Speaker 1: This is Bloomberg Wall Street Week. What's the state of
Speaker 1: corporate governance? It defresent is a real issue. The US
Speaker 1: economy continues to send mixed signals to the financial stories,
Speaker 1: the cheap our word fed action to con concerns over
Speaker 1: dollar liquidity and encouraging China data. The town's reaction to
Speaker 1: news on Brexit. Through the eyes of the most influential
Speaker 1: voices Larry Summers, the former Treasury Secretary, star Ward CEO,
Speaker 1: Kevin Johnson sec Chairman Jake Clayton. Bloomberg wool Street Week
Speaker 1: with David Weston on Bloomberg Radio, Davos decides what the
Speaker 1: world should be concerned about, and competition and streaming video
Speaker 1: heats up. I'm David Weston. Welcome to Bloomberg Wall Street Week.
Speaker 1: This week was the Week of Davos, that annual gathering
Speaker 1: the Swiss Alps, when the great and the good convened
Speaker 1: to reassure one another that they are both great and good.
Speaker 1: We've talked this year about growth and reduced trade tensions
Speaker 1: and high hopes for one of our Wall Street Week contributors,
Speaker 1: Chief Bloomberg economist Stephanie Flanders, was on the scene and
Speaker 1: gave us this week's contributors take they like to talk
Speaker 1: big hit in Davos about the threats the world must
Speaker 1: confront climate change, the dark side of the Internet technology
Speaker 1: turning old business models on their heads, but about the
Speaker 1: short term state of the global economy. The conversation here
Speaker 1: has been remarkably upbeat. But don't be fooled. The past
Speaker 1: two years of drama have come at a cost, and
Speaker 1: if we don't pay it in twenty we will almost
Speaker 1: certainly feel it down the road. And remember, the US
Speaker 1: China trade deal has not removed most of the tariffs
Speaker 1: the Trump administrations slapped on Chinese goods. The average tariff
Speaker 1: on Chinese imports to the US is now nearly twenty
Speaker 1: up from three percent two years ago, and China has
Speaker 1: put similar tariffs on US imports. Everyone agrees all the
Speaker 1: really important stuff has been left for the Phase two deal,
Speaker 1: and there's little chance of that happening to this side
Speaker 1: of the presidential election. And because the US has refused
Speaker 1: to appoint anyone to the appeal system within the World
Speaker 1: Trade Organization, there is now no global system for resolving
Speaker 1: trade disputes. The Europeans say even the U S China
Speaker 1: deal violates w t O rules, but without that appeal system,
Speaker 1: it's not clear they could do anything about it even
Speaker 1: if they were right. So the global trading system has
Speaker 1: taken a hit, and Britain leaving the EU is going
Speaker 1: to make it harder for British companies to do business
Speaker 1: with their most important trading partner in a year's time.
Speaker 1: And that won't sink the UK economy, but it's going
Speaker 1: to make it hard to sustain that Boris bouts. And
Speaker 1: don't forget the most important consequence of all the dramas
Speaker 1: we've seen since the US Central Bank never got to
Speaker 1: take interest rates closer to normal levels, and neither did
Speaker 1: central banks in the Eurozone, China or the UK. So
Speaker 1: after more than a decade of economic recovery, interest rates
Speaker 1: are still at or rather close to record lows. So yes,
Speaker 1: the FED coming to the rescue of the U s
Speaker 1: economy and the financial markets last year has probably put
Speaker 1: off the date of the next recession, but it's also
Speaker 1: taken away central banks ammunition for fighting one when it comes.
Speaker 1: Then I expect the movers and shakers here in Davos
Speaker 1: will be looking for those same governments to all come
Speaker 1: together to collaborate to prop up the global economy as
Speaker 1: they did in two thousand and eight. But after everything
Speaker 1: that's happened, I wonder is there any chance of that
Speaker 1: happening again? Now? To our contributors with us today are
Speaker 1: Larry Summers are Harvard, who is not only an esteemed
Speaker 1: economist in his own right, but the nephew of two
Speaker 1: Nobel laureates and economics Paul Samuelson and Kenneth Arrow. What
Speaker 1: you might not know about Larry, but you should be
Speaker 1: careful about this. He as an undergraduate and M I
Speaker 1: T was a serious debater, qualifying three times for the
Speaker 1: National Debate Tournament, which explains a lot about Larry Summers,
Speaker 1: I think. And Roger Ferguson is with us for t
Speaker 1: I a A. Roger was the only member of the
Speaker 1: Federal Reserve Board in Washington when terrorist attacked the United
Speaker 1: States on nine eleven, and drew on his experience with
Speaker 1: the New York banking system to make sure the financial
Speaker 1: system remained up and running to avoid a possible panic.
