Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul Sweene. You,
Speaker 1: along with my co host Lisa Brahma Wicks. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor, find a Bloomberg Penil podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Let's switch gears there now to
Speaker 1: we work. Talk about a company that has had a
Speaker 1: rough couple of weeks. First of all, it's evaluation appears
Speaker 1: to have been dressed dramatically from forty seven billion dollars,
Speaker 1: So what might be something in the ten to fifteen
Speaker 1: billion dollar range? Now, even the chair, the CEO is
Speaker 1: under pressure to resign, So let's get the latest. We
Speaker 1: bring in Sure overday. She's a technology columnist for Bloomberg Opinion,
Speaker 1: joining us here in our Bloomberg inter after Broker studio.
Speaker 1: So sure, it's been a tough couple of weeks for
Speaker 1: this company, for this CEO. What's the latest here? Because
Speaker 1: it looks like the board might be meeting today. Yes,
Speaker 1: that is the latest that our colleagues at Bloomberg News
Speaker 1: and other news outlets have reported the the we Work
Speaker 1: board is meeting, maybe as early as today, and one
Speaker 1: of the things they may talk about is um removing
Speaker 1: Adam Newman or pressuring Adam Newman, who's the co founder
Speaker 1: and CEO of the company, to step down from the
Speaker 1: CEO position, which is uh, just the latest very weird
Speaker 1: twist and what has been a very very weird corporate saga.
Speaker 1: So is he being basically the fall guy here? It
Speaker 1: does feel that way. I mean, the thing to understand
Speaker 1: about all this is that this is ultimately there's ultimately
Speaker 1: two players that matter in we Work, and that is
Speaker 1: we Works, Uh Adam Newman, the co founder and CEO,
Speaker 1: and Massio Shi sone who's the head of soft Bank,
Speaker 1: which is UM we Works biggest outside investor, and Son,
Speaker 1: until I guess now has been Adam Newman and we
Speaker 1: Works biggest backer. In the face of resounding doubts from
Speaker 1: many other people, including SoftBank's own investors and it's very
Speaker 1: large vision fund investment fund, and Massa has stood by
Speaker 1: Newman again. Something must have changed in the in the
Speaker 1: calculus of Son and soft Bank. I do not know
Speaker 1: what it is, but it's clear that they are turning
Speaker 1: billions ten billions that would yeah, well yeah, the valuation
Speaker 1: cut I think it was is probably the thing that
Speaker 1: would change the minds of even um sort of idiosyncratic
Speaker 1: billionaires like Maayoshi. So what's I mean? In reality? Though
Speaker 1: they can't force him out of the CEO spot can
Speaker 1: doesn't he still have some super voting stock? Yes, so
Speaker 1: I can't pretend to understand the corporate structure and what
Speaker 1: is or isn't possible. But yes, Adam Newman controls the
Speaker 1: votes in this company, and he can remove the entire board. Um,
Speaker 1: but there is also stipulation that you can see and
Speaker 1: we works i PO documents that the board has the
Speaker 1: power to remove the CEO. Now, I don't know how
Speaker 1: those two things could be in conflict, and so I
Speaker 1: don't know how to resolve those. Um, if it gets
Speaker 1: to that, what do you think that Adam Newman did wrong?
Speaker 1: So I don't want to put all the blame on
Speaker 1: Adam Newman. Look, this is a company that has been
Speaker 1: run in rather wild fashion for years, and that was
Speaker 1: enabled by all of the investors in this company, including
Speaker 1: soft Bank, and so everything that we work is today,
Speaker 1: which is this cash burning, maybe financially unsustainable company run
Speaker 1: by self dealing CEO. That was all information that was
Speaker 1: known and enabled by every investor in this company the
Speaker 1: last few years. And that top of that list is
Speaker 1: soft Bank. So everybody deserves blame for the company getting
Speaker 1: to the position that it is today. So let's flip
Speaker 1: it on its head. Is there anything that Adam Newman
Speaker 1: rings to we Work and frankly cult of personality among
Speaker 1: them that would be problematic if the company was stripped
Speaker 1: of it? Yeah? Look, I mean I you have to
Speaker 1: give Adam Newman credit. Again. It may seem baffling to
Speaker 1: those of those of us on the outside, but he
Speaker 1: has been a very effective pitchman for this company, both
Speaker 1: with investors, um and with other business partners and employees.
