WEBVTT - Conoco Deal, American Air Guidance, Musk Empire 0:00:02.920 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.560 --> 0:00:14.400 This is Bloomberg Intelligence with Alex Steinhl and Paul'sweeny. 0:00:14.520 --> 0:00:17.720 The real app performance has been in US corporate high yield. 0:00:17.880 --> 0:00:20.240 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.320 --> 0:00:23.880 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.200 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:33.159 These are two big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.680 Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio. 0:00:43.240 --> 0:00:45.760 Today's Bloomberg Intelligence Show, we dig inside the big business 0:00:45.760 --> 0:00:47.880 stories impacting Wall Street and the global markets. 0:00:47.960 --> 0:00:49.800 Each and every week we provide in depth research and 0:00:49.880 --> 0:00:51.640 data on some of the two thousand companies and one 0:00:51.720 --> 0:00:54.360 hundred and thirty industries our analysts cover worldwide. 0:00:54.480 --> 0:00:57.480 Today, we'll look at why offshore wind industry, particularly in 0:00:57.520 --> 0:00:59.440 the US, has been struggling. 0:00:59.040 --> 0:01:01.760 Plaus We'll discuss why the CEO Elon Musk's companies may 0:01:01.760 --> 0:01:04.160 be under threat as Tesla struggles. 0:01:04.240 --> 0:01:06.040 But first we dive into M and A in the 0:01:06.080 --> 0:01:09.320 oil and gas industry. This week Conoco Phillips agreed to 0:01:09.319 --> 0:01:12.000 require Marathon Oil in an all stock deal, value in 0:01:12.000 --> 0:01:13.919 the company at about seventeen billion dollars. 0:01:14.040 --> 0:01:17.000 The move expands Conicco Phillips footprint and domestic shale fields 0:01:17.000 --> 0:01:19.560 from Texas to North Dakota. It also adds to the 0:01:19.600 --> 0:01:22.240 wave of recent mega deals as producers are betting that 0:01:22.280 --> 0:01:25.479 oil and gas demand will remain robust for years to come. 0:01:25.640 --> 0:01:28.200 For more, we were joined by Vince Piazza, Bloomberg Intelligence, 0:01:28.240 --> 0:01:31.000 senior equity research Channels, who covers the oil and gas space. 0:01:31.160 --> 0:01:33.120 We first ask bens and if this deal makes Conicgo 0:01:33.160 --> 0:01:34.720 Phillips bigger or better. 0:01:35.600 --> 0:01:38.400 I think a little bit of both. It makes them. 0:01:38.480 --> 0:01:43.160 Better in certain basins because it does consolidate an opportunity 0:01:43.240 --> 0:01:47.560 set in places like the Delaware, the Baking and even 0:01:47.640 --> 0:01:48.919 the Eagle Forward. 0:01:49.200 --> 0:01:53.400 But it does extend the franchise into other areas that 0:01:54.320 --> 0:01:57.960 probably dilutes some of that narrative. You know, the narrative 0:01:58.040 --> 0:02:03.480 has been consolidate streamline leverage to what you do best. 0:02:04.160 --> 0:02:07.480 We saw that in the Permian. We saw that for 0:02:07.640 --> 0:02:13.200 natural gas as well, with Southwestern and Chesapeake likely getting together. 