Speaker 1: Roger has a long affiliation with Wall Street Week, having
Speaker 1: watched the original Lewis Rockheiser program with his father as
Speaker 1: a young boy growing up in Washington, so welcome, Larry Roger,
Speaker 1: good to have you here. You just heard what Stephie Flanders,
Speaker 1: our contributor, had to say that things look pretty good
Speaker 1: for the short term, but if there's a down term,
Speaker 1: we're not prepared for it. What's your take, Larry, I
Speaker 1: think that's about I think Stephanie was right about that.
Speaker 1: I thought her comments were in general right on the mark.
Speaker 1: I don't think she's right that it's only trade frictions
Speaker 1: and the like that explain why the FED hasn't been
Speaker 1: able to raise interest rates. I think it's the much
Speaker 1: more fundamental things we talked about a couple of weeks ago,
Speaker 1: having to do with secular stagnation, rising savings, diminished investment propensity,
Speaker 1: all that, and I think we have a deep problem
Speaker 1: of maintaining demand without having unsound uh financial conditions, and
Speaker 1: they should be talking about that in Davos, but I
Speaker 1: actually don't think uh they are. I also have to
Speaker 1: say I've been going to Davos probably and last thirty years.
Speaker 1: I missed it this year, And in general, I'm not
Speaker 1: sure it's a leading indicator. I think it might be
Speaker 1: a contrary indicator. When Davos is most optimistic, that's when
Speaker 1: things tend to get worse. When Davos is most pessimistic,
Speaker 1: that's when things tend to get better. Right, I want
Speaker 1: to pick about one thing Larry said, it's not all
Speaker 1: about trade, but people are talking about trade. We had
Speaker 1: Christine Lagarde about what was going on with Europe and
Speaker 1: this is what she said. She said, part of the
Speaker 1: turner in Europe is because of trade. The risks surrounding
Speaker 1: the euro Area growth outlook related to geopolitical factors, rising protectionism,
Speaker 1: and vulnerabilities in emerging markets remain tilted to the downside,
Speaker 1: but have become less pronounced as some of the uncertainty
Speaker 1: surrounding international trade is receding. Okay, so how much of
Speaker 1: them in the economy overall is because of at least
Speaker 1: a receiving of trade tensions. I think fair amount of it. Frankly,
Speaker 1: as one thinks about what was happening last year, a
Speaker 1: year and a half ago, there was anxiety about recession
Speaker 1: that receded anxiety about trade as Trump put on more
Speaker 1: and more terroffs, and indeed, as we got through the
Speaker 1: so called Phase one deal, my senses that markets were
Speaker 1: breathing a bit of a side relief, having set out
Speaker 1: of that. If you listen to everything Christine had to say,
Speaker 1: she also points to a number of other risks, some
Speaker 1: which are still, as she says, tilted the downside. And
Speaker 1: so if I put Christine's comments and a brought a
Speaker 1: context of what's next, partically for the ECB, what I
Speaker 1: take from the entire pictures trade uncertainty perhaps has receded
Speaker 1: that might help growth this a little bit. Okay, we're
Speaker 1: gonna be back with our contributors coming up next from
Speaker 1: Davos to a different kind of entertainment, the kind on
Speaker 1: film that gets Oscars and Emmy's. We talked of the
Speaker 1: streaming media transformation with dean of media analysts, Jessica reef
Speaker 1: Erlick from Back America. This is Boomberg Wall Street greeting.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio. Shaping up to be the year of streaming
Speaker 1: video and the competition is really heating up. Comcast Peacock
Speaker 1: app is the latest on the scene, entering a crowded
Speaker 1: space already occupied by Netflix, Amazon and Disney. So consumers
Speaker 1: who were hoping they might just save some money by
Speaker 1: cord cutting are now facing the prospect of paying seven dollars,
Speaker 1: thirteen dollars, fifteen dollars for each of the individual streaming services,
Speaker 1: but so far it isn't slowing them down. Banc of
Speaker 1: America sees people continuing to add to their streaming this
Speaker 1: year and then at least three streaming subscription for each
Speaker 1: of us will become the new norm, and the services
Speaker 1: appear to be willing to spend whatever it takes to
Speaker 1: keep their growing customer base. It that critical race to
Speaker 1: create streaming content. Netflix last year outproduced everybody else with
Speaker 1: nearly sixty releases. Now two of their streaming films, The
Speaker 1: Irishman and Marriage Story are in the Oscar running for
Speaker 1: Best Picture. So, whether you've jumped on the streaming bandwagon
Speaker 1: yet or not, if you're rooting for Robert de Niro
Speaker 1: in The Irishman, you are a streaming fan. We are
Speaker 1: back with Roger Ferguson and Larry Summers, and we welcome
Speaker 1: now our special guest, Jessica reef Erlick from Bank of America.
