WEBVTT - First Big Test for Buy Now, Pay Later 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Carol Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all purtnising the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.160 --> 0:00:20.000 analyst in more than one twenty countries. You can download 0:00:20.000 --> 0:00:23.239 Bloomberg Business Week and iTunes, SoundCloud, or Bloomberg dot Com. 0:00:23.400 --> 0:00:25.160 You can also listen to our radio show at two 0:00:25.160 --> 0:00:28.360 pm Eastern Time on Bloomberg Radio, or watch us on YouTube. 0:00:28.400 --> 0:00:32.880 Search Bloomberg Clobal News, Well Affirm Clarina after Pay. You 0:00:32.960 --> 0:00:34.800 know the names and the big players when it comes 0:00:34.800 --> 0:00:38.040 to the buy now, pay later industry, also known as bnpls. 0:00:38.080 --> 0:00:40.520 They are the subject of this week's Bloomberg Business Week 0:00:40.560 --> 0:00:43.920 cover story. That magazine issue now on newstands. It's also 0:00:43.960 --> 0:00:46.320 online of Bloomberg dot com, slash business Week and on 0:00:46.360 --> 0:00:49.400 the Bloomberg terminal. A great group in the byeline as 0:00:49.440 --> 0:00:52.960 made to Prez, Evan Weinberger and Jenny Seraine, all chipping 0:00:52.960 --> 0:00:55.400 in on the story. As Made Press is Projects and 0:00:55.480 --> 0:00:58.240 Investigations reporter for Bloomberg News as May joins us on 0:00:58.280 --> 0:01:00.800 the phone from California. Joe well Bur is with us now. 0:01:00.840 --> 0:01:03.240 He's editor of Bloomberg Business Week. He's with us in 0:01:03.280 --> 0:01:06.679 the Bloomberg Interactive Broker Studio. So Joel, the concept of 0:01:06.720 --> 0:01:09.760 buy now, pay later, it really took off over the 0:01:09.840 --> 0:01:13.120 last couple of years. What could go wrong with, you know, 0:01:13.280 --> 0:01:16.280 buying something now but paying later. It sounds so good, 0:01:16.959 --> 0:01:18.720 like it's pretty good, just give it to me now. 0:01:19.520 --> 0:01:23.840 So so what really stood out here was how much 0:01:23.880 --> 0:01:27.440 we were all suddenly being indated with with sort of 0:01:27.480 --> 0:01:29.120 these offers, like you go to a checkout and it's 0:01:29.160 --> 0:01:32.120 sort of like, you know, do you want to pay 0:01:32.120 --> 0:01:34.280 in four easy payments? And we were sort of like, 0:01:34.319 --> 0:01:37.880 where did this come from? Like it is suddenly everywhere, 0:01:38.400 --> 0:01:40.679 and lo and behold. It really took off during the 0:01:40.720 --> 0:01:44.000 pandemic and we were all doomed scrolling and hoping consumption 0:01:44.080 --> 0:01:46.160 would bail us out of a pandemic and you know, 0:01:46.240 --> 0:01:48.680 or at least maybe feel better for a moment. And 0:01:48.880 --> 0:01:53.240 it turned out that this industry just boomed on it. 0:01:53.760 --> 0:01:58.760 But now we're seeing economic headwinds. Regulators have taken note, 0:01:59.160 --> 0:02:01.800 and lo and behold, old as. We'll talk with as 0:02:01.880 --> 0:02:05.280 may here. Uh, there's good old fashioned debt problems even 0:02:05.320 --> 0:02:08.920 when you're you know, supposedly paying and four for easy payments. 0:02:08.919 --> 0:02:11.079 So so as may As you kind of dove into 0:02:11.160 --> 0:02:15.400 this topic, the topic I'm curious. There's a real fundamental 0:02:16.000 --> 0:02:19.960 loophole that the by now pay later industry is built on, 0:02:20.000 --> 0:02:22.840 which was it's one thing if you pay in five payments, 0:02:22.840 --> 0:02:25.760 but it's another and four. Why why that distinction and 0:02:25.800 --> 0:02:29.360 why does it matter so much? Yeah, So this story 0:02:29.440 --> 0:02:32.240 really focuses on the pay and for a model in particular, 0:02:32.280 --> 0:02:35.280 and that's what really unites these companies, so Affirm after 0:02:35.320 --> 0:02:37.760 pay Learner. They all kind of do different stuff, but 0:02:37.880 --> 0:02:40.760 there their main product is paying for, or one of 0:02:40.800 --> 0:02:42.600 their main products is paying for and that's what they 0:02:42.600 --> 0:02:45.679 all do the same. And so the way that they're 0:02:45.720 --> 0:02:48.400 able to really change the consumer credit game was by 0:02:48.440 --> 0:02:52.720 bypassing consumer protection regulations. That explains one of the reasons 0:02:52.720 --> 0:02:56.040 why these two have just seemingly exploded overnight. And so 0:02:56.160 --> 0:02:58.440 if you take the Truth in Lending Act, for example, 0:02:58.480 --> 0:03:02.760 that's a landmark law and acted and it requires extensive 0:03:02.760 --> 0:03:06.359 disclosures for what are called unsecured consumer loans split into 0:03:06.360 --> 0:03:09.960 payments are five or more. The law doesn't touch pay 0:03:09.960 --> 0:03:13.400 in four because it's pay in four four payments. And 0:03:13.440 --> 0:03:15.600 so that's a really like, you know, that's a really 0:03:15.800 --> 0:03:18.480 easy way to understand some of the loopholes that they've 0:03:18.480 --> 0:03:22.359 been able to, um, you know, bypass and and take 0:03:22.400 --> 0:03:24.880 off as a result. Well, let's talk about taking off, 0:03:24.880 --> 0:03:27.639 Like how big have these companies become? Because right, the 0:03:27.680 --> 0:03:31.320 bigger also kind of sets up the problem that you know, 0:03:31.360 --> 0:03:33.520 that they could become a bigger problem down the road, 0:03:33.600 --> 0:03:36.160 especially as we talk about recession. Feels like on a 0:03:36.240 --> 0:03:40.800 daily basis, So how big has this industry become? Usage 0:03:40.840 --> 0:03:43.360 has increased, you know, over the past few years, usage 0:03:43.560 --> 0:03:47.200 increase every year. So consumers, you know, they're really making 0:03:47.280 --> 0:03:50.760 up a larger part of particularly e commerce spending. Um 0:03:50.760 --> 0:03:53.320 they're slowly creeping into brick and mortar, but it's really 0:03:53.320 --> 0:03:55.520 just e commerce. So we're looking at at like, you know, 0:03:55.560 --> 0:03:59.960 a few percent um two percentage points of consumer spending online, 0:04:00.040 --> 0:04:02.920 but obviously growing, you know, every single day. As far 0:04:02.960 --> 0:04:05.320 as valuations, I mean, if you look at Clarna, the 0:04:05.440 --> 0:04:09.240 value has dropped significantly recently, but it's still worth seven 0:04:09.240 --> 0:04:13.160 billion dollars after pay was sold to Block, the Digital 0:04:13.240 --> 0:04:17.040 Payments Company for twenty nine billion dollars. So these companies 0:04:17.080 --> 0:04:20.960 are are very big. They're making Hey, they're missing billionaires. Um. 0:04:21.160 --> 0:04:23.920 And as Joel said, though, you know, were we may 0:04:24.040 --> 0:04:26.680 we may see the party coming to an end or 0:04:26.680 --> 0:04:29.599 at least um, you know, getting a little bit less fun. 0:04:29.680 --> 0:04:33.920 And yeah, that happened. Um. You know that Clarina headline, Uh, 0:04:34.080 --> 0:04:37.000 you know when the valuation got got slashed recently was 0:04:37.080 --> 0:04:39.760 really interesting because it was sort of like if everything 0:04:39.920 --> 0:04:42.960 seemed like it was going great for this industry and 0:04:43.000 --> 0:04:45.520 then you saw that valuation gets last night, it was 0:04:45.560 --> 0:04:48.560 sort of like, wait, what so what what is what 0:04:48.720 --> 0:04:50.640 is your reporting bear out there? What like, what what's 0:04:50.680 --> 0:04:53.160 going on with the industry and why are valuations maybe 0:04:53.480 --> 0:04:57.599 continuous Suddenly there's I mean there's a number of reasons. 0:04:57.600 --> 0:05:00.240 So first of all, losses are up there, say being 0:05:00.279 --> 0:05:03.320 you know, more people obviously, you know, usage has increased, 0:05:03.360 --> 0:05:06.440 so they're having more customers. But also more customers are 0:05:06.920 --> 0:05:09.520 unable to pay back their loans. So investors obviously don't 0:05:09.520 --> 0:05:13.000 like that. Stocks are way down, you know, competition is increasing. 