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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa Bramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Apple

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Speaker 1: is bringing back a lot of money from overseas, and

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Speaker 1: Amazon is choosing which city it wants to put its

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Speaker 1: headquarters number two, and it has narrowed down the list

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Speaker 1: from two d cities to twenty. Here to talk about

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Speaker 1: all of this tech news is Spencer Soaper, tech reporter

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Speaker 1: in Seattle, who has been writing on the Amazon Bachelorette

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Speaker 1: show that we are currently admired in, as well as

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Speaker 1: our own shira ov Day Bloomberg Gadfly columnist ring all

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Speaker 1: things technology. Spencer, Let's start with you. Did Amazon give

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Speaker 1: any color as to its selection process and this reality

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Speaker 1: television show known as Headquarters to for Amazon? No? Not

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Speaker 1: not really? Uh? And this really looks like administrative clean up.

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Speaker 1: You know. They put out this bit for proposals and

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Speaker 1: they got way more proposals than they anticipated more than

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Speaker 1: two hundred and so it was simply matter. It was

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Speaker 1: just getting on wieldy for them. Uh and inboxes were

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Speaker 1: blowing up, you know, email boxes overflowing. So this is

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Speaker 1: kind of like an administrative cleanup. We we don't. It's

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Speaker 1: a huge, huge, very long shortlist, so it doesn't really

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Speaker 1: give much indication of anything. You know, you've got West

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Speaker 1: Coast cities, East Coast City's, Heartland cities, Southeast cities, Texas cities. Um.

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Speaker 1: But basically it's it's it includes all of the the

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Speaker 1: front runners that that people were anticipating, So it's largely

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Speaker 1: administrative cleanup and getting rid of a lot of those

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Speaker 1: smaller markets that that that likely never to the chance

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Speaker 1: Spencer at just the point about perhaps it's not a

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Speaker 1: clean up. Maybe it's a sort of an expenditure of

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Speaker 1: energy on the part of Amazon because people, of course

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Speaker 1: on the Internet, they don't get enough advertising. Um. Now

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Speaker 1: Amazon will be offering advertising, as I guess, a form

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Speaker 1: of entertainment on their website. Tell us about this move. Yeah,

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Speaker 1: well so advertising is really emerging. Um. If if you

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Speaker 1: think of Amazon and cycles right the core the core

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Speaker 1: e commerce business has grown and wild investors with this

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Speaker 1: with this tremendous top line growth and ability to steal

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Speaker 1: steel market share from Big buckstores and department stores, but

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Speaker 1: it's never been profitable. Then along came its cloud computing division,

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Speaker 1: which was also growing quickly and adding a lot to

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Speaker 1: the top line, but healthing helping profitability. And now the

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Speaker 1: latest thing we have emerging is advertising. It's another fast

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Speaker 1: growing business, but it's also extremely profitable. It doesn't require

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Speaker 1: the big investments of warehouses around the country or data

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Speaker 1: centers around the country that it's commerce business or it's

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Speaker 1: cloud computing business requires. So so investors are excited about

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Speaker 1: the revenue growth, but but more importantly excited about the

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Speaker 1: potential profit margins of the of the advertising business. Shara,

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Speaker 1: I mean, it's it's not as if some of these

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Speaker 1: tech companies need more cash, but it seems like the

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Speaker 1: cash is just flowing in, and the question now is

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Speaker 1: really how they plan to spend it. And Apple said

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Speaker 1: that it was going to be bringing back what thirty

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Speaker 1: billion dollars of cash. What did they say exactly, Well,

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Speaker 1: they didn't say exactly, but if there's they did say

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Speaker 1: they're expecting to spend expected to pay a tax bill

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Speaker 1: of thirty eight billion dollars on their overseas cash, which

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Speaker 1: implies that they're going to bring back to the US

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Speaker 1: something like two forty billion dollars of their overseas cash stockpile.

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Speaker 1: And where is that going to go? Do you think?

