WEBVTT - French Election Debate, Starmer Targets 2.5% Growth & Plane Maker Turbulence 0:00:00.160 --> 0:00:10.400 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:10.440 --> 0:00:13.480 Day piccurate podcast, available every morning on Apple, Spotify or 0:00:13.480 --> 0:00:16.319 wherever you listen. It's Wednesday, the twenty sixth of June. 0:00:16.360 --> 0:00:16.920 Here in London. 0:00:16.960 --> 0:00:18.200 I'm Caroline Hepkit. 0:00:18.040 --> 0:00:21.400 And I'm Stephen Carroll. Coming up today, France's leading parties 0:00:21.480 --> 0:00:24.560 clash on the economy and immigration as Day look to 0:00:24.600 --> 0:00:26.400 win over undecided voters. 0:00:26.600 --> 0:00:30.680 The ECB's Ollie Wren tells us it's reasonable to expect 0:00:30.800 --> 0:00:32.680 two more interest rate cuts this. 0:00:32.800 --> 0:00:36.360 Year, plus hitting turbulence. Air travels set to hit a 0:00:36.400 --> 0:00:39.640 new record this year, but the world's two biggest planemakers 0:00:39.800 --> 0:00:41.440 are struggling to take advantage. 0:00:41.640 --> 0:00:43.559 Let's start with the round up of our top stories. 0:00:43.920 --> 0:00:47.199 Representative from France's three main political groupings clashed in their 0:00:47.200 --> 0:00:50.520 first TV debate ahead of the first round of parliamentary 0:00:50.560 --> 0:00:54.760 elections there this weekend. The Prime Minister Gabriella tale National 0:00:54.800 --> 0:00:57.720 rally leaders Jon Dane Bardella and Manuel Bompa from the 0:00:57.720 --> 0:01:01.400 New Popular Front Alliance frequently at and interrupted each other 0:01:01.680 --> 0:01:03.760 as they laid out their plans for the country. 0:01:04.800 --> 0:01:07.479 Every time, Jordan Bardella explains that he's going to lower 0:01:07.560 --> 0:01:10.400 v eight by magic. He never says how he will 0:01:10.440 --> 0:01:13.440 finance it, because the reality is what he'll give you 0:01:13.480 --> 0:01:15.720 with one hand he will take back with the other. 0:01:16.040 --> 0:01:19.560 It's extremely interesting because we have here a prime minister 0:01:19.680 --> 0:01:22.520 who is preparing to leave power in less than two weeks, 0:01:22.600 --> 0:01:25.160 who has just told us, in fact, that the state 0:01:25.520 --> 0:01:29.400 that he is responsible for is incapable of applying the law. 0:01:29.560 --> 0:01:32.240 I will tell you VAT cuts have been put in 0:01:32.280 --> 0:01:34.720 place in many European countries. 0:01:35.400 --> 0:01:38.120 That was the National rallyader Jean d'in Baldella and Francis 0:01:38.120 --> 0:01:41.640 Prime Minister Gabriella Tale there during the TV debate a 0:01:41.920 --> 0:01:46.680 TFI yesterday. The three candidates taking part also exchange views 0:01:46.680 --> 0:01:50.480 on immigration and on the retirement age. Polls suggest President 0:01:50.480 --> 0:01:54.919 Emmanuel Macron's party is set to lose its majority in Parliament, 0:01:55.040 --> 0:01:59.280 with most polls putting the far right National Rally in front. 0:01:59.560 --> 0:02:02.960 Macron decision to call a snap vote initially sent markets 0:02:02.960 --> 0:02:06.880 into turmoil, though recent moves suggests investors are getting used 0:02:07.000 --> 0:02:09.000 to the idea of potential disruption. 0:02:10.160 --> 0:02:13.080 Now to the UK, where Labor leader Kis Starmer says 0:02:13.120 --> 0:02:16.200 that he would target annual GDP growth of two and 0:02:16.280 --> 0:02:19.440 a half percent if he wins the general election. The 0:02:19.440 --> 0:02:23.040 British economy has lagged behind peers, with stagnant productivity gains 0:02:23.080 --> 0:02:26.440 and a shrinking labor force. Starma was asked by ITV's 0:02:26.440 --> 0:02:30.040 Paul Brand where he sees GDP growth under labor. 0:02:30.760 --> 0:02:32.919 To be the top of the G seven. 0:02:33.160 --> 0:02:35.120 You have to appreciate that is slightly meaningless because it 0:02:35.120 --> 0:02:36.960 could just be zero point one percent. We could even 0:02:37.000 --> 0:02:38.520 be in recession and still have to be better off 0:02:38.560 --> 0:02:39.000 than the rest of this. 0:02:39.160 --> 0:02:40.160 We want significant growth. 