlines is talking about how they've managed to 0:00:51.560 --> 0:00:54.120 raise their ticket prices and that sort of helped them 0:00:54.160 --> 0:00:57.160 offset the increase in jet fuel prices. I mean, we've 0:00:57.200 --> 0:01:00.360 seen jet field prices so almost double more than bubble 0:01:00.720 --> 0:01:03.320 since the war and Iran began, and that's really the 0:01:03.400 --> 0:01:06.840 biggest chunk of costs for airlines. And what airlines are 0:01:06.840 --> 0:01:09.400 talking about is saying that they've managed to pass on 0:01:09.440 --> 0:01:11.680 those cost increases to the customers in the form of 0:01:11.760 --> 0:01:14.600 higher ticket prices, and that's really helped them sort of 0:01:15.000 --> 0:01:18.080 continue to weather the crisis and be able to sort 0:01:18.080 --> 0:01:22.559 of manage a ramp up bookings. I mean, Delta talked 0:01:22.560 --> 0:01:25.880 about how in the last in the last since the 0:01:25.920 --> 0:01:29.960 war began, they've had five of their ten biggest sale days, 0:01:30.200 --> 0:01:32.640 and that sort of really shows that consumers are sort 0:01:32.640 --> 0:01:34.479 of locking in their travel at the moment. 0:01:35.280 --> 0:01:37.200 That's great if you have the pricing power like a 0:01:37.240 --> 0:01:40.880 Delta Airlines, but what if you are a discount carrier 0:01:40.920 --> 0:01:45.360 that relies on low ticket prices to get your passengers, 0:01:45.360 --> 0:01:47.280 to get consumers to sign up. I mean, it's a 0:01:47.280 --> 0:01:49.160 different story, isn't it. 0:01:49.160 --> 0:01:49.520 It is? 0:01:49.600 --> 0:01:53.920 And so Delta Airlines obviously has a predominance of premium 0:01:54.000 --> 0:01:56.760 heavy travelers, so they sort of talk about how they're 0:01:56.760 --> 0:01:59.960 targeting businesses and corporate travel, which is sort of continue 0:02:00.240 --> 0:02:03.559 to see growth. They're also talking about how premium leisure 0:02:03.560 --> 0:02:06.800 travelers are continuing to buy tickets, but at the lower 0:02:06.880 --> 0:02:08.880 end of the spectrum, I mean, the Spirit Airlines and 0:02:08.919 --> 0:02:12.000 the others they might see their consumers that have balk 0:02:12.040 --> 0:02:14.760 at higher ticket prices and they may put off those trips. 0:02:15.000 --> 0:02:17.600 Although we are sort of seeing Jet Blue. We heard 0:02:17.600 --> 0:02:19.679 from Jet Blue earlier today and they talked about how 0:02:20.080 --> 0:02:23.160 they are also seeing people continuing to book. So it 0:02:23.200 --> 0:02:26.160 does look like consumers are trying to sort of get 0:02:26.200 --> 0:02:29.960 ahead of future price increases by locking in travel for 0:02:30.040 --> 0:02:31.919 the summer and the rest of the year early. 0:02:32.919 --> 0:02:36.919 So what's about the visibility. What are the airlines saying 0:02:36.919 --> 0:02:40.480 about the visibility of their bookings. I mean, that's also 0:02:40.720 --> 0:02:42.440 a metric that I know kind of gives you a 0:02:42.480 --> 0:02:44.440 sense of how confident they are in their business. 0:02:45.200 --> 0:02:48.120 So at the moment, the airlines say that the bookings 0:02:48.160 --> 0:02:51.639 look visibly healthy, at the other end of the spectrum, 0:02:51.680 --> 0:02:54.200 I mean, they're still talking about how they're not quite 0:02:54.200 --> 0:02:57.079 sure where jet fuel prices will settle, and that's sort 0:02:57.080 --> 0:02:59.720 of really key in terms of bookings as well as 0:02:59.720 --> 0:03:02.280 the jet fuel prices. So that's sort of those two 0:03:02.280 --> 0:03:05.080 things go hand in hand and determine how profitable the 0:03:05.080 --> 0:03:07.760 airlines will be, because remember, if they're able to sort 0:03:07.760 --> 0:03:11.120 of pass on higher ticket prices, but jet fuel prices 0:03:11.160 --> 0:03:13.760 continue to grow higher than those ticket prices, that's when 0:03:13.800 --> 0:03:15.920 the airlines start feeling the pain because then sort of 0:03:15.960 --> 0:03:18.040 not being able to keep up with their costs. On 0:03:18.080 --> 0:03:19.480 the other hand, if they can sort of dick the 0:03:19.560 --> 0:03:23.760 higher prices and see costs come down, that'll sort of 0:03:23.800 --> 0:03:25.320 help them boost their profitability. 