0:02:13.800 --> 0:02:16.960 So in this case you have some pieces of that 0:02:17.120 --> 0:02:22.799 marathon pie. That may not work as well within the 0:02:22.840 --> 0:02:27.840 broader Conicco platform, but that's an opportunity set to divest 0:02:28.080 --> 0:02:33.160 some of those pieces and really concentrate around Texas and 0:02:33.240 --> 0:02:36.239 the Bakan. But the bocket itself is maturing as well. 0:02:36.880 --> 0:02:39.680 What you're really getting here is a ton of free 0:02:39.760 --> 0:02:42.880 cash flow as well. You know, this is consistent with 0:02:43.080 --> 0:02:47.120 the formula, the theme, the narrative that we've heard and 0:02:47.200 --> 0:02:51.120 seen in the past, the acquirer using a slightly higher 0:02:51.200 --> 0:02:56.160 multiple to do an all stock transaction by the company, 0:02:56.600 --> 0:03:01.280 bring those assets, those cash flow generating assets that's into 0:03:01.320 --> 0:03:05.799 the platform, lower the spend, generate that free cash flow, 0:03:06.320 --> 0:03:10.320 be able to boost the ordinary dividend and also the 0:03:10.360 --> 0:03:13.959 supplemental dividend and support the stock by buying back shares 0:03:14.000 --> 0:03:18.359 as well. And in this case financially, financially, engineering wise, 0:03:18.400 --> 0:03:19.919 it actually works out right. 0:03:20.400 --> 0:03:23.080 Hey, Vince, I noticed you know there's a lot of 0:03:23.160 --> 0:03:25.440 M and A stuff going on in your energy world here. 0:03:25.520 --> 0:03:27.680 Do the regulators care about this stuff? 0:03:27.960 --> 0:03:30.120 Oh yeah, they will take a serious look at this. 0:03:31.000 --> 0:03:33.960 They will increase the scrutiny of all of these deals. 0:03:34.639 --> 0:03:37.360 I know that they're looking to close this by four 0:03:37.480 --> 0:03:41.200 q twenty twenty four. I think that's kind of tight. 0:03:42.120 --> 0:03:47.760 We have seen other deals close Exxon closing Pioneer around 0:03:47.760 --> 0:03:50.800 that same time as a projected closing date as well, 0:03:51.200 --> 0:03:54.640 But there are other deals that may be prolonged. And 0:03:54.800 --> 0:03:58.160 this will be a rather large entity. It's going to 0:03:58.240 --> 0:04:00.720 be roughly, you know, two point two million barrels a 0:04:00.800 --> 0:04:04.920 day of production, so it will get scrutiny. It will 0:04:04.920 --> 0:04:09.920 get scrutiny more broadly, but in general, it's really not 0:04:10.440 --> 0:04:14.480 sizeable in those particular basins that they are consolidating. 0:04:14.880 --> 0:04:18.960 So to that point, do we see another bitter come in? 0:04:19.160 --> 0:04:22.560 So Bloomberg has reported that Devin was also interested in 0:04:22.640 --> 0:04:25.279 Marathon Oil. Do you think we see this happening now? 0:04:26.440 --> 0:04:28.760 Well, you know they were looking at it. When you 0:04:28.839 --> 0:04:31.320 work out the numbers, it would have been kind of 0:04:31.320 --> 0:04:35.760 difficult to make it work. But the increation here Conico 0:04:35.920 --> 0:04:41.799 Marathon actually works out better for Marathon holders. It's interesting 0:04:41.880 --> 0:04:45.520 because within the first three years of the deal, Conico 0:04:45.720 --> 0:04:49.159 suggests that they'll buy back as much stock as the 0:04:49.360 --> 0:04:53.520 entire market cap of Marathon, including a boosted dividend for 0:04:53.760 --> 0:04:59.480 legacy Conical holders and new holders from the Marathon purchase. 0:05:00.120 --> 0:05:01.920 You know, it's an all stock deal, which all right, 0:05:02.000 --> 0:05:03.719 I get my M and A fee Alex, but I 0:05:03.720 --> 0:05:05.640 don't get to do the high yield piece which choices 0:05:05.760 --> 0:05:08.200 mine here. So I'm not really happy with an all 0:05:08.200 --> 0:05:09.560 stocks it's evercore. 0:05:09.600 --> 0:05:11.920 I think that led kind of go on this one. 0:05:12.400 --> 0:05:12.640 Yeah. 0:05:12.680 --> 0:05:14.200 I looked at M A go. They did not have 0:05:14.240 --> 0:05:16.640 the M and advisors. They're a little bit slow on. 0:05:16.600 --> 0:05:17.239 That, Vincer. 