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Speaker 1: I don't know. That's a very good question. Um. So

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Speaker 1: it's worth saying right that Apple, you know, patted itself

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Speaker 1: on the back for paying the US Treasury thirty eight

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Speaker 1: billion dollars. But the reasons paying that some now is

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Speaker 1: that it's parked two billion dollars or so of cash

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Speaker 1: that it considered permanently reinvested in its overseas operations because

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Speaker 1: it didn't want to pay taxes on that money until now.

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Speaker 1: I believe the tax rate was too high. So now

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Speaker 1: with the new tax code changes, that tax rate goes

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Speaker 1: down to fifteen and a half percent. So Apple thinks, well,

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Speaker 1: this is a good opportunity to bring that cash home,

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Speaker 1: and it's gonna owe that tax bill regardless of whether

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Speaker 1: it brings the money back to the U S or not.

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Speaker 1: So it's gonna have something like two hundred billion dollars

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Speaker 1: remaining after it pays taxes um on that cash stockpile.

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Speaker 1: And I think investors expect the company to spend it

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Speaker 1: on things like stock buybacks, which is maybe not what

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Speaker 1: Donald Trump and his crew had in mind when they

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Speaker 1: passed these large tax code changes. But Apple has also

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Speaker 1: said what that they will consider spending some of this

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Speaker 1: to expand their real estate empire. They're gonna be adding

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Speaker 1: maybe a new office. Uh of what could they be

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Speaker 1: spending it on, at least domestically, right, so their Apple's

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Speaker 1: announcement yesterday did include some disclosures about US investments and spending.

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Speaker 1: I have to say, it's hard to know how much

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Speaker 1: of that would have been done regardless of whether the

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Speaker 1: tax code changed. So, yes, the company did announce that

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Speaker 1: they're going to open a new location somewhere in the

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Speaker 1: US specifics TBD that will house customer service kind of personnel,

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Speaker 1: at least initially. Again, it's possible they may have done

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Speaker 1: that anyway. They have a customer service location in near Austin,

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Speaker 1: Texas already, And they made some disclosures about hiring twenty

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Speaker 1: people in the US, although they already have eighty four

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Speaker 1: thousand employees in the U S and it's likely that

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Speaker 1: at the rate that they've been adding to that, the

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Speaker 1: twenty people in five years is not a deviation from

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Speaker 1: their current rate. So Spencer, come on in here, because

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Speaker 1: Shia is talking about a ton of expansion here and

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Speaker 1: hiring plans. Those hires have to go somewhere. And I'm wondering,

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Speaker 1: you know, Amazon is getting all the attention, but are

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Speaker 1: there other big tech companies that are also erecting new

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Speaker 1: buildings and you know, hiring mass at workforces, and are

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Speaker 1: these are these cities lobbying for for that activity as well? Well?

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Speaker 1: I think that the Amazon is Q two just by

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Speaker 1: the nature of its size, has kind of sucked all

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Speaker 1: the oxygen out of the room. But yes, I mean

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Speaker 1: cities are are always looking for any type of economic development,

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Speaker 1: even even even uh small businesses maybe creating fifty or

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Speaker 1: so jobs will get an audience and will get incentives

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Speaker 1: depending on the market and the the attract The attraction

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Speaker 1: of the tech jobs is this generally you know, clean

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Speaker 1: office type setting um jobs that pay good wages. And

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Speaker 1: that's always the uh, the problem or the detension around

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Speaker 1: job creation tax credits is, Okay, we want job growth,

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Speaker 1: but what kind of jobs are we investing in? And

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Speaker 1: you know, good paying, high skilled tech jobs generally worth

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Speaker 1: the investment in terms of that that ripple effect, people

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Speaker 1: are enough to buy homes and and spend elsewhere in

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Speaker 1: the economy. Sure, you heard the spencer, and we're talking

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Speaker 1: about the advertising business that Amazon is looking for. Who

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Speaker 1: gets hit by that? Facebook? Google? Probably not. I mean

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Speaker 1: it's and I think Spencer did a good job in

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Speaker 1: his story kind of talking about the potential losers there.

