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Speaker 2: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
Speaker 2: my co host Matt Miller.
Speaker 1: Every business day we bring you interviews from CEOs, market pros,
Speaker 1: and Bloomberg experts, along with essential market movin news.
Speaker 2: I'm the Bloomberg Markets podcast called Apple Podcasts or wherever
Speaker 2: you listen to podcasts, and at Bloomberg dot Com slash podcasts.
Speaker 2: All right, he's back, folks. He said he'd be back,
Speaker 2: and he's back. Brad Jacobs, Executive Chairman of XPO You
Speaker 2: know what in Lovin on the New York Sock Exchange XBO.
Speaker 2: He's got a new company, which he's been talking. I
Speaker 2: guess he kind of hinted at the last time he
Speaker 2: ses to tease. Thank you very much, Brad, Thanks so
Speaker 2: much for joining us. We really appreciate you coming back.
Speaker 2: Talk to us about the new opportunity you've seen. I mean,
Speaker 2: you've done roll ups of the waste management business, the
Speaker 2: rental business, the logistics business.
Speaker 3: Now what building products distribution?
Speaker 2: Building products distribution? Okay, so if you can.
Speaker 4: Think about any house or a commercial facility, or a
Speaker 4: hospital or a school or a church, all the stuff
Speaker 4: that goes into making that building, so that could be
Speaker 4: the roof, the flooring, the windows, the tiles, the doors,
Speaker 4: the fire hydrant, the infrastructure, the.
Speaker 3: Pipes, HVAC. All that stuff has to go through the
Speaker 3: supply chain and its huge, huge markets eight hundred billion
Speaker 3: dollars in size between here and Western Europe, and it's
Speaker 3: been growing about seven percent.
Speaker 5: All right, So what what do you bring to it
Speaker 5: that that's new.
Speaker 3: We'll bring a lot that's new. First of all, we're
Speaker 3: going to create a very large company and get all
Speaker 3: the advantages of scale and size that come with that.
Speaker 3: Second of all, we're going to apply technology We're going
Speaker 3: to apply technology, especially AI, for dynamic pricing, for managing
Speaker 3: the warehouses better, making them more automated, to do route optimization,
Speaker 3: for the delivery trucks, to do interactions with the customer.
Speaker 3: E commerce right now is mid single digits percent. It
Speaker 3: should be the majority.
Speaker 5: And in building materials, Paul, all I want is a
Speaker 5: straight tube by five. I know that's can you make
Speaker 5: that happen. It's a big deal. It's a big deal
Speaker 5: where you source your materials because even though it's commoditized,
Speaker 5: I just find as the end user, it's not always
Speaker 5: the same product.
Speaker 3: Well, I'm glad to hear that there's a problem to
Speaker 3: solve in this chain, and we will solve that.
Speaker 2: Talk to us about kind of the I guess in
Speaker 2: the past, part of your strategy has been rolling up well,
Speaker 2: rolling up a fragment in industry. Is that in fact
Speaker 2: the case here? Talk to us about kind of the
Speaker 2: fragmentation and kind of how you plan to deal with that.
Speaker 3: So there's about thirteen thousand distributors here in the United States,
Speaker 3: excuse me, seven thousand here the United States. It's about
Speaker 3: thirteen thousand in Europe. So there's twenty thousand distributors between
Speaker 3: here and Western Europe. So it's very, very very fragmented.
Speaker 3: The largest company would be Fergusing. It's about thirty billion dollars.
Speaker 3: Great company, done very good, very well. But I plan
Speaker 3: to make a company even bigger than that.
Speaker 2: Boy, how do I invest in this on? I'm not
Speaker 2: going to miss this one.
Speaker 5: Well, as Paulman, it's not your first rodeo. What is
Speaker 5: the experience that you picked up at the other companies
Speaker 5: with which you were involved and how does it apply
Speaker 5: to this.
Speaker 3: Well, it's a similar business plan in the sense that
Speaker 3: it's going to be primarily based on consolidation acquisitions, So
Speaker 3: acquiring companies at a relatively good price, a price that's
Speaker 3: a lower multiple demo we're trading app and then improving
Speaker 3: those companies. So if you look at XPO Logistics, for example,
Speaker 3: we bought eighteen companies. They were doing roughly a billion
Speaker 3: dollars in EBITDA between all of them, and after a
Speaker 3: few years they were doing over two billion dollars VIVI do.
Speaker 3: So we improved the companies that we bought. That's the
Speaker 3: same thing we're going to do here.
Speaker 5: Do you become then a friend or enemy or a
Speaker 5: frindemy of a home depot or Lows home.
Speaker 3: Depot and a lesser extent. Low's plays in a specific
Speaker 3: niche of this market, mostly the pro contractor, and they'll
Speaker 3: be one of many competitors twenty thousands of precise all.
Speaker 2: Right, So I know we're talked to you the last
Speaker 2: time management teams. Assembling a management team is one of
Speaker 2: your primary responsibilities jobs, the most important thing, most important things.
Speaker 2: Talk to us about how you're going to kind of
Speaker 2: do that here.