0:02:40.200 --> 0:02:40.640 You don't know. 0:02:41.080 --> 0:02:43.760 I don't accept this defeated. I understand the challenge you're 0:02:43.760 --> 0:02:44.240 putting to me. 0:02:44.960 --> 0:02:47.120 It'll be nice to have a ballpark figure of how 0:02:47.639 --> 0:02:49.560 large you want the economy to be in five years time. 0:02:49.720 --> 0:02:52.839 Under the last labor government, we grew by about two 0:02:52.840 --> 0:02:54.160 and a half percent. 0:02:54.120 --> 0:02:55.720 So you're looking for that kind of growth two and 0:02:55.720 --> 0:02:56.880 a half per certainly. 0:02:56.880 --> 0:03:02.720 Yes, kis Starma there on ITV's Tonight program. Meanwhile, the 0:03:02.800 --> 0:03:06.119 Bank of England's forecasts predict only one point two five 0:03:06.120 --> 0:03:08.799 percent growth by twenty twenty six. 0:03:09.440 --> 0:03:11.280 Italy is said to be offered the chance to fill 0:03:11.320 --> 0:03:14.240 a senior role in the next European Commission he will 0:03:14.240 --> 0:03:16.680 be up to Prime Minister Georgia Maloney to decide who 0:03:16.720 --> 0:03:18.960 will be put forward for the job, which Bloomberg has 0:03:19.040 --> 0:03:21.840 learned is likely to be an executive vice president role. 0:03:22.160 --> 0:03:25.399 Those familiar with talks say the deal with Italy includes 0:03:25.520 --> 0:03:29.239 nominating Ursula Vonderline for a second term as Commission President, 0:03:29.560 --> 0:03:33.040 and in that capacity she will negotiate with Maloney. Centrist 0:03:33.080 --> 0:03:35.040 parties are looking to wrap up a deal on the 0:03:35.040 --> 0:03:37.880 block's top jobs before a summit later this week. 0:03:38.640 --> 0:03:42.760 European Central Bank policymaker Ollie Wren says that it's reasonable 0:03:42.760 --> 0:03:45.880 to expect the ECB to cut interest rates another two 0:03:45.960 --> 0:03:48.560 times this year. The Finish central banker has told Bloomberg 0:03:48.600 --> 0:03:52.120 that while officials must ensure inflation returns to two percent, 0:03:52.480 --> 0:03:57.080 they shouldn't overly dampen economic activity. Ren says this, if 0:03:57.120 --> 0:04:01.880 inflation continues to slow, investors expectationations for cuts are fair. 0:04:02.560 --> 0:04:06.360 Me this, for example, to assume that we stay with 0:04:06.480 --> 0:04:11.760 this direction and continual grade cuts. Having said that, I 0:04:11.800 --> 0:04:14.800 don't take any stand on when and how much, so 0:04:14.960 --> 0:04:18.720 we are not pre committing ourselves to any particular red bath. 0:04:19.839 --> 0:04:23.280 The ECB's Olie Wren, speaking there to Bloomberg in Helsinki. 0:04:23.640 --> 0:04:26.880 Investers currently expect around forty five basis points of right 0:04:27.000 --> 0:04:29.560 cuts from the ECB in twenty twenty four, which would 0:04:29.560 --> 0:04:32.839 imply a second quarter point move and about a seventy 0:04:32.839 --> 0:04:35.800 five percent chance of a third this year. Market see 0:04:35.880 --> 0:04:39.160 the next move potentially coming as soon as September, and 0:04:39.200 --> 0:04:41.720 they have fully priced one in by October. 0:04:42.240 --> 0:04:45.400 Federal Reserve Governor Lisa Cook says it will be appropriate 0:04:45.440 --> 0:04:48.520 to cut rates at some point, however when that is 0:04:48.560 --> 0:04:52.039 remains unclear. Delivering prepared remarks at the Economic Club of 0:04:52.080 --> 0:04:55.760 New York, Cook says she expects inflation to improve gradually 0:04:55.800 --> 0:04:59.320 this year before more rapid progress in twenty twenty five. 0:05:00.080 --> 0:05:03.839 With significant progress on inflation and the labor market cooling gradually, 0:05:04.279 --> 0:05:07.640 at some point, it will be appropriate to reduce the 0:05:07.720 --> 0:05:11.039 level of policy restriction to maintain a healthy balance in 0:05:11.080 --> 0:05:14.640 the economy. The timing of any such adjustment will depend 0:05:14.680 --> 0:05:18.359 on how economic data evolve and what they imply for 0:05:18.480 --> 0:05:20.960 the economic outlook and balance of risks. 