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Speaker 1: It doesn't seem like the money that's being spent on

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Speaker 1: advertisements on Amazon isn't necessarily money that would have been

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Speaker 1: spent on Facebook, Um or Google anyway. But you know

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Speaker 1: that's the kind of money that companies spend places like

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Speaker 1: Walmart right to get better shelf placement at big box stores. Right,

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Speaker 1: those are the kinds of budgets that are maybe instead

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Speaker 1: shifting to Amazon, which is now getting the sort of

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Speaker 1: equivalent of money to put tide at at on the

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Speaker 1: shelves at eye level. I see. So that the button right,

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Speaker 1: the tide buttons or what do they called, the Amazon

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Speaker 1: sells you that, thank you, Spencer, that they're not doing

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Speaker 1: their job. You've got to have advertising and addition, right Spencer. Yeah,

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Speaker 1: and and what Sure just mentioned this. If you look

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Speaker 1: at traditional marketing, especially big CpG brands, consumer package goods brands.

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Speaker 1: These are the products that are lining the shelves of

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Speaker 1: a supermarket. Uh. They've they've developed a program over years

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Speaker 1: of a combination of TV commercials, radio commercials, display advertising

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Speaker 1: in newspapers and magazines, coupons in your mailbox, and what

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Speaker 1: Amazon brings is kind of a one stop solution for

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Speaker 1: all of that UM and even even the in store placement.

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Speaker 1: They call it like trade promotional, but basically they're paying

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Speaker 1: for an end cap or they might even not necessarily

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Speaker 1: be paying the retailer, but offering a discounted price that

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Speaker 1: that retailer come promote to get an end cap placement

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Speaker 1: in the store. UM that that's spending, all of that

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Speaker 1: combined is like two billion dollars for consumer package for

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Speaker 1: goods companies. So even if Amazon takes us takes the

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Speaker 1: piece of that, there's a lot of room for a

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Speaker 1: lot of ceiling there. Thanks very much, Spencer Soaper, Bloomberg

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Speaker 1: News reporter, and our thanks also to share over Day,

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Speaker 1: Bloomberg Gadfly columnist. We turn our attention now to the

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Speaker 1: world of NAFTA and trade with Jacques Gordon he Is

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Speaker 1: Kellogg School of Management, Real Estate professor and the global

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Speaker 1: head of research and strategy for LaSalle Investment Management that

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Speaker 1: helped to manage more than sixty billion dollars worth of

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Speaker 1: real estate assets. Jacques, thank you very much for being

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Speaker 1: with us. You know. President Donald Trump yesterday said that

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Speaker 1: terminating the North American Free Trade Agreement would result in

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Speaker 1: the quote best deal to fix the twenty four year

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Speaker 1: old trade packed between Canada, Mexico and the United States.

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Speaker 1: But lawmakers, industrial groups, agricultural proponents, they all say this

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Speaker 1: is not a good idea. What do you glean from

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Speaker 1: this back and forth? Well, it could be posturing. UM.

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Speaker 1: Of course, the US President has um UH spoken on

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Speaker 1: both sides of this issue at some point, saying that

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Speaker 1: he was a little bit flexible about NAFTA last week

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Speaker 1: and then this week. UH certainly heading into the sixth

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Speaker 1: round of discussions UH scheduled up in Canada and Montreal

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Speaker 1: and January twenty three. It could be it could be

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Speaker 1: just being able to put a bit of fear of

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Speaker 1: God into the other trade representatives from Mexico and Canada.