Speaker 1: Back when I ran the ABC Television Network and then
Speaker 1: ABC News, Jessica was the person on the outside we
Speaker 1: paid attention to when we wanted a smart inform take
Speaker 1: on what was going on in media, generally in the
Speaker 1: companies we were competing with, and I have to say
Speaker 1: sometimes even within our own company. She covers broadcast, cable, satellite,
Speaker 1: filmed entertainment, and now streaming video for Bank of America. Jessica, welcome,
Speaker 1: great to head. Thank you so much. What an introduction.
Speaker 1: It's all true, you know it's all true. So let's
Speaker 1: start with the most basic question. Why is a year
Speaker 1: We've heard about streaming for some time. Now it's coming,
Speaker 1: It's coming, It's coming. You think this is the year.
Speaker 1: This is the year of comody launches. So Disney Plus
Speaker 1: launched well late to thos nineteen, but it was an
Speaker 1: amazing launch, a ten million subscribers the first day and
Speaker 1: way past the estimates. What way I mean they were
Speaker 1: they've been talking about well they said, um sixty ninety
Speaker 1: billion subs in five years, of which would be in
Speaker 1: the US. I mean, they're obviously going to blow past
Speaker 1: their forecasts. Not even a question. But then we have Peacock,
Speaker 1: which is owned by Comcast or NBC Universal parent company
Speaker 1: Comcast launching Phase launched April, and then bigger push behind
Speaker 1: the Olympics, HBO Max is launching. So that's just all
Speaker 1: the traditional media companies have to get in the game.
Speaker 1: Discovery has launched also in a very different way, but
Speaker 1: every media company has got to be in streaming. That is,
Speaker 1: this is the new distribution system. Is this an offensive
Speaker 1: move or a defensive move? I mean, do they see
Speaker 1: a lot of money out there to be made or
Speaker 1: they're saying we have to get there because otherwise we
Speaker 1: lose our base. It's both. I mean it clearly it
Speaker 1: was defensive and they you know, everybody sort of held back.
Speaker 1: But it takes a long time to have the technology,
Speaker 1: and there's a lot of content. It's not just library
Speaker 1: content that's going in but original to keep people on
Speaker 1: and you know, all the strategy strategy is a little
Speaker 1: bit different. But the traditional media companies are compete with
Speaker 1: the fan companies who have not unlimited funds but eumongus
Speaker 1: eumongus balance sheets. Can we talk a bit about those
Speaker 1: funds because if one looks at what Netflix has been doing,
Speaker 1: three billion dollars spend the free crash flow burn rate,
Speaker 1: it is pretty high. The market sort of hoping at
Speaker 1: it settles down to only two and a half bay
Speaker 1: and next year the cost of interests is huge. You've
Speaker 1: had both content and the technology. So how does this
Speaker 1: how does this become profitable for a lot of these businesses.
Speaker 1: It's I mean, the traditional media companies have given a
Speaker 1: path to profitability and they are different. Netflix suspending seventeen
Speaker 1: billion dollars in cash on content this year, and and
Speaker 1: the burn is as you said, the free cashold and
Speaker 1: it's negative more than three billions. So it's and that
Speaker 1: would not be accepted from traditional media investors. Having said that,
Speaker 1: there are advantages that the traditional media companies have. They
Speaker 1: have brands, they have they have content that they already
Speaker 1: produced in any case, they have deep libraries, and maybe
Speaker 1: most important, they have you manga platforms to promote from.
Speaker 1: So think about Peacock's launch. They will launch UM initially Enapril,
Speaker 1: and with all of Comcast properties and its theme parks, films,
Speaker 1: there are a lot of touchpoints cable networks. And then
Speaker 1: when they really fully launched, it will be behind the Olympics.
Speaker 1: Two fifty million people in the US watched the Olympics.
Speaker 1: That's an unparalleled platform. When Disney launched, of the US
Speaker 1: was aware of the service launching, So it's gonna be
Speaker 1: a game where scale will win out, and as you
Speaker 1: point out, the ability to cross market, etcetera. And so
Speaker 1: if one were an investor, maybe you think not as
Speaker 1: much disruption as one might have imagine. And the big names,
Speaker 1: the historic names, the NBC, Universal's, the the Disneys have
Speaker 1: a real shot at holding on and not being disintermediated.
Speaker 1: They sort of have been already and they're fighting back.