Speaker 1: So you know, again, this company is what it is
Speaker 1: today because of Adam Newman, both the good things and
Speaker 1: the bad things about We Work. My question is if
Speaker 1: you if you remove Newman from if Newman is removed
Speaker 1: or it steps down from the CEO position, do things
Speaker 1: really change? I mean, this is now a weekend company.
Speaker 1: It's reputation. I don't think I've ever seen a company,
Speaker 1: certainly not on the doorstep of an I P O
Speaker 1: where the sentiment about it is so relentlessly negative, and
Speaker 1: in a way, removing the CEO or having the CEO
Speaker 1: step down is sort of acknowledge ament of how messed
Speaker 1: up it is. And so I don't know what happens
Speaker 1: with or without Adam Newman in the CEO position. It's interesting.
Speaker 1: I like your thought that you know, really his behavior,
Speaker 1: of the company's behavior. The company's just the whole rise
Speaker 1: has been enabled by a whole host of investors, led
Speaker 1: by soft Bank. So to me, the only thing that's
Speaker 1: changed in the last two weeks is the valuation. That's
Speaker 1: the only thing that that's changed. And what that does.
Speaker 1: It shows that soft Bank miss priced and the other
Speaker 1: investors anything above ten or twelveillion dollars that's on them,
Speaker 1: that's not on Adam Newman. So it's one can make
Speaker 1: an argument, which I'm sure the Adam Newman camp is
Speaker 1: going to make, that he is perhaps being used as
Speaker 1: escapegoat for what is a arguably a flawed business model
Speaker 1: and a flawed valuation which the public markets are now
Speaker 1: shining a light upon. I think that's absolutely right that look,
Speaker 1: this shows you some of the inherent flaws in the
Speaker 1: soft bank business model is soft bank investment model, which
Speaker 1: is we poor, we train our cash ucas on these companies,
Speaker 1: and we make their success inevitable just by virtue of
Speaker 1: having more capital than anybody else. The downside of that,
Speaker 1: as you pointed out, is that they have so much
Speaker 1: money that valuations inherently become inflated. And the downside of
Speaker 1: that is what happens if nobody else but soft Bank
Speaker 1: agrees um what this company's work. And I think what's
Speaker 1: changed in the private to public thing in T nine
Speaker 1: is Uber. It just kind of changed the whole dynamic,
Speaker 1: which is, if you can't convince me, public shareholder to
Speaker 1: mutual fund in Boston, that you have a path of
Speaker 1: profitability that I can value, then I have a hard time,
Speaker 1: you know, giving you the valuation you're looking forward. So
Speaker 1: there's it's almost a pre uber post Uber timeframe, and
Speaker 1: unfortunate for we Work, they came post I think that's
Speaker 1: it's a good point. Obviously we can't go back in time,
Speaker 1: but I do wonder if Uber hadn't gone out first
Speaker 1: and kind of fallen a little bit on its face,
Speaker 1: would we work? We would the we work situation be
Speaker 1: a little bit different. I would point to remember Blue
Speaker 1: Apron from two years ago. That was a company again
Speaker 1: that once it went public, everybody was like, this company
Speaker 1: doesn't make sense, and then it had. It took a
Speaker 1: significant valuation haircut and has continued to decline precipitously. So
Speaker 1: that shows you that Uber wasn't the first time where
Speaker 1: public investors questioned UM, a highly touted company that had
Speaker 1: a lot of question works around its business model. Sure
Speaker 1: of it A thank you so much for the insight
Speaker 1: show over a Bloomberg opinion columnist joining us here in
Speaker 1: our interactive Brokers studios. We're joined by John Author's senior
Speaker 1: editor for Bloomberg Markets, and Culver Kadonna, chief US economists
Speaker 1: for Bloomberg Economics. So John, let's follow up on that
Speaker 1: wide ranging interview that Tom Keene and Jonathan Faroe just
Speaker 1: had with a former New York Fed chairman President John
Speaker 1: UM Bill Dudley. So key takeaways for you as it
Speaker 1: relates to some of his discussion about the report market.