0:05:17.279 --> 0:05:19.000 We going to see more of this. I mean, we're 0:05:19.040 --> 0:05:21.000 going to be talking to you more about M and 0:05:21.080 --> 0:05:22.600 A in your space. 0:05:23.520 --> 0:05:26.600 Yeah, we've seen it across the Permian. We've seen it 0:05:26.880 --> 0:05:29.520 in natural gas as well. Haven't seen it as much 0:05:30.160 --> 0:05:33.080 in natural gas, but I think that'll pick up as well, 0:05:33.360 --> 0:05:37.039 as we're seeing a big here for Henry Hub and 0:05:37.200 --> 0:05:41.080 various prices across the regions. When you have a industry 0:05:41.320 --> 0:05:45.400 that is in the crosshairs of both civic and political leaders, 0:05:45.920 --> 0:05:49.320 the one way to survive is to consolidate and get 0:05:49.400 --> 0:05:52.040 bigger if you're not able to grow organically. 0:05:52.279 --> 0:05:55.200 Our thanks to Vince Piatza, Bloomberg Intelligence senior equity research 0:05:55.240 --> 0:05:57.560 channelists on the oil and gas industry. 0:05:57.360 --> 0:05:59.760 We move now to big tech and Apple Apples, I 0:06:00.080 --> 0:06:02.760 on stage the rebound in China last month, with shipments 0:06:02.839 --> 0:06:05.800 rising fifty two percent. That's according to the latest figures 0:06:05.839 --> 0:06:08.880 from the China Academy of Information and Communications Technology. 0:06:09.200 --> 0:06:11.600 This all comes as Apple and it's Chinese retailers have 0:06:11.680 --> 0:06:13.920 been cutting prices since it start of twenty twenty four, 0:06:14.160 --> 0:06:15.480 following steep declines. 0:06:15.600 --> 0:06:19.000 For more, we're joined by aniog Rana, Bloomberg Intelligence Technology analysts. 0:06:19.080 --> 0:06:21.520 We first asked anarog for his reaction to the data. 0:06:21.680 --> 0:06:23.479 This is the way I looked at it in jan 0:06:23.600 --> 0:06:26.680 and feb. This data was down I think minus thirty 0:06:26.680 --> 0:06:29.719 five minus forty percent or so. And then when Apple 0:06:29.800 --> 0:06:32.679 reported their quarter, they said, you know what, mainland China, 0:06:32.760 --> 0:06:35.800 our iPhone revenue grew. So there is not that direct 0:06:35.800 --> 0:06:39.280 correlation between the two numbers. And it could be because 0:06:39.360 --> 0:06:43.159 there are times when Apple, you know, sells phone, but 0:06:43.240 --> 0:06:45.840 it's stuck in the inventory channel in between. Then they 0:06:45.880 --> 0:06:48.160 put out a sale and then gets cleared up. So 0:06:48.160 --> 0:06:50.440 it's a question of timing not so much. But the 0:06:50.440 --> 0:06:53.600 big thing for us is that there was a downdraft 0:06:53.640 --> 0:06:57.040 of negative news coming out of China. It's turned positive 0:06:57.080 --> 0:06:59.240 two months in a row, so that's a good news. 0:06:59.640 --> 0:07:02.039 Seems more like a cyclical issue to me than a 0:07:02.040 --> 0:07:06.000 structural problem of people giving away Apple phones not buying it. 0:07:06.080 --> 0:07:07.920 So that's not the case. So that's a good news. 0:07:08.120 --> 0:07:11.240 So I think, you know, from an overall point of sentiment. 0:07:10.880 --> 0:07:12.480 Point of view, I think this is good news for 0:07:12.520 --> 0:07:15.600 Apple that China, which in our view is the most 0:07:15.680 --> 0:07:18.640 important market for them over the next three to five years, 0:07:18.920 --> 0:07:20.920 and we are not going to see you know, let's 0:07:20.920 --> 0:07:24.920 say eurobar declining share. I think it's going to be 0:07:24.960 --> 0:07:27.320 okay over the next few years, even if it goes 0:07:27.520 --> 0:07:28.080 ups and down. 0:07:28.120 --> 0:07:29.760 So that's really the big takeaway for us. 0:07:29.960 --> 0:07:32.160 So can I call this a nothing burger? 