WEBVTT - US Congress Passes Stopgap, Spirit's Future in Doubt

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<v Speaker 1>Good morning. I'm Brian Curtis and I'm Doug Prisner. Here

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<v Speaker 1>are the stories we're following today.

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<v Speaker 2>Congress has averted a partial government shut down, sent for

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<v Speaker 2>this weekend, and back to with that story and more

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<v Speaker 2>from San Francisco ed.

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<v Speaker 3>If you want to be a Senate here, Brian, the

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<v Speaker 3>threat of snow tomorrow motivated congress shut down averted in

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<v Speaker 3>any case, as you say, Bloomberg's Laura Davison says, the

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<v Speaker 3>can kick down the road, which presents a whole list

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<v Speaker 3>of problems.

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<v Speaker 4>Congress has been able to keep the government open only

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<v Speaker 4>by kind of kicking the can down the road. The

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<v Speaker 4>one mild success, if your Mike Johnson, is that you

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<v Speaker 4>kept your job at least for now in this But

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<v Speaker 4>looking into March, there's a bunch of different things that

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<v Speaker 4>get a bit more complicated. As you said, they're about

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<v Speaker 4>halfway the fiscal year without actually, you know, doing anything

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<v Speaker 4>beyond just extending last year's budget, and by the time

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<v Speaker 4>you get to the end of April, that's when mandatory

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<v Speaker 4>cuts start kicking into effects. So Congress has a more

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<v Speaker 4>of a real deadline there that they need to act,

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<v Speaker 4>and you decide on something that they want to do,

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<v Speaker 4>and of course you know things that got left on

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<v Speaker 4>the side of the here a tax deal with business

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<v Speaker 4>tax credits, child tax credits, as well as border Ukraine

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<v Speaker 4>and other foreign eight.

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<v Speaker 3>Yeah, so a lot to be done, but done for now. Meanwhile,

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<v Speaker 3>Donald Trump is in the Ukraine funding phray. He's posted

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<v Speaker 3>that any deal on Ukraine and border contain every Conservative

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<v Speaker 3>demand for border and immigration changes. The House planned on

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<v Speaker 3>working on this next week, but this may force GOP

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<v Speaker 3>leaders to reject any moves toward compromise. President Joe Biden,

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<v Speaker 3>en route to Joint Base Andrews this morning, is vowed

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<v Speaker 3>to continue attacks on Houthy targets until they dismantle the

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<v Speaker 3>operations that make the attacks on ships in the Red

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<v Speaker 3>Sea possible.

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<v Speaker 1>Another stopping the huthis so are they going.

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<v Speaker 4>To continue yet?

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<v Speaker 3>Yes, and the Pentagon is clarifying what the operations is about.

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<v Speaker 3>Spokes when Sabrina Singh says the US is not at war.

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<v Speaker 5>What we took, the actions that Central Command took last

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<v Speaker 5>night was to destroy missiles that could be launched and

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<v Speaker 5>that we're preparing to launch either towards US Navy ships

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<v Speaker 5>that are in the region that are in that waterway.

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<v Speaker 5>Or other commercial vessels.

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<v Speaker 3>Badhuthi chief Abdul Malik al Huthi says it's not direct confrontation.

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<v Speaker 3>Says the militants are taking concrete steps to improve their

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<v Speaker 3>military capabilities. He says the US UK strikes will not

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<v Speaker 3>change his stance, and as Pakistan fires missiles into Iran

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<v Speaker 3>this morning, US is concerned about potential regional spread there.

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<v Speaker 3>NSC official John Kirby, these are two.

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<v Speaker 6>Well armed nations, and again we don't want to see

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<v Speaker 6>an escalation of any armed conflict in the region, certainly

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<v Speaker 6>between those two countries.

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<v Speaker 3>And the spokesman for Pakistan's Ministry of Foreign Affairs Moments Balak,

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<v Speaker 3>says these were very targeted.

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<v Speaker 7>Pakistan undertook a series of highly coordinated and specifically targeted,

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<v Speaker 7>precision military strikes against terrorist hideouts in Sistano Belushistan province

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<v Speaker 7>of Hiddan.