Speaker 1: He seemed to be suggesting that kind of a short
Speaker 1: term issue, nothing major to be concerned about. Yes, I
Speaker 1: think he was definitely trying to do his bit to
Speaker 1: calm things down. I think it is interesting bearing in
Speaker 1: mind that there's been a lot of anger in the
Speaker 1: last week about the dismissal of all the early enforced
Speaker 1: early retirement of Simon Potter, who was very much regarded
Speaker 1: as Bill Dudley's man, and who is the guy who
Speaker 1: would have been in charge of dealing with the response
Speaker 1: last week, and who has been quoted. I don't think
Speaker 1: he wanted to be quoted publicly, but talked to be
Speaker 1: of a and Bloomberg gathered that the typing Potter has
Speaker 1: been making some criticisms of the way that the Fed
Speaker 1: has handled this, the new Fetters handled this, So I
Speaker 1: think he was going quite a long way out of
Speaker 1: his way to be to downplay the degree of conserve
Speaker 1: of criticism, the degree of anger that there has been
Speaker 1: in the market about about the New York Fed itself
Speaker 1: and its response, and whether there's been something wrong in
Speaker 1: the way that Williams has taken over from him. He's
Speaker 1: being diplomatic. That's that's a really interesting point. Carcadona also
Speaker 1: joining US GPS economist Karl what was your biggest takeaway? Well,
Speaker 1: I think it was important to see that he wasn't
Speaker 1: raising any red flags, because there is this notion that
Speaker 1: maybe the FED was you know, a day late and
Speaker 1: a dollar short to respond to the situation. But now
Speaker 1: things are well under control. So they did announce uh,
Speaker 1: you know, recurring operations extending beyond month end, plus a
Speaker 1: longer term operations. So that that really is taking a
Speaker 1: buzuka to the problem and should be a very solid
Speaker 1: temporary patch. What I was looking for in terms of
Speaker 1: a little bit more color was maybe some timing about
Speaker 1: when the balance sheet does start to grow again. Uh.
Speaker 1: And again we shouldn't call it QUWI. I wouldn't even
Speaker 1: call it QUI light, but an expansion of this point
Speaker 1: exactly prudent reserve management. When will prudent reserve pr When
Speaker 1: will PRM kick in? Uh? And that's going to have
Speaker 1: to happen relatively soon or we are going to see
Speaker 1: these funding strains extend through the latter half. Just understand, Carl,
Speaker 1: is this the permanent um fix for this repo issue.
Speaker 1: The permanent fix will be expanding the reserves over time
Speaker 1: that reserve management operation. What they're doing now is really
Speaker 1: a temporary patch and it should work. Right. Seventy five
Speaker 1: billions of repos on a on a daily basis should
Speaker 1: be enough to add to sufficient liquidity back into the system.
Speaker 1: They could certainly expand that if they needed to. Unlikely
Speaker 1: that that would actually become a problem. But the reality is, uh,
Speaker 1: relatively soon before year end, for sure, the FED is
Speaker 1: going to have to embark on this balance sheet expansion.
Speaker 1: And the reason for that is as the economy expands
Speaker 1: the banking system, banking system has to keep a pace
Speaker 1: with it, and that means that reserves have to grow
Speaker 1: along with economic growth. So I want to shift gears
Speaker 1: a little bit because I'll tell you what my biggest
Speaker 1: takeaway was. I thought that actually, probably one of the
Speaker 1: most interesting things that he said is that, uh, the
Speaker 1: risk is not necessarily right now looking like deflation. It's
Speaker 1: looking like he's seeing a little bit more of a
Speaker 1: pickup in inflationary trends. Not the risk, but that he's
Speaker 1: actually seeing the trend go in the opposite direction. And John,
Speaker 1: I thought that was interesting because it's kind of counter
Speaker 1: to what the market has been implying. It's drastically counter
Speaker 1: to what the market has been implying. I actually nervously
Speaker 1: took a quick look at the break Heavens Well allows
Speaker 1: minute and they're down again too. This, yes, that's what
Speaker 1: I'm saying. Last week's core CPN numbers. Okay, the Fed
Speaker 1: cares more about ec even core CPI, but they were up.
Speaker 1: They were the highest they've been, off the top of
Speaker 1: my head in a decade um. It does certainly look
Speaker 1: as though you're finally getting the feed through with about
Speaker 1: the kind of lag you would have expected from all
Speaker 1: the jolt of adrenaline that was that was delivered during
Speaker 1: the tax tax cutter for eighteen months or so ago.