0:03:25.960 --> 0:03:28.280 So one thing that you and your colleagues point out 0:03:28.280 --> 0:03:32.120 and your reporting is that US carriers, unlike those in Europe, don't. 0:03:31.800 --> 0:03:33.639 Hedge fuel prices. 0:03:34.120 --> 0:03:36.480 Once upon a time, some of them did, but most 0:03:36.480 --> 0:03:39.480 of them don't anymore. Why the change And do you 0:03:39.560 --> 0:03:42.640 think that because of what we're seeing in around, because 0:03:42.680 --> 0:03:45.200 of what we're seeing with the volatility the uncertainty around 0:03:45.200 --> 0:03:48.320 oil prices, that airlines might start to hedge those fuel 0:03:48.360 --> 0:03:49.000 prices again. 0:03:50.200 --> 0:03:53.640 So the airlines have typically not hedge. I mean, famously, 0:03:53.720 --> 0:03:56.680 during COVID, a lot of airlines got stuck with hedges 0:03:56.720 --> 0:04:00.320 that were sort of in the wrong direction when jet 0:04:00.320 --> 0:04:04.000 field prices crashed, when demand plummeted, and so at at 0:04:04.000 --> 0:04:06.800 the moment, we haven't yet heard from airlines talking about 0:04:07.200 --> 0:04:10.600 returning to the hedging policies. But Delta does point out 0:04:10.640 --> 0:04:13.680 that they own a refinery and that gives them somewhat 0:04:13.680 --> 0:04:17.359 of a natural hedge, and essentially they expect that to 0:04:17.440 --> 0:04:20.320 help them whether the increase in jet field prices. 0:04:20.680 --> 0:04:23.760 He said, what are the airlines saying about the state 0:04:23.800 --> 0:04:26.080 of TSA today? A lot of We've seen a lot 0:04:26.080 --> 0:04:28.440 of stories, a lot of video plasts a week or 0:04:28.440 --> 0:04:30.560 so of really long lines at airports. Do they have 0:04:30.600 --> 0:04:32.440 an opinion on how this might play out? 0:04:33.040 --> 0:04:35.919 I mean, the airlines, including the industry groups that Airlines 0:04:35.960 --> 0:04:38.000 for America has been talking about how there needs to 0:04:38.000 --> 0:04:41.599 be a deal that would basically allow DSA staff to 0:04:41.600 --> 0:04:45.320 get paid and basically start reducing those lines, because essentially 0:04:45.320 --> 0:04:47.880 the problem is that while it's not a safety or 0:04:47.960 --> 0:04:51.240 flight issue like the previous shutdown when the FAA had 0:04:51.240 --> 0:04:53.920 to sort of cancel flights into forty airports because of 0:04:54.000 --> 0:04:57.279 concerns about safety, this time it is sort of affecting 0:04:57.279 --> 0:05:00.480 the comfort of passengers and causing those long life we've 0:05:00.520 --> 0:05:04.080 seen in various airports acrowns the country, And essentially the 0:05:04.120 --> 0:05:07.080 airlines have been saying that this will get worse as 0:05:07.120 --> 0:05:09.400 we get into the peak summer travel season, and so 0:05:09.400 --> 0:05:13.400 they're hoping for early resolution and a return to somewhat 0:05:13.480 --> 0:05:15.760 normal as they go into the busy travel peaks. 0:05:16.000 --> 0:05:18.880 Yeah, speaking of the busy travel season, of the summer. 