0:05:21.839 --> 0:05:24.159 Lisa Cook is the latest FED rate setter to share 0:05:24.360 --> 0:05:28.200 her thoughts on inflation after the US Central bankers opted 0:05:28.240 --> 0:05:31.520 to hold borrowing costs at are multi decade high earlier 0:05:31.560 --> 0:05:35.800 this month. The Fed's preferred measure of inflation, the PCE deflator, 0:05:35.920 --> 0:05:36.920 comes out on Friday. 0:05:37.760 --> 0:05:41.120 Now to some corporate news, Rivian's shares jumped to more 0:05:41.160 --> 0:05:44.040 than fifty percent after the bell in New York, as 0:05:44.160 --> 0:05:47.599 Volkswagen announced plans to invest five billion dollars in a 0:05:47.720 --> 0:05:50.960 joint venture with the ev maker. The tie up will 0:05:51.000 --> 0:05:55.919 give VW access to Rivian's technology for its cause. Bloomberg's 0:05:56.000 --> 0:05:59.119 David Welch says that it's also a much needed source 0:05:59.120 --> 0:06:00.719 of fresh cab for Rivian. 0:06:01.080 --> 0:06:02.640 We do that much of a hint that it was coming, 0:06:02.680 --> 0:06:05.000 but Rivine was clearly out there raising money and they 0:06:05.040 --> 0:06:08.200 needed cash. They've been burning cash and given the world 0:06:08.240 --> 0:06:11.200 production numbers that they had, really didn't seem like they 0:06:11.200 --> 0:06:15.200 were going to get the cash for a positive anytime soon, 0:06:15.440 --> 0:06:18.680 so they needed money. There were maybe financial partners out 0:06:18.720 --> 0:06:20.400 there they could have gone with, but this helps them 0:06:20.400 --> 0:06:21.200 a lot. 0:06:22.520 --> 0:06:26.120 Bloomberg's David Well She adds that Volkswagen's business strust she 0:06:26.279 --> 0:06:30.120 often involves joint ventures or tie ups. Bloomberg Intelligence says 0:06:30.120 --> 0:06:33.480 that the deal highlights VW's need to bridge the gap 0:06:33.600 --> 0:06:36.560 with the likes of Tesla. Now in a moment we'll 0:06:36.600 --> 0:06:40.600 discuss more about that election debate in France and also 0:06:40.600 --> 0:06:43.280 bring you more on how Europe's aerospace sector has seen 0:06:43.320 --> 0:06:48.240 its shares pummeled over supplied difficulties at air bars. But 0:06:48.480 --> 0:06:51.400 before that, this story really caught my eye this morning 0:06:51.440 --> 0:06:56.120 banner Alnor Elegance and Exclusivity, the story of how he 0:06:56.320 --> 0:07:01.320 created LVMH. It's a totally absorbing piece with beautiful photographs 0:07:01.360 --> 0:07:05.520 and all the history around the creation of this European 0:07:05.920 --> 0:07:08.000 giant really and it's in Bloomberg Business. 0:07:07.720 --> 0:07:08.159 Week this ye. 0:07:08.279 --> 0:07:10.920 And the construction of an empire that really spans the 0:07:10.960 --> 0:07:13.680 globe now, of course, bringing together all of these brands 0:07:13.760 --> 0:07:17.200 that symbolized Europe's post war influence and bringing them to 0:07:17.280 --> 0:07:20.120 the rest of the world as well. It's a conglomerate 0:07:20.200 --> 0:07:23.640 now that's you know, a major international brand and of 0:07:23.640 --> 0:07:27.679 course their products known everywhere. But that's something that's really 0:07:27.720 --> 0:07:28.880 been put together by Abo. 0:07:29.640 --> 0:07:32.280 Yeah, and it has a lovely story about really the 0:07:32.320 --> 0:07:35.840 inception of why he came up with this idea. It 0:07:35.920 --> 0:07:38.800 was actually a New York taxi driver, that's the story 0:07:38.800 --> 0:07:40.800 that he got into a New York taxi driver and 0:07:40.840 --> 0:07:43.320 he asked the driver whether he knew who the president 0:07:43.360 --> 0:07:45.800 of France was is back in the nineteen seventies, and 0:07:45.840 --> 0:07:48.360 the man said, the only name I know is Christian Dio. 0:07:48.440 --> 0:07:50.320 The only French name I know is Christo and that 0:07:50.360 --> 0:07:53.160 gave him the inspiration for building this forty year business. Anyway, 0:07:53.160 --> 0:07:55.680 it was one of the little factoids that was just 0:07:55.760 --> 0:07:57.280 lovely in that Bloomberg. 