Speaker 6: So I wrote a book, as you know, yep, and
Speaker 6: it's called how to Make a few billion dollars. And
Speaker 6: the key thing if you read that book is the
Speaker 6: quality of the people. Make sure you have people who
Speaker 6: are really smart, really hard working, very good at what
Speaker 6: they do, collaborative, good team members, people are really sharp
Speaker 6: and focused. And if you can get that quality of
Speaker 6: world class management hired, and if you can create a
Speaker 6: culture where everyone values the relationships between each other and
Speaker 6: treats each other with respect and transparency, you can accomplish
Speaker 6: a real lot. I'm going to have that same exact
Speaker 6: principle here. That's one of the most important principles.
Speaker 3: For success in my opinion. And by the way, we
Speaker 3: named it QXO qx quality. Yep, we kept the X
Speaker 3: and O because we're going to use some of the
Speaker 3: same winning principles that made XPO and g XO and
Speaker 3: RXO successful.
Speaker 5: How far behind is the buildings supply industry in terms
Speaker 5: of adapting and using technology.
Speaker 3: As an as an industry as a whole, it's behind.
Speaker 3: Maybe it's in like the second inning. There are a
Speaker 3: handful of companies doing pretty well. So last week Builders
Speaker 3: First Source had an investor day. I read the transcript
Speaker 3: and sought on webcast. Heard it on the webcast. I
Speaker 3: like what they said about what they're doing in technology.
Speaker 3: But they're the exception.
Speaker 7: They're the anomaly.
Speaker 3: Most companies are not using technology in any big way.
Speaker 3: In the warehouses. Most of them are not using technology
Speaker 3: enough on the route optimization. Most of the building products
Speaker 3: distributors are not using technology enough for pricing decisions, for
Speaker 3: pricing optimization. And these are big, big variables that can
Speaker 3: enhance the customer experience dramatically and take out lots of
Speaker 3: unnecessary cost.
Speaker 5: Well, does this mean you pass the costs on to
Speaker 5: the end users?
Speaker 3: To the contrary, I hope we save money for the
Speaker 3: end user because we're going to take out waste, takeout
Speaker 3: inefficiency in the whole supply chain, and we'll share that.
Speaker 3: We'll share that with the customer. We'll have better margins,
Speaker 3: but we could share some of that improve margin with
Speaker 3: the customer.
Speaker 5: What kind of revenues are you predicting at this point?
Speaker 3: By the end of the first year, we should be
Speaker 3: on a revenue run rate of at least a billion dollars.
Speaker 3: At the end of the second year, we should be
Speaker 3: on a revenue run rate of at least five billion dollars.
Speaker 3: And over the next decade, we expect to get this
Speaker 3: into the tens of billions of dollars in revenue size.
Speaker 2: So where are we with QXO now, you just press
Speaker 2: release comes out today. Where do you start? Where's your
Speaker 2: capital come from? How do you go from here? How
Speaker 2: do you build this company?
Speaker 3: Well, it was on your show last week and we
Speaker 3: talked about how we're putting a billion dollars of equity
Speaker 3: into a very small cap company called silver Soun. That's right,
Speaker 3: and we're going to wait till that deal closed is
Speaker 3: in a few months, and then we're going to spin
Speaker 3: that company back to the original legacy shareholders. We're going
Speaker 3: to give them a little dividend two and a half
Speaker 3: million dollars. We're gonna give them a less than half
Speaker 3: percent share in our new company. We we'll have our
Speaker 3: new company, we'll own ninety nine percent of it, and
Speaker 3: we will use that money to go out and do
Speaker 3: some acquisitions and start building the business, and over time
Speaker 3: we'll tap the capital markets as we've done over the decades.
Speaker 2: How do you typically fund your deals equity versus debt,
Speaker 2: given now that the debt is so much more expensive
Speaker 2: than it was over the last ten to fifteen years.
Speaker 3: More equity than debt than in the past. In the past,
Speaker 3: I've been comfortable going up to two to four times
Speaker 3: of leverage. Here, I'm thinking more roughly half of that.
Speaker 3: And the reasons are two full One, as you said,
Speaker 3: interest rates are higher, although twenty years going to straight
Speaker 3: for right here, Yeah, just recently. It was in the
Speaker 3: last ten years they got almost nothing. Secondly, is the
Speaker 3: world has a lot of macro issues going on, wars
Speaker 3: and geopolitical tension, and it's more prudent to have less
Speaker 3: leverage in my opinion.
Speaker 5: What's your title going to be, what's your role in
Speaker 5: all this? And are you giving up your business, your
Speaker 5: other businesses.
Speaker 3: I'm certainly not going to give up my other businesses.
Speaker 3: I'm executive chairman of XPO and I planned to keep
Speaker 3: doing that, And I'm non executive chairman of RXO and
Speaker 3: of GXO, and I love all fear of those companies dearly,
Speaker 3: and I think I help them in the roles that
Speaker 3: I play there. In terms of what my title and
Speaker 3: position is going to be here, it's going to be
Speaker 3: the same time I've had since I've been twenty three.
Speaker 3: I'm going to be chairman and CEO, and I'm going
Speaker 3: to run the company. I'm going to leave the management team.
Speaker 5: And what makes you target this industry specifically? You've got
Speaker 5: about thirty seconds or so left.
Speaker 3: I looked at over five hundred opportunities and many many
Speaker 3: different industries, and this is the one that checked every
Speaker 3: single box of what I was looking for. Something that
Speaker 3: was large, something that was act position rich, something that
Speaker 3: was up my alley in terms of my skill set.
Speaker 3: Something with it was growth seven percent organic growth, and
Speaker 3: an industry and a customer set that is familiar to me.
Speaker 3: United Rentals is a big overlap with the construction customers.