0:05:19.720 --> 0:05:22.840 Also at this conference, a lot of industry executives were 0:05:22.839 --> 0:05:24.520 making the point that if the strait of her moves 0:05:24.520 --> 0:05:28.000 were not secured by Memorial Day, that would be a 0:05:28.120 --> 0:05:31.279 key timeframe in which consumers might start to see ticket 0:05:31.279 --> 0:05:34.240 prices really go up even more than perhaps they already have. 0:05:34.920 --> 0:05:37.280 Exactly that would sort of take the long That would 0:05:37.320 --> 0:05:39.680 basically mean that higher fuel prices are here to stay 0:05:39.720 --> 0:05:42.680 for the slightly longer term, or we're not really sure 0:05:42.720 --> 0:05:45.080 when those fuel prices start coming down, and that's when 0:05:45.120 --> 0:05:46.040 consumers will. 0:05:45.920 --> 0:05:46.960 Say, Hey, do I. 0:05:46.920 --> 0:05:49.039 Really need to take three trips? Maybe I can just 0:05:49.080 --> 0:05:51.039 do with two, or I can sort of not fly 0:05:51.080 --> 0:05:51.880 at all the summer. 0:05:53.480 --> 0:05:56.360 Stay with us. More from bloomberk Intelligence coming up after this. 0:06:00.080 --> 0:06:03.719 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:03.800 --> 0:06:06.880 weekdays at ten am Eastern on Apple, Cocklay and Android 0:06:06.880 --> 0:06:10.200 Auto with the Bloomberg Business App. Listen on demand wherever 0:06:10.240 --> 0:06:13.800 you get your podcasts, or watch us live on YouTube 0:06:13.440 --> 0:06:14.720 through some. 0:06:14.760 --> 0:06:17.520 Other company news here Today, our friends at Craft Hindes 0:06:18.640 --> 0:06:19.240 they were going to. 0:06:19.240 --> 0:06:21.800 Split up, right, Yeah, but now they called it off. Yeah, 0:06:21.800 --> 0:06:22.440 they called it off. 0:06:22.440 --> 0:06:23.880 This They have a new CEO and I think he 0:06:23.960 --> 0:06:27.120 feels like can invest in some of these brands and 0:06:27.240 --> 0:06:29.400 drive growth that way, which is a different strategy than 0:06:29.440 --> 0:06:32.159 what we've seen from some other consumer products companies, because, 0:06:32.240 --> 0:06:34.080 let's face it, they're under pressure here. I think a 0:06:34.080 --> 0:06:36.839 lot of people like me are have traded down, our 0:06:36.920 --> 0:06:40.360 trading down some of the store brand, the private label brands, 0:06:40.400 --> 0:06:42.440 private label brands. That's putting pressure on some of those 0:06:42.480 --> 0:06:46.119 brands that they've spent generations trying to create these brand 0:06:46.200 --> 0:06:49.599 values through advertising in other ways. Christina Peterson joins US 0:06:49.640 --> 0:06:53.640 food industry reporter for Bloomberg News. Christia talk to us 0:06:53.640 --> 0:06:55.679 about what's going on at Craft Hines. What's the latest 0:06:55.720 --> 0:06:56.120 news there. 0:06:57.440 --> 0:07:00.359 Yeah, as you guys mentioned that they halted their plans 0:07:00.400 --> 0:07:05.320 to split. Their new CEO, Steve Kaling, is trying a 0:07:05.320 --> 0:07:09.640 new tactic by investing six hundred million dollars in their 0:07:09.680 --> 0:07:13.640 research and development. They're marketing, lowering some of their prices, 0:07:14.200 --> 0:07:16.880 and as part of that effort to restore growth in 0:07:16.920 --> 0:07:20.920 the company, they are unveiling some new healthier products and 0:07:20.960 --> 0:07:23.360 some of the brands that have really struggled but are 0:07:23.480 --> 0:07:27.640 showing some signs of growth. So we are going to 0:07:27.680 --> 0:07:31.280 be able to purchase a higher protein version of Kraft 0:07:31.280 --> 0:07:35.840 mac and Cheese later this month, and then in April 0:07:36.040 --> 0:07:41.960 they are unveiling a pre sun lower sugar hydration beverage 0:07:42.400 --> 0:07:46.120 and a snack sized version of Lunchables. So these are 0:07:46.160 --> 0:07:48.440 some of the brands that craft Higns has been weighed 0:07:48.480 --> 0:07:50.960 down by. But when they are investing in some money, 0:07:51.000 --> 0:07:53.800 they've seen a little bit of growth coming into those brands. 