Speaker 1: And that in turn does give you a very ample
Speaker 1: explanation for why the FED at this point is so
Speaker 1: in such a different place from the market. I think
Speaker 1: the other possibility, and this is one of the things
Speaker 1: that Powell arrived really trying to make a big signal
Speaker 1: that he was going to be different from his predecessors,
Speaker 1: is that he didn't buy that US monetary policy had
Speaker 1: as big an impact on the rest of the world
Speaker 1: as others had said. If you are looking at the
Speaker 1: rest of the planet, particularly the Eurozone, you are much
Speaker 1: more likely to be really worried about inflation then if
Speaker 1: you're just looking at the US, where it looks like
Speaker 1: we have a not by the comparison with the seventies
Speaker 1: and eighties. But we have a minor league inflation problem
Speaker 1: dreaming here, which suggests we shouldn't be cutting rights. So Carl,
Speaker 1: what do you think is it related as you know,
Speaker 1: just what John was saying about inflation, where we might
Speaker 1: be what we've experienced with the repo market in the
Speaker 1: last week. Where do you think the FED is right now?
Speaker 1: Is I think about the next level meetings? Sure? Well,
Speaker 1: I think the Fed is, And again Bill Dudley suggested
Speaker 1: there's not as much division on the committee as maybe
Speaker 1: looking at the dot plot would otherwise have You believe
Speaker 1: the Fed is very much looking at taking insurance out
Speaker 1: to extend a record long economic expansion, and that means
Speaker 1: that they're watching the trade negotiations very carefully. And if
Speaker 1: we do see a significant escalation of tariffs in mid
Speaker 1: October a scheduled and more follow through in December as scheduled,
Speaker 1: than the FEED is going to have to act more forcefully.
Speaker 1: So right now, even the as devish doves on the
Speaker 1: committee are signaling a willingness for just one additional high
Speaker 1: game where seven dots excuse me, cut, there were seven
Speaker 1: dots calling for a cut by year end. I think
Speaker 1: that that's going to continue to drift downward if we
Speaker 1: see those additional tariffs that come into play. And so
Speaker 1: my team's view is we'll see a rate cut in
Speaker 1: October and of October and another follow through in mid December,
Speaker 1: and we can look at what's happening in the market
Speaker 1: here right there was risk off in August, September was
Speaker 1: a little bit of renewed optimism, and now as October looms,
Speaker 1: it looks like we're going back into a risk off mode.
Speaker 1: Yields her down, and really the compelling issue for the
Speaker 1: Fed towards YR end is going to be a trade
Speaker 1: headwinds stiffening and also the FED having to cut further
Speaker 1: to uninvert the yield curve. So I'm just curious going forward.
Speaker 1: First of all, whether Bill Dudley has any impact on
Speaker 1: the Federal Reserve at this point in the fact he
Speaker 1: is no longer with it. I mean, how much do
Speaker 1: former FED members and leaders have on the current FED
Speaker 1: john It depends on which former leader it is, evidently,
Speaker 1: I think I think Stanley Fisher, who apart from anything else,
Speaker 1: wrote that, literally wrote the textbook that most current FED
Speaker 1: governors read when they did their original economics degrees. I
Speaker 1: read Dornbush and Fisher when I did my economics degree,
Speaker 1: as he's come out beginning to suggest that negative rates
Speaker 1: and helicopter money are things that can at least be considered.
Speaker 1: That makes which is not something I remember thinking was
Speaker 1: even remotely a possibility from my reading of the Dornbush
Speaker 1: and Fisher all those years ago. That that's very influential
Speaker 1: he's beginning to create give them permission to go to
Speaker 1: a space that they didn't really previously. Intellect would be
Speaker 1: like a go, But that's Stan Fisher. Bill Dudley, I
Speaker 1: doubt is as influential as Stan Fisher. That's said, the
Speaker 1: New York Fed is unquestionably first among equals. The New
Speaker 1: York Fed governor is always on, gets to vote in
Speaker 1: the f O m C. The New York Fed always
Speaker 1: votes with the governor. Paul Volker moved to the move
Speaker 1: to the big the hot seat from being from running
Speaker 1: the New York Fed. Previous New York Fed governors do
Speaker 1: matter more. Um final point, I it's very unusual. It
Speaker 1: was very unusual to see the Fed itself really feel
Speaker 1: the need to say no, this is wrong, to build
Speaker 1: Dudley's original um op ed for Bloomberg Opinion, which we
Speaker 1: are delighted he wrote for us, We're very happy chose
Speaker 1: us as and we were delighted to continue that that
Speaker 1: relationship that he built, built it that he foster debate
Speaker 1: through us. But it was quite interesting that they really
Speaker 1: did say, no, we don't agree with our former New
Speaker 1: York Cha just being onto what John said there. Uh
Speaker 1: you know, I think there was an important, too too
Speaker 1: important observation, so one as a uh relates to the
Speaker 1: ongoing situation in the repo market. I think that Bill
Speaker 1: Dudley has tremendous way because the Dudley Potter fed you know,
Speaker 1: was there during the crisis and really understands how these
Speaker 1: things operate. And uh, you know, he was way out
Speaker 1: in front talking about banks, you know, the reserves being
Speaker 1: at a higher level post crisis and where we were
Speaker 1: pre crisis. So number one, he has tremendous authority on
Speaker 1: that front. In number two, he did throw negative rates
Speaker 1: under the bus, and he's the discussion. The hurdle is
Speaker 1: very very that will definitely get to that CARCA down
Speaker 1: in chief you as economist at a later conversation. Unfortunately,
Speaker 1: thank you so much for being with us, and of
Speaker 1: course our sincere thanks John Author, senior editor for a
Speaker 1: Bloomberg Market's both joining us in our interactive broker studios.