0:07:57.040 --> 0:07:58.760 Well, let's think about the name who might be the 0:07:58.800 --> 0:08:02.000 next Prime Minister of France. Representatives of the three leading 0:08:02.000 --> 0:08:04.200 groups in the election took part in a televised debate 0:08:04.280 --> 0:08:08.200 last night, clashing over tax, pensions and immigration. This as 0:08:08.200 --> 0:08:11.400 Bloomberg has been looking at President Emmanuel Macron's role in 0:08:11.440 --> 0:08:14.080 this election campaign. Our Paris Burea chief Alan Katz is 0:08:14.120 --> 0:08:17.160 with us for more this morning. Alan. Last night's debate 0:08:17.440 --> 0:08:20.520 was at times fractious, but also revealing about some of 0:08:20.520 --> 0:08:23.440 the policy differences between the groupings. What will voters have 0:08:23.480 --> 0:08:26.600 taken away from it, hig. 0:08:26.320 --> 0:08:29.520 Morning, I don't know that it really will have changed 0:08:29.600 --> 0:08:34.360 many people's minds. The three candidates Jordan Bardella for their 0:08:34.520 --> 0:08:38.079 national rally. Gabriel Attal, who's the current Prime Minister, is 0:08:38.120 --> 0:08:40.800 the representive for the majority of the presidential majority. In 0:08:40.840 --> 0:08:43.800 many of both pacos representing the leftist alliance of the 0:08:43.840 --> 0:08:47.640 New Popular Front, it sort of stuck mainly to their positions. 0:08:48.000 --> 0:08:49.560 One of the things that I think people might take 0:08:49.559 --> 0:08:53.199 away is that Gabriel Attel doesn't actually come off as 0:08:53.240 --> 0:08:56.040 being particularly nice. He was actually the one who interrupted 0:08:56.040 --> 0:08:58.240 the others the most, to tried to speak over others 0:08:58.320 --> 0:09:01.920 the most. And in Bardella and Manuel Bompa both came 0:09:01.960 --> 0:09:05.800 off as sort of more in many ways more reasonable people. 0:09:05.880 --> 0:09:08.680 They were at least willing to be quiet and let 0:09:08.760 --> 0:09:11.640 their opponent speak in a way that got ahead at 0:09:11.720 --> 0:09:14.880 town didn't seem to and so excluding any of the 0:09:14.880 --> 0:09:17.439 policy issues and policy differences and arguments that they had, 0:09:17.440 --> 0:09:22.520 sort of just from a behavioral standpoint. One of my 0:09:22.600 --> 0:09:24.760 thoughts was that that might be some people's takeaway. 0:09:25.200 --> 0:09:28.640 Okay, that's really interesting. I mean, it was also quite 0:09:28.679 --> 0:09:32.319 a significant test, wasn't it. For Jordan Bardella from the 0:09:32.440 --> 0:09:36.280 National Rally he is leading in the polls. Did we 0:09:36.320 --> 0:09:39.280 get more details about his party's economic plans? 0:09:40.679 --> 0:09:42.199 Now much a little bit. I mean, he discussed a 0:09:42.240 --> 0:09:46.559 little bit more about how retirement reform would work under 0:09:46.600 --> 0:09:49.439 the Under the National Rally, if he were to become 0:09:49.840 --> 0:09:53.840 prime minister. He did point out that you know, while 0:09:53.880 --> 0:09:58.720 some people would end up with their retirement age reduced slightly, 0:09:58.760 --> 0:10:01.920 others would end up with the retirement age actually potentially 0:10:01.960 --> 0:10:06.000 extended slightly. Again, one of the things that he has 0:10:06.480 --> 0:10:08.600 repeatedly done is that that he can't really make too 0:10:08.600 --> 0:10:10.880 many promises because he keeps claiming there needs to be 0:10:10.920 --> 0:10:13.480 an audit of public finances before he releases a lot 0:10:13.520 --> 0:10:19.200 of financial details. That is largely it's not really true. 0:10:19.880 --> 0:10:23.440 There are plenty of audits of Puble French public finances 0:10:23.600 --> 0:10:27.600 that are done annually that you can consult. But it 0:10:27.600 --> 0:10:31.320 allows him to maintain a bit of haziness around the 0:10:31.400 --> 0:10:35.000 numbers around his his financial programs. I mean. One of 0:10:35.040 --> 0:10:38.319 the things that though, that he came out with was 0:10:38.360 --> 0:10:40.520 he discussed one of the main policies that would put 0:10:40.559 --> 0:10:42.800 in place, at least initially as a reduction in the 0:10:42.920 --> 0:10:47.800 VAT tax on energy products, particularly gasoline and energy to 0:10:48.120 --> 0:10:50.520 heat your home. He said it would cost about twelve 0:10:50.640 --> 0:10:54.679 billion euros a year. Tel jumped on him and claimed like, no, no, 0:10:54.720 --> 0:10:56.640 this is going to cost seventeen billion dollars a year. 0:10:56.640 --> 0:10:59.520 But then he made a really I thought revealing point. 