Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app. We begin this out
Speaker 2: with stocks looking to recover following the biggest one day
Speaker 2: loss of the year so far. Cam Dawson and New
Speaker 2: Wedge Wealth writing after a nine week winning streak at
Speaker 2: a break neck pace, we should not be surprised to
Speaker 2: see some come down from the huge gains. Cam is
Speaker 2: joining us for the air and joined us now for more. Cam,
Speaker 2: Good morning, good to see it.
Speaker 1: Good morning.
Speaker 2: We've been told repeatedly the fundamentals are great, but the
Speaker 2: technicals are stretched. To the technicals beginning to bite.
Speaker 3: Yeah, Beta bites both ways. We had been enjoying a
Speaker 3: massive Beta rally where we got to some pretty big
Speaker 3: extremes come midweek last week, seventy six percent above the
Speaker 3: two undred aage moving average. On the socks, you got
Speaker 3: the costby up to one hundred and twelve percent above
Speaker 3: its two hundred day moving average. That would qualify as
Speaker 3: a classic price bubble. And so we're seeing this unwind
Speaker 3: just out of these really big overbought conditions. And what's
Speaker 3: notable is that we're nowhere near over sold. Just to
Speaker 3: get to your fifty day moving average on the on
Speaker 3: the socks, you would be down another thirteen percent. And yes,
Speaker 3: the fundamentals are great, but you had seen these stocks
Speaker 3: get so overbought, move so far so fast. It was
Speaker 3: sort of like seeing icarus fly closer and closer to
Speaker 3: the sun and getting a little bit of that wax melting.
Speaker 2: Do you think then at this point there was an
Speaker 2: air pocket then for further declines from here.
Speaker 3: Yeah, look, I think it would be actually a very
Speaker 3: healthy thing to see.
Speaker 1: I think the other thing that's really.
Speaker 3: Notable to focus on is the fact that you had
Speaker 3: seen valuations already reset back up to their twenty twenty
Speaker 3: six highs. So the whole dynamic that had happened at
Speaker 3: the start of the year is that valuations de rated
Speaker 3: significantly to about seventeen times on the socks just because
Speaker 3: earnings estimates went up so much. Now we've effectively reclosed
Speaker 3: that gap, where we've seen valuations get back up to
Speaker 3: twenty eight times forward. So arguably you could say that
Speaker 3: the easy part is over, meaning the valuation reset is over,
Speaker 3: and now the question is do you still see earnings
Speaker 3: upside for these semiconductors from here?
Speaker 4: Is the next catalyst potentially the inflation data Jonathan mentioned
Speaker 4: later in the week.
Speaker 3: Well, certainly for the broad markets, and it'll be fascinating
Speaker 3: because we could print a four handle on headline CPI,
Speaker 3: we could also print a six handle on headline PPI,
Speaker 3: and certainly if we're looking at the bond market, that
Speaker 3: would put upward pressure on yields. And you're already pricing
Speaker 3: in one hundred and seventeen percent chance of a hike
Speaker 3: by the end of the year for the Fed, which
Speaker 3: just suggests that could we even see more upside on
Speaker 3: that if you get a hot CPI or PPI print.
Speaker 4: A four handle on this inflation would basically mean what
Speaker 4: for Kevin Wosh.
Speaker 3: It means its back is very firmly in a and
Speaker 3: he has very few ways to argue that the Fed
Speaker 3: should be cutting rates at this point, whether you're looking
Speaker 3: at the labor market, which remains very resilient, or you're
Speaker 3: looking at the inflation picture. And I think the other
Speaker 3: important part about the inflation picture is that you're seeing
Speaker 3: this upward pressure on core CPI as well. So, yes,
Speaker 3: wages remain very subdued. And I think that's a really
Speaker 3: important point about this employment pictures. You're not seeing upward
Speaker 3: pressure on wages, but you're still seeing things like that
Speaker 3: super core CPI, core services X housing move higher, which
Speaker 3: just suggests that this can't be something that you completely
Speaker 3: look through at least.