0:07:33.400 --> 0:07:35.200 No, that's not true because. 0:07:35.840 --> 0:07:37.160 I say that because you didn't hear it. 0:07:37.160 --> 0:07:39.400 But Paul was guessing you would call this data a 0:07:39.440 --> 0:07:41.480 nothing for But you're being too polite about it. 0:07:41.480 --> 0:07:42.200 I think gone a wrong. 0:07:42.840 --> 0:07:44.600 So sentiment advice, think about it. 0:07:44.800 --> 0:07:47.080 The only thing that we've been hearing for almost a 0:07:47.160 --> 0:07:49.880 year now that people don't want to buy iPhones in China, 0:07:50.000 --> 0:07:52.960 it's because of the government and nationalism and so many 0:07:53.040 --> 0:07:55.240 all things. And I think this one tells us that's 0:07:55.240 --> 0:07:58.400 not the case. People are strapped for cash and if 0:07:58.440 --> 0:08:00.440 they get a good deal on a phone, buy it. 0:08:00.520 --> 0:08:02.920 So what do I expect. I expect Apple to go 0:08:03.000 --> 0:08:06.280 out and do more promotional activities over the next few 0:08:06.320 --> 0:08:09.640 months to try and sell more products into the market. Now, 0:08:09.720 --> 0:08:12.720 not every market is different. Apple's not known to give 0:08:12.880 --> 0:08:15.360 a lot of discounts globally, but if that's what they 0:08:15.400 --> 0:08:16.960 have to do in China, that's what they have to. 0:08:16.920 --> 0:08:19.400 Do, all right, fair enough. But let's go to the 0:08:19.440 --> 0:08:20.440 discounts though for a second. 0:08:20.600 --> 0:08:23.200 So even if we don't say, take this data as gold, 0:08:23.240 --> 0:08:27.360 but just directionally, Apple and discounts tend not to go together, 0:08:27.400 --> 0:08:28.560 at least in my mind. 0:08:28.920 --> 0:08:29.720 What do you make of that? 0:08:30.840 --> 0:08:32.680 Yeah, I think this is a new thing for Apple, 0:08:32.720 --> 0:08:35.400 and again they're probably grinding their teeth and not liking it. 0:08:35.480 --> 0:08:37.040 But you know what, they have the rest of the 0:08:37.040 --> 0:08:39.520 world to make up for it. In the US, for example, 0:08:39.559 --> 0:08:42.160 people are liking to buy the higher end model, the 0:08:42.200 --> 0:08:45.760 pro model. That helps margins, that helps the average selling price. 0:08:46.000 --> 0:08:47.680 So if they have to give a little bit up 0:08:47.720 --> 0:08:50.120 to gain market share in China, I think they should 0:08:50.120 --> 0:08:52.200 do it, because you don't want to be branded as 0:08:52.480 --> 0:08:55.600 somebody a second player in China out there, which is 0:08:55.960 --> 0:08:58.360 you know, in our view the most important market for 0:08:58.440 --> 0:09:01.679 growth for Apple, what's going to happen is you're not 0:09:01.720 --> 0:09:04.319 going to see any growth in China. For that matter, 0:09:04.440 --> 0:09:06.480 their top line growth is not going to grow, and 0:09:06.520 --> 0:09:07.600 that's not good for the stock. 0:09:07.640 --> 0:09:09.600 Also, and I've talked to. 0:09:09.640 --> 0:09:12.559 Us about India. What is it as a percentage of 0:09:12.559 --> 0:09:14.760 Apple's business today and what do you think it can 0:09:14.840 --> 0:09:16.880 be five, six, seven years from now. 0:09:17.600 --> 0:09:19.880 Yeah, so in our view, apples very small, less than 0:09:19.880 --> 0:09:23.040 five percent. In fact, when we have done a lot 0:09:23.040 --> 0:09:26.640 of work on the number of shipments in India, Apple's 0:09:26.679 --> 0:09:29.040 market share is, you know, less than five percent. 