Speaker 2: For example, fascinating Brad thanks so much for joining us again.
Speaker 2: We appreciate you coming back and bringing us up to
Speaker 2: date on your new opportunity. Brad Jacobsy's executive chairman of XPO.
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
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Speaker 7: on demand wherever you get your podcasts.
Speaker 2: The Business of Sports, John, it's scarlettfou and a couple
Speaker 2: other slugs. I think Michael Barr and some guy who's
Speaker 2: an emerging markets guy. How he gets a Damien c
Speaker 2: does it all? He does it all. But they talk
Speaker 2: about the business of sports. I've got a lot of
Speaker 2: business of sports questions. I'm a golfer. I'm a fan
Speaker 2: of the game of golf, fan of the business of
Speaker 2: the golf. I don't understand what's going on with this
Speaker 2: live golf thing. I thought the PGA and the Live
Speaker 2: we're merging. Everybody's gonna be happy altogether. And then John
Speaker 2: Rahm says he's going to go and take three hundred
Speaker 2: large from live golf. Can you, Scarlet Fiel, you cover
Speaker 2: all this for us? Can you tell us what's happening here.
Speaker 8: Well, he's a reigning Master's champ, the number three player
Speaker 8: in the world, so he ads this legitimacy to going
Speaker 8: over to Live and he's the biggest signing by far
Speaker 8: yet And you're right. Live Golf and PGA Tour are
Speaker 8: working towards a deal, but nothing's happened yet. They have
Speaker 8: to give an update by December thirty first, and it's
Speaker 8: not clear what shape this deal will take, although we
Speaker 8: do know that PGA has been talking with other investors,
Speaker 8: including a report this morning from Jillian Tan that a
Speaker 8: Fenway Sports Group led consortium has been chosen to enter
Speaker 8: into final talks to be a co investor, a US
Speaker 8: co investor in this Live Golf PGA Tour entity.
Speaker 5: Every one of these sports stories as of late, the
Speaker 5: common denominator is money, and with it this specific case
Speaker 5: golfers signing with Live. Something in me tells me that
Speaker 5: this is some sort of Faustian bargain that these golfers
Speaker 5: are made. Am I being too cynical or fausia not realistic?
Speaker 8: If the PGA Tour is in active negotiations with Live
Speaker 8: Golf to merge whatever obstacles they threw up there, and
Speaker 8: whatever concerns they cited has kind of gone by the wayside.
Speaker 8: They opened the door to golfers negotiating with Live Golf directly.
Speaker 8: We know that John Rahm had said in the past
Speaker 8: that he was not interested in the money. He said
Speaker 8: he and his wife were not concerned about the money,
Speaker 8: you know, that Live could offer them. He's always been
Speaker 8: very interested in history and legacy, and he said back
Speaker 8: in twenty twenty two. Right now, the PGA Tour has that. Now,
Speaker 8: once it became apparent that the PGA Tour was negotiating
Speaker 8: with Live Golf, maybe it doesn't have that history and
Speaker 8: legacy anymore because it's open season it is.
Speaker 2: I mean, if the PGA is going to merge with Live,
Speaker 2: they're going to take a direct investment from the set
Speaker 2: Investment Fund. So you've already lost that The fundamental argument
Speaker 2: that the PGA had against Live is now, by the way, say,
Speaker 2: because you're in fact taking that money. So now if
Speaker 2: I'm John Rahm, I'm like, why do I wait?
Speaker 5: Where the regulators and all this? What's there?
Speaker 8: The DOJ is looking into this, and you know, again
Speaker 8: they have that December thirty first deadline with which to
Speaker 8: update the government. We do know that Jaymonahan and the
Speaker 8: PIF governor, yasir Al Ramayan Our scheduled to meet this
Speaker 8: week for negotiations, so maybe there'll be some reporting out
Speaker 8: of that.
Speaker 5: Here's the independent of each other. Can they possibly Could
Speaker 5: the PGA possibly survive on its own against an entity
Speaker 5: like Live?
Speaker 2: I don't know.
Speaker 8: They don't have bottomless pockets like Live. Live is backed
Speaker 8: by the Saudi government.
Speaker 2: But I'll tell you what the PGA has that Live
Speaker 2: doesn't have, which is a network television contract. I mean,
Speaker 2: if you want to watch Live, you got to go
Speaker 2: find it on the CW with's your a bunch of
Speaker 2: hotstruct stations around. They have no and so it is.
Speaker 2: I mean, I'm an avid golf fan. I will watch
Speaker 2: the round of some tournament in Poughkeepsie if it's the
Speaker 2: PGA Tour. I didn't haven't seen one shot of You could,
Speaker 2: but you just don't want to. It's a combination. I
Speaker 2: don't really care to. The PJS takes care of it
Speaker 2: for me, and you know, I don't know so, but
Speaker 2: there's enough people that are following Live. I think that
Speaker 2: it's a thing and it doesn't matter what the TV
Speaker 2: contract is as long as you have I guess that's
Speaker 2: Saudi money behind you.
Speaker 9: Yeah.
Speaker 8: Well, I mean they can always disrupt that at some point,
Speaker 8: and technology is moving the direction of people are not
Speaker 8: necessarily going to be signing up for the cable bundles
Speaker 8: and signing up for CW streaming will become more and
Speaker 8: more attractive over time.
Speaker 5: Yep. All right, So what next for the Saudi government
Speaker 5: in its investments?