Speaker 2: So it's talked about this and we'll can't you at
Speaker 2: leaster a little bit later this morning, she's found herself
Speaker 2: in real in Brazil, believe or not. We'll spend some
Speaker 2: time on that in a few hours time. At Lisa's
Speaker 2: talked about the fact that inflation is close to four,
Speaker 2: unemployment is close to four, and here we are having
Speaker 2: a discussion about dropping an easing bus, not hiking rates,
Speaker 2: but dropping an easing bus. Can you expect anything more
Speaker 2: than just that? And next week's mating, well.
Speaker 3: I would add one other peculiar factor, which is that
Speaker 3: if you look at five or five year inflation spreads
Speaker 3: or inflation breaks, they remain very contained. So you have
Speaker 3: a FED that's not necessarily saying that we're going to
Speaker 3: fight inflation with a lot of gusto, and yet the
Speaker 3: bond market says, yeah, but we think you're going to
Speaker 3: be successful at getting back to two percent. So I
Speaker 3: think the question will be is as we move through
Speaker 3: later in the year, if inflation still continues to trend higher,
Speaker 3: if energy prices continue to push higher, will we start
Speaker 3: to see the long end of the curves start to
Speaker 3: become a little bit more dubious of the Fed's willingness
Speaker 3: to fight inflation. And if that's the case, that really
Speaker 3: is the thing that forces the Fed's hand to start
Speaker 3: coming out and talking a much tougher game than just saying, oh,
Speaker 3: we're not easy.
Speaker 2: So two out to tens we've seen some flattening. Would
Speaker 2: you expect some statement to come back into the curve.
Speaker 3: I think that's certainly possible this week, mostly if we
Speaker 3: continue to see resilient economic data. The relationship to watch
Speaker 3: is the fact that you're seeing economic surprises continue to
Speaker 3: push higher. That's putting a lot more upward pressure on
Speaker 3: the back end of the curve. But you've seen a
Speaker 3: lot more upside on the front end the curve, which
Speaker 3: is why you're seeing that flattening.
Speaker 1: So if you see the hotter.
Speaker 3: Inflation data, and if you see things like the NFIB survey,
Speaker 3: which we also get this week show some improvement, that
Speaker 3: could be another reason why we see that back and
Speaker 3: back up.
Speaker 5: This week.
Speaker 2: Is not just about the data, it's also about supply, IPOs,
Speaker 2: SpaceX very much on the horizon. We've seen an upsize
Speaker 2: capital race from Alphabet the fteam reporting on Friday that
Speaker 2: MET is considering doing something similar that contributed to this move.
Speaker 2: Corporate America is telling you it's a good time to
Speaker 2: sell equity. Why is it a good time for investors
Speaker 2: to buy it?
Speaker 3: Yeah, well, they're telling you it's a good time that
Speaker 3: they need more money in order to fund this AI
Speaker 3: capex and this whole bull market is built on the
Speaker 3: idea that the mag seven would take their incredible, formerly
Speaker 3: very strong balance sheets and use them to fund this
Speaker 3: massive capex spending. And the question is how do we
Speaker 3: get to that next leg hire We've already gone from
Speaker 3: expecting ten percent growth in AI revenue or AI capex
Speaker 3: spending this time last year to up to eighty percent
Speaker 3: growth for this year. People are expecting that now to
Speaker 3: go from one trillion up to one point two trillion.
Speaker 3: To fund that gap, you need more capital. And what
Speaker 3: this could be a sign is that maybe we're running
Speaker 3: a little bit long and thinking that maybe we can't
Speaker 3: turn to debt markets as much. And so it certainly
Speaker 3: suggests that in order for this to keep running, you
Speaker 3: have to have a continued bull market, which just means
Speaker 3: that that there's so much pressure for the AI capex
Speaker 3: to continue to deliver.
Speaker 1: We saw about this last time.
Speaker 4: You're on where are people taking capital from to then
Speaker 4: make sure they can get in on these IPOs.