0:07:54.160 --> 0:07:58.200 Okay, adding protein makes sense given the shift among consumers 0:07:58.240 --> 0:08:01.960 towards more protein packed foods. But isn't the bigger shift 0:08:02.000 --> 0:08:05.680 about people wanting to avoid food that is seen as 0:08:05.800 --> 0:08:08.240 perhaps not as healthy as fresh food. I mean, we're 0:08:08.240 --> 0:08:10.280 still talking about packaged goods, right. 0:08:11.280 --> 0:08:13.440 Yeah, I mean I think that is the sort of 0:08:13.440 --> 0:08:18.240 inherent risk here. I asked the CEO about this, and 0:08:18.280 --> 0:08:21.680 he said he thinks people are leaving the center aisles 0:08:21.680 --> 0:08:23.640 of the store where you buy package food because they 0:08:23.720 --> 0:08:27.000 want better for you options, and that as a packaged 0:08:27.000 --> 0:08:28.960 food company, what they can do is try and do 0:08:29.120 --> 0:08:31.840 better for you through a shorter ingredient list what food 0:08:31.840 --> 0:08:35.400 companies called clean labels, by adding more of these kind 0:08:35.400 --> 0:08:39.640 of trendy macronutrients, leaning into protein, leaning into fiber, but 0:08:39.760 --> 0:08:41.959 You're right, no one's going to confuse this for Kale. 0:08:42.440 --> 0:08:45.560 So they're betting that there are times when convenience and 0:08:45.760 --> 0:08:48.320 taste will win over consumers. 0:08:48.880 --> 0:08:50.760 That's the only thing that drives me. I don't know 0:08:50.760 --> 0:08:53.800 what they're talking about here, but I understand. 0:08:53.400 --> 0:08:54.600 You're all Kale all the time. 0:08:54.800 --> 0:09:00.000 Oh yeah, exactly, Christina. What's the specifically for Craft Highs. 0:09:00.240 --> 0:09:02.160 I mean a lot other companies in the package goods 0:09:02.200 --> 0:09:06.840 industries have pursued separation plans. Is there a sense within 0:09:06.920 --> 0:09:09.920 the industry whether that's a good strategy not a good strategy. 0:09:09.960 --> 0:09:12.120 Maybe Craft finds things they can be a little bit 0:09:12.120 --> 0:09:12.760 smarter about it. 0:09:14.440 --> 0:09:17.960 I think that there was a general agreement that splitting 0:09:18.120 --> 0:09:21.280 Craft Hinds into two separate companies at that moment in 0:09:21.320 --> 0:09:23.840 time did not actually make a lot of sense because 0:09:23.920 --> 0:09:28.000 both halves were seen as somewhat weak. If you had 0:09:28.000 --> 0:09:31.520 one company that was doing really well and one half 0:09:31.559 --> 0:09:33.680 of the company that was struggling, then you could siphon 0:09:33.760 --> 0:09:37.840 that off and protect the stronger half. But in this instance, 0:09:37.880 --> 0:09:40.280 I think people thought it did make sense to pump 0:09:40.320 --> 0:09:43.160 the brakes on that and see if you could restore 0:09:43.200 --> 0:09:47.600 growth and at least part of the company before splitting 0:09:47.600 --> 0:09:52.040 them apart. So even if you know Oscar Meyer Meets 0:09:52.440 --> 0:09:55.360 or Maxwell Hoouse Coffee can't be restored, maybe some of 0:09:55.360 --> 0:09:57.319 the other parts of the business can be. And then 0:09:58.040 --> 0:09:59.960 if they were to pursue a sale down the road, 0:10:00.040 --> 0:10:02.600 a split down the road, that would make more sense. 0:10:02.960 --> 0:10:05.280 So just trying to like bring the company back to 0:10:05.360 --> 0:10:07.160 life before you auction it off. 0:10:08.160 --> 0:10:10.480 Well, you mentioned a couple of brands there, mac and 0:10:10.520 --> 0:10:13.480 Cheese being something that Craft Times is willing to invest in. 0:10:14.160 --> 0:10:17.120 The Lunchible's brand is also something that they're kind of 0:10:17.160 --> 0:10:19.719 beefing up, and Caprice Son as well, which I think 0:10:19.760 --> 0:10:22.800 we all remember from packing our kids lunchboxes and having 0:10:22.840 --> 0:10:26.880 them ourselves, but also the other brands within its portfolio, 0:10:27.280 --> 0:10:31.440 including Maxwell Hooll's Coffee and Oscar Meyer Delli Needs. Like 0:10:31.480 --> 0:10:33.960 those are things that has a company largely given up 0:10:33.960 --> 0:10:36.440 on it and if they're not going to refresh those. 