Speaker 8: Maybe the Saudi government should look into Shoho Tani.
Speaker 2: Yes, so now again, money money, It's all about a
Speaker 2: lot of money in this case, seven hundred million dollars.
Speaker 8: Over ten years. This is the largest contract of any
Speaker 8: in any US professional sports league. It tops Aaron Judge
Speaker 8: his contract as a free agent nine year, three hundred
Speaker 8: and sixty million, Mike Trout who got an extension twelve year,
Speaker 8: or four hundred twenty six and a half million, even
Speaker 8: Patrick Mahomes ten year, four hundred and fifty million, Lionel
Speaker 8: Messi when he resigned with Barcelona. So this is a
Speaker 8: you know, ball Well no, I didn't want to use
Speaker 8: that word. Well, I mean, it's a racket busting contract
Speaker 8: about that.
Speaker 2: It's amazing. I mean, I mean, did they what's the
Speaker 2: money behind the Dodgers, and I think about the Yankees.
Speaker 2: I think about the YES Network, and they make a
Speaker 2: ton of a.
Speaker 8: Very lucrative sports TV CONTRACTIA contract. But I mean, this
Speaker 8: is also the second biggest media market in the nation,
Speaker 8: right after New York. And on top of that, unlike
Speaker 8: the Yankees, they've done very very well on the field.
Speaker 8: They won the World Series in twenty twenty. They haven't
Speaker 8: missed a season since twenty two.
Speaker 2: Well, that's amazing. That's kind of like the Yankees of
Speaker 2: the nineties in their early two thousand day.
Speaker 5: Is he worth it is?
Speaker 8: Yeah, he's worth it.
Speaker 5: Okay, give me some stats, so the comparation's with me.
Speaker 2: But how about this.
Speaker 8: He won the MVP twice. He is an incredible hitter
Speaker 8: and he's an incredible pitcher. If he just became one
Speaker 8: a hitter or one a pitcher, he would be an
Speaker 8: All Star in either, except that he could make.
Speaker 2: People are saying, I mean he is as good or
Speaker 2: better than Babe Ruth. That's how far those are.
Speaker 8: Those are the comparisons. And this summer when he was
Speaker 8: playing around the league, everywhere he went there were fans
Speaker 8: showing up and it was like showtime. You know, and
Speaker 8: they're just like tons of fans everywhere, and it was
Speaker 8: it was basically a tour to see, like how can
Speaker 8: we uh appeal to him and show him that like
Speaker 8: he should come play for the Mets, or he should
Speaker 8: come play for Detroit or whatever city you want to mention?
Speaker 5: Is there any chance he'll start dating Taylor Swift exactly?
Speaker 8: Kelsey is not giving up on his situation at all.
Speaker 2: Ok, All right, what else he has for the business
Speaker 2: of sports? Coming out for the businesses? Now you have,
Speaker 2: I mean our listeners and our viewers on YouTube. Scarlet's
Speaker 2: watching wearing a New York Rangers jacket. So is that
Speaker 2: the team number one for you?
Speaker 8: Team number one?
Speaker 2: You got to Cornell? So does that mean you're you're
Speaker 2: just a die hard hockey fan.
Speaker 8: I've always been a hockey fan, Okay. And when I
Speaker 8: went to school, I actually didn't go to any of
Speaker 8: the games because, yeah, because it was really hard to
Speaker 8: get a ticket.
Speaker 2: You had to hard to get a hockey ticket.
Speaker 8: Yeah, you had to sleep outside and to get the ticket. Yeah,
Speaker 8: I mean back in the day, this is what it entailed.
Speaker 2: And I didn't do that. Yeah. Wow.
Speaker 8: But then they started playing all the hockey games or
Speaker 8: the big game Red Hot Hockey in Madison Square Garden
Speaker 8: on Thanksgiving weekend and it became a bigger thing. Okay,
Speaker 8: so that's been going on for a couple of years,
Speaker 8: and I know I came on to talk about that.
Speaker 8: That's really fun.
Speaker 2: That's a fun all right. So you're a Ranger fan.
Speaker 2: Unbelievable years so far.
Speaker 8: For this so far, but seasons early, I mean seasons young,
Speaker 8: and anything could happen.
Speaker 5: Who's your team?
Speaker 2: Well, I don't know. I mean the Rangers, I mean
Speaker 2: I mean Yankees, guy, Giants.
Speaker 5: You're from New Jersey. You've had a root for your Devils.
Speaker 2: Yeah, you know, I've been to. I took the kids
Speaker 2: to a lot of game. It's actually a great thing
Speaker 2: to take kids with. Point's expensive.
Speaker 8: Yeah, the Devils are very exciting though. Yes, young players,
Speaker 8: they're really they're doing a lot.
Speaker 2: Yeah, but I mean Madison Square Garden going to the
Speaker 2: protection Duke Blue Devil's next Wednesday at the Garden against Baylor. Oh,
Speaker 2: next time, and that'll be fine.
Speaker 5: Longtime listener called Wright sin Googenheim money behind the LA Dodgers.
Speaker 5: There you go, that's right, that's from mister.
Speaker 2: Cinch Ye thank you. Yep, that's I remember that deal
Speaker 2: getting done. All right, Scarlet Food, thank you so much.