Speaker 3: I mean, it certainly seems to be in areas of
Speaker 3: other risk assets. People have been thinking maybe that's where
Speaker 3: some of the selling pressure is coming from, things like
Speaker 3: bitcoin in order to make room for it. But we
Speaker 3: still come back to the point that there are a
Speaker 3: lot of investors that don't have a choice in order
Speaker 3: to make room for some of these names and these
Speaker 3: IPOs simply because they're being forced into indices at a
Speaker 3: much more rapid pace. I think the turn last week
Speaker 3: though from S and P five hunderd SMP Global of
Speaker 3: effectively saying that they are not going to relax their
Speaker 3: profitability rule was a very import in potential sentiment shift
Speaker 3: and how quickly these things could be included in that
Speaker 3: big index. But I think at the end of the day,
Speaker 3: that's a really good thing for indux investors when we
Speaker 3: think about long term quality.
Speaker 5: Let's bring up bitcoin.
Speaker 2: Can you mention bitcoin? Bitcoin took out the loads of
Speaker 2: the year in Friday session, down fifty percent from the
Speaker 2: stand of October. We caught up with Lisa Shout Out
Speaker 2: of Morgan Stanley recently. You asked the question about whether
Speaker 2: we're seeing signs of things tightening up a little bit.
Speaker 2: Bitcoin is a liquidity oriented asset. When financial conditions are
Speaker 2: beginning to tighten, it falls back over the next twelve
Speaker 2: to eighteen months. Lisa's words, as everyone is issuing debt,
Speaker 2: as everyone is issuing stock, we're going to start to
Speaker 2: see things tighten up here. Would you expect to see
Speaker 2: further signs of that in the year ahead.
Speaker 5: Yeah.
Speaker 3: I think the most interesting thing over the course of
Speaker 3: the last let's call it nine months, is that bitcoin
Speaker 3: has completely sat out on this risk rally. So if
Speaker 3: we think about the cohort of things that typically go
Speaker 3: together and liquidity sensitive areas, it's the least profitable companies,
Speaker 3: it's the most speculative parts of the market, and Bitcoin.
Speaker 1: But you've seen Bitcoin sit.
Speaker 3: Out on the speculative rally.
Speaker 1: But you have.
Speaker 3: Things like a sixty percent rally and unprofitable tack over
Speaker 3: the course of the last two months. So the question
Speaker 3: would be is that is Bitcoin effectively a harbinger of
Speaker 3: things to come for those other speculative parts of the market,
Speaker 3: And certainly we're starting to see that unwind on Friday,
Speaker 3: as we saw a lot of that beta and momentum
Speaker 3: come out of the market.
Speaker 2: Stay with us. More Bloomberg surveillance coming up after this.
Speaker 2: The former Defense secretary Mark Esper ranking the following the
Speaker 2: conflict is in a strategic stalemate with no clear path
Speaker 2: forward for negotiations. We're now over one hundred days into
Speaker 2: a conflict there was only supposed to last four to
Speaker 2: six weeks. Mark joined us now for more, mister secretary,
Speaker 2: welcome to the program. Let's talk about how much control
Speaker 2: the president has over Israel at the moment given the
Speaker 2: events of the weekend.
Speaker 6: Well, he does have some control over Israel with regard
Speaker 6: to his relationship through Vbnnyahoo. But keep in mind the
Speaker 6: political dynamics in Israel and the United States are quite different.
Speaker 6: Both leaders have elections coming up in the fall. NET
Speaker 6: and Yahoo directly, the kanessets being has an election, but
Speaker 6: he is fighting a war in which overwhelming numbers sixty
Speaker 6: to seventy percent of the Israeli people at least support
Speaker 6: the conflict, certainly against Hezballah in Lebanon, but also against Iran,
Speaker 6: and President Trump's numbers are flipped. So there are different
Speaker 6: political dynamics here at play. I also think there are
Speaker 6: different end states that are desired. Obviously, Israel wants regime
Speaker 6: change and President Trump wants to get a deal that
Speaker 6: it says no nuclear weapons or a path to nuclear
Speaker 6: weapons for Iran.
Speaker 7: So in some ways they are just on different paths.
Speaker 7: Right now, quit just talk.
Speaker 4: About the latest hostilities of the past forty eight hours.
Speaker 4: It doesn't seem like the ceasefire is fully broken. Do
Speaker 4: you think that these are just countries that are testing
Speaker 4: each other right now?