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Speaker 1: Who knows, UM, But in the world of real estate,

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Speaker 1: similar to other industries, we are watching, UH. The NAFTA

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Speaker 1: negotiations with great interest. UM I think real estate is

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Speaker 1: not UM in the direct line of path of the

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Speaker 1: of the of the NAFTA negotiations. But but we're watching

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Speaker 1: them carefully because of course the UM manufacturers, agriculture industries,

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Speaker 1: financial services industries, well, those those folks are all tenants

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Speaker 1: in our buildings, and so UM my firm and others

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Speaker 1: have huge operations UM in in all three countries, and

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Speaker 1: we'll be watching carefully for any UM any rollback that

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Speaker 1: makes it harder for our tenants to do business. And

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Speaker 1: that's that's really the focus that probably most real estate

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Speaker 1: people are watching very careful. You have big firms like Brookfield,

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Speaker 1: like LaSalle, um many firms who are are investing UH

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Speaker 1: and and operating large portfolios of property across the borders

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Speaker 1: of Canada, US and Mexico. So so we do care

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Speaker 1: about this topic as well. Amazon, for example, released their

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Speaker 1: shortlist can I put short in air quotes twenties cities

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Speaker 1: for their potential headquartered to UH, and it basically is

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Speaker 1: who's who of cities in North America. But it included Toronto,

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Speaker 1: which I thought was very interesting and I'm just wondering,

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Speaker 1: can you walk us through what the real estate effects

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Speaker 1: would be on a city that one this golden ticket

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Speaker 1: that Amazon is kind of hanging out there. Well, we said,

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Speaker 1: the real estate world is is really watching this carefully because, UM,

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Speaker 1: what's happening is is all of those um what was

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Speaker 1: it two thirty cities UH not only said, uh, do

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Speaker 1: we welcome Amazon, and we've got the workforce and we've

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Speaker 1: got the tax abatements, but we have the locations, we

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Speaker 1: have the buildings, we have the real estate development UH

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Speaker 1: expertise to handle you. Now we're down to twenty and

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Speaker 1: Toronto is very competitive on on all those fronts. And UM,

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Speaker 1: just as a good example, Sidewalk Labs, which is part

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Speaker 1: of Alphabet, part of that that enormous UH empire UM

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Speaker 1: that UH is UM looking at doing more in cities,

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Speaker 1: has chosen Toronto as a place where they will basically

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Speaker 1: be working on de oping a city of the future.

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Speaker 1: It wouldn't surprise me that that that whole effort and

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Speaker 1: the Amazon bid that Toronto put forward was linked in

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Speaker 1: some way. Uh. I think all these cities are trying

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Speaker 1: to say, look, we're the place where knowledge industries are

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Speaker 1: are going to be comfortable, and a firm like Amazon

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Speaker 1: should consider Toronto very very seriously. I I it makes

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Speaker 1: total sense to me that Toronto is on the list. Um.

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Speaker 1: Of course they're gonna have a tough competition with the

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Speaker 1: likes of Washington, d C. And Boston and Atlanta and Austin,

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Speaker 1: who are all on the list as well. But um,

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Speaker 1: luckily so I think. I think in terms of location, location, location, um, Vancouver,

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Speaker 1: um uh, Toronto, um uh. These these cities compete right

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Speaker 1: alongside American cities for jobs when things get expensive in

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Speaker 1: incoding world in in San Francisco. Vancouver is a place

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Speaker 1: that UM tech firms like to go as a way

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Speaker 1: to diversify their operations. So there's a lot of just

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Speaker 1: um integration of of the way that companies in technology

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Speaker 1: as well as the ones I know Bloomberg's covering on

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Speaker 1: industrial auto manufacturing, agriculture. Of course those supply chains are

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Speaker 1: all integrated across three countries too, But there are a

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Speaker 1: lot of other industries real estate being one, financial services

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Speaker 1: being another, technology being another, that really operate pretty seamlessly

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Speaker 1: across across all three borders. So um um, you know,

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Speaker 1: it's it's very difficult to to read what uh Robert

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Speaker 1: Leightheiser maybe thinking, and what what the White House may

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Speaker 1: be thinking as they go into the Montreal talks. But

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Speaker 1: we're all hoping that a complete rollback of NAFTA is

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Speaker 1: just posturing and not really, not really, not really on

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Speaker 1: the table. Jack Gordon, thank you so much for joining us.