Speaker 2: We appreciate Scarlet Fush. She's a host of Bloomberg Television
Speaker 2: and Bloomberg Radio's Business of Sports. Michael Barr Damien Sassaur
Speaker 2: take a backseat to Scarletfoodle's let let's let let's let's
Speaker 2: be honest.
Speaker 8: You're like the other way around.
Speaker 7: You're listening to the tape. Can's are live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, tune
Speaker 7: in app, Bloomberg dot Com, and the Bloomberg Business App.
Speaker 7: You can also listen live on Amazon Alexa from our
Speaker 7: flagship New York station just say Alexa playing Bloomberg eleven.
Speaker 2: All right, let's switch gears, go a little bit political.
Speaker 2: Get President Zelensky coming to the States, coming to d C.
Speaker 2: Meeting with lawmakers to try to unlock some of that
Speaker 2: aid for Ukraine. Let's bring in Wendy Schuler. She's a
Speaker 2: professor at Brown University. Wendy, I mean give us a
Speaker 2: sense of in Washington, d C. Where Ukraine fits in
Speaker 2: with all the other news, whether it's from the Middle
Speaker 2: East or just the coming election, it seems like the
Speaker 2: Ukraine and the support of Ukraine has kind of lost
Speaker 2: a little bit of the limelight here Where are we?
Speaker 10: Yeah, man, I.
Speaker 11: Think the momentum, I wouldn't say collapsed, but I think
Speaker 11: the momentum has slowed considerably. And rather than have a
Speaker 11: sort of a singular conflict that we've been very involved
Speaker 11: in and very supporter of Ukraine against Russia, now another
Speaker 11: conflict has opened up that has really soaked up all
Speaker 11: the attention, all the emotion and passion, and that of
Speaker 11: course the Middle East Israeli Gaza conflict.
Speaker 10: So that has really become a problem for the.
Speaker 11: Biden administration and the tendency in the Republican Party, particularly
Speaker 11: with the Alistair McCarthy and the replacement with someone who's
Speaker 11: more conservative.
Speaker 10: And more insular in their.
Speaker 11: View about the United States role globally in terms of
Speaker 11: military conflict and support.
Speaker 10: That has happened at the same time, and so you.
Speaker 11: Know that Caucus is not particularly persuaded that we should
Speaker 11: be spending billions of dollars to continue to support Ukraine.
Speaker 11: And notice that they have not yet, although they want
Speaker 11: to separate the Israeli eight out, they haven't passed the
Speaker 11: Israeli aid.
Speaker 5: Either let's jump ahead to election day and when a
Speaker 5: voter walks into the poll and pulls the lever of
Speaker 5: the switch or whatever it is, now, are they thinking
Speaker 5: about Ukraine? Are they thinking about funding for israel? I?
Speaker 11: Think a small group of people in particularly the Gaza conflict,
Speaker 11: a small group relative to the United States voting population.
Speaker 11: A small group will have intense preferences and they will
Speaker 11: remember either favorably or unfavorably, what the Biden administration has done,
Speaker 11: and then they will now listen potentially to Trump or
Speaker 11: Nikki Hanley Rondo Santis on what the government should do
Speaker 11: so that. I don't think those people swing an election nationally,
Speaker 11: but there are some communities in swing states where they
Speaker 11: could really make a difference in their voting Ukraine. I
Speaker 11: don't think has ever been an issue that as at
Speaker 11: the forefront or top of mind that swings electoral decision making.
Speaker 2: Kind of on that front, Wendy, there's a couple of
Speaker 2: polls that one from CBS News, one from the Wall
Speaker 2: Street Journal. Biden's support of Israel alienates more Democrats in
Speaker 2: the new poll. What kind of calculus is the president,
Speaker 2: you know, kind of working on here? As it relates
Speaker 2: to his support for Israel.
Speaker 11: Well, I think here we really see as we watch,
Speaker 11: you know, for the next months before the US pop
Speaker 11: up has had a daily dose of Donald Trump. I mean,
Speaker 11: we just haven't been exposed to the daily dose yet.
Speaker 11: If he wins Iowa, as we now sort of expect
Speaker 11: him to, and if he wins New Hampshire, we are
Speaker 11: going to get multiple daily doses of Donald Trump, and
Speaker 11: I think the polls will probably reflect a shift a
Speaker 11: couple of months down the line.
Speaker 10: All on that comparison.
Speaker 11: But right now, the Democrats face a real problem because
Speaker 11: at the congressional level they are divided on Israel and Gaza,
Speaker 11: and that division is obviously very public.
Speaker 10: So going into the twenty twenty four races.
Speaker 11: You've got house races, you've got a chance to take
Speaker 11: the House back, you've got Senate seats you're desperate to preserve,
Speaker 11: and you've got the Biden reelection all converging. And you
Speaker 11: don't have consensus within the Democratic Party on each of
Speaker 11: those levels on what the best policy path for is.
Speaker 11: And that's a considerable problem. Donations, endorsements, and again, people
Speaker 11: who are intense about this, those preferences are going to
Speaker 11: harden in the next couple of months, and you're not
Speaker 11: going to be able to shake them once they do.
Speaker 5: That Daily does said you're speaking of is the implication
Speaker 5: that his supporter or maybe not the core, but people
Speaker 5: are going to get a little tired of this.
Speaker 11: Well, so this is the you know, we look at
Speaker 11: independent voting, especially in swing states, and we say, what
Speaker 11: has the pattern been twenty eighteen, twenty twenty, twenty twenty two,
Speaker 11: they did not vote for either Trump or Trump endorsed
Speaker 11: candidates in big numbers. The Democrats had the advantage among
Speaker 11: independent voters. Right now, the polling shows that advantage has eroded,
Speaker 11: not disappeared, but eroted.