0:05:13.040 --> 0:05:15.719 Apple recently announced that it would get into the game 0:05:15.760 --> 0:05:18.440 with its version of paying for work called Apple Pay. Later, 0:05:18.839 --> 0:05:21.240 PayPal joined the crew a couple of years ago with 0:05:21.360 --> 0:05:24.080 its version of paying for You know, even big banks 0:05:24.160 --> 0:05:26.160 these days are looking at the n p L. It's 0:05:26.240 --> 0:05:28.720 less so pay and for and more so just like 0:05:28.800 --> 0:05:31.640 kind of old fashioned uh installment loans that they want 0:05:31.640 --> 0:05:33.800 to apply the b NPL name too, because it's such 0:05:33.800 --> 0:05:36.760 a hot name. Um But also we sawt you know, 0:05:36.800 --> 0:05:40.880 we looked at Consumer Financial Protection Bureau complaints their database, 0:05:41.000 --> 0:05:44.520 and complaints are mounting, and then of course regulation is 0:05:44.560 --> 0:05:49.000 likely coming. UMPP is now looking into this industry and 0:05:49.000 --> 0:05:51.360 trying to really figure out like what kind of consumer 0:05:51.400 --> 0:05:54.520 harm is happening, And we definitely found that there was 0:05:54.800 --> 0:05:58.400 absolutely consumer harm being happening. I mean, in part because 0:05:58.400 --> 0:06:00.800 it's just so easy to get these own you know, 0:06:00.920 --> 0:06:04.280 the credits, the old traditional credit system, you know, excludes 0:06:04.360 --> 0:06:06.760 people unfairly a lot of the times, but it also 0:06:06.880 --> 0:06:09.760 sometimes you know, prohibits people from being able to take 0:06:09.760 --> 0:06:12.960 on debt because they truly cannot you know, they truly 0:06:12.960 --> 0:06:14.480 cannot take on debt because they're not going to be 0:06:14.480 --> 0:06:16.960 able to pay it back. And this is a problem. 0:06:17.040 --> 0:06:19.560 You know, the b NFL industry often will give you 0:06:19.600 --> 0:06:22.800 a loan even if you can't qualify elsewhere. So you know, 0:06:23.000 --> 0:06:26.039 that's really the heart of a lot of the problems, 0:06:25.920 --> 0:06:28.040 as will you go through the business model here and 0:06:28.080 --> 0:06:30.600 how these companies make money because I've seen these checking 0:06:30.640 --> 0:06:33.720 out when I'm buying stuff online and they offer essentially 0:06:33.839 --> 0:06:36.159 zero percent interest if you paying for in some cases, 0:06:36.160 --> 0:06:37.600 So how do they how do they make money if 0:06:37.640 --> 0:06:41.200 they're they're not charging you for the ability to pay 0:06:41.200 --> 0:06:45.239 back over time exactly, you know, so so you usually 0:06:45.279 --> 0:06:47.800 paying for is always interest free. You can get hit 0:06:47.800 --> 0:06:50.720 with late fees, but primarily what b NFL companies do 0:06:50.880 --> 0:06:53.320 to make money is that they charge the merchant a 0:06:53.440 --> 0:06:56.520 percentage of whatever it is you're buying, and the merchant 0:06:56.600 --> 0:06:59.839 thinks that that's worth it because they you're more like 0:07:00.120 --> 0:07:02.880 to buy with these things, so you're there's less quote 0:07:03.160 --> 0:07:05.479 quote unquote cart abandonment. You're not going to walk away 0:07:05.520 --> 0:07:07.400 from your card. You're actually gonna go through with the purchase. 0:07:07.680 --> 0:07:09.680 And then also your cart is going to be bigger, 0:07:09.840 --> 0:07:13.080 You're gonna buy more stuff because you think you're human 0:07:13.120 --> 0:07:15.640 monkey or your monkey brain things that it's cheaper because 0:07:15.680 --> 0:07:18.200 you're only paying and fo you're praying and for payments 0:07:18.240 --> 0:07:21.200 not all, you know, not one big price tag at once. 0:07:21.240 --> 0:07:24.320 So primarily mergency and make up a big part of 0:07:24.360 --> 0:07:27.440 the of the revenue of across the board for these companies. Um. 0:07:27.720 --> 0:07:29.960 You also, you know they do with some Klarna and 0:07:30.160 --> 0:07:34.080 a firm for example, also have longer term interest loans 0:07:34.120 --> 0:07:36.920 that they offer until they make some interest off that. 0:07:37.320 --> 0:07:39.320 But this is kind of their main selling point. I mean, 0:07:39.320 --> 0:07:42.520 they really say the merchants are their primary customer. You know, 0:07:42.600 --> 0:07:44.840 we as shoppers think that we're getting the good deal, 0:07:44.880 --> 0:07:48.000 but really it's merchants that are their primary customer. Um. 0:07:48.280 --> 0:07:50.840 So that's really the and that's and that's also sorry. 