Speaker 6: Well, first of all, I've been lucky to say for
Speaker 6: at least last week or so ceasefire. It seems to
Speaker 6: me it's more like a cessation or a suspension of
Speaker 6: major hostilities, because, as you know, there have been missiles
Speaker 6: flying back and forth across the Persian Gulf, from the
Speaker 6: United States attacking Iranian coastal sites to the Iranians attacking
Speaker 6: Kuwait and Bahrain and other countries. And now the last
Speaker 6: twenty five hours this is a big flare up with Israel.
Speaker 6: So look, I think this is going to continue for
Speaker 6: a while. What's interesting to me as well, is it
Speaker 6: seems like Iran is putting new things on the table
Speaker 6: with regard to negotiations, because now they're talking about wanting
Speaker 6: upfront twelve billion dollars in unfrozen assets, maybe another twelve
Speaker 6: along the way. There's the threat, of course, of leveraging
Speaker 6: the Babel Mandeb, and we know that Dave said, and
Speaker 6: as your reporter said just prior that Iran is demanding
Speaker 6: a complete cessation of hostilities in Lebanon. And I'm not
Speaker 6: sure that BB Neeta who can agree to that well?
Speaker 4: And also how can the president agree to that for
Speaker 4: Israel given the fact that accord the Financial Times, the
Speaker 4: president that he called the shots and then Israel actually
Speaker 4: took their own step to have this response.
Speaker 6: Sure, and look, the agreement between the last few days
Speaker 6: between Lebanon and Israel, which does not include Hesbla, was
Speaker 6: that Israel would not attack into southern bay Rout into
Speaker 6: the outskirts of Beirut unless Hesbelah attacked into Israeli territory.
Speaker 7: And we know the last twenty fours.
Speaker 6: Israel has alleged that his Blood did strike, did send
Speaker 6: rockets or missiles into northern Israel.
Speaker 7: They were intercepted.
Speaker 6: But that's what prompted this latest round of exchanges between
Speaker 6: with Israel going into Beirut and then of course Iran responding.
Speaker 7: So this is a big part of this.
Speaker 6: Is Iran trying to defend its proxy, hes bloods its longest, oldest,
Speaker 6: best proxy from elimination, and you have this dynamic at
Speaker 6: play and they're not going to give that up easily.
Speaker 4: As the former Defense secretary, the president said in this
Speaker 4: Meet the Press interview when talking about troops, saying, we
Speaker 4: have a lot of people there, quote, they're very safe.
Speaker 4: Do you think our troops in the middle are safe
Speaker 4: right now?
Speaker 6: Well, you know, you're always at some risk when you're
Speaker 6: in a combat zone. But I think in terms of
Speaker 6: the status of the war, and I'm confident in the
Speaker 6: ability of our commanders to take good defensive measures.
Speaker 7: I think they're in pretty good shape. But look, war
Speaker 7: is risky. Things happen. We know.
Speaker 6: Unfortunately, we lost thirteen service members already. That's thirteen too many,
Speaker 6: and several hundred have been wounded, so we can't forget
Speaker 6: about that as well.
Speaker 7: So look, it's not risk free, but.
Speaker 6: We're not in the hot war that we were two
Speaker 6: and a half months ago, per se.
Speaker 4: So do you think our troops right now are just
Speaker 4: there to set a deterrence when it comes to Iranian regime.
Speaker 7: Well, it's a combination of determinent deterrence.
Speaker 6: You also are supporting your diplomatic efforts so that the
Speaker 6: Iranians know that we can back up whatever we say
Speaker 6: with military force, or if things break down or if
Speaker 6: the Iranians lash out again, we're there to back it
Speaker 6: up with military force.
Speaker 7: So there are a number of reasons why we're there.
Speaker 6: And of course, you know, for a long time, certainly
Speaker 6: during my period, we've kept over forty thousand troops in
Speaker 6: the Middleaks, regardless of what was happening happening, so now
Speaker 6: we have a plus up there, mostly with regard to
Speaker 6: Air Force and Navy, and I suspect they will stay
Speaker 6: there for a while until this is resolved, which doesn't
Speaker 6: appear to get resolved, won't appear to get resolved anytime soon.