Speaker 10: You know, as he comes back into the limelight and
Speaker 10: independence are.
Speaker 11: Reminded of why they have not voted for Trump or
Speaker 11: Trump surrogates in the last three elections. That's where I
Speaker 11: think the polling becomes more favorable, if you can put
Speaker 11: it that way, for Biden, in the sense that he's
Speaker 11: a chance to win those voters back into the Democratic
Speaker 11: camp at least at the presidential alone.
Speaker 2: How do you think this Republican I don't know. Competitive
Speaker 2: landscape is going to shake out here is going to
Speaker 2: be you know, if and when former President Trump comes
Speaker 2: back and wins in Iowa and or New Hampshire's you
Speaker 2: suggest that'll just everybody will kind of bow out at
Speaker 2: that point because he will take all the oxygen out
Speaker 2: of the air.
Speaker 10: Yeah, you know, that's a great question.
Speaker 11: It really depends on South Carolina obviously, and they've got
Speaker 11: proportional delegation allocation in the Republican Party and winner take
Speaker 11: all as you move further down the line in the
Speaker 11: primary season.
Speaker 10: So that's how Trump.
Speaker 11: Stayed alive in twenty sixteen. He didn't do all that
Speaker 11: while in the early primaries, but he stayed alive and
Speaker 11: then managed to win many more delegates. So the question is,
Speaker 11: not only does he soak up all the oxygen per se,
Speaker 11: but he sets the agenda for the Republican Party. He
Speaker 11: becomes the symbolics postperson for all Republicans running in twenty
Speaker 11: twenty four, And now they're slowly going down to like
Speaker 11: a four seat margin or a six seat margin. Their
Speaker 11: margin has shrunk and where they won seats California and
Speaker 11: New York are not likely to be as favorable to
Speaker 11: them in twenty twenty four presidential election. More voters get
Speaker 11: out the door on both sides, and if you have
Speaker 11: a competitive, slightly leaning Democratic district that flipped, that's very
Speaker 11: tough to maintain. So I think it looks bad for
Speaker 11: the Republicans on the House side. Also, I'm not sure
Speaker 11: they can govern. Will we shut the government down in
Speaker 11: early spring or late winter? Will they pass the death
Speaker 11: ceiling or filibuster that They've got all the same challenges
Speaker 11: going forward in leadership, and I.
Speaker 10: Think it's going to be a very tough landscape.
Speaker 11: On the other hand, the Democrats are defending twenty seats,
Speaker 11: the Republicans are defending ten in the United States Senate,
Speaker 11: So the odds look very good for the Republicans on
Speaker 11: the Senate side, and the Senate Republicans have really stayed
Speaker 11: as far away as they possibly could from the House Republicans.
Speaker 10: Whether you can do that with Trump at the.
Speaker 11: Top of the ticket, that is the big political puzzle
Speaker 11: I think facing the Republican Party going to twenty twenty.
Speaker 5: Four, this might be a little at a left field.
Speaker 5: But is there any doubt that Kamala Harris is the
Speaker 5: running mate for Joe Biden?
Speaker 11: So I have said on Bloomberg that I think Joe
Speaker 11: Biden is running as long as he's walking, talking, and breathing,
Speaker 11: I still think he's running.
Speaker 10: Maybe there's a little bit more doubt there.
Speaker 11: But Kamala Harris is a big quest question mark, not
Speaker 11: from her perspective but from the Biden team. You know,
Speaker 11: if you really need a Hail Mary and Biden's still
Speaker 11: the head of the ticket, do you find a way
Speaker 11: to have something else for her to do and she
Speaker 11: stays vice president until next year, but find a different
Speaker 11: candidate to be VP. So the hail Mary might be
Speaker 11: Raphael Warnock of Georgia. There is no race of note
Speaker 11: in Georgia in twenty twenty four, and certainly no African
Speaker 11: American candidate at the top of the ticket statewide. That's
Speaker 11: a big difference between twenty and twenty twenty two for
Speaker 11: the Democrats.
Speaker 10: So I think Jordan slips, Georgia slips away. But if
Speaker 10: you have Ralphael Warnock, who's won statewide twice.
Speaker 11: In Georgia at on the ticket instead of Kamala Harris,
Speaker 11: I think that changes that ticket's odds. So I think
Speaker 11: the team will have to creative because right now it
Speaker 11: doesn't look like it's a compelling enough team to make
Speaker 11: sure the same people got out the door in twenty
Speaker 11: twenty and make sure they'll get out the door in
Speaker 11: twenty twenty four.
Speaker 2: All right, just thirty seconds left, I mean, is what
Speaker 2: kind of campaign do you think the president by and
Speaker 2: we'll run.
Speaker 10: You know, we used to call.
Speaker 11: It the Rose Garden strategy, where the presidents didn't leave
Speaker 11: the White House they said they were too busy.
Speaker 10: Obama did that in twenty twelve in thirty seconds.
Speaker 11: Let's see how I can do this, And then he
Speaker 11: didn't get out the door really until late September October
Speaker 11: when Romney was tied with him in the polls.
Speaker 10: So I think they're going to do the same thing.