Speaker 1: In this current era of technology, it really is the
Speaker 1: STEM careers that are in the front and center that
Speaker 1: are most needed as well as often has paid. There
Speaker 1: is a question why are there so few women who
Speaker 1: are entering the field? Joining us down to discuss this,
Speaker 1: Corliss Murray, senior vice president, head of Engineering at Abbot
Speaker 1: based in Chicago, to talk about a new blueprint that
Speaker 1: they have come up with to get more girls into
Speaker 1: the STEM field. Before we get started on that, though, Corless,
Speaker 1: can you just give us a sense of what it
Speaker 1: means to be senior vice president and head of Engineering
Speaker 1: at Abbott. Yes, Lisa, and thank you so much for
Speaker 1: the opportunity to to speak to your audience today. UM.
Speaker 1: I'm responsible for UM, the corporate quality, engineering and regulatory organizations,
Speaker 1: and our team supports all of Abbott's businesses worldwide and
Speaker 1: we do that through a number of for such as UM.
Speaker 1: It could be everything from structural and architectural support to
Speaker 1: special technical areas including governance of quality policies and procedures
Speaker 1: and regulatory strategy. So let's gives a sense you know,
Speaker 1: we we know the numbers in terms of women in
Speaker 1: STEM underrepresented. Gives a sense of kind of what Abbott
Speaker 1: is thinking about in terms of its blueprint for you know,
Speaker 1: getting young women involved in STEM. Well, I think one
Speaker 1: of the things that we have found very consistently and
Speaker 1: it lines up what other research that has been conducted,
Speaker 1: and that is that many, as not most, girls don't
Speaker 1: enter these fields because of lack of exposure and lack
Speaker 1: of role models and encouragement. And so for us, being
Speaker 1: a science based company, it is essential for us to
Speaker 1: be able to bring women to help with the diversity
Speaker 1: of ideas and innovation as well as representing the markets
Speaker 1: quite frankly in which we operate UM. And so it's
Speaker 1: it's a part of our foundation and a part of
Speaker 1: our talent focus UM at all levels the new organization.
Speaker 1: And so, but you have to begin with building that
Speaker 1: pipeline and making certain that we're reaching these young women
Speaker 1: early in life UM, so that they can get a
Speaker 1: feel for what it is that that they can do
Speaker 1: as far as their careers may go. Okay, so this
Speaker 1: has been a big question which is how do you
Speaker 1: exactly counter and the idea that you came up with
Speaker 1: a blueprint a detailed playbook for successful high school girls
Speaker 1: going into an internship program. Can you give a sense
Speaker 1: of what the playbook is? So the playbook is actually
Speaker 1: UM built similar off our college intern program. And and
Speaker 1: what we do is we work with based on criteria
Speaker 1: to select students to come into the program. We work
Speaker 1: with high schools that UH they have curriculums that are
Speaker 1: Project Lead the Way or the International Baculide Program, and
Speaker 1: these are programs that UM would make sure that these
Speaker 1: young people are getting some of the higher advanced levels
Speaker 1: of science and math exposure. UM. We then take that
Speaker 1: bring it into our organization and work with assignment managers.