0:07:50.880 --> 0:07:54.280 What what they say helps distinguish them from credit cards 0:07:54.320 --> 0:07:56.480 because it makes them better than credit cards because credit 0:07:56.480 --> 0:07:58.960 card companies, you know, they may are credit card issuers, 0:07:59.000 --> 0:08:01.200 they make a lot of money off of the invite 0:08:01.240 --> 0:08:03.040 and fees that they charge on people that don't play 0:08:03.040 --> 0:08:06.160 their bills on time. The other thing that's really fascinating 0:08:06.200 --> 0:08:08.000 that as Man goes into and you can read it 0:08:08.040 --> 0:08:11.120 on your own, is about how there's a whole shadow 0:08:11.200 --> 0:08:13.480 credit industry that's sprung up here too, all right, it's 0:08:13.520 --> 0:08:15.400 a great read. It's the cover story. Joe Weber as 0:08:15.400 --> 0:08:20.560 may depress. Thank you so much. This is Bloomberg. This 0:08:20.840 --> 0:08:24.880 is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes, 0:08:24.960 --> 0:08:28.880 Tim Stinovic on Bloomberg Radio. All right on the Bloomberg Today. 0:08:28.920 --> 0:08:31.120 An update on how funding plans from monkey poks are 0:08:31.160 --> 0:08:33.800 at risk because of an impasse on Capitol hillover additional 0:08:33.880 --> 0:08:37.200 aid for COVID nineteen meantime timp there are nearly thirty 0:08:37.240 --> 0:08:40.520 six d monkey pox cases across almost every state DC 0:08:40.760 --> 0:08:42.679 in Puerto Rico. Maybe it doesn't sound like a lot, 0:08:42.720 --> 0:08:44.480 but do you remember when COVID didn't sound like a 0:08:44.480 --> 0:08:47.040 lot either. I'm not saying apples to apples, no, not 0:08:47.080 --> 0:08:48.640 apples to apples. But at the same time, the World 0:08:48.640 --> 0:08:51.120 Health Organization, you know, make taking the extraordinary step over 0:08:51.160 --> 0:08:53.920 the weekend of declaring it an emergency. Let's get into 0:08:53.960 --> 0:08:56.560 it with Dr Tom Inglesby, director at Center for Health 0:08:56.559 --> 0:08:59.480 Security Think JOHNS. Hopkins at Bloomberg School of Public Health. 0:08:59.559 --> 0:09:01.599 Dr angles He joins us on the phone from Baltimore, 0:09:01.960 --> 0:09:03.960 the Bloomberg School of Public Health that is supported by 0:09:04.000 --> 0:09:07.920 Michael R. Bloomberg founder of Bloomberg GALP and Bloomberg Philanthropies. 0:09:08.160 --> 0:09:10.520 Dr Engels, be great to have you with us. I 0:09:10.559 --> 0:09:12.920 mentioned the extraordinary step of that we heard from the 0:09:12.960 --> 0:09:16.320 World Health Organization essentially for the second time in three years, declaring, 0:09:16.559 --> 0:09:19.560 you know, another global health emergency this time monkey poks. 0:09:20.559 --> 0:09:23.000 How should we be thinking about this, especially in the 0:09:23.000 --> 0:09:25.320 context of what we've learned about viruses over the last 0:09:25.320 --> 0:09:28.640 two and a half close to three years. Yeah, well, 0:09:28.679 --> 0:09:30.160 first of all, very good to be with you, Thanks 0:09:30.200 --> 0:09:33.840 for having me. Um. I think, Um, you're right to 0:09:33.880 --> 0:09:36.200 think about kind of the frequency with which we're seeing 0:09:36.280 --> 0:09:41.679 these new viruses and and uh, in the past, in 0:09:41.720 --> 0:09:46.080 between big events, I think we've kind of started to 0:09:46.080 --> 0:09:48.160 to think that they won't happen again. But I think 0:09:48.400 --> 0:09:50.559 we're really looking at kind of the new global normal. 0:09:50.679 --> 0:09:55.400 We will continue to have infectious disease crises in the world, 0:09:55.440 --> 0:09:57.040 and we just need to get prepared for them, have 0:09:57.120 --> 0:10:00.800 good stockpiles of medicine, be ready to react quickly. And 0:10:00.880 --> 0:10:03.719 I'm really happy that the World Health Organization declared a 0:10:03.760 --> 0:10:06.520 public health emergency because I think it helps focus the 0:10:06.559 --> 0:10:11.040 intention of countries and hopefully get more resources for the response. 