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Speaker 1: As Jacques Gordon is global head of Research and Strategy

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Speaker 1: for LaSalle Investment Management, which oversees nearly sixty billion dollars

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Speaker 1: in US. It's also professor of real estated Kellogg School

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Speaker 1: of Management. Coming to us from Chicago, he says that

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Speaker 1: the traditional approach to being a passive, intermediate maturity focused

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Speaker 1: investors seeking income only is no longer suitable for municipal

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Speaker 1: bond investors. Well, here to tell us why is Bob

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Speaker 1: de Mella. He is the co head of Municipal Managers

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Speaker 1: from McCay Shields, helping to manage more than twenty three

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Speaker 1: billion dollars. He joins us in our eleven three oh studios. Bob,

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Speaker 1: thank you very much for coming in. So why is

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Speaker 1: that no longer a suitable perspective for investors? I think

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Speaker 1: what has happened is, if you look at the shape

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Speaker 1: of the municipal yield curve, your average investor in the

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Speaker 1: high grade intermediate space no longer has a reasonable income

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Speaker 1: stream anymore, and that's the primary goal for a bond

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Speaker 1: or a bond strategy, right, but you also have a

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Speaker 1: reasonable amount of duration risk in that space. And so

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Speaker 1: we're advising clients to actually move away from either a

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Speaker 1: little longer out the yield curve or a barbell st ategy,

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Speaker 1: which is even better. That's going to make a big

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Speaker 1: difference for them on an income stream and also potential

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Speaker 1: total return. Especially give on our outlook with regards to

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Speaker 1: the yield curve, What do you mean to mean? Because

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Speaker 1: I'm looking, for example, at a tenure in New York State,

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Speaker 1: you'll get about two correct, and so uh as an example,

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Speaker 1: we have our our our flagship National fund, you can

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Speaker 1: attain around a three and a quarter three and a

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Speaker 1: half percent yield um if you're taking more of a

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Speaker 1: barbell strategy, being a little more creative with regards to

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Speaker 1: the yield curve. The problem with that bond that you

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Speaker 1: just pointed out, right, it's it's a two percent yield,

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Speaker 1: it's an eight year duration and so therefore it doesn't

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Speaker 1: take much of a rise in rates and and then

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Speaker 1: your net total return is negative and you're kind of

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Speaker 1: playing catch up with that, and so we think income

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Speaker 1: is really important, and so people should look at their

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Speaker 1: overweight allocations that they have today with the high grade

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Speaker 1: intermediate part of the municipal yield curve and and allocate

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Speaker 1: away from that. Let's just seem out a little bit

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Speaker 1: in just to take a look at the municipal bond

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Speaker 1: category as an asset class. There was a three point

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Speaker 1: one billion dollar in flow into municipal bond funds in

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Speaker 1: the week end in January. This set an all time

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Speaker 1: high record. This was from i c I, the Investment

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Speaker 1: Company Institution for UH for investment managers, and I have

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Speaker 1: to wonder, you know, this follows pretty steady flows, not

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Speaker 1: this high. There's a lot of demand for this stuff

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Speaker 1: right now that should be good for municipal bonds. Now.

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Speaker 1: It is definitely good for bonds, and it's one of

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Speaker 1: our main themes for two thousand eighteen. We believe the

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Speaker 1: municipal marketplace. One of our insights at Mackay is that

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Speaker 1: the ratios of one of the relative value ratios that's

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Speaker 1: always used is muni triple a yields versus triple A treasuries.

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Speaker 1: Historically on the long ends around eight percent. We believe

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Speaker 1: you're going to test twenty year lows this year, in

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Speaker 1: other words, that the yields on municipal bonds will fall

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Speaker 1: much lower relative to treasuries than in the past has

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Speaker 1: been sustainable. Correct, And a couple of different reasons for that.

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Speaker 1: One is technicals, really strong demand, increasing demand, especially for

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Speaker 1: high tax states like California, New York, New Jersey. In

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Speaker 1: addition to a significant reduction in supply, tax reform has

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Speaker 1: a big reduction in supply going into two thousand eighteen.