0:10:59.559 --> 0:11:02.120 He said that five billion dollar difference is the same 0:11:02.200 --> 0:11:05.760 as the budget of the Culture Ministry every year, which, 0:11:05.880 --> 0:11:07.760 as I was watching that, I was like, that's in 0:11:07.800 --> 0:11:11.559 many ways absurd to most people watching this program. If 0:11:11.559 --> 0:11:14.080 you live in Paris, perhaps you care about the Culture Ministry. 0:11:14.080 --> 0:11:15.559 If feel ab outside of Paris, I don't think you 0:11:15.679 --> 0:11:19.040 really do. And that is your example struck me as 0:11:19.080 --> 0:11:21.760 a very urban and somewhat out of touch example to 0:11:21.920 --> 0:11:23.199 use for most viewers. 0:11:24.800 --> 0:11:27.400 Meanwhile, Alan, we have some new reporting today on the 0:11:27.480 --> 0:11:32.040 role that President Macron is playing in this campaign, quite prominent, 0:11:32.280 --> 0:11:35.079 not pleasing many of those running under his banner. Is 0:11:35.120 --> 0:11:37.560 he a benefit or a liability to those who are 0:11:37.600 --> 0:11:39.200 running from his party and their allies? 0:11:40.400 --> 0:11:44.480 So there's not I guess that depends on perceptions a bit. 0:11:44.559 --> 0:11:47.760 There's no sort of studies particularly to show whether not 0:11:47.920 --> 0:11:53.920 maccall's interventions are benefiting or hurting his The people running 0:11:54.559 --> 0:11:58.160 under his group, they certainly view it as a negative. 0:11:58.280 --> 0:12:00.920 As we point out in the story today, many of 0:12:00.960 --> 0:12:03.760 them don't want maconto appear on their posters, They don't 0:12:03.760 --> 0:12:07.800 want to appear with him in campaign rallies. People have 0:12:07.960 --> 0:12:12.040 asked him to not intervene so much. He said he 0:12:12.080 --> 0:12:14.040 would not intervene very much, and that it was up 0:12:14.040 --> 0:12:17.120 to the parties to campaign in this election. But yet 0:12:17.160 --> 0:12:20.000 he can't seem to help himself, and he pops up 0:12:20.040 --> 0:12:23.520 in editorials, he pops up, you know, on TV, he 0:12:23.600 --> 0:12:29.480 pops up in a podcast for entrepreneurs. He really can't 0:12:29.480 --> 0:12:31.280 seem to help himself, and I don't think it's helping 0:12:31.320 --> 0:12:31.720 his group. 0:12:32.920 --> 0:12:36.840 Alan. I have a last question about the debate, which 0:12:36.920 --> 0:12:39.439 is that we've talked a lot about the far right 0:12:39.480 --> 0:12:43.000 and the far left in France being at the heart 0:12:43.080 --> 0:12:47.800 of this election, parliamentary election. How extreme did those two 0:12:47.880 --> 0:12:54.280 candidates ultimately portray themselves as versus centrist That's. 0:12:54.080 --> 0:12:57.000 A good question. So the answer is they portrayed themselves 0:12:57.040 --> 0:13:04.800 as being extremely reasonable people. No one was calling for revolution. 0:13:06.000 --> 0:13:10.599 So at one point Jordan Bardella did accuse Manuel bompass or, 0:13:10.760 --> 0:13:13.360 the far right candidate, accused the far left candidate of 0:13:13.360 --> 0:13:16.880 trying to impose a Cuban style economy on France, but 0:13:16.960 --> 0:13:19.040 that was sort of as far as it went for 0:13:19.120 --> 0:13:24.199 their own policies. They kept being portraying themselves as extremely reasonable, 0:13:24.600 --> 0:13:30.000 as people who would be competent stewards of the French economy. 