Speaker 1: You know, we're going through this transition period and the
Speaker 1: stocks reflect that. We've in my entire career decades, I've
Speaker 1: never seen multiples this low for media. So the stocks
Speaker 1: reflect the worst and now they're coming back. So it's defensive,
Speaker 1: but it's also offensive, and it's it's really interesting. Peacock
Speaker 1: had an analyst event recently, and it's it's a different
Speaker 1: strategy than Disney. You know, Disney is sort of family
Speaker 1: and kids and amazing titles. You know, boys with Marvel,
Speaker 1: you know what you you know exactly what you're not geo.
Speaker 1: You know, you know what you're getting. NBC U or
Speaker 1: Peacock will have news and sports and you know, all
Speaker 1: of their library and original content, but they're also curating
Speaker 1: stuff differently, so it's you know, it's the curating channels
Speaker 1: and it's it is they actually isn't a lot of comedy.
Speaker 1: There's there's my question not about this, not about the
Speaker 1: stock market. It's like a golden age for the viewer.
Speaker 1: There's huge amounts of stuff being produced from lots of sources,
Speaker 1: really high quality. Seems to me as an amateur, really
Speaker 1: high production values. Is it economic to produce as much
Speaker 1: new content, as many new series, as many new films
Speaker 1: as are being produced right now, or are we in
Speaker 1: a situation like when a lot of new airlines crowd
Speaker 1: into a route where sooner or later it shakes out
Speaker 1: and the amount of capacity comes down. Is this a
Speaker 1: golden age that we're going to remember as being special
Speaker 1: in the amount of content that's being produced, or is
Speaker 1: this the new normal? There has to be a shakeout.
Speaker 1: There is no way you can have five hundred plus
Speaker 1: original you know, episodic shows and there's not just no
Speaker 1: time for everyone to watch and and and you know
Speaker 1: viewers are watching YouTube as well. I mean, there's just
Speaker 1: there's just so many options right now, So there has
Speaker 1: to be a shakeout. So it's interesting to see everybody's
Speaker 1: different approaches um different revenue drivers, some the subscription, some
Speaker 1: is advertising. The case of Discovery, there's a big piece
Speaker 1: of e commerce as well. Um, but there's there's no
Speaker 1: question that they can also live with old. This new
Speaker 1: competition is the price for standard properties half an hour
Speaker 1: new show at six thirty in the afternoon, the World,
Speaker 1: the World Series, Uh, the Masters, the NFL. Are the
Speaker 1: prices for those things coming down just because there's so
Speaker 1: much more stuff, or the prices going up because their
Speaker 1: flagships that will bring everything else in, I mean the
Speaker 1: cost of sports. We're all waiting for the NFL to
Speaker 1: be renewed. Um, there is no way that's going down.
Speaker 1: There will be a lot of competition. Our view is
Speaker 1: that it will stay on broadcast TV because of the
Speaker 1: reach and the production capability. But the digital rights there's
Speaker 1: gonna going to be a battle. But there's a real
Speaker 1: bifurcation between live sports on the one hand, that is
Speaker 1: much more resistant to some of the forces we've seen
Speaker 1: as opposed to filmed entertainment. So the sports rice go up,
Speaker 1: as you say, the NFL, NBA, major League Baseball I
Speaker 1: think went out. The sports rights are going to come down.
Speaker 1: You know, they're just not okay. Thanks so much to
Speaker 1: Jessica Weak Girl, We're gonna be back with our contributors.
Speaker 1: This is Bloomberg Wall Street Week. This is Bloomberg Will
Speaker 1: Street Week with David Weston from Bloomberg Radio. The Hills
Speaker 1: were alive this week in Davos with the sounds of
Speaker 1: what everyone's going to do about climate change, from investment
Speaker 1: funds talking about what they would and wouldn't invest in
Speaker 1: the government saying how they were going to invest in
Speaker 1: green or what they've already done for that matter, to
Speaker 1: reports that even the big oil companies were meaning to
Speaker 1: try to come up with a common approach to louving
Speaker 1: CEO two emissions from the oil and gas they produced
Speaker 1: spoiler alert. The reportedly all agreed something needs to be done,
Speaker 1: but they couldn't agree on what to do. Here's a
Speaker 1: sample of what we heard. Given the signs that climate change,
Speaker 1: it requires immediate action. This is the decade and so
Speaker 1: be more need to start by saying, look, let's make
Speaker 1: some good commitments. These issues have moved very swiftly from
Speaker 1: being corporate social responsibility issues or more niche issues within
Speaker 1: finance to fundamental value drivers. You will ultimately invest in
Speaker 1: a company who really think we're not getting the traction
Speaker 1: that we need We do need real breakthroughs. This is
Speaker 1: no one company is going to do this. We do
Speaker 1: a little with millennials in terms of the next generation,
Speaker 1: and clearly they are very focused on the um if
Speaker 1: you we should be ethical signature. We've got to set
Speaker 1: up policies around the world that changes the demand patterns
Speaker 1: of the market, because it isn't supply that creates economics.