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<v Speaker 3>She says, a first strike to halt further violence. NATO

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<v Speaker 3>military leaders announcing that the Alliance will launch its biggest

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<v Speaker 3>military exercise in decades next week. NATO military leaders announcing

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<v Speaker 3>that the Alliance will launch it's the biggest exercise. NATO

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<v Speaker 3>Supreme Allied Commander US General Christopher Cavolle introduced in the exercise,

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<v Speaker 3>He's just marvelous at the scale.

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<v Speaker 8>Steadfast Defender twenty four will be the largest NATO exercise

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<v Speaker 8>in decades, with participation from approximately ninety thousand forces from

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<v Speaker 8>all thirty one allies plus our good partner Sweden.

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<v Speaker 3>Yeah, adding Sweden. The mix global news twenty four hours

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<v Speaker 3>a day and whenever you want it with Bloomberg News

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<v Speaker 3>now in San Francisco. I'm at Baxter. This is Bloomberg

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<v Speaker 3>Brian all.

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<v Speaker 2>Right, time now for the top business stories of the hour. Well,

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<v Speaker 2>Spirit Airlines says it has no plans for a bankruptcy

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<v Speaker 2>driven restructuring. The airline is now taking a hard look

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<v Speaker 2>at his balance sheet. We heard from Bloomberg's George Ferguson.

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<v Speaker 9>Profitability hasn't been good. I'm sure management's lost its focus

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<v Speaker 9>as it's gone through this potential acquisition by Jet Blue,

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<v Speaker 9>and now the difficulty will be, yeah, get getting the

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<v Speaker 9>ship right and getting employees. Management focused on getting this

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<v Speaker 9>airline back to profitability.

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<v Speaker 2>Bloomberg's George Ferguson. Spirit shares have been in a tailspin

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<v Speaker 2>since its merger with Jet Blue was blocked in court.

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<v Speaker 2>Shares have plunged more than sixty percent over the past

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<v Speaker 2>three days. Today they closed down seven percent. Jet Blue

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<v Speaker 2>fared a little bit better. It was up seven point

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<v Speaker 2>eight percent.

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<v Speaker 1>Well, US banking regulators are planning to require banks to

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<v Speaker 1>tap the Fed's discount window at least once a year.

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<v Speaker 8>Now.

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<v Speaker 1>The aim here is to reduce the stigma and ensure

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<v Speaker 1>that these banks are ready for troubled times. Bloomberg's Katanka

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<v Speaker 1>Johnson tells us how this might play out.

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<v Speaker 10>It's very clear if FED regulators, including the OCC, the

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<v Speaker 10>FED and the FCIIC really want to make the discover

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<v Speaker 10>into more attractive by requiring them not just to tap

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<v Speaker 10>the window once a year to make it easier somewhat

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<v Speaker 10>of a fire drill who told me, but also to

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<v Speaker 10>focus on what plans or preparation for accessing it could

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<v Speaker 10>be or could mean. Regulars really want to see a

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<v Speaker 10>number of changes to how banks think about the disco

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<v Speaker 10>window but liquidity.

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<v Speaker 1>In general, that is Bloomberg's Catanka Johnson. Now, it was

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<v Speaker 1>last year the regional banking crisis somewhat revealed that a

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<v Speaker 1>number of banks were not even set up to quickly

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<v Speaker 1>borrow from the Fed's discount window in a pinch Brian Well.

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<v Speaker 2>Blackstone CEO Steve Schwartzman is expecting the FED to cut

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<v Speaker 2>interest rates, and they said those cuts are going to

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<v Speaker 2>have an impact on Wall Street.

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<v Speaker 3>The economy is slowing a bit.

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<v Speaker 9>That's normal with high interest rates. On the other side

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<v Speaker 9>of the latcher, the expectation that interest rates are going

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<v Speaker 9>down is creating animal spirits.

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<v Speaker 2>Again, as Blackstone CEO Steve Schwartzman. As anticipation builds around

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<v Speaker 2>the impending rate cuts, not everyone is ready to go

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<v Speaker 2>all in. Today. Atlanta FED President Raphael Bostik said the

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<v Speaker 2>worst outcome would be for policymakers to act and to

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<v Speaker 2>cut rates and then have to raise them again later.

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<v Speaker 2>That's if inflation were to move higher. Bostik says he

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<v Speaker 2>sees the Fed's first rate cut coming sometime in the

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<v Speaker 2>third quarter.