0:13:30.080 --> 0:13:33.520 They portrayed themselves as perhaps a little bit less reasonable 0:13:33.520 --> 0:13:36.400 when they attack each other on immigration, but certainly on 0:13:36.440 --> 0:13:39.440 the economic side, they really all tried to present themselves 0:13:39.440 --> 0:13:43.600 as being not necessarily the same, but they would all 0:13:44.000 --> 0:13:46.400 do things that would actually in the long term boost 0:13:46.760 --> 0:13:49.680 the French economy either either essentially either from the supply 0:13:49.760 --> 0:13:52.640 side or from the demand side, and that all three 0:13:52.679 --> 0:13:55.480 of them claimed that they would be positive for you know, 0:13:55.600 --> 0:14:00.640 French consumer purchasing power and for French economic growth overall. 0:14:00.720 --> 0:14:05.600 But what is the outlook then for Emmanuel Macron's party 0:14:05.679 --> 0:14:08.720 in this as we do see more voters attracted by 0:14:09.200 --> 0:14:13.000 those two ends of the political spectrum. 0:14:13.280 --> 0:14:15.640 So it's relatively poor. I mean, one of the issues 0:14:15.679 --> 0:14:18.560 for McCain is that he sort of occupies the broad 0:14:18.640 --> 0:14:22.200 center of French politics right there. Previously before him there 0:14:22.240 --> 0:14:25.320 had been sort of test the two biggest parties were 0:14:25.320 --> 0:14:26.920 sort of a center left and a center right party. 0:14:26.920 --> 0:14:29.720 And if in terms of democratic governance you think generally 0:14:29.720 --> 0:14:31.720 there's going to be all you know, you're going to 0:14:31.720 --> 0:14:35.160 go back and forth among administrations. That that was sort 0:14:35.200 --> 0:14:37.280 of the back and forth attended to happen in France. 0:14:37.280 --> 0:14:39.560 But with macall start taking over that broad center, what 0:14:39.680 --> 0:14:43.320 he's created is a three body system with sort of 0:14:43.400 --> 0:14:45.640 him in the center and then these two extremes at 0:14:45.760 --> 0:14:49.760 the ends. And what the polls are showing is that 0:14:49.800 --> 0:14:53.920 people are want a change in government right now. The 0:14:53.920 --> 0:14:56.560 polls are showing roughly for the first round voting intentions 0:14:56.640 --> 0:14:59.960 roughly thirty three to thirty five percent for the far right, 0:15:00.520 --> 0:15:03.960 roughly twenty eight to twenty nine percent for the far left, 0:15:04.000 --> 0:15:07.400 and more like nineteen to twenty percent for Matt CON's group, 0:15:08.080 --> 0:15:11.640 So really pretty far behind. And so it looks like 0:15:11.640 --> 0:15:15.360 what people are potentially interested in is a change in administration. 0:15:15.400 --> 0:15:17.680 And that means either for right or for left. There 0:15:17.720 --> 0:15:21.760 is no sort of alternate, alternative centrist group that they 0:15:21.760 --> 0:15:22.440 can pick from. 0:15:23.160 --> 0:15:26.200 Okay, Alan, thank you so much for your time this morning. 0:15:26.240 --> 0:15:30.440 That is Blimberg's Paris bureau chief, Alan katz Well. 0:15:30.440 --> 0:15:33.160 Now, the International Air Transport Association says it expects a 0:15:33.240 --> 0:15:36.760 record number of passengers to take to the skies this year, 0:15:36.880 --> 0:15:40.480 while industry data compiled by Bloomberg and EF shows that 0:15:40.680 --> 0:15:44.160 ten and a half million flights are scheduled to take 0:15:44.200 --> 0:15:47.360 place in the third quarter. That should mean those making 0:15:47.400 --> 0:15:50.240 the planes are set for bigger takeoff and profits, but 0:15:50.280 --> 0:15:53.480 problems ranging from safety issues to supply chain bottlenecks. That 0:15:53.560 --> 0:15:55.840 meant the world's two biggest plane makers, Boeing and Airbus, 0:15:55.960 --> 0:15:58.920 are struggling for altitude. Joining us how to discuss what's 0:15:58.920 --> 0:16:03.200 going wrong. As our Globe Aviation editor Bandix Camel beny Bet, 0:16:03.440 --> 0:16:06.720 good morning to you. Airlines are desperate for new planes, 0:16:06.760 --> 0:16:09.480 but the world suppliers are struggling to deliver. 