Speaker 1: That's supply and demand. Climate change is not going to
Speaker 1: be fixed by a central bank, and it's gonna be
Speaker 1: fixed by combination of public and private. We want to
Speaker 1: invest in clean technology, in the green new procedures. We
Speaker 1: are doing better right now than we've ever done in
Speaker 1: terms of cleanliness, in terms of numbers. We have a
Speaker 1: beautiful ocean called the Pacific Ocean with thousands and thousands
Speaker 1: of tons of garbage flows towards us, and that's put
Speaker 1: there by other countries. It's time now to turn back
Speaker 1: to our contributors, Larry Summers and Roger Ferguson. So Roger,
Speaker 1: I'll pick on you first, because this is not new
Speaker 1: to you at t i A. You've been involved in
Speaker 1: this for some time. What do you do and what
Speaker 1: have you learned from it? All? Right, So you're right,
Speaker 1: it's not new to us. We've been involved in climate
Speaker 1: and E s G issues for about fifty years and
Speaker 1: we're really proud to be one of the leaders. And
Speaker 1: what we've learned over that period of time is you
Speaker 1: have to take a holistic approach. So first, we are
Speaker 1: a very large asset manager, and we think about first
Speaker 1: how do we vote the shares in the proxies And
Speaker 1: we're really proud that we voted with shareholder resolutions about
Speaker 1: eighty two of the time, much higher than a lot
Speaker 1: of others in the industry. And so, you know, the
Speaker 1: first thing is use your voice as a shareholder to
Speaker 1: let management know that your care. The second thing that
Speaker 1: we've learned is really are going to have to start
Speaker 1: to build a databases and to really understand and dig
Speaker 1: in with what companies that actually are doing and use
Speaker 1: that to engage them on getting more transparency, more disclosure,
Speaker 1: including oil companies and others. And the funny thing that
Speaker 1: we've learned in terms of this being a holistic solution
Speaker 1: is we also own and manage a lot of assets
Speaker 1: and think about managing and owning those in a responsible way,
Speaker 1: be real estate agg timber So it's a holistic story.
Speaker 1: Crashings you get credit for that, we get drum credit.
Speaker 1: To be fair, we've got two classes of investors. We've
Speaker 1: got a group for whom E s G. Climate very
Speaker 1: important and they want to put their money there. We
Speaker 1: have a number of brothers who I think are less focused.
Speaker 1: One of the things that we've learned over time, though,
Speaker 1: is all of these factors e s G. Climate, governance,
Speaker 1: et cetera important risks to manage. And now we're starting
Speaker 1: to see the conversation turn towards the fact that this
Speaker 1: is a positive return generator, taking these factors in consideration
Speaker 1: and creating investment thesis around us. So, Larry, can private
Speaker 1: investment make the difference in climate? I think most of
Speaker 1: what you heard is a pretty total avoidance of the
Speaker 1: real problem, and that as long as this kind of
Speaker 1: thing is the focus, the problem is going to get worse.
Speaker 1: There are three things that need to happen if the
Speaker 1: world's are going to make real progress on climate, none
Speaker 1: of which were mentioned by any of those people. One
Speaker 1: is we need to scale back the hundreds of millions
Speaker 1: of dollars that the world spends on fossil fuels and
Speaker 1: fossil fuel subsidies. We need to have governments stop around
Speaker 1: the world subsidizing fossil fuels and their ability and their use. Second,
Speaker 1: we need much more invested by governments in clean energies.
Speaker 1: And the way governments need to get the revenue to
Speaker 1: make those investments is by levying taxes and having the
Speaker 1: people and the organizations represented in that video paying more
Speaker 1: in taxes. And none of them are willing to say that.
Speaker 1: They'd rather talk about how they've got a pied a
Speaker 1: chief Green officer and how they're using a putting up
Speaker 1: solar power plant SOL or something or other on their
Speaker 1: roof than recognize that they need to pay more taxes.