0:09:29.240 --> 0:09:30.200 But here's the kicker. 0:09:30.800 --> 0:09:34.000 Ninety five percent of the phones don't even qualify for 0:09:34.440 --> 0:09:37.520 to be in the Apples you could say ecosystem, which 0:09:37.520 --> 0:09:42.120 means they're under three hundred dollars. As the Indian economy grows, 0:09:42.200 --> 0:09:45.199 as the middle class becomes more affluent, I think Apple's 0:09:45.240 --> 0:09:47.200 going to be a winner over here. But think about 0:09:47.240 --> 0:09:49.040 it this way. When we look at the US with 0:09:49.120 --> 0:09:51.960 per capita income of let's say sixty five seventy thousand dollars, 0:09:52.160 --> 0:09:54.640 somewhere in that realm, China is around twelve and a 0:09:54.679 --> 0:09:57.800 half thousand dollars. India is about two thousand, twenty five 0:09:57.840 --> 0:10:00.760 hundred dollars. So when you look at these three systems, 0:10:01.600 --> 0:10:04.360 I think when we look at that growth driver from 0:10:04.440 --> 0:10:07.800 five years onwards, that's where you know, India comes in 0:10:07.840 --> 0:10:10.400 and there's a massive market there for Apple. But that's 0:10:10.440 --> 0:10:12.319 not going to happen next year or the year after. 0:10:12.280 --> 0:10:15.120 Right, that's sort of a structural change, et cetera in 0:10:15.160 --> 0:10:17.360 the market. I don't know what else are you working 0:10:17.360 --> 0:10:18.000 on right now. 0:10:18.880 --> 0:10:20.800 I think the biggest thing right now is what happens 0:10:20.800 --> 0:10:23.640 at WWDC and whether that's going to be enough to 0:10:23.679 --> 0:10:27.280 sustain this. You know, I would say optimism that we 0:10:27.320 --> 0:10:29.480 have seen in Apple for the first time, I would 0:10:29.480 --> 0:10:32.400 say in the last eighteen months, because we all knew 0:10:32.480 --> 0:10:34.840 China was a problem. We saw that in the numbers, 0:10:35.480 --> 0:10:39.080 sales numbers and not very strong. But AI has that 0:10:39.240 --> 0:10:42.680 outside potential to go out and spur the next sale 0:10:42.720 --> 0:10:46.040 off phones. Why because there is a massive amount over 0:10:46.120 --> 0:10:49.280 forty three percent of the phones our iPhone twelve and below, 0:10:49.360 --> 0:10:52.240 which is old phones with lower you know, you could 0:10:52.280 --> 0:10:55.240 say RAM memory and other things. Now for if they 0:10:55.280 --> 0:10:57.720 go out and say I have really cool features coming 0:10:57.760 --> 0:10:59.760 into the phone you got to go find a way 0:10:59.800 --> 0:11:03.320 to upgraded. Now, if somebody has a fourteen or a fifteen, 0:11:03.440 --> 0:11:05.559 they're most likely not going to upgrade it. But if 0:11:05.559 --> 0:11:08.079 you have something that I can iPhone ten, iPhone eleven, 0:11:08.280 --> 0:11:10.400 there may be a reason enough for you to upgrade it. 0:11:10.760 --> 0:11:14.680 So that really brings a new fresh you could say 0:11:14.760 --> 0:11:17.920 life and Apple, and that's really important. On June tenth 0:11:17.960 --> 0:11:19.680 when they get this developer conference. 0:11:19.800 --> 0:11:24.400 All right, I'm sitting on an Apple iPhone eleven. When 0:11:24.400 --> 0:11:25.120 do I upgrade? 