0:10:11.559 --> 0:10:14.800 So it means, since we've learned so much over the 0:10:14.880 --> 0:10:17.240 last two two and a half years because of COVID, 0:10:17.559 --> 0:10:20.880 we're going to get the next pandemic or infectious disease crisis. 0:10:20.920 --> 0:10:24.520 We're gonna get it right. We're gonna be really well prepared. Right, Sorry, 0:10:24.559 --> 0:10:27.079 I can't stop laughing. Forgive me. I grew up in 0:10:27.240 --> 0:10:30.480 a large family with a lot of sarcasm. I think 0:10:30.520 --> 0:10:33.320 we are. It doesn't always feel like it, but we 0:10:33.559 --> 0:10:37.120 are building new capacities in the world. In the United States, 0:10:37.559 --> 0:10:42.040 we have this time around. We have a vaccine that's 0:10:42.080 --> 0:10:44.400 ready to go. We don't have nearly enough of it, 0:10:44.880 --> 0:10:47.480 but the vaccine was created some time ago, so as 0:10:47.480 --> 0:10:50.640 opposed to COVID vaccine, which took about a year to 0:10:50.720 --> 0:10:52.960 come online, we do have vaccine that's ready to go. 0:10:53.000 --> 0:10:55.480 We do have a medicine that works against this virus 0:10:56.000 --> 0:10:58.679 that's also ready to go. It's just a matter of 0:10:58.720 --> 0:11:01.200 getting it in the to the places that need it 0:11:01.360 --> 0:11:05.439 fast enough and getting it getting doctors and healthcare providers 0:11:05.640 --> 0:11:07.880 very aware of this illness so they can not to 0:11:07.960 --> 0:11:09.960 test for and know to get the vaccine and the 0:11:09.960 --> 0:11:12.960 treatment for people who need it. So forget, but and 0:11:13.000 --> 0:11:15.160 forgive me my sarcasm. But I can't tell you how 0:11:15.160 --> 0:11:17.880 many you know, Dr Englesby people have come up to me. 0:11:17.920 --> 0:11:20.040 They know what we do for a living. We we 0:11:20.080 --> 0:11:23.000 know we have incredible access to the likes of someone 0:11:23.080 --> 0:11:25.360 like yourself who are on the front lines and are 0:11:25.600 --> 0:11:29.000 hearing about it, seeing about it directly. Um people coming 0:11:29.080 --> 0:11:31.320 up to me, They're like, are you worried about this? 0:11:31.400 --> 0:11:36.720 And I don't know what the right answer is. Yeah, 0:11:36.880 --> 0:11:39.840 I mean, I think if you are in a high 0:11:39.960 --> 0:11:42.319 risk group, then I do think you should be worried 0:11:42.320 --> 0:11:44.600 about it. Right now, that high risk group is men 0:11:44.600 --> 0:11:48.400 who have sex with men, and uh so a lot 0:11:48.480 --> 0:11:52.040 of attention is now being focused on providing that community 0:11:52.120 --> 0:11:56.559 with information awareness, especially the healthcare providers who take care 0:11:56.600 --> 0:11:59.160 of that demographic. Making sure that they have access to 0:11:59.240 --> 0:12:02.200 vaccine is quickly as we get vaccine online. If you're 0:12:02.200 --> 0:12:04.720 not in that group, then I think it's it's reasonable 0:12:04.720 --> 0:12:07.200 to be paying attention to it, just to be tracking it. 0:12:07.440 --> 0:12:09.679 But it is not now posing a risk to the 0:12:09.720 --> 0:12:13.480 general population. It is possible that if we don't get 0:12:13.600 --> 0:12:16.400 control of it over time, that it could move into 0:12:16.440 --> 0:12:19.040 different groups of people in the United States, but this 0:12:19.400 --> 0:12:22.320 is not a disease that spreads like COVID or influence 0:12:22.400 --> 0:12:24.880 the person to person through the air. This requires very 0:12:24.880 --> 0:12:30.200 close contact, skin to skin contact or household contact between 0:12:30.200 --> 0:12:31.800 people are very close to each other. So it's never 0:12:31.880 --> 0:12:34.120 gonna be like what we experienced the COVID, but it's 0:12:34.160 --> 0:12:38.880 something to pay attention to get it right. It has 0:12:39.600 --> 0:12:44.160 in in past years when it was mostly in Africa, 0:12:44.400 --> 0:12:46.760 in a number of countries in Africa, it did have 0:12:47.320 --> 0:12:50.199 um some mortality associate with it, you know, single digit 0:12:50.240 --> 0:12:53.920 percentages between one per five. It is not does not 0:12:54.000 --> 0:12:57.120 appear to be killing people yet in the world. There 0:12:57.120 --> 0:12:59.640 have been a few cases of people die, but very 0:12:59.760 --> 0:13:03.679 very very small numbers. But it is causing very painful 0:13:03.720 --> 0:13:06.840 illness um for long painblell illness for for some of 0:13:06.840 --> 0:13:09.280 the people who've gotten it. So I really want to 0:13:09.320 --> 0:13:11.400 make sure that we do everything we can to contain 0:13:11.440 --> 0:13:13.160 it and end in the United States it doesn't become 0:13:13.200 --> 0:13:16.600 a problem that lasts and that's out there as as 0:13:16.640 --> 0:13:18.480 another thing that people have to were worried about. Can 0:13:18.520 --> 0:13:20.760 you be really quick ted seconds, Are we ready for 0:13:20.800 --> 0:13:24.960 the next COVID like pandemic as a society just quickly? 0:13:25.520 --> 0:13:29.720 We're not ready, but I think we are removing in 0:13:30.000 --> 0:13:32.320 positive directions. We just can't take our eye off the ball, 0:13:32.440 --> 0:13:34.640 all right, really appreciate it. Thank you so much. Dr 0:13:34.720 --> 0:13:37.360 Tom Inglesby. He's director of the Center for Health Security 0:13:37.360 --> 0:13:39.680 at the Johns Hopkins Bloomberg School of Public Health, of course, 0:13:39.679 --> 0:13:42.439 supported by Michael R. Bloomberg, founder of Bloomberg LP and 0:13:42.480 --> 0:13:47.360 Bloomberg Philanthropy. You're listening to Bloomberg Business Week with Carol 0:13:47.400 --> 0:13:52.600 Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, 0:13:52.679 --> 0:13:54.600 this guy is not so friendly as Jeff Blue in 0:13:54.600 --> 0:13:57.880 Frontier battle to over buying Deep discounter Spirit Airlines. The 0:13:57.920 --> 0:14:00.800 battle is over, as you know, Jeff Blue clinching a 0:14:00.880 --> 0:14:02.960 deal one day after Spirit called off a plan merger 0:14:03.000 --> 0:14:06.000 with Frontier. Well, today, Barry Biffle, he's the president CEO 0:14:06.120 --> 0:14:10.360 Frontier Airlines, telling Bloomberg our own Katie Greifeld about walking 0:14:10.360 --> 0:14:13.360 away from that deal with Spirit but mm hinting it 0:14:13.400 --> 0:14:16.080 might not all be over. So I'm not gonna speculate. 0:14:16.200 --> 0:14:19.880 But look, we're always looking for ways to save more consumers, Mike, So, 0:14:20.120 --> 0:14:23.280 so I'm not gonna close the door, but let's let's 0:14:23.320 --> 0:14:25.520 let them, uh, you know, pursue their path and we'll 0:14:25.520 --> 0:14:28.880 see how it goes. Barry, Jeff Blues calling the doors, 0:14:29.160 --> 0:14:31.560 We'll see how it goes. That's what he said exactly. 0:14:31.920 --> 0:14:34.440 We'll time, we'll tell Well, uh, let's get to it 0:14:34.480 --> 0:14:37.320 with our own Blueberg Intelligence senior Aero Aerospace, Defense and 0:14:37.400 --> 0:14:40.800 Airlines analyst, George Ferguson. He's on the phone from New Jersey. 0:14:40.880 --> 0:14:42.760 George is so glad to have you back with him 0:14:42.760 --> 0:14:45.360 and myself. So are you surprised that it kind of 0:14:45.360 --> 0:14:47.680 went this way? And do you agree that maybe the 0:14:47.720 --> 0:14:52.840 door still might be open for Frontier? So not surprised 0:14:52.840 --> 0:14:55.800 that it went this way? Um, you know really, I 0:14:55.840 --> 0:14:59.280 think after we saw Jeff blue uh, you know up 0:14:59.360 --> 0:15:03.160 there proposed usls UM, I think if if Frontier had 0:15:03.840 --> 0:15:05.600 more to bring, they would have brought it, and we 0:15:05.640 --> 0:15:08.280 just didn't see him bring anything, I think, significantly more 0:15:08.320 --> 0:15:10.440 to the deal to try to win it. And so 0:15:10.640 --> 0:15:12.680 she seemed him, you know me that they were just 0:15:12.720 --> 0:15:15.920 