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<v Speaker 1>Apple was smart watches without that blood oxygen feature are

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<v Speaker 1>being sold today at Apple's US retail outlets. Now this

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<v Speaker 1>comes following a legal setback in Apple's patent dispute with

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<v Speaker 1>the tech startup Massimo. That company makes the blood oxygen sensors. Now,

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<v Speaker 1>Apple itself cannot sell the watches with this feature. While

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<v Speaker 1>an appeal of a US band plays out. The CEO

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<v Speaker 1>of Massimo is Joe Keani. He told us the outcome

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<v Speaker 1>is best for consumers.

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<v Speaker 11>The consumers are better off without it. Apple knew their

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<v Speaker 11>product wasn't good enough to be relied on medically, but

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<v Speaker 11>literally they said, and this is in twenty twenty and

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<v Speaker 11>the chaos of COVID. This is quotation in their document.

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<v Speaker 11>If we launch pulsock symmetry with our we'll gain market

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<v Speaker 11>share from Fitbit.

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<v Speaker 1>That is Joe Keane. He is the chief executive officer

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<v Speaker 1>at Massimo. By the way, Apple believes the appeal process

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<v Speaker 1>on this particular case will take a year or more.

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<v Speaker 2>Brian Well, TSMC is expecting a return to solid growth

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<v Speaker 2>this quarter. It gave itself some room to raise capital

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<v Speaker 2>spending in twenty twenty four. It suggests that TSMC anticipates

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<v Speaker 2>a recovery in smartphone and computing demand. Bloomberg's Ian King

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<v Speaker 2>says industry shifts toward AI could be fueling the confidence.

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<v Speaker 12>Roll back two years ago, and the chip industry executive

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<v Speaker 12>was saying, this time it's different. We're on a path.

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<v Speaker 12>Oh you look at last year and that really wasn't

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<v Speaker 12>the case. Again, we were down. What is different though?

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<v Speaker 12>This time is how some of the end markets are behaving.

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<v Speaker 2>And that's i in king TSMC shares, the eight rs

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<v Speaker 2>in New York were up nine point eight percent, their

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<v Speaker 2>biggest intra day jump since May. And it's quite a

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<v Speaker 2>change from the way it's doc traded in in Taipei yesterday,

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<v Speaker 2>where it was only up a little more than one percent.

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<v Speaker 2>This is Bloomberg Daybreak Asia and right now I'm joined

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<v Speaker 2>by Paul Allen in Sydney, and our guest is joining

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<v Speaker 2>us here live on the program, Chester Dawson, Bloomberg's North

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<v Speaker 2>American Transportation editor, to take a closer look here at

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<v Speaker 2>Spirit Air. So it's one thing for the stock to

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<v Speaker 2>struggle as much as it has, you know, it might

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<v Speaker 2>make it more difficult to raise money. It's a slightly

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<v Speaker 2>soate topic to be talking about bankruptcy, but it's clear

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<v Speaker 2>that that the board now has an issue at hand.

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<v Speaker 2>And what are we learning about how close Spirit could

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<v Speaker 2>get to bankruptcy?

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<v Speaker 13>Well, that is the question de jour, and as you

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<v Speaker 13>noted earlier, the stock has been paying a heavy price

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<v Speaker 13>for it. The company, however, did say in a statement

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<v Speaker 13>that came out late today that it is not pursuing

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<v Speaker 13>or involved in a statuary with structuring, which is a

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<v Speaker 13>kind of a jargonistic and legalists way of saying that

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<v Speaker 13>they're not planning for bankruptcy. It has been a matter

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<v Speaker 13>of a lot of speculation. A number of analysts on

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<v Speaker 13>Wall Street have openly said that that is a very

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<v Speaker 13>real possibility. But the company says it's taking measures to

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<v Speaker 13>shore up its balance sheet and is hoping to you know,

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<v Speaker 13>right the ship.

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<v Speaker 6>All right, taking measures? What does that mean?

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<v Speaker 9>Are we talking about job cuts, slashing roots?

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<v Speaker 3>What's the plan?

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<v Speaker 13>Well, that is also a very good question. They have

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<v Speaker 13>not said much more beyond what they had kind of

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<v Speaker 13>previously outlined in terms of efforts to for example, ground

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<v Speaker 13>parts of its fleet, delay the ontake of some airplanes,

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<v Speaker 13>and other measures, you know, perhaps involving it's stet load.