Speaker 1: And the third thing is we need to tax things
Speaker 1: that are bad. Right now, we have a world that's
Speaker 1: oriented to taxing things that are good, like work and saving,
Speaker 1: and we need to think tax things that are bad,
Speaker 1: like putting emissions UH into the air. So as long
Speaker 1: as the word tax and subsidy are outside of the
Speaker 1: conversation and it's all just will feel better if we
Speaker 1: do this, the world's not going to make progress in
Speaker 1: UH solving UH this problem. And the president notwithstanding emissions,
Speaker 1: the idea is that we're supposed to in twenty or
Speaker 1: thirty years, get a mission, get the level of emissions
Speaker 1: to zero. We haven't even achieved the much more modest
Speaker 1: goal of stopping emissions from growing year after year. Okay,
Speaker 1: we will come back with our contributors coming up. Here
Speaker 1: we turn from investing in climate to changing operations on
Speaker 1: the ground and one of the most difficult industries. Sophia
Speaker 1: Mendelssohn is here from Jet Blue who tells how she's
Speaker 1: trying to take an entire airline industry green. This is
Speaker 1: Bloomberg Wall Street Week. This is Bloomberg Wall Street Week
Speaker 1: with David Weston from bloom Bird Radio. We're going to
Speaker 1: stay on the subject of climate and get a second opinion.
Speaker 1: Now that takes us beyond the world of investing in
Speaker 1: economics to the world of operating a company. Sophia Mendelssohn
Speaker 1: is Jet Blues head a sustainability Thank you very much
Speaker 1: for being here. Sylvia, So you're trying to take an
Speaker 1: airline company green, which doesn't sound like an easy thing
Speaker 1: to do. Well, it's not easy, but that doesn't mean
Speaker 1: we can't do it, and we don't have to do
Speaker 1: it quickly. The larger, the polluter. The more you rely
Speaker 1: on fossil fuels, the faster you have to act now.
Speaker 1: And that's why recently Jet Blue has made an announcement
Speaker 1: there we are going carbon neutral on all our domestic flying.
Speaker 1: We're already have a carbon deal for a lot of
Speaker 1: our international flying, and we see this as the way
Speaker 1: of business going. Well, how do you do that? Is that?
Speaker 1: Is that buying offsets and do those really work? Does
Speaker 1: that really make us carbon neutral? Well, the first step
Speaker 1: is that you avoid burning fuel where you don't have to,
Speaker 1: you don't want to spend the money or burning emissions
Speaker 1: in the first place. The second immediate step is carbon
Speaker 1: offsets now and we've been very clear these these work
Speaker 1: for now. They're verifiable, they're traceable, they're retired on our behalf,
Speaker 1: they're permanent, and they're also only the first step and
Speaker 1: certainly not a silver bullet. Next has to come sustainable
Speaker 1: aviation fuel, a lower carbon alternative to a liquid fossil fuel,
Speaker 1: and of course, finally we want to make the transition
Speaker 1: to electric aircraft at least for short and medium hall.
Speaker 1: How do you think this plays into pricing consumer demand?
Speaker 1: Are you expecting that you're gonna be a bunch of
Speaker 1: consumers who are going to sort of sign up for
Speaker 1: that view, and you know, this is a way that
Speaker 1: they expressed their support by, you know, switching some of
Speaker 1: their demand over to your airline. Absolutely, we don't expect it.
Speaker 1: We're already seeing it. Europe has already seen it. And
Speaker 1: our job here at jeff Blue, my job is to
Speaker 1: stay ahead of customer demand. We know people need to
Speaker 1: keep flying. They want to keep flying. Quite frankly, we
Speaker 1: need flying to keep the global economy together. Well, let's
Speaker 1: be real concrete. As I understand, sustainable jet fuel is
Speaker 1: more expensive than on the jet fuel by the way,
Speaker 1: there's not a lot of availability, but it's more expensive.
Speaker 1: Are your customers willing to pay more for their airline
Speaker 1: ticket because they know jet flew is green and the
Speaker 1: next guy isn't. Right now, what Jet Blue has done
Speaker 1: is take care of the carbon on the customer's behalf.
Speaker 1: We are paying for the carbon offset as a cost
Speaker 1: of doing business, which it is and which we know
Speaker 1: other companies are increasingly seeing it. As As for sustainable
Speaker 1: aviation fuel being more expensive, there's nothing inherently more expensive.
Speaker 1: There's nothing about the physics of it that makes it
Speaker 1: need to be more expensive. What we need is volume,
Speaker 1: and we need economies of scale to bring that price down.