Speaker 11: I think Biden is not going to travel that much
Speaker 11: and only get out the door late in the game,
Speaker 11: and we'll see how he does on the campaign trail
Speaker 11: versus the quote unquote vitality that we're seeing from Donald
Speaker 11: Trump right now.
Speaker 2: All right, Wendy Schilder, thank you so much. We appreciate
Speaker 2: it as always, Wendy Schiller, professor at Brown University, kind
Speaker 2: of giving us kind of the political lay of the land.
Speaker 2: Twenty twenty four. John's gonna be here in a matter
Speaker 2: of days, and that's just election year.
Speaker 5: Momentum, and the lead that the former president has over
Speaker 5: his Republican rivals is really astounding at this point.
Speaker 2: Yeah, it's just extraordinary. So it looks like that will
Speaker 2: be former President Trump, at least at this stage, looks
Speaker 2: to be the nominee. We'll see how it plays out
Speaker 2: over the coming months, and there's some primaries and all
Speaker 2: that kind of stuff that the politicos like to focus on.
Speaker 7: You're listening to the tape. Can's our live program Bloomberg
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Speaker 2: We want to get to our C suite discussion, Big
Speaker 2: M and a trade in the airline business Alaska Airlines
Speaker 2: and Hawaiian Airlines. Alaska said that it will be buying
Speaker 2: Hawaiian for one point nine a billion dollars eighteen dollars
Speaker 2: a share plus nine hundred million dollars of Hawaiian's debt.
Speaker 2: Joining us right now to talk about this transaction. Peter Ingram,
Speaker 2: the CEO of Hawaiian Airlines joining us via zoom from Hawaii.
Speaker 2: Good for you, my friend. So let's talk about this, Peter,
Speaker 2: talk to us about this transaction. The market's unsure whether
Speaker 2: this deal is going to go through. What's the message
Speaker 2: you're giving to the market today about why this deal
Speaker 2: should be done.
Speaker 9: Well, we feel very good about the deal that was announced.
Speaker 9: I think it's a good deal for Hawaiian Airlines Hawaiian
Speaker 9: Holding shareholders. It's also positive for Alaska. I think it
Speaker 9: sets the company out, the combined company up very well
Speaker 9: to compete effectively in a very dynamic airline market. And
Speaker 9: obviously we're going to work through the regulatory process over
Speaker 9: the next twelve to eighteen months, but we expect this
Speaker 9: transaction to close.
Speaker 12: I want to pick up on that a little bit,
Speaker 12: because of course, the Alaska Airlines investors were really spotted
Speaker 12: that right away. This issue about getting this past the regulators,
Speaker 12: and this is not an administration that's very friendly to
Speaker 12: these big mergers. So what's the main point that investors
Speaker 12: should be thinking about, you know, to put some meat
Speaker 12: on this idea that the regulatory process will go through.
Speaker 9: Okay, Well, I think the regulators will look at this,
Speaker 9: you know, as an individual transaction, and look at it
Speaker 9: on its own merits, and what they're going to see
Speaker 9: is that you've got two airlines that have very complementary networks.
Speaker 9: We have, you know, big areas of our network where
Speaker 9: we don't currently compete with Alaska. They also have huge
Speaker 9: parts of their network where we don't overlap at all.
Speaker 9: The amount of overlap is very limited, and I think
Speaker 9: when people look in into that and dig into it,
Speaker 9: that's what they're going to see.
Speaker 2: Alaska Airlines, some of their shareholders are skepule of this transaction,
Speaker 2: suggesting that Hawaiian will not return to twenty nineteen cash
Speaker 2: flow levels. We've got Southwest coming into the market. Talk
Speaker 2: to us about kind of, you know, the profitability of
Speaker 2: your company in today's market.
Speaker 9: Well, we feel very good about our standalone business plan.
Speaker 9: This was a deal that came along and provided us
Speaker 9: a new alternative, but we were working very aggressively to
Speaker 9: better our own standalone prospects. Demand remains very strong in
Speaker 9: our core markets between the US mainland and Hawaii. We've
Speaker 9: seen good recovery in the Japan part of our business,
Speaker 9: which is a key piece that had lagged recovery during
Speaker 9: the pandemic, but really started to come on since May
Speaker 9: of this past year. Continue to be the market leader
Speaker 9: in our neighbor island business, which represents roughly twenty percent
Speaker 9: of our revenue pre pandemic. So as long as we
Speaker 9: compete effectively, I think there's a good market position for
Speaker 9: Hawaiian airlines.
Speaker 12: I mean, you mentioned Japan. I'm wondering if you can
Speaker 12: talk a little bit more about flights coming in from Asia,
Speaker 12: because with this strong dollar, it might be something that
Speaker 12: is putting a bit of pressure on you there.
Speaker 9: I think that will hold the demand back a little bit. Obviously,
Speaker 9: you know, when we were pre pandemic, the end was
Speaker 9: trading one hundred and five one hundred and ten to
Speaker 9: the dollar. Now it's in the mid one forties, so
Speaker 9: that's a considerable amount of inflation that a Japanese visitor
Speaker 9: looks at when they're coming to Hawaii. But we saw
Speaker 9: strong recoveries in Australia from South Korea and now even
Speaker 9: you know, Japan has come back over the course of
Speaker 9: this year, and we think that'll that'll prove to be
Speaker 9: a steady recovery going into next year. The affinity of
Speaker 9: the Japanese travelers have more Hawaii is really unparalleled. There
Speaker 9: were about a million and a half visitors each year
Speaker 9: before the pandemic, and it may take a little time
Speaker 9: to climb back to those levels, but we think demand
Speaker 9: is going to be very strong over the long term.