0:10:36.480 --> 0:10:38.440 Does that mean that they are for sale? For sure? 0:10:40.080 --> 0:10:43.000 They have said that they will invest in order to 0:10:43.080 --> 0:10:46.200 protect their market share, but they are not as far 0:10:46.240 --> 0:10:49.600 as we know now, thinking a lot of resources in 0:10:49.679 --> 0:10:52.800 to get new consumers there to grow their market share. 0:10:53.360 --> 0:10:55.600 The CEO has said that he would not rule anything 0:10:55.679 --> 0:10:59.640 out in terms of a sale or divestment, and they 0:10:59.640 --> 0:11:02.480 are you in the portfolio kind of broadly speaking, to 0:11:02.520 --> 0:11:04.760 see what works and what isn't working. He said they're 0:11:04.760 --> 0:11:08.720 not actively engaged and looking for buyers for those brands, 0:11:08.720 --> 0:11:10.920 but that they would not rule anything out. 0:11:11.480 --> 0:11:14.080 What's the market's feedback on this new CEO or has 0:11:14.120 --> 0:11:16.360 been there's too soon to really hear anything. 0:11:17.120 --> 0:11:20.439 Well, you know, it's a tricky time. Shares of craft 0:11:20.480 --> 0:11:24.160 higns have been down since the split was paused, but 0:11:24.240 --> 0:11:26.720 it's also been a tough time for the food industry. 0:11:26.800 --> 0:11:29.720 Just in general. Consumers are strapped. The conflict in the 0:11:29.720 --> 0:11:33.079 Middle East has sent oil prices rising. There are concerns 0:11:33.080 --> 0:11:38.400 that that will stress already strapped consumers out further. In general, 0:11:38.520 --> 0:11:43.480 the large food companies have been selling less food, so 0:11:43.880 --> 0:11:48.040 there is just concern broadly in the market. So I 0:11:48.080 --> 0:11:51.440 think people are willing to give Steve Kaylene a shot. 0:11:51.520 --> 0:11:55.040 And in general, you know, he is not highly of 0:11:55.160 --> 0:11:58.000 He presided over the split of Kellogg, so I think 0:11:58.040 --> 0:12:00.800 there was initially an expectation that he do the same 0:12:00.880 --> 0:12:05.000 with Kraft Times. I think people are interested to see 0:12:05.000 --> 0:12:07.839 if his gamble works but there is some skepticism that 0:12:07.880 --> 0:12:11.120 these are the brands that will be able to be 0:12:11.200 --> 0:12:13.440 perceived as better for you. That seems a little. 0:12:15.559 --> 0:12:16.600 Make a little bit of a lift. 0:12:18.240 --> 0:12:21.080 Stay with us. More from Bloomberg Intelligence coming up after this. 0:12:24.440 --> 0:12:28.160 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:28.240 --> 0:12:30.920 weekdays at ten am. He's done on Apple, Cocklay, and 0:12:30.920 --> 0:12:34.200 Android Auto with the Bloomberg Business app. Listen on demand 0:12:34.240 --> 0:12:38.240 wherever you get your podcasts, or watch us live on YouTube. 0:12:38.960 --> 0:12:41.000 A little m and a trade on the tape here Today, 0:12:41.400 --> 0:12:45.640 the MasterCard will acquire the stable point infrastructure startup bv 0:12:45.920 --> 0:12:48.240 NK for as much as one point eight billion dollars. 0:12:48.280 --> 0:12:50.120 Have no idea what that is, so I'm going to 0:12:50.160 --> 0:12:53.320 go to somebody who does. Catherine Chiglinsky, US finance team 0:12:53.400 --> 0:12:55.480 leader for Bloomberg News, joining us Lacker in our Bloomberg 0:12:55.520 --> 0:12:58.960 Interactive Brokers studio. Katherine, what is MasterCard buying? What is 0:12:59.000 --> 0:12:59.640 bv nk. 0:13:00.080 --> 0:13:03.120 Well, it really does a lot of the stable coin infrastructure, 0:13:03.760 --> 0:13:05.640 So I think that's been a huge bet for them. 0:13:05.760 --> 0:13:10.760 Right Like MasterCard and its rival Visa have long dominated 0:13:10.800 --> 0:13:16.400 the payment infrastructure world, and this deal with bvank and MasterCard. 