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<v Speaker 13>So it's a little vague exactly what that means, but

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<v Speaker 13>you're you're right, Typically when you hear that language, you

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<v Speaker 13>do think about drastic cost cuts, including job reductions. If

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<v Speaker 13>they're thinking that, they're not saying so publicly.

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<v Speaker 2>Yes, so they're not even talking about bankruptcy protection, much

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<v Speaker 2>less liquidation, but certainly people in the market have been

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<v Speaker 2>at least thinking about that. The possibility of liquidation. And

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<v Speaker 2>it's ironic because you know what that would do for

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<v Speaker 2>you know, for prices. One only knows, but it probably

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<v Speaker 2>wouldn't be what the judge was expecting. I'm just musing

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<v Speaker 2>aloud a little bit here. I mean, is there any

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<v Speaker 2>chance that to raise funds, that Spirit could raise prices?

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<v Speaker 2>You know it's a low cost carrier, but could he

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<v Speaker 2>raise prices?

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<v Speaker 13>Well, you put your finger on it. The whole point

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<v Speaker 13>of Spirit is to be an ultra low cost carrier,

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<v Speaker 13>so in theory it might be able to try. But

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<v Speaker 13>you know, the whole reason you go to Spirit is

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<v Speaker 13>to get a super cheap fare and kind of a

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<v Speaker 13>no frills flight experience. Now you know the But he

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<v Speaker 13>hasn't said whether it plans to appeal the court ruling

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<v Speaker 13>that broke up plans for the takeover by Jet Blue. However,

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<v Speaker 13>it's very unclear, you know, if it can survive as

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<v Speaker 13>an independent entity, not just because of it kind of

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<v Speaker 13>planned to be taken over by Jet Blue, but because

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<v Speaker 13>the environment has deteriorated so much since that deal was announced.

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<v Speaker 13>You know, it's been very bad for all low cost carriers,

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<v Speaker 13>including Jet Blue, which isn't quite an ultra low cost

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<v Speaker 13>carrier like Spirit, but is still you know, kind of

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<v Speaker 13>a more of a discount carrier than say, Delta is.

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<v Speaker 13>But but those companies, you know, being very domestic and

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<v Speaker 13>very fair focused, have not been doing well. The environment

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<v Speaker 13>has deteriorated a lot. So if it's left to stand

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<v Speaker 13>on its own two legs, so to speak, Spirit faces

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<v Speaker 13>a very difficult future. So it's kind of unclear, you know,

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<v Speaker 13>what comes next. Everybody's kind of waiting for the next

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<v Speaker 13>shooter drop. Clearly the company has got to do more,

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<v Speaker 13>you know, but investors aren't waiting, as you noted, they're bailing.

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<v Speaker 6>Yeah, they sure.

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<v Speaker 9>Uh the ship Rice down sixty two percent and three days.

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<v Speaker 9>Is there any feeling that we're at the bottom yet

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<v Speaker 9>or is there the potential for further losses here?

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<v Speaker 13>Well, it's a little hard to say, but it is

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<v Speaker 13>interesting that when the company finally came out with its

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<v Speaker 13>statement after the close of trading in New York, the

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<v Speaker 13>shares you know, basically traded unchanged in the post market. Obviously,

0:12:29.040 --> 0:12:31.640
<v Speaker 13>they were down during the day, kind of in a

0:12:31.640 --> 0:12:35.720
<v Speaker 13>free fall. But I guess there's some hope that maybe

0:12:35.760 --> 0:12:39.400
<v Speaker 13>this you know, this kind of very late in the

0:12:39.480 --> 0:12:43.080
<v Speaker 13>day statement by the company that it's not preparing for

0:12:43.120 --> 0:12:47.400
<v Speaker 13>bankruptcy at least not immediately, will be some solace to investors,

0:12:47.720 --> 0:12:49.920
<v Speaker 13>But we really won't know, I guess until the market

0:12:50.000 --> 0:12:54.320
<v Speaker 13>opens in New York tomorrow. But it does feel like

0:12:54.360 --> 0:12:58.720
<v Speaker 13>the company is in kind of a desperate struggle to survive.