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Speaker 1: So here's what I'm struggling with. Because we hear about

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Speaker 1: the the infrastructure problems that a lot of states are having,

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Speaker 1: not hearing a lot about how that's going to get financed.

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Speaker 1: There's certainly some issues with high tax states. What's the

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Speaker 1: revenue going to look like? Given potential exodus is on

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Speaker 1: the heels of this tax plan? Um, how are you

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Speaker 1: thinking about that? Does that concern you at all? Yeah?

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Speaker 1: So you have to Yeah, absolutely, I mean you picked

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Speaker 1: the you picked the problem. I'll give you you know. Yeah, No,

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Speaker 1: there's there's absolutely, But the municipal marketplace is a very

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Speaker 1: strong credit worthy marketplace and without issues, no but most

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Speaker 1: states have done pension reform. The overall credit characteristics of

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Speaker 1: the municipal marketplace is very positive. Infrastructure will definitely play

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Speaker 1: out with it. As you know, Washington, d C. Is

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Speaker 1: grappling with some kind of infrastructure solution. The infrastructure need

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Speaker 1: in the in the United States will not be born

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Speaker 1: municipal entities. As a matter of fact, you have seen it.

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Speaker 1: They've pulled away from a lot of the projects. We've

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Speaker 1: had an introduction of the P three structures to public

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Speaker 1: private partnerships, which is part of the funding for um

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Speaker 1: tapan Zee Bridge replacement, Gothel's Bridge and also LaGuardia terminal replacement.

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Speaker 1: That brings private equity, private debt into the mix in

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Speaker 1: addition to yes taxpayer municipal bonds. And so we actually

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Speaker 1: think the supply of the municipal marketplace this year is

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Speaker 1: going to shrink. The new issue volume is probably gonna drop.

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Speaker 1: That's a big reduction, Bob. I'm just go back to

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Speaker 1: this idea of having to change the way you view

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Speaker 1: municipal bond investing because of the tax overhaul. If you

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Speaker 1: hold whatever bonds you purchased and maturity and you're okay

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Speaker 1: with the interest rate, that you're getting I assume that

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Speaker 1: you should be smiling at the end of that particular term, correct.

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Speaker 1: So I'm wondering about the alignment of interest because if

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Speaker 1: you're a manager of municipal debt, your interest obviously is

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Speaker 1: to make sure that you don't show any big capital losses.

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Speaker 1: But if you're an actual investor, you don't really care

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Speaker 1: in terms of the interim what happens to your capital.

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Speaker 1: You just want to get paid and you know you're

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Speaker 1: gonna get your money back at the end, So why

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Speaker 1: go further out on the yield curve for that extra

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Speaker 1: bit of yield? Um In in many cases it's not

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Speaker 1: just a little extra bit of yield. And I'm not

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Speaker 1: talking about increasing your interst rate risk again I throughout

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Speaker 1: Barbell strategy. With a Barbel strategy, you're not increasing your

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Speaker 1: duration risk, and you actually can actually something short term,

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Speaker 1: you can match it with something short term exactly, and

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Speaker 1: you can insulate yourself from the risk that what have

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Speaker 1: happens if the shape of the municipal yield curve shifts.

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Speaker 1: As an example, with tax reform, there's the potential for

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Speaker 1: banks and property and casualty insurance company reducing their exposures

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Speaker 1: in the municipal marketplace because their tax rates have come down.

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Speaker 1: Banks and property casually insurance companies are own very large

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Speaker 1: books of high grade intermediate municipal bonds. Now, I don't

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Speaker 1: think they're gonna be net sellers per se, but they're

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Speaker 1: certainly got not going to be marginal buyers in two

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Speaker 1: thousand eighteen. So what's going to happen in that part

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Speaker 1: of the yield curve versus the rest of the yield curve.

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Speaker 1: So I'm an active municipal bond money manager. I can

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Speaker 1: absolutely sit there in front of a client and say, listen,

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Speaker 1: look and think actively in the municipal space. You're absolutely right, Pimp.