0:13:16.400 --> 0:13:19.520 I think really just allows MasterCard to actually boost its 0:13:19.520 --> 0:13:23.040 sort of digital payments operation without actually having to build 0:13:23.080 --> 0:13:26.199 the truct some of the technology itself, which I think 0:13:26.240 --> 0:13:27.400 is a real boon for it. 0:13:28.120 --> 0:13:31.280 There's also, you know, kind of this strategy that MasterCard 0:13:31.280 --> 0:13:35.080 has taken over the last few weeks, few months, because 0:13:35.080 --> 0:13:37.520 earlier this month they launched a what they call a 0:13:37.559 --> 0:13:41.480 global partnership network with a whole bunch of digital asset 0:13:41.520 --> 0:13:44.760 crypto related firms for more collaboration. It sounds like, you know, 0:13:44.960 --> 0:13:46.880 they're moving in that direction, but I don't know what 0:13:46.920 --> 0:13:50.160 it really means in terms of what changes for consumers. 0:13:50.480 --> 0:13:53.000 Yeah, well, I don't think a ton will change for consumers, 0:13:53.000 --> 0:13:55.600 because I think MasterCard is still very much wedded to 0:13:55.640 --> 0:13:59.400 the idea that like regular payments are its bread and butter. 0:13:59.800 --> 0:14:01.640 I do think, though, that they want to be a 0:14:01.679 --> 0:14:04.360 player in all these different markets, and especially as we 0:14:04.400 --> 0:14:07.240 see the adoptions of digital currencies increase, you know, I 0:14:07.240 --> 0:14:09.360 think they want to have at least the back end 0:14:09.400 --> 0:14:11.120 so that they can handle a lot of that. So 0:14:11.160 --> 0:14:13.720 I think those partnerships and this BV and K deal 0:14:13.840 --> 0:14:16.040 really are helping them sort of toggle both end so 0:14:16.080 --> 0:14:18.880 that they can get bigger with the growing market and 0:14:18.960 --> 0:14:21.520 have that technology ready so that as it continues to 0:14:21.560 --> 0:14:23.280 grow and they can really seize on it. 0:14:23.680 --> 0:14:27.880 You know, when I first started learning about fintech, one 0:14:27.880 --> 0:14:31.160 analyst said, just buy Visa, Mastercret. I mean, no matter 0:14:31.200 --> 0:14:33.760 what the technology is, it's going to flow on their 0:14:33.760 --> 0:14:37.120 platforms to some degree. How is that playing out? How 0:14:37.200 --> 0:14:40.200 is how are our mass card en Visa and maybe 0:14:40.200 --> 0:14:43.840 even A. Do they feel like they're participating in this 0:14:44.080 --> 0:14:47.360 transition to financial technology and digital in many ways? 0:14:47.440 --> 0:14:50.480 Yes, Like I do think that they have been, you know, 0:14:50.680 --> 0:14:54.240 seeking different ways to get there, to establish footholds in 0:14:54.280 --> 0:14:57.440 these markets. In other ways, you are still seeing deals 0:14:57.640 --> 0:15:00.120 like you're still seeing them by BV and K. I 0:15:00.120 --> 0:15:02.960 think there is still room for them to grow. But 0:15:03.320 --> 0:15:05.480 in the end, yes, will they find a way to 0:15:05.640 --> 0:15:08.480 sort of have their how have their fingers in all 0:15:08.480 --> 0:15:11.200 these different markets? I one hundred percent belief, so just 0:15:11.240 --> 0:15:14.800 because yeah, it really is this benefit of even if 0:15:15.000 --> 0:15:17.360 you know most of our markets are still relying on 0:15:17.400 --> 0:15:21.320 sort of regular payment systems, they want to be you know, 0:15:21.720 --> 0:15:23.880 intertwined with sort of this digital asset. 