Speaker 1: Assignment managers or individuals that actually work in the professions
Speaker 1: UM day in and day out. So they could be
Speaker 1: cybersecurity experts, they could be UM, you know, mechanical engineers, architects,
Speaker 1: civil engineers and electrical engineers, biomedical engineers. And then we
Speaker 1: actually develop assignments that are real projects that are done
Speaker 1: by these engineers and others like them. And we create
Speaker 1: these assignments for the students and we expose them to
Speaker 1: it and the blueprint goes into a lot of detail
Speaker 1: on everything around how to work and pardner with a
Speaker 1: school to how to work and identify assignments to what
Speaker 1: we call an intern week where they're exposed to other
Speaker 1: things such as how to conduct yourself in a professional environment, um,
Speaker 1: you know, basic business ethics and things of that nature,
Speaker 1: so that they're well rounded. So court less um Abbott
Speaker 1: that is a you know, it's a glow little healthcare company.
Speaker 1: I'm sure lots of demand for engineering math type folks
Speaker 1: at your company. How do you go about at Abbott
Speaker 1: trying to ensure that you attract the best and brightest
Speaker 1: uh and and you know, get a fair representation in
Speaker 1: your workforce. And I know, I'm sure a lot of
Speaker 1: these jobs that you have are very important and uh
Speaker 1: but define you getting the right talent. We are getting
Speaker 1: the right talent and we are a company that people
Speaker 1: want to be a part of. You know when when
Speaker 1: you look at not only the technical work that we do,
Speaker 1: but you look at the environment that we have where
Speaker 1: we've been recognized for you know, being working mothers, working women,
Speaker 1: be at you know, scientists, you know, UM innovation. We've
Speaker 1: been recognized on a lot of different venues. And so
Speaker 1: when you combine UM the total environment along with an
Speaker 1: environment that encourages development of people. UM, these young people,
Speaker 1: we find they're excited about the technologies that we create.
Speaker 1: They're excited about the people that they work with. Because
Speaker 1: the mentors and the assignment managers that work with them
Speaker 1: love developing others and and they want these young people
Speaker 1: to be successful, and they're excited to share their professions
Speaker 1: with them and help them to have a better indication
Speaker 1: of what they potentially could do. So I think that
Speaker 1: Abbott creates a holistic environment where people want to be
Speaker 1: a part of our organization so we get our fair
Speaker 1: share of talent. If you will to come into this organization.
Speaker 1: Courtlos Marie, thank you so much for joining us. Corliss
Speaker 1: as a senior vice president, head of Engineering and Abbott
Speaker 1: talking about getting young women into STEM related fields. It
Speaker 1: was a tremendous story to read the concept of a
Speaker 1: hundred and fifty thousand tourists stranded on overseas beaches and
Speaker 1: in vacation hotspots. The UK government is now trying to
Speaker 1: get back to the country in what is being called
Speaker 1: the largest repatriation in peacetime history. This all comes after
Speaker 1: the collapse of tour operator Thomas Cook Group. My question is, Paul,
Speaker 1: why did this come such a huge surprise and shock
Speaker 1: suddenly to leave so many people stranded? And here to
Speaker 1: answer that question is Richard Weis's reporter for Bloomberg News
Speaker 1: joining us from Frankfurt. So Richard, what is the answer
Speaker 1: to that question. Well, the honest answer is it didn't
Speaker 1: come as a surprise to those who follow the company closely.
Speaker 1: Of course, the timing was a surprise that this happened
Speaker 1: at two in the morning local time last night. But
Speaker 1: they just want to add a little bit of contracts contexts.
Speaker 1: As you say, this is the biggest repatriation since the
Speaker 1: Second World War. There's hunead fifty thousand Brits stranded abroad
Speaker 1: at this point in time, So the British government is
Speaker 1: tasked with bringing about twenty thousand people home every day.
Speaker 1: So if you take a seven four seven jumbo jet,
Speaker 1: which seats about just under five that's forty jumbo jets
Speaker 1: every day for about a week, to be organized by
Speaker 1: a government which doesn't have a fleet of such size
Speaker 1: for such a task. So that gives you a feel
Speaker 1: for what the bridge are undertaking as we speak. So
Speaker 1: it's again I have to admit I really don't understand
Speaker 1: how this happened and how I just can't take my
Speaker 1: ticket that I guess is no longer valid and maybe
Speaker 1: get another airline to honor it and fly back home.
Speaker 1: But is that not an option for these people? The
Speaker 1: good thing is that in Europe for a lot of
Speaker 1: these things there's consumer protection. In the UK it's called atoll.