0:11:26.080 --> 0:11:28.840 You should update it in the winter when the sixteen 0:11:28.880 --> 0:11:31.199 comes out or whatever the name they give that phone, 0:11:31.200 --> 0:11:34.320 because it should have a faster processor, it should have 0:11:34.360 --> 0:11:37.160 a lot more memory. They'll just make things easier for you. 0:11:37.160 --> 0:11:38.880 You can watch your golf shows in a little bit 0:11:39.080 --> 0:11:39.720 easier way. 0:11:40.080 --> 0:11:42.280 Very good. Now, Tim Cook's sixty three, I'm gonna switch 0:11:42.520 --> 0:11:45.120 gears on you. Is there any push for this guy 0:11:45.160 --> 0:11:49.000 to put out a succession plan of note or things 0:11:49.080 --> 0:11:51.640 just going so well at Apple that nobody's pushing for that. 0:11:52.720 --> 0:11:56.440 See, Tim's done well. The Apple's done very well under Tim. 0:11:56.920 --> 0:11:58.920 I have no way of predicting what he's going to leave. 0:11:59.040 --> 0:12:01.719 But in my view, if you were to somehow ring 0:12:01.800 --> 0:12:05.440 fence the China business. Apple alone is a company that 0:12:05.559 --> 0:12:08.360 I think can do good by itself. It doesn't really 0:12:08.400 --> 0:12:11.440 need a massive charismatic leader in order to, you know, 0:12:11.520 --> 0:12:13.400 come up with that. This is a company with a 0:12:13.760 --> 0:12:17.480 global brand, the products people love, people trust the products, 0:12:17.679 --> 0:12:20.120 and the installed base is very loyal. I mean, we 0:12:20.200 --> 0:12:23.640 think somewhere in the mid nineties people can keep the phones. 0:12:23.679 --> 0:12:26.920 They don't go out and change into a new ecosystem. 0:12:27.000 --> 0:12:30.000 I think this is a phenomenal business, but you know, 0:12:30.120 --> 0:12:32.840 you do need certain innovation, but not to the level 0:12:32.880 --> 0:12:34.520 you need in other technology companies. 0:12:34.720 --> 0:12:37.760 Our thanks to anorak Ruana Bloomberg Intelligence technology analyst. 0:12:37.960 --> 0:12:40.120 Coming up, we're going to breakdown why American Airlines gave 0:12:40.120 --> 0:12:42.760 an outlook for the coming quarter the disappointed investors. 0:12:42.840 --> 0:12:45.640 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:45.679 --> 0:12:48.040 depth research and data on two thousand companies and one 0:12:48.120 --> 0:12:51.120 hundred and thirty industries. You can access Bloomberg Intelligence be 0:12:51.200 --> 0:12:52.520 a b I go on the terminal. 0:12:52.600 --> 0:12:55.400 I'm Paul Sweet and I'm Alex Steel and this is Bloomberg. 0:13:00.280 --> 0:13:04.640 This is Bloomberg Intelligence with Alex Steele and Paul Sweeney 0:13:04.960 --> 0:13:06.640 on Bloomberg Radio. 0:13:07.360 --> 0:13:09.880 We move now to the airline industry. This week, American 0:13:09.920 --> 0:13:13.280 Airlines issued guidance for the second quarter. The disappointed investors. 0:13:13.600 --> 0:13:17.160 The carrier slash profit and revenue expectations, and American air 0:13:17.240 --> 0:13:20.600 also acknowledged that it misjudge domestic demand heading into the 0:13:20.640 --> 0:13:22.360 crucial summer travel season. 0:13:22.480 --> 0:13:25.120 For more, we're drawn by George ferguson Bloomberg Intelligence in 0:13:25.160 --> 0:13:27.200 your Aerospace, Defense and Airlines analyst. 0:13:27.440 --> 0:13:30.320 We first asked George for his take on this week's guidance. 