0:15:23.920 --> 0:15:28.440 Push has MasterCard clarified what its M and A strategy is. 0:15:28.480 --> 0:15:31.440 I mean there's partnerships that it's formed with this you 0:15:31.440 --> 0:15:34.920 know network, this global partnership network that it announced, and 0:15:34.920 --> 0:15:37.160 then there's actual M and A. At what point do 0:15:37.240 --> 0:15:40.040 they buy something wholesale versus just form a partnership. 0:15:40.240 --> 0:15:42.680 Yeah, well, I think there's a careful divide obviously. I 0:15:42.720 --> 0:15:44.240 think it has a lot has to do with price 0:15:44.320 --> 0:15:47.200 these days for these assets, especially when you think about 0:15:47.200 --> 0:15:50.160 how hyped up sort of the digital asset space is. 0:15:50.840 --> 0:15:53.160 So I assume, you know, like many companies are going 0:15:53.200 --> 0:15:55.400 to be pretty careful about exactly which ones they buy 0:15:55.440 --> 0:15:57.440 and which ones they partner with. You know, I think 0:15:57.480 --> 0:16:00.920 some of their partnerships have also been really to expand 0:16:00.920 --> 0:16:03.520 it widely. And I think but with like BV and K, 0:16:03.680 --> 0:16:06.640 I think they're getting you know, specific data infrastructure that's 0:16:06.680 --> 0:16:09.960 going to help sort of beef up their back end. 0:16:10.280 --> 0:16:13.440 Well, it's the stock prices performed just about in lockstep 0:16:13.520 --> 0:16:16.480 Visa and MasterCard over the trailing five years on a 0:16:16.480 --> 0:16:20.760 compounded annual basis, their stocks up about seven percent per year. 0:16:20.600 --> 0:16:21.160 Both of them. 0:16:21.680 --> 0:16:24.240 But that's laggings and people that's our thirteen percent, So 0:16:24.360 --> 0:16:25.920 a little bit of an issue there. Performing kind of 0:16:25.920 --> 0:16:27.760 in lockstep with each other. Catherine, thank you so much. 0:16:27.880 --> 0:16:28.400 Appreciate that. 0:16:28.480 --> 0:16:31.400 Kathryn Chiglinsky, US Finance team leader, Bloomberg News talk to 0:16:31.480 --> 0:16:33.640 us about MasterCard buying in a little bit more into 0:16:33.680 --> 0:16:35.160 that fintech space here. 0:16:35.720 --> 0:16:36.320 Stay with us. 0:16:36.480 --> 0:16:38.840 More from Bloomberg Intelligence coming up after this. 0:16:42.760 --> 0:16:46.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:16:46.520 --> 0:16:49.600 weekdays at ten am Eastern on Apple, Coarclay, and Android 0:16:49.640 --> 0:16:52.920 Auto with the Bloomberg Business app. Listen on demand wherever 0:16:53.000 --> 0:16:56.520 you get your podcasts, or watch us live on YouTube. 0:16:57.200 --> 0:17:00.600 We've been following this office market really since the pandemic, 0:17:00.600 --> 0:17:02.840 as you talk about an industry that was really hit 0:17:02.920 --> 0:17:06.480 hard by the pandemic and it's still recovering as we 0:17:06.520 --> 0:17:08.800 think about getting back to the offices, and different companies 0:17:08.800 --> 0:17:12.200 have different policies, but from a real estate invest perspective, 0:17:12.200 --> 0:17:13.240 what's the story these days? 0:17:13.240 --> 0:17:13.719 What's check out? 0:17:13.720 --> 0:17:17.440 With Jeff Langbam, Senior US RIAT analyst FRO Bloomberg Intelligence. Jeff, 0:17:17.440 --> 0:17:19.920 I know you guys and your team did some research 0:17:20.000 --> 0:17:23.240 on kind of the current state of the office market 0:17:23.280 --> 0:17:24.480 in the US. What did you guys find? 0:17:26.000 --> 0:17:28.760 Yeah, not just the US, We actually did a survey 0:17:28.960 --> 0:17:33.840 of cities in the US and Europe and Asia and Australia, 0:17:34.320 --> 0:17:38.200 and the story was largely the same in all of 0:17:38.240 --> 0:17:40.679 these major cities, which is, companies want people back in 0:17:40.680 --> 0:17:44.040 the office and the way to get them back is 0:17:44.040 --> 0:17:49.240 to offer high quality new space and highly amenditized space 0:17:49.400 --> 0:17:54.320 and adjacent to transportation. And if you do that, then 0:17:54.600 --> 0:17:57.640 the people will come. And then the other takeaway, which 0:17:57.680 --> 0:18:00.639 is interesting I think, is that as of right now, 0:18:00.840 --> 0:18:05.640 at least so far, employees sitting in office buildings view 0:18:06.000 --> 0:18:11.600 AI as an expansion opportunity, less so of a and 0:18:11.680 --> 0:18:14.440 less so a threat to office demand. 