trying to convince shareholders that in the long run it 0:15:16.040 --> 0:15:19.440 was better to put Speed together with Frontier. Um. But 0:15:19.480 --> 0:15:23.280 they again we weren't ready to bring cash and so um, 0:15:23.360 --> 0:15:25.280 so I wasn't surprised if it was interesting that they 0:15:25.400 --> 0:15:28.280 I think we never really finally got a vote yesterday 0:15:28.360 --> 0:15:31.600 or itally of a vote. Um. So it just tells 0:15:31.640 --> 0:15:33.920 me that the Cheryls just weren't going to be We're 0:15:33.920 --> 0:15:38.000 gonna be suede. I mean, there's definitely some discussion in 0:15:38.040 --> 0:15:41.280 the marketplace today that, Um, there are people that are 0:15:41.320 --> 0:15:43.840 worried that you know, the d O J you know 0:15:44.080 --> 0:15:46.440 and I trust wouldn't let this go through. I just 0:15:46.840 --> 0:15:48.880 I don't see it, like I don't see either of 0:15:48.920 --> 0:15:53.920 these airlines being so critical to the US UM, you know, 0:15:54.000 --> 0:15:57.400 travel business that they couldn't let them, you couldn't put 0:15:57.400 --> 0:16:01.360 them together. Just they're just not big enough. Um, will 0:16:01.360 --> 0:16:03.320 help us in the country and us George, help us 0:16:03.360 --> 0:16:05.800 understand sort of the test for regulators in a situation 0:16:05.800 --> 0:16:08.160 like this, because this is a highly regulated industry. So 0:16:08.440 --> 0:16:11.280 what does what what does Spirit and Jeff Blue? What 0:16:11.280 --> 0:16:13.520 do they have to prove to regulators in order for 0:16:13.560 --> 0:16:16.680 regulators to sign off on this? Okay, so I'm gonna 0:16:16.960 --> 0:16:18.600 I'm gonna punt on this one because I have a 0:16:18.760 --> 0:16:20.680 I have a colleague that spends all day long on 0:16:20.720 --> 0:16:23.840 the hearth and or whatever index, you know, they're used, 0:16:23.880 --> 0:16:26.880 and and I'm just gonna say, you know that they're 0:16:26.920 --> 0:16:29.400 gonna want to make sure that it doesn't mean that 0:16:29.480 --> 0:16:33.200 the industry is too concentrated and that consumer is going 0:16:33.240 --> 0:16:36.240 to pay a lot more for fairs. And so again 0:16:36.280 --> 0:16:41.080 I'm going to drop back on there four major airlines 0:16:41.120 --> 0:16:44.920 in front of the Southwest, American, United and Delta already 0:16:45.440 --> 0:16:48.040 right have a huge amount of the marketplace. Is not 0:16:48.320 --> 0:16:50.960 going to be a lot of the marketplace. There's already 0:16:50.960 --> 0:16:55.600 competitors underneath the combined to the last school be there, right, 0:16:55.680 --> 0:16:59.440 we'll have we'll have a growing frontier underneath there. And 0:16:59.480 --> 0:17:01.560 the group you you of this industry as airlines are 0:17:01.640 --> 0:17:04.359 always being born, um, you know, and so we've got 0:17:04.480 --> 0:17:07.679 Breeze and a Velo and you name it. So speaking 0:17:07.680 --> 0:17:11.600 of Blue right, yeah, And so I'm just having I 0:17:11.640 --> 0:17:15.160 have a hard time imagining someone saying there isn't enough 0:17:15.200 --> 0:17:17.879 competition in this industry, because there's a heck of a 0:17:17.880 --> 0:17:20.720 lot of companies in this industry always working to take 0:17:20.760 --> 0:17:23.640 fairs down on each other always. Yeah, I mean right, 0:17:23.720 --> 0:17:27.600 you know this the cycles of you know, tons of 0:17:27.640 --> 0:17:30.439 airline names and then we see consolidation and then we 0:17:30.480 --> 0:17:33.720 see more airline names, and then we see consolidation. Like right, 0:17:33.760 --> 0:17:36.399 you've seen this movie several times before. I don't know 0:17:36.440 --> 0:17:39.200 if it's harder to get into it now. I don't know. 0:17:39.800 --> 0:17:42.280 I'm even this quarter. If you think about it, the 0:17:42.320 --> 0:17:47.440 airlines are approaching levels of capacity and they're nowhere near 0:17:47.480 --> 0:17:51.320 that level of profitability. I mean Southwest did breach that today. 