Speaker 1: Let me ask you about something I've wondered about for
Speaker 1: a long time. Thirty years ago, I could fly to
Speaker 1: Chicago in half an hour less. From Boston. I could
Speaker 1: fly to California in about forty five minutes less. I
Speaker 1: could fly from Boston to New York in fifteen to
Speaker 1: twenty minutes less. Some of that's about congestion and landing rights,
Speaker 1: but some of that's about airlines fly their plane slower
Speaker 1: so that they're gonna be more fuel of more fuel
Speaker 1: of Well, that's what people have told me. Do you
Speaker 1: make flights longer on Jet Blue in order to save
Speaker 1: on carbon admissions and save on energy costs? Could you
Speaker 1: fly the plane's faster if you wanted to. Each airline
Speaker 1: flies their plane differently. What we're doing is taking care
Speaker 1: of the carbon on the customer's behalf without asking the
Speaker 1: customer to make a sacrifice. We're not saying squeeze your
Speaker 1: knees in or give up first class. We're saying flying
Speaker 1: needs to happen. You need to be on our aircraft,
Speaker 1: and that creates carbon emissions, which we need to take
Speaker 1: care of as a costom doing business. So how about
Speaker 1: the speed at which you fly the planes? So flying
Speaker 1: slower does in some cases save fuel. A much more
Speaker 1: business friendly, customer savvy way to do it is to
Speaker 1: buy new aircraft, much like Jet Blue has. The new
Speaker 1: aircraft are increasingly fuel efficient. So if we talk a
Speaker 1: bit more about that, so technology, I'm hearing offing the
Speaker 1: answer is gonna be technology driving down the need to
Speaker 1: consume fossil fuels while we're waiting for better you know,
Speaker 1: sort of green fuels. What are you seeing when you
Speaker 1: talk to the providers of jet engines that is helping
Speaker 1: us give you some sense of confidence. This is going
Speaker 1: to get better and better over time. Yeah, aviastion is
Speaker 1: a bright spot in this. We're not waiting for the technology.
Speaker 1: The technology is here. The new aircraft are more fuel efficient.
Speaker 1: We've already made investments in new electric aircraft companies. Um,
Speaker 1: the carbon offsets are happening now, that's today, that's carbon
Speaker 1: being avoided and sucked out of the environment today. Sustainable
Speaker 1: aviation fuel already exists, it's already safe. We need more
Speaker 1: of it, We need economies of scale. That's an economics problem,
Speaker 1: not a technology problem. Feel one piece of technology the
Speaker 1: airlines can't fix on their own is air traffic control.
Speaker 1: That's true. If we were to really revamp, which I
Speaker 1: understand we need to do, it's absolutely If we were
Speaker 1: tomorrow to revamp our air traffic control system, how much
Speaker 1: would it save in terms of carbon? It would be significant.
Speaker 1: And it would not just save carbon, It would save time,
Speaker 1: it would save money. This is a really good example
Speaker 1: of the intersection of business US in government. The global
Speaker 1: climate crisis is so big, it's affecting us so quickly.
Speaker 1: There is no corner of the economy that hasn't already
Speaker 1: been affected, that isn't going to be potentially crippled by it.
Speaker 1: Everyone needs to be coming with part of the solution.
Speaker 1: I tell you a story when I entered the government,
Speaker 1: and we were in the beginning in two thousand and nine,
Speaker 1: the government was thinking about it's uh priorities. I had
Speaker 1: a meeting as the head of the President's National Economic
Speaker 1: Council with the CEOs. Then there were half a dozen
Speaker 1: or more airlines and they all told me we needed
Speaker 1: to work on the air traffic control system. And they
Speaker 1: had a plan and it was called next Gen. And
Speaker 1: the thing about the plan was it was going to
Speaker 1: take a whole gen, a whole generation. And I said,
Speaker 1: if we did this according to your plan, when would
Speaker 1: we have a modern air traffic control system. This was
Speaker 1: in two thousand and nine, and they said wow, And
Speaker 1: I said to them, that's really very interesting, and I
Speaker 1: appreciate it. And I know this is a really big,
Speaker 1: complicated problem. But World War two is a really big
Speaker 1: and complicated war. And it took three and a half
Speaker 1: years from the time we entered till the time we
Speaker 1: won with twelve million people under arms. So why was
Speaker 1: it going to take a quarter century to get a
Speaker 1: better air traffic control system? Has any progress really been
Speaker 1: made on that? Yeah, there's been there's been progress made.
Speaker 1: And I will say, you know, it's not the job
Speaker 1: of CEO's. No one's ever made money just waiting on
Speaker 1: congressional action, betting on what congressional action might or might
Speaker 1: not do. So what we need to do, as airlines,
Speaker 1: as the people running the companies today is find the
Speaker 1: solutions that we can work on today. White carbon offsets
Speaker 1: like sustainable aviation fuel. How about airlines contributing How about
Speaker 1: airlines contributing to an infrastructure that would enable them to
Speaker 1: save fuel costs by not spending as much time circling
Speaker 1: that would enable the land scarce landing slide to be used.