Speaker 2: Peter, I'm taking a look at your balance sheet and
Speaker 2: I see you've got about one point three billion dollars
Speaker 2: of debt maturing in twenty twenty six, A big bullet.
Speaker 2: There's the what's the plan for that assuming this transaction
Speaker 2: does not go through? And how much of your balance
Speaker 2: sheet kind of brought you to the table to sit
Speaker 2: down with the last Airlines.
Speaker 9: Again, we were really confident and remain confident in our
Speaker 9: standalone plan. We've got considerable fleet assets that are unencumbered.
Speaker 9: We've got new seven eight sevens coming on against which
Speaker 9: we can borrow, and that one point two billion dollars
Speaker 9: of that maturity in twenty twenty six is represented by
Speaker 9: a loyalty bond of financing that was raised against our
Speaker 9: brand and our loyalty program, and so with that coming due,
Speaker 9: we would have those cash flows to be able to
Speaker 9: do a financing, and it was under collateralized as it was,
Speaker 9: so I think the prospects for us continuing to be
Speaker 9: able to fund the business are very very strong.
Speaker 12: One thing I wanted to ask you a little bit
Speaker 12: about is your costs, particularly your fuel costs. I mean,
Speaker 12: regardless of whether or not this deal goes through, this
Speaker 12: is something that's been plaguing a lot of people in
Speaker 12: your space, and so can you talk to me a
Speaker 12: little bit about what your expectations are there and how
Speaker 12: you're going to manage it.
Speaker 9: Well, I don't have a crystal ball and where fuel
Speaker 9: prices are going, but I do know that if we
Speaker 9: look back over the last couple of weeks, we've actually
Speaker 9: seen some relief in the fuel price numbers, and that
Speaker 9: you know, as we forecast, we just use a forward
Speaker 9: curve going forward, So right now the outlook is a
Speaker 9: little bit better than it used to be. But you know,
Speaker 9: fuel prices are a part of our industry have been
Speaker 9: for a very very long time. For most airlines. It
Speaker 9: is either the largest cost item or the second largest
Speaker 9: cost behind salaries and wages. So we will do what
Speaker 9: we can to conserve. We have a hedging program that
Speaker 9: helps us smooth out some of the volatility, but we
Speaker 9: aren't making bets on where the fuel prices go. I
Speaker 9: don't think that's what our investors want us to be doing.
Speaker 2: Peter, as you and Alaska Air execs sit down with
Speaker 2: the regulators, what are you prepared to do to get
Speaker 2: this deal approved in terms of maybe routes that may
Speaker 2: need to be divested or how flexible can you guys.
Speaker 9: Be I'm not going to get into any of the
Speaker 9: specifics on that, and some of that, you know, obviously
Speaker 9: would would be up to the Alaska team to comment on.
Speaker 9: But the fact of the matter is that these are
Speaker 9: two networks that are very complementary. There is a very
Speaker 9: limited amount of overlap. We think the market is incredibly competitive,
Speaker 9: lots of airlines serving Hawaii, and we expect it to
Speaker 9: be very competitive going forward. That's the nature of our business.
Speaker 12: Last year, the holiday travel season produced a lot of delays,
Speaker 12: a lot of difficulties, and in the airline that came
Speaker 12: under pressure for that was Southwest. How do you feel
Speaker 12: like the industry is fixed up this year to meet
Speaker 12: any difficulties in weather patterns and do you feel like
Speaker 12: Southwest is still on the back foot here? Is this
Speaker 12: something you can take advantage of?
Speaker 9: Well, just comment on our airline. You know, we're very prepared.
Speaker 9: We you know, make sure that we schedule within what
Speaker 9: the capabilities of our fleet and our staffing levels are,
Speaker 9: and we feel very good about how we're positioned in
Speaker 9: that regard. Our reliability has been very strong historically, and
Speaker 9: particularly over the last couple of months as we've recovered
Speaker 9: from some infrastructure challenges that played Tontolulu Airport earlier in
Speaker 9: the year. We've been number one and on time performance
Speaker 9: with a very low level of cancelations, and we expect
Speaker 9: to execute well in the months ahead.
Speaker 2: Peter, just thirty seconds, just remind us what's the timing
Speaker 2: of this transactional last air.
Speaker 7: Well.
Speaker 9: The next step is for us to file a proxy
Speaker 9: statement and complete our shareholder vote, which we expect to
Speaker 9: happen in the first quarter of next year, and then
Speaker 9: after that is really up to the regulatory process and
Speaker 9: the Department of Justice to review. We'll be working on
Speaker 9: filing the information with them and responding to whatever requests.
Speaker 9: We think given the current regulatory environment in the country,
Speaker 9: it could take twelve to eighteen months to complete the
Speaker 9: entire process, but we think it could also go quicker
Speaker 9: than that.
Speaker 2: Peter, thank you so much. For joining us. We really
Speaker 2: appreciate getting a few minutes of your time. Peter ingram
Speaker 2: He is the see of Hawaiian Airlines, recently announced that
Speaker 2: Alaska Airline will be acquiring the folks at Hawaiian Airline
Speaker 2: and probably the highlight for Peter ingram As. He is
Speaker 2: an NBA from Duke University's Fucal School of Business.
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