0:12:59.360 --> 0:13:01.679
<v Speaker 2>You wonder what's a message that would send to the

0:13:01.760 --> 0:13:05.000
<v Speaker 2>Justice Department and to the FTC and just generally too.

0:13:05.400 --> 0:13:08.319
<v Speaker 2>And I trust, you know, the antitrust regulators that they're

0:13:08.360 --> 0:13:11.160
<v Speaker 2>concerned about people. They don't care about the shareholders. I mean,

0:13:11.160 --> 0:13:14.600
<v Speaker 2>that's for other people to worry about. But if the

0:13:14.679 --> 0:13:17.640
<v Speaker 2>result of this is that the airline goes busted, I

0:13:17.640 --> 0:13:21.120
<v Speaker 2>wonder what sort of message it would send to to

0:13:20.559 --> 0:13:22.319
<v Speaker 2>the anti trust people.

0:13:23.760 --> 0:13:26.320
<v Speaker 13>Well, it would be an incredible irony, wouldn't it if

0:13:26.840 --> 0:13:30.280
<v Speaker 13>you know, by by saving or trying to save spirit

0:13:31.080 --> 0:13:36.600
<v Speaker 13>uh spirits independence, that actually was a death sentence. You know,

0:13:36.720 --> 0:13:38.959
<v Speaker 13>I think you're right. I think basically, you know, the

0:13:39.240 --> 0:13:43.560
<v Speaker 13>legal eagles and the court you know, uh clearly was

0:13:43.559 --> 0:13:47.320
<v Speaker 13>thinking about you know, the spirit of your not maybe

0:13:47.360 --> 0:13:49.560
<v Speaker 13>so much about what would happen if if the deal

0:13:49.640 --> 0:13:51.839
<v Speaker 13>was unraveled. And of course, you know, we want to

0:13:51.880 --> 0:13:54.719
<v Speaker 13>be careful. The company has not declared bankruptcy and it's

0:13:54.720 --> 0:13:56.960
<v Speaker 13>still flying. And you know, even if it were to

0:13:57.000 --> 0:14:00.640
<v Speaker 13>do something like that, and I'm just speculating now, chances

0:14:00.640 --> 0:14:04.640
<v Speaker 13>are they would continue operations. But you know, obviously, whenever

0:14:04.679 --> 0:14:07.760
<v Speaker 13>the B word has floated, it scares investors quite a bit,

0:14:08.679 --> 0:14:12.120
<v Speaker 13>and you know, the bad news keeps coming. We just

0:14:12.160 --> 0:14:16.040
<v Speaker 13>got word late of some action by the rating agencies

0:14:16.040 --> 0:14:21.040
<v Speaker 13>which are also sitting up and taking notice, and that

0:14:21.080 --> 0:14:24.880
<v Speaker 13>doesn't bode too well for Spirit either. Just quickly, just

0:14:25.080 --> 0:14:29.600
<v Speaker 13>what's the legacy of Spirits management going to be? Well,

0:14:29.640 --> 0:14:34.320
<v Speaker 13>that's a good question too, because when you know they

0:14:34.320 --> 0:14:38.040
<v Speaker 13>were initially approached by jet Blue, they were buff the offer.

0:14:38.080 --> 0:14:42.360
<v Speaker 13>In fact, they were in favor of a rival takeover

0:14:42.440 --> 0:14:45.800
<v Speaker 13>bid from Frontier, which is another ultra low cost carrier,

0:14:46.960 --> 0:14:51.480
<v Speaker 13>and effectively there was something of a shareholder revolt and

0:14:51.560 --> 0:14:55.320
<v Speaker 13>the board had to backtrack and did accept a sweetened

0:14:55.360 --> 0:14:57.880
<v Speaker 13>bid from Jet Blue. But now you've got to look

0:14:57.920 --> 0:15:01.200
<v Speaker 13>back and wonder about culpability because there is some question

0:15:01.760 --> 0:15:03.800
<v Speaker 13>whether the board made the right call there on the

0:15:03.840 --> 0:15:05.040
<v Speaker 13>way the events have played out.

0:15:05.400 --> 0:15:09.480
<v Speaker 2>And all right, Leicester Wels Yeah, yeah, absolutely, a very

0:15:09.480 --> 0:15:13.880
<v Speaker 2>good point. This is Bloomberg Daybreak Asia Your morning brief

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