0:18:14.720 --> 0:18:18.760 Okay, that that seems kind of counterintuitive. Explain why that is. 0:18:18.840 --> 0:18:20.880 Why is it an expansion opportunity? 0:18:21.880 --> 0:18:23.840 Well, a couple of different reasons. 0:18:23.880 --> 0:18:28.200 Well, the first, I guess the most obvious, as as 0:18:28.240 --> 0:18:32.600 it relates to leasing, is all these growing and forming 0:18:32.800 --> 0:18:35.000 AI companies need someplace to. 0:18:35.640 --> 0:18:36.360 Have their headquarters. 0:18:36.400 --> 0:18:39.560 So there was a lot of tech leasing happening in 0:18:39.640 --> 0:18:43.800 some of these big CDs that is directly related to 0:18:44.280 --> 0:18:45.240 this AI wave. 0:18:45.359 --> 0:18:46.200 So that's one thing. 0:18:46.400 --> 0:18:49.920 But as it relates to the survey itself, you know, 0:18:50.119 --> 0:18:53.040 a lot of the a lot of the jobs that 0:18:53.160 --> 0:18:57.560 may be deemed irrelevant from AI or maybe back office. 0:18:58.160 --> 0:18:59.200 They don't. They don't. 0:18:59.440 --> 0:19:01.520 They're not the jobs that are sitting in the high 0:19:01.600 --> 0:19:02.960 rise towers in New York. 0:19:02.720 --> 0:19:05.560 And London and Hong Kong. 0:19:05.720 --> 0:19:11.000 And maybe, you know, if companies can find incremental business opportunities, 0:19:11.280 --> 0:19:14.000 you know, by making themselves more efficient, there's actually a 0:19:14.040 --> 0:19:18.360 need to expand their space in those types of buildings 0:19:18.040 --> 0:19:21.440 to take advantage of that opportunity, even if it does 0:19:21.520 --> 0:19:23.920 mean some job redundancy elsewhere. 0:19:24.400 --> 0:19:27.560 Jeff, I think I know an A quality office building 0:19:27.600 --> 0:19:30.359 when I see on simply because I work in an 0:19:30.440 --> 0:19:33.480 A plus quality building here. Bloomberg seven thirty one les 0:19:33.680 --> 0:19:37.120 what percentage of the inventory office inventory in the US 0:19:37.160 --> 0:19:38.560 would you say is a quality? 0:19:39.560 --> 0:19:40.400 It's pretty low. 0:19:41.400 --> 0:19:46.440 And what's interesting is there is such a need for 0:19:46.520 --> 0:19:49.200 more of it that even though there are a lot 0:19:49.240 --> 0:19:53.479 of empty or mostly empty older office buildings, there is 0:19:53.600 --> 0:19:57.320 now new building new construction starting to come out of 0:19:57.320 --> 0:20:01.119 the ground and being earmarked for new construction coming out 0:20:01.160 --> 0:20:04.040 of the ground. And because there's no big blocks of 0:20:04.119 --> 0:20:07.399 available high end new space, and you know, we've got 0:20:07.400 --> 0:20:09.280 a couple of new buildings that are getting ready to 0:20:09.320 --> 0:20:13.920 start in New York and you know, you look back 0:20:13.960 --> 0:20:15.679 at two years or so ago, and that would have 0:20:15.680 --> 0:20:18.280 been crazy. Nobody would have thought that was that was possible. 0:20:18.280 --> 0:20:20.960 But that's where we are because there's just not the 0:20:21.000 --> 0:20:22.320 space that people want to lease. 0:20:22.480 --> 0:20:23.919 There is no availability, all right. 0:20:24.040 --> 0:20:26.200 So let's say like eighty percent is B and C. 0:20:26.400 --> 0:20:28.160 What happens all that stuff in every city? 0:20:29.280 --> 0:20:32.600