Speaker 2: Frankly, mister Secretary, when you are at the Pentagon, you
Speaker 2: go through a lot of scenario analysis without a doubt.
Speaker 2: And I'm sure this was an event that you spend
Speaker 2: time on in the past. How does this play out
Speaker 2: in your mind? And what kind of preparation have we
Speaker 2: made for this enduring through the summer.
Speaker 6: Well, you know, I went through this scenario a few times,
Speaker 6: or at least this drill with the President in the
Speaker 6: situation room. I talk about it a lot in my memoir,
Speaker 6: where you'd have folks who wanted to go to Iran,
Speaker 6: wanted to strike Iran, and I would least say two things.
Speaker 6: You know, first of all, mister President, a war is
Speaker 6: easy to get into but hard to get out of.
Speaker 6: And secondly, if we want to do this, it's going
Speaker 6: to take a lot of preparation, weeks of preparation to
Speaker 6: get all the troops in place, whether it's Army, air defenders,
Speaker 6: air Force, fighter squadrons or Navy ships, and so it
Speaker 6: does take a preparation time. Of course, you always want
Speaker 6: to bring along as many allies as you can to
Speaker 6: support you, preferably some of the European militaries, but certainly
Speaker 6: the golf allies. You know, obviously we know that the
Speaker 6: President started this at the end of February of this
Speaker 6: year when talks broke down in Geneva, and there wasn't
Speaker 6: a lot of that preparation going on. So obviously they've
Speaker 6: kind of short some of that up in the meantime.
Speaker 6: But you go through at least those steps of preparation
Speaker 6: when you're looking at a possible major conflict with the country.
Speaker 2: Like Ron stay with us more Bloomberg surveillance coming up
Speaker 2: after this. According to the International Air Transport Association, airlines
Speaker 2: are expecting to bring in a combined twenty three billion
Speaker 2: dollars in net profit this year, down from the previously
Speaker 2: projected forty one billions. Holding its annual conference in Brazil,
Speaker 2: of all places, Bramo joined just now with a special guest.
Speaker 2: Good morning, Lisa.
Speaker 1: Buji, Jonathan Verro.
Speaker 8: I am here still in Rio, enjoying the beaches. As
Speaker 8: you've said, you can see here the incredible beach of
Speaker 8: this conference center, and I'm here with the chief operating
Speaker 8: officer of Southwest Andrew Watterson.
Speaker 1: Thank you so much for being with us this morning.
Speaker 5: My pleasure.
Speaker 1: So I want to start with the.
Speaker 8: Story that Jonathan and Emory we're just talking about this
Speaker 8: idea of higher fuel costs. This morning we see another
Speaker 8: leg higher. We're hearing yes, people are concerned about oil prices,
Speaker 8: but that they've been managing through I mean, how have
Speaker 8: you managed to offset the increased cost through raising prices,
Speaker 8: cutting roots and potentially raising costs on charging for bags.
Speaker 9: Yeah, so you can you need to cover the extra
Speaker 9: cost from higher fuel. You can't do it in a
Speaker 9: matter of days if you can't organize yourself and do
Speaker 9: it in a.
Speaker 5: Matter of months and quarters.
Speaker 9: And so we have been taking access to you know,
Speaker 9: conserve costs, prove fuel efficiency, but also revenue through you
Speaker 9: know additional you know bag fee increases, through fare increases
Speaker 9: and other demand generation activities that allow you to move
Speaker 9: your revenues up to cover that increased cost you know
Speaker 9: food by the end of this year early next as.
Speaker 8: It impeded your quest to become profitable and your actual
Speaker 8: ability to do so so far this year.
Speaker 9: Well, we had the highest adjusted net margin in the
Speaker 9: US industry in Q one, so we were stored profitability
Speaker 9: before fuel enough, which better than the other way around.
Speaker 9: We certainly anticipate that transformation activity driving us throughout the
Speaker 9: rest of the year from profit perspective, so we're focused
Speaker 9: on that.
Speaker 5: And have more to go.
Speaker 8: Have you been surprised by how little demand destruction there's
Speaker 8: actually been that customers keep flying even as you raise prices.