0:17:51.320 --> 0:17:54.240 That did a nice job. They said they see fair 0:17:54.400 --> 0:17:58.080 softening into three Q. They guided much lower than their 0:17:58.119 --> 0:18:02.440 twenty nineteen results. They aren't getting back all the increases 0:18:02.480 --> 0:18:06.440 in costs. It's a very competitive marketplace. George, before we 0:18:06.520 --> 0:18:08.440 let you go, help us understand what a confined Jet 0:18:08.440 --> 0:18:10.960 Blue Spirit would look like. It's going to be run 0:18:10.960 --> 0:18:12.960 by the CEO and just wants to know you're going 0:18:13.000 --> 0:18:15.200 to get mint on Spirit. Yeah, there's no way. I mean, 0:18:15.280 --> 0:18:18.000 how do they do this? These are different cultures. Yeah, 0:18:18.040 --> 0:18:20.720 so I think they will. I think it's absolutely going 0:18:20.800 --> 0:18:23.560 the Jet Blue direction. It'll be a kindler, gentler, low 0:18:23.600 --> 0:18:27.680 cost carrier. I think you will get mint on some uh, 0:18:27.760 --> 0:18:29.560 some of the routes right there, the routes you can 0:18:29.600 --> 0:18:32.520 get people to pay up for. It's it's they're gonna 0:18:32.520 --> 0:18:36.480 have to reconfigure all the Spirit airplanes, repaint them all 0:18:36.520 --> 0:18:38.720 and I think every you know, everyone to be sort 0:18:38.760 --> 0:18:41.760 of kindler and gentler and there and there and there 0:18:42.040 --> 0:18:45.520 we do those interiors, right, Yep, that's a bunch of 0:18:45.520 --> 0:18:48.160 money involved. Yeah, that we'll put out a piece of research. 0:18:48.240 --> 0:18:50.240 They put some numbers on that. Does it still just 0:18:50.280 --> 0:18:52.720 ten seconds? Still be? Is it still though? A discount? 0:18:52.800 --> 0:18:56.080 Deep discount airline? Don't know, not deep discount. I think 0:18:56.119 --> 0:18:58.600 a discount, but not a deep discount. Maybe called a funding. 0:18:59.359 --> 0:19:01.119 Very interesting day, well maybe then a little bit of 0:19:01.119 --> 0:19:03.960 a new strategy there for for Jet Blue. George Ferguson, 0:19:04.000 --> 0:19:05.240 we ran out of time. We wanted to talk a 0:19:05.280 --> 0:19:07.720 little bit about the air show in the UK, but 0:19:07.760 --> 0:19:09.080 we're gonna have to bring you back for that because 0:19:09.080 --> 0:19:11.240 I'm just curious about some of the major trends going forward. 0:19:11.240 --> 0:19:14.199 George Ferguson, He's senior Aerospace, Defense and Airlines analyst at 0:19:14.200 --> 0:19:17.159 Bloomberg Intelligence and must read on the Bloomberg when it 0:19:17.160 --> 0:19:19.560 comes to all things in this industry. Thank you so much. 0:19:19.680 --> 0:19:27.240 This is Bloomberg. I'm broom a journal Yeah, but you 0:19:27.320 --> 0:19:34.160 let me drive, no, no, no, who's please? I'll ride gravels. 0:19:34.600 --> 0:19:42.919 I want to drive. It's good question drive. This is 0:19:42.920 --> 0:19:48.320 good ride for the clobemular thing. Well up on Bloomberg 0:19:48.400 --> 0:19:50.879 Radio list. Indeed, everybody, we are just about nine minutes 0:19:50.880 --> 0:19:53.400 away from the closing bell on this Thursday. A lot 0:19:53.520 --> 0:19:56.760 going on, and we are seeing a rally underway another 0:19:56.840 --> 0:19:59.399 risk trade, building on the games that we got in 0:19:59.480 --> 0:20:02.119 yesterday's trade. I'm talking about the equity markets in particular. 0:20:02.160 --> 0:20:04.480 You heard Charlie talking about it. More than one percent 0:20:04.560 --> 0:20:07.400 gains on each of those major averages right now. Tim, Yeah, 0:20:07.400 --> 0:20:08.960 I wonder if this is a bear market rally like 0:20:08.960 --> 0:20:11.159 our guest yesterday said, or if you know it's here 0:20:11.200 --> 0:20:13.040 to stay. Let's take into the tech part of this 0:20:13.160 --> 0:20:16.760 with James chock Mark partner and technology Analystic Clockwise Capital. 0:20:17.040 --> 0:20:20.320 James joining us on the phone from Miami this afternoon. James, 0:20:20.359 --> 0:20:21.880 good to have you back with us. It's been a while. 0:20:21.880 --> 0:20:25.800 How are you. I'm well, pleasure to be with you. Well, 0:20:25.880 --> 0:20:28.160