Speaker 1: It essentially means in a case like this, the government
Speaker 1: will step in and organize a transport and you even
Speaker 1: have to pay for it, and if you're lucky, you
Speaker 1: can even stay for the remainder of your holiday at
Speaker 1: your hotel. Of course, at the moment this happens, like
Speaker 1: last night, this causes shock and awe with the fact
Speaker 1: that people, but in the end most of the bridge
Speaker 1: on vacation at the moment, will probably be able to
Speaker 1: spend the days on the beaches there and they will
Speaker 1: get home taken possibly even by the same aircraft that
Speaker 1: they flew into. The destination. Was just with the difference
Speaker 1: that the government charges it from wherever owns it, lessers
Speaker 1: most likely to fly them home, and that money comes
Speaker 1: from a fund that all two operators have to pay
Speaker 1: into So Richard, I hate being pedantic here, but I
Speaker 1: want to go back to the two am filing here
Speaker 1: or announcement. I mean, what transpired that led to such
Speaker 1: a sudden shuddering of the entire operation in anyway with
Speaker 1: no contingency plan whatsoever to continue to sort of make
Speaker 1: things go smoothly until the orderly wind down of the
Speaker 1: company and its operations could be completed. It sounds very
Speaker 1: dramatic that that's happened tonight at two am, and that's
Speaker 1: what actually did happen. However, there's a strong rationale behind it.
Speaker 1: When a company is bankrupt or have to be liquidated,
Speaker 1: like in this case, the question is where are the
Speaker 1: asset and who owns them? So the administrator has to
Speaker 1: go in basically count everything and see what can I
Speaker 1: turn into cash. So if I ground an airline and
Speaker 1: Thomas Cook is a huge airline with more than one
Speaker 1: hundred jets in the leisure sector, that's one of the
Speaker 1: biggest airlines across Europe, when I ground an airline at
Speaker 1: two in the morning, chances are most of the jets
Speaker 1: are going to be at their home airports, meaning in
Speaker 1: the UK this is the UK company, so the insolvency
Speaker 1: administrator will be able to actually get their hands on
Speaker 1: the jets and sell them later on. So there's some
Speaker 1: practical reasons behind this timing. So this is a you know,
Speaker 1: Thomas Cook has been around for a hundred seventy eight years.
Speaker 1: What happened to this company to push it to where
Speaker 1: we are today. Well, um, if you go back and
Speaker 1: look into the history books, it was founded by a
Speaker 1: preacherman who wanted to keep people in Victorian England from drinking.
Speaker 1: So it's actually fascinating history. The problem is in the
Speaker 1: last fifteen or twenty years or so, they haven't been
Speaker 1: quite up to speed with the changes in the industry
Speaker 1: as the low cost carriers emerged also across Europe and
Speaker 1: ticket prices continued to fall over the last couple of years.
Speaker 1: At the same time, online rivals, both travel agents and
Speaker 1: pure online travel agents as you know in booking dot
Speaker 1: Com for example, pushed into this market and squeezed the
Speaker 1: margins that were already slim and highly seasonal. It's a
Speaker 1: business where in the summer the money comes in and
Speaker 1: in the winter you have to pay the hotels that
Speaker 1: you buy your beds from. In bulk, so it's very
Speaker 1: seasonal and you have to be able to withstand shocks.
Speaker 1: For example, across Europe, a lot of the important destination
Speaker 1: countries are Tunisia, Egypt, Turkey, and all these countries had
Speaker 1: political turmoil in the past couple of years, and some
Speaker 1: of them even had incidents that shut the entire country
Speaker 1: is down for a couple of months. Out of a
Speaker 1: perspective from a tour operator, so that means you may
Speaker 1: have spent money on sending hundreds of thousands of guests
Speaker 1: there and in the end you can't. So if you
Speaker 1: don't have a big financial buffer, this is a very
Speaker 1: tough business to be in. Richard Wis, thank you so
Speaker 1: much for bringing this story to us. Just extraordinary. Richard Rice,
Speaker 1: Bloomberg News based in Frankfort. Thanks for listening to the
Speaker 1: Bloomberg P and L podcast. You can subscribe and listen
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa A.
Speaker 1: Bram Woyits. I'm on Twitter at Lisa bramwo Wits. One
Speaker 1: Before the podcast, you can always catch us worldwide. I'm
Speaker 1: Bloomberg Radio