Speaker 9: Well, the drivers a demand are corporate profits really drive
Speaker 9: business travel, and corporate profits is held up well, and
Speaker 9: job growths we saw last week is also strong and
Speaker 9: that drives leisure travel. So the fundamentals of demand generation
Speaker 9: are strong and that really helps the customer overcome increase prices.
Speaker 8: At is business travel this year compared to last year?
Speaker 8: Is it actually more or is it less because of
Speaker 8: the higher costs.
Speaker 9: It's incredibly strong right now. Last year in a terrorist
Speaker 9: there's a lot of uncertainty. Businesses hate uncertainty, and so
Speaker 9: they pulled back on travel in the uncertain times. Now
Speaker 9: it's higher cost for fuel, they understand that they can
Speaker 9: act on that, and as we said in Burnstein conference
Speaker 9: last week, we're seeing twenty five percent growth in corporate
Speaker 9: travel from March on.
Speaker 8: There has been some speculation that businesses would pull back
Speaker 8: on first class travel, on business class travel because the
Speaker 8: costs are.
Speaker 1: Going up to such a degree. Have you seen any
Speaker 1: signs of that.
Speaker 9: No, we've not seen any change of business travel. If anything,
Speaker 9: is an acceleration in March versus February. So businesses are
Speaker 9: out traveling themselves, trying to generate the revenue they need
Speaker 9: for the higher cost.
Speaker 1: Environment going forward.
Speaker 8: Do you expect to be able to raise prices further
Speaker 8: without seeing demand destruction?
Speaker 9: We certainly have to organize yourself to have the higher revenue.
Speaker 9: There's many levels you can do in general.
Speaker 5: The higher costs to lower your growth rate.
Speaker 9: So you have to look at your growth of supply
Speaker 9: versus demand growth. And so as long as demand keeps
Speaker 9: growing and you can modify supply, even it's not a
Speaker 9: direct fare increase, you can get the revenue tracktion you need.
Speaker 8: Southwest was known as the place you could go for
Speaker 8: the cheapest fairs. You would wait in lines in different
Speaker 8: groups and then everybody would get on the plane.
Speaker 1: There wouldn't be seen assignments.
Speaker 8: There's been a transformation to the identity of Southwest since
Speaker 8: you took over really as chief operating office and in
Speaker 8: twenty twenty four with some of the activist shareholders, have
Speaker 8: you seen a change in your customer base in a
Speaker 8: dramatic way.
Speaker 5: Not really.
Speaker 9: What we've seen is our customers and giving us more
Speaker 9: their share of wallet. So we went from an one
Speaker 9: size fits all to a pay more to get more model.
Speaker 9: So we still have a base fare product that if
Speaker 9: you're just very cast senseif that's for you. We've found
Speaker 9: that our customers really were eager to pay us more
Speaker 9: to have the exact seat they want, the exact product
Speaker 9: they want.
Speaker 5: So it's worked out fabulously.
Speaker 1: Well going forward.
Speaker 8: Do you expect that you are going to see increases
Speaker 8: in demand also from the economy, sort of your brank
Speaker 8: and file versus just those who can afford some of.
Speaker 9: The perks, you know, we see a broad base. We
Speaker 9: talked about a cake shape to communy. That's actually a
Speaker 9: very broad middle of people who have the ability to
Speaker 9: travel and they're traveling and so when you give them
Speaker 9: a multiple price points and they can choose to what
Speaker 9: fits them, you see you can really harvest demand.
Speaker 5: Commis might call it watching down the demand.
Speaker 8: Curve going forward, do you expect that you're going to
Speaker 8: have to raise prices further?
Speaker 9: I think we're going to have to have a mix
Speaker 9: of revenue enhancing opportunities, whether it's on the price side,
Speaker 9: capacity changes, or other fee changes. And so the big
Speaker 9: changes and prices I think happened in March and now
Speaker 9: it's more incremental type changes you have to do to
Speaker 9: capture How much more can you charge for I mean, yes, drinks, sure,
Speaker 9: baggage fees.
Speaker 1: Going to the bathroom.
Speaker 8: I mean, honestly, at what point can you sort of
Speaker 8: run out of things to monetize?