0:16:09.600 --> 0:16:11.160 Why. 0:16:11.240 --> 0:16:13.720 Yes, you're absolutely right, there is that huge need for 0:16:13.800 --> 0:16:17.240 new planes. They want the fuel efficient planes. Remember, fuel 0:16:17.400 --> 0:16:21.320 is the single biggest cost for airlines and therefore they're 0:16:21.360 --> 0:16:24.600 desperate to lower that cost and that's the easiest way 0:16:24.640 --> 0:16:27.760 to do that is with new planes. Now, both Boeing 0:16:27.840 --> 0:16:31.160 and Abbus have very distinct problems. On the Boeing side 0:16:31.240 --> 0:16:34.960 well documented. Since that January fifth blowout, they've really been 0:16:35.000 --> 0:16:38.880 in crisis mode. They've had to cut back significantly in 0:16:38.960 --> 0:16:41.600 terms of output to sort of get their factories in order. 0:16:42.000 --> 0:16:45.600 Airbus hasn't had a similar issue, but they are still 0:16:45.640 --> 0:16:48.120 struggling with the supply chain. So for them, it's not 0:16:48.200 --> 0:16:51.800 a demand question, it's really a supply issue. Their supply 0:16:51.920 --> 0:16:55.000 chain remains stretched, they don't they're not getting the parts 0:16:55.040 --> 0:16:57.640 they need. And we had a profit warning from Airbus 0:16:57.760 --> 0:17:02.080 just two days ago, or the stock drop quite significantly 0:17:02.160 --> 0:17:04.920 yesterday as a result. And what we heard from the 0:17:04.960 --> 0:17:07.920 Abbas CEO is it's really across the board in terms 0:17:07.920 --> 0:17:10.719 of parts that they're missing. They're missing engines, they're missing 0:17:10.800 --> 0:17:14.119 aero structures for the planes. They're missing interior, so things 0:17:14.160 --> 0:17:17.560 like seats and tables and other parts of the galleys 0:17:17.600 --> 0:17:19.520 and so on. And the moment you miss a part 0:17:19.560 --> 0:17:23.000 of a plane to build it, you can't complete the 0:17:23.040 --> 0:17:25.960 project and your plane is stuck on the tarmac. In 0:17:26.000 --> 0:17:29.520 the factory, they're building what's called gliders, so you know, 0:17:29.560 --> 0:17:32.680 completed planes that don't have engines. So all these kinds 0:17:32.680 --> 0:17:36.920 of issues are rippling through the production line and are 0:17:37.080 --> 0:17:40.000 leading to a lower than expected number of planes that 0:17:40.040 --> 0:17:40.879 they can deliver. 0:17:41.840 --> 0:17:44.880 Yeah, and as you mentioned, Airbus shares led the declines 0:17:44.920 --> 0:17:48.680 in Europe yesterday. In some senses, it's quite surprising though 0:17:48.720 --> 0:17:53.040 that airlines are seeing such problems with supply constraints. I mean, 0:17:53.080 --> 0:17:56.840 most other industries have moved beyond the sort of pandemic 0:17:56.960 --> 0:17:59.240 era concerns. Is it still to do with the pandemic 0:17:59.320 --> 0:18:00.480 or is it other issues. 0:18:01.680 --> 0:18:04.959 Well, the pandemic obviously was sort of the big It 0:18:05.000 --> 0:18:08.439 really amplified the issues that existed previously. Supply chains have 0:18:08.520 --> 0:18:11.600 always been quite stretched in the aviation industry. You've got 0:18:11.640 --> 0:18:15.240 to remember, these are incredibly complex products to put together, 0:18:15.480 --> 0:18:18.080 so the supply chain has to work perfectly, and the 0:18:18.080 --> 0:18:19.960 moment there was a glitch somewhere there, At the moment 0:18:20.000 --> 0:18:22.680 there's a supplier that might be smaller, might not be 0:18:22.760 --> 0:18:26.159 as financially sound as the bigger ones, that's where the 0:18:26.200 --> 0:18:28.600 problems start. And Airbus and Boeing have taken a very 0:18:28.600 --> 0:18:31.480 close look at these suppliers over the years and making 0:18:31.480 --> 0:18:33.840 sure that that supply chain does not tear in some 0:18:33.920 --> 0:18:38.680 kind of way or show even strain. They've sometimes put 0:18:38.720 --> 0:18:42.600 people in, they've sometimes even put resources in. And the 0:18:42.640 --> 0:18:45.919 most extreme example might be Spirit Aerospace, which is a 0:18:45.920 --> 0:18:48.800 big supplier to Boeing and to some degree also to 0:18:48.840 --> 0:18:52.800 airb Us that's being reintegrated by Boeing just to get 0:18:53.080 --> 0:18:56.240 a better grip onto that on that supplier. So those 0:18:56.240 --> 0:18:59.480 are some of the measures that they're taking, but it's 0:18:59.480 --> 0:19:02.240 a valid question that we have put to Airbus in particular. 