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Speaker 1: Most clients don't think actively in the community book. They

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Speaker 1: put it aside. It's low risk, low ball, and as

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Speaker 1: long as it gives them a reasonable tax exempt income stream.

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Speaker 1: Here at Mackay we're a little different. We say I'm

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Speaker 1: gonna give you capital preservation. I'm also going to give

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Speaker 1: you a slightly better than attractive income stream, but also

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Speaker 1: I'm gonna look at the entire municipal marketplace from a

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Speaker 1: total return lens. Because at the end of five or

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Speaker 1: ten years, as you pointed out with your time horizon

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Speaker 1: if I can be a little more opportunistic and make

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Speaker 1: money for you in between. With some certain strategies you're after.

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Speaker 1: Tax return is substantially better without a significant increase in risk.

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Speaker 1: Real quick. To your clients, understand what you tell them

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Speaker 1: when you explain this to them. Yeah, we have you

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Speaker 1: know what, we have a great clientele base, not only

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Speaker 1: in the in the pure retail space, but the ultrahan

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Speaker 1: net worth family office client space. We are different, so

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Speaker 1: I'm I'm a different participant, our team is different in

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Speaker 1: the municipal marketplace. We absolutely look at it through a

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Speaker 1: total return lens. There's opportunities out there as to how

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Speaker 1: you you can make money UM, and there's other risks

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Speaker 1: out there with it. Right. Our insights this year talk

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Speaker 1: about it's a return and a risk profile in the

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Speaker 1: current year. I think when you look at the different

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Speaker 1: credit and yield curve UM issues with regards to not

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Speaker 1: only tax reform, but everything else that's going on with

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Speaker 1: regards to the federal Reserve. Yes, i am I will

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Speaker 1: sound different than most money managers in the municipal space.

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Speaker 1: Bob Damela, thank you so much for joining us. Bob

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Speaker 1: Tamela as co head of the Mackay Municipal managers. Another

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Speaker 1: story that we're keeping track of is Airbus, which seems

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Speaker 1: to be getting a lifeline. I want to bring in

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Speaker 1: George Ferguson's your aerospace defense airlines analyst for Bloomberg Intelligence

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Speaker 1: who joins us. Now this seems like a pretty big deal.

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Speaker 1: Airbus getting the sixteen billion dollar order from Emirates, yet

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Speaker 1: shares up just under one point three percent. Why are

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Speaker 1: shareholders not rallying more around this? Hey, good morning, Lisa.

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Speaker 1: I think the challenge here is that the A three

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Speaker 1: eight doesn't make any money for Airbus, and this order

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Speaker 1: doesn't materially change the landscape for the A three eight.

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Speaker 1: And the reason I say that is that the order

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Speaker 1: book is still very very much um uh Emirates focus.

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Speaker 1: There's some order actually. I think this will go to

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Speaker 1: a hundred and fifteen firm motors, and sixty of those

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Speaker 1: will be the Emirates. I don't really see it changing

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Speaker 1: the production rate right now, Airbus building about twelve of

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Speaker 1: these a year, they'll they'll just dip down to about

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Speaker 1: eighty year that they can't make a profit there, or

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Speaker 1: much of a profit there. So the program is still

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Speaker 1: sort of limping along with one real customer, which is

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Speaker 1: Emirates not making any money. This doesn't change either of

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Speaker 1: those outlooks. And you know, Emirates is not going to

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Speaker 1: bring these orders forward quickly so that it's not going

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Speaker 1: to change production rate. So the program is still very challenged.