Speaker 1: Do you don't you think the airline industry should be
Speaker 1: willing to contribute to the airline traffic air traffic control
Speaker 1: system we need so we have we have next gen
Speaker 1: equipment on our aircraft, and that aircraft needs to talk
Speaker 1: to other parts of the system. Government does need to
Speaker 1: build out some of that. And every time we land
Speaker 1: a plane, every time we fly a plane, there's so
Speaker 1: much going on. There's so many ways that we can
Speaker 1: be reducing those emissions. And what we're really looking for
Speaker 1: is the ways that affect the customer today, because this
Speaker 1: is a customer driven revolution that we're saying, Sophia, Are
Speaker 1: you seeing action on the part of your partners, the
Speaker 1: major oil companies, that the engine companies, those are the
Speaker 1: manufacturing the planes. Is this becoming an ecosystem of folks
Speaker 1: supporting what you're trying to do and helping you drive
Speaker 1: it forward. I think there's a lot of room for
Speaker 1: opportunity there. I'd like to see more of the majors
Speaker 1: in the sustainable aviation fuel space. There's some companies that
Speaker 1: have started making it on the smaller side. We're really
Speaker 1: looking for economies of scale going forward in and I
Speaker 1: think is going to be the year where customers begin
Speaker 1: to demand that where is big energy on this? Because
Speaker 1: we heard they just met Oro in Dallas to figure
Speaker 1: out what they could do about CEO two emissions. It
Speaker 1: sounds like there's a proposal, So okay, you want to
Speaker 1: do something, here's one concrete thing you can do. What
Speaker 1: did they say when you when you're talking about this,
Speaker 1: you know they're they're working on a number of things.
Speaker 1: Our job in the conversation is to say the demand
Speaker 1: is here, and it's not just because we're good people
Speaker 1: who want to sleep easy at night. It's because our
Speaker 1: primary fiduciary responsibility on a daily basis is to protect
Speaker 1: that share price over the long run, and reducing carbon
Speaker 1: emissions taking care of the carbon emissions you can't avoid
Speaker 1: is part of that financial value. So this goes back
Speaker 1: to our point and we're making earlier we're talking about
Speaker 1: good returns in this space, and it sounds like you've
Speaker 1: just convinced yourself and present your shareholders that over the
Speaker 1: long term, share price would be higher if you become
Speaker 1: a Green Airline as opposed to if you didn't do that,
Speaker 1: I'm reading it's correctly. And look at the facts that
Speaker 1: we know. We know at the climate crisis is getting worse.
Speaker 1: We know that we can't have a global economy without aviation.
Speaker 1: That means, in some fundamental way, aviation is going to
Speaker 1: have to deal with their emissions. And that's not just
Speaker 1: our industry as you guys have seen, as you've said,
Speaker 1: it's literally going to be every industry. So the price
Speaker 1: of carbon is going to rise over time. Not taking
Speaker 1: a stance on that is effectively still making a joint,
Speaker 1: shouldn't we. I I admire enormously, Really I do what
Speaker 1: your company is doing in the energy or bringing uh
Speaker 1: to this. But when you say the solutions or customer driven,
Speaker 1: actually wonder whether you're right. That's what the tobacco industry
Speaker 1: used to say. They used to say the solutions to
Speaker 1: access smoking or educating consumers about the bad health and
Speaker 1: consequences and letting it be customer driven. And in fact
Speaker 1: it turned out we've made enormous progress, almost none of
Speaker 1: which has been customer driven. We tax tobacco, we've stopped
Speaker 1: outlawed smoking in restaurants, we've outlaw smoking in airplanes. It
Speaker 1: was basically when we decided it wasn't going to be
Speaker 1: customer driven, it was going to be policy driven that
Speaker 1: we solve the problem. And shouldn't we not be putting
Speaker 1: you at a competitive disadvantage if you decide that you
Speaker 1: want to do the right thing and do complete offsets
Speaker 1: and your airline competitors don't. Isn't the right thing to
Speaker 1: do to make there be rules so you can do
Speaker 1: the right thing by the environment and by the future
Speaker 1: without being at a competitive disadvantage. Don't we need much
Speaker 1: more active public policy rather than this talk and hopes
Speaker 1: about private policy. Well, well, where the kicker is. I'm
Speaker 1: not trying to do the right thing. I'm in doing
Speaker 1: the smart thing because dealing with carbon is part of
Speaker 1: going forward for any business. Sophia, thank you so much
Speaker 1: for being here. That's Sophia Mendelssohn of Jet Blue. This
Speaker 1: has been another edition of Bloomberg Wall Street Week and
Speaker 1: had to Boomberg dot com for more exclusive thoughts from
Speaker 1: our weekly contributors, along with full episodes and the official
Speaker 1: Bloomberg Wall Street Week podcast. This is Bloomberg Wall Street Week.
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