Speaker 9: As demand growth happens, that puts natural upward pressure on revenue.
Speaker 9: So you can see as customers get raised, as businesses
Speaker 9: get higher profits, they can afford a little bit more,
Speaker 9: they end up paying and budgeting a little bit more.
Speaker 9: So now we're in kind of the gradual grain of
Speaker 9: price increases versus kind of the big one we had.
Speaker 5: To begin with.
Speaker 8: You know, we were talking to the United CEO Scott
Speaker 8: Kirby yesterday and he said he wasn't surprised by the
Speaker 8: jobs report that we got on Friday, based on how
Speaker 8: much he had seen an acceleration and demand into the summer.
Speaker 8: Did you feel the same way that you actually see
Speaker 8: a reacceleration rather than some sort of deceleration in response
Speaker 8: to higher prices.
Speaker 9: March saw a big inflection upwards, and so March you didn't.
Speaker 9: Though the war was kind of hot and heavy at
Speaker 9: that point, we saw a big acceleration both business and
Speaker 9: leisure travel demand.
Speaker 5: So the US economy is roaring, it seems to us.
Speaker 8: Do you think that the inflationary inputs and what your
Speaker 8: experience in terms of the costs that you're paying are
Speaker 8: also going up at an accelerating pace?
Speaker 9: They're modest to us, So maybe if you're the FED
Speaker 9: chairman you think differently, But for us, the changes and compensation,
Speaker 9: the changes and input costs x fuel or modest.
Speaker 8: Meanwhile, there has been an issue with respect deliveries of planes,
Speaker 8: Boeing in particular.
Speaker 1: We've heard of your some of the.
Speaker 8: Issues and how that's crimping plans.
Speaker 1: How do you see that resolving, man?
Speaker 8: How much has that put a damper on some of
Speaker 8: what you're planning going forward?
Speaker 5: I give big kudos to Boeing.
Speaker 9: A few years back they was not their finest hour,
Speaker 9: but now they're delivering us a quality aircraft on time.
Speaker 9: So we're pleased with what Bone has given us. And
Speaker 9: the Max seven, which has been much delayed, is seemingly
Speaker 9: very close to certification based on the FA administrator said,
Speaker 9: So we're very pleased with how Boeing's moving along.
Speaker 8: Meanwhile, we did here from Aada that you are seeing
Speaker 8: profits crimped pretty significantly for airlines. It doesn't seem like
Speaker 8: that's what you're saying at all. It seems like you've
Speaker 8: been able to offset and recoup all of the oil
Speaker 8: price increases in terms of your other measures.
Speaker 1: Have you seen any impact to.
Speaker 8: Your growth projector I know you say you've got to
Speaker 8: pull back some of your expansion and your growth, but
Speaker 8: with respect to profitability, have you seen any kind of
Speaker 8: deterioration in that?
Speaker 9: Well, higher fuel does lead to lower profits, and so
Speaker 9: really the question becomes for next year as we get
Speaker 9: into the late summer early fall, and it's a business
Speaker 9: planning season for most companies for the following year, and
Speaker 9: so where we'll oil b what would the trajectory be.
Speaker 5: For next year?
Speaker 9: That's when you'll be able to understand what's my growth
Speaker 9: rate next year? How does that impact everything?
Speaker 8: Do you think that oil prices need to come down
Speaker 8: for your company for the broad industry to be okay,
Speaker 8: or do you think that they could stay here in
Speaker 8: perpetuity and end up with a pretty healthy airline sector
Speaker 8: because of the demand and consumer's ability to absorb higher costs.
Speaker 9: Over the last decade plus, we've seen airlines be able
Speaker 9: to adjust to high fuel environments. We've also seen the
Speaker 9: high field doesn't last forever, so it will come down.
Speaker 9: The question is when, and we can organize ourselves to
Speaker 9: kind of meet that glidscope down.
Speaker 5: To fuel price to restore profitability.
Speaker 9: So whether we're turns to where last year or if
Speaker 9: it stays higher for longer, we can organize ourselves any
Speaker 9: ands a the uncertainty is much less than I one
Speaker 9: might imagine.
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