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Speaker 1: It's just we've got a little more order in the

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Speaker 1: in the back of the in the back of the backlog. Now,

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Speaker 1: George's Emirates just really buying a big repair shop, because

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Speaker 1: if the air bus was going to close down the

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Speaker 1: production line, good luck trying to get those things fixed

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Speaker 1: in the future. Yeah, I mean, I'm not so sure

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Speaker 1: they're buying a big repair shop. I mean, I understand

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Speaker 1: what you're saying. And anybody else fly that's a three

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Speaker 1: eight and want to fly it. I mean there are

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Speaker 1: other people that do fly it, right, it's Singapore, but

431
00:24:51,800 --> 00:24:54,920
Speaker 1: they've got a couple of park Air France flies it, love,

432
00:24:55,000 --> 00:24:59,000
Speaker 1: tons of flies that Korean Air flies it. Um in time,

433
00:24:59,040 --> 00:25:02,960
Speaker 1: there may well be problems with getting spares on on

434
00:25:03,000 --> 00:25:06,400
Speaker 1: the airplane. I don't think we're near that yet. Um

435
00:25:06,640 --> 00:25:09,600
Speaker 1: Rolls makes an engine for it. Plus there's a consortium

436
00:25:09,640 --> 00:25:14,040
Speaker 1: with g that makes an engine for it. Saffran. Yeah,

437
00:25:14,720 --> 00:25:18,240
Speaker 1: I believe, but isn't. Isn't then the A three eighty

438
00:25:18,359 --> 00:25:22,320
Speaker 1: the wrong aircraft for the time, I mean it is.

439
00:25:22,359 --> 00:25:25,160
Speaker 1: And you know where we're seeing a concentration of orders

440
00:25:25,359 --> 00:25:28,600
Speaker 1: is really in the narrow body fleet, which is a

441
00:25:28,800 --> 00:25:32,840
Speaker 1: dfty to two some airplanes, and the small wide body fleet,

442
00:25:32,840 --> 00:25:36,600
Speaker 1: which is seven eight seven's, A three fifties, A three thirties.

443
00:25:37,200 --> 00:25:39,040
Speaker 1: That's where the bulk of the orders are being placed.

444
00:25:39,040 --> 00:25:42,359
Speaker 1: Those those airplanes are sort of two fifty two maybe

445
00:25:42,400 --> 00:25:45,640
Speaker 1: up the three hundred ish seats. That's where we see

446
00:25:45,640 --> 00:25:49,119
Speaker 1: the bulk of demand right now. At the top of

447
00:25:49,160 --> 00:25:51,520
Speaker 1: the wide body world, the A three eighties and seven

448
00:25:51,560 --> 00:25:56,159
Speaker 1: four sevens and even the larger twin engines, the triple seven,

449
00:25:56,640 --> 00:25:59,880
Speaker 1: we're seeing less demand and it's just harder to put

450
00:25:59,880 --> 00:26:03,520
Speaker 1: the those airplanes into markets and not have to deluke

451
00:26:03,680 --> 00:26:06,560
Speaker 1: fares to do it. So airlines are not as excited

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00:26:06,600 --> 00:26:09,480
Speaker 1: about those airplanes right now. And again, so this sort

453
00:26:09,480 --> 00:26:12,040
Speaker 1: of helps this airplane continue to roll down the road.

454
00:26:12,359 --> 00:26:15,159
Speaker 1: I think Airbus thinks somewhere down the road there's a

455
00:26:15,160 --> 00:26:17,000
Speaker 1: lot of demand for this airplane. They're just trying to

456
00:26:17,000 --> 00:26:21,280
Speaker 1: get it to survive until that it helps. Yeah, it helps,

457
00:26:21,320 --> 00:26:24,160
Speaker 1: but it thanks. It's it's hard. Thanks very much. George Ferguson,

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00:26:24,240 --> 00:26:28,080
Speaker 1: Senior Aerospace Defense analyst for Bloomberg Intelligence. And Dave Wilson,

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00:26:28,080 --> 00:26:33,080
Speaker 1: Bloomberg Stocks Calm this. Thanks for listening to the Bloomberg

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00:26:33,119 --> 00:26:35,760
Speaker 1: P and L podcast. You can subscribe and listen to

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00:26:35,800 --> 00:26:40,320
Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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00:26:40,760 --> 00:26:44,320
Speaker 1: I'm Pim Fox. I'm on Twitter at pim Fox. I'm

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00:26:44,320 --> 00:26:47,639
Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.

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00:26:47,680 --> 00:26:50,280
Speaker 1: You can always catch us worldwide on Bloomberg Radio