0:19:02.320 --> 0:19:05.520 So why can't you get your supply chain sorted out? 0:19:05.560 --> 0:19:08.640 Even when everyone else the car industry, are the manufacturing 0:19:08.640 --> 0:19:11.520 industries have emerged from the pandemic. And the answer is 0:19:11.560 --> 0:19:15.320 always it's the complexity of our products. It's the complexity 0:19:15.359 --> 0:19:19.080 of the supply chain. It's the sort of high skill 0:19:19.359 --> 0:19:22.520 of our workers. A lot of people have left that 0:19:22.640 --> 0:19:26.040 workforce don elsewhere and have not returned. So you have 0:19:26.080 --> 0:19:29.760 to replenish the factories, both with kit and with people, 0:19:30.000 --> 0:19:32.639 and that seems to take longer than everybody thought. The 0:19:32.680 --> 0:19:34.919 outlook isn't that great. Abbus did say it's going to 0:19:34.920 --> 0:19:38.600 take two to three years to get this sorted out. 0:19:38.800 --> 0:19:41.040 Just this give a chance for any other companies to 0:19:41.119 --> 0:19:43.760 step in and try to muscle in on this geoopoly 0:19:43.840 --> 0:19:46.080 that's been held so closely by our Bos and Boeing. 0:19:47.160 --> 0:19:48.679 I mean, you'd think, and if you look at it 0:19:48.680 --> 0:19:51.000 from the outside, that this is a strange arrangement that 0:19:51.040 --> 0:19:55.080 you have essentially two companies sort of globally dominating you know, what, 0:19:55.160 --> 0:19:57.919 is a very sizable industry. I can't really think of 0:19:58.320 --> 0:20:02.320 very many other industries where only two players play a role. 0:20:02.359 --> 0:20:04.040 You might have it to a degree and sort of 0:20:04.040 --> 0:20:07.680 the you know, iOS versus Android game, But other than that, 0:20:07.840 --> 0:20:09.720 you know, it's not like you only have two car 0:20:09.800 --> 0:20:13.760 makers or you only have two plane sort of airlines 0:20:13.760 --> 0:20:16.680 out there. But that's the world we live in in aviation. 0:20:17.240 --> 0:20:20.080 And again it's the complexity of the product, it's the 0:20:20.160 --> 0:20:24.080 it's the sort of the hurdle eventry is so high 0:20:24.280 --> 0:20:29.080 that getting into that market is incredibly complicated. The Chinese 0:20:29.240 --> 0:20:31.879 are probably in the best position to get there eventually. 0:20:32.200 --> 0:20:34.280 They have a product of the Comac nine to one 0:20:34.440 --> 0:20:38.159 nine that is certified in China and it's picking up 0:20:38.240 --> 0:20:41.680 orders in China, but is not certified outside of China. 0:20:41.760 --> 0:20:44.360 So the FAA and the US or YASA over here, 0:20:44.400 --> 0:20:46.919 those are the regulators. They have not signed off on 0:20:46.960 --> 0:20:49.560 this plane. So that might happen eventually. And if you 0:20:49.600 --> 0:20:51.000 look at the plane, it looks a lot like an 0:20:51.040 --> 0:20:53.240 A three twenty or seven three seven. It's sort of 0:20:53.280 --> 0:20:57.320 in that bracket. But again it'll take time. That plane 0:20:57.359 --> 0:20:59.959 is picking up orders in China, which isn't great new 0:21:00.160 --> 0:21:03.159 for Aurboston's bone because that's a really important market, and 0:21:03.200 --> 0:21:06.680 every plane that is sold to Comac means one less 0:21:06.760 --> 0:21:09.879 order for Ourboston Boeing. So nothing that's going to happen 0:21:09.880 --> 0:21:13.040 in the short term. We're talking years, possibly even decades 0:21:13.440 --> 0:21:16.720 for this to really change, but eventually that popoly will 0:21:16.720 --> 0:21:17.320 be broken up. 0:21:17.880 --> 0:21:20.639 This is Bloomberg Daybreak Europe, your morning brief on the 0:21:20.680 --> 0:21:23.760 stories making news from London to Wall Street and beyond. 0:21:24.040 --> 0:21:28.000 Look for us on your podcast feed every morning, on Apple, Spotify, 0:21:28.119 --> 0:21:30.040 and anywhere else you get your podcasts. 0:21:30.080 --> 0:21:33.119