0:13:30.720 --> 0:13:33.880 There's some analysts that think that this is driven by 0:13:34.800 --> 0:13:38.760 they got a very much more domestically focused strategy, different 0:13:38.760 --> 0:13:42.679 corporate strategy than United in Delta. You know, I guess 0:13:42.920 --> 0:13:47.040 we're the view that American has been underperforming Delta United 0:13:47.280 --> 0:13:50.360 for the last couple quarters, especially last quarter. We saw 0:13:50.400 --> 0:13:55.199 them down in every single market, including Transatlantic, which had 0:13:55.240 --> 0:14:01.040 been an area of strength for airlines like you know, Delta. 0:14:01.240 --> 0:14:05.000 So they absolutely seem like they've been underperforming. But you know, 0:14:05.040 --> 0:14:07.439 we've taken a look at the capacity that's getting added 0:14:07.520 --> 0:14:12.160 to the market all the markets US airlines fly domestic, 0:14:13.040 --> 0:14:17.880 Latin America, you know, Atlantic and Pacific, and frankly, what 0:14:17.920 --> 0:14:21.480 we see is capacity ads that are in some cases 0:14:21.560 --> 0:14:25.600 twice GDP growth since last summer. So well, we think 0:14:25.640 --> 0:14:28.400 Americans probably going to be the worst on the downside 0:14:28.440 --> 0:14:31.440 of the big three. I think it's going to be 0:14:31.480 --> 0:14:34.760 hard for the other two to avoid similar trends. They 0:14:34.800 --> 0:14:36.960 won't be as bad, but we just see too much 0:14:36.960 --> 0:14:40.080 capacity coming to most of the markets US airlines fly too, 0:14:40.120 --> 0:14:42.920 and we think the REDA cross is probably even greater 0:14:43.520 --> 0:14:47.280 to the budget very domestically focused and Latin American focused 0:14:47.280 --> 0:14:50.720 carriers that be Southwest, that be Jet Blue, that be 0:14:50.800 --> 0:14:52.760 all the low cost carriers, So the REDA cross is 0:14:52.800 --> 0:14:55.040 probably even stronger for those carriers. 0:14:55.600 --> 0:14:58.240 So Georgia, I kind of feel my just you know, 0:14:58.320 --> 0:15:02.960 layperson's eye, United, Delta, and American. Are they all kind 0:15:03.000 --> 0:15:05.400 of the same, kind of the same strategy. 0:15:06.400 --> 0:15:08.400 No, No, not at all, all. 0:15:08.360 --> 0:15:09.600 Right, So what's different? 0:15:10.440 --> 0:15:11.840 God, exactly? 0:15:12.200 --> 0:15:15.440 Well, I fly Delta, I'm like I fly United being 0:15:15.480 --> 0:15:18.680 a Newark person myself. But so what's different about these guys. 0:15:18.920 --> 0:15:21.640 Well, they each have their own, you know, their different strengths, right, 0:15:21.680 --> 0:15:25.560 and so American really has very little presence in the 0:15:25.600 --> 0:15:28.760 Pacific region, so they don't get much pickup fares there. 0:15:28.920 --> 0:15:31.920 Are pretty strong, although coming down because capacity is getting added, 0:15:32.160 --> 0:15:34.280 but they don't get any of the Pacific tailwind because 0:15:34.280 --> 0:15:37.400 that's sort of the last recovering market right now. American 0:15:37.800 --> 0:15:41.560 is very strong, has a lot of capacity into Latin America. 0:15:41.920 --> 0:15:45.920 Latin America is very weak right now, especially near in 0:15:46.080 --> 0:15:49.440 Latin America. You know, the sort of short haul narrow 0:15:49.440 --> 0:15:52.480 body flying. There's just a lot of capacity going into 0:15:52.480 --> 0:15:55.680 beach markets, a lot of capacity coming out of Mexico. 0:15:56.200 --> 0:15:59.240 So that's a source of pain. American I think more 0:15:59.320 --> 0:16:03.840 focused than United in Delta on the US domestic market, 0:16:04.120 --> 0:16:07.600 where we're seeing United in Delta do more out across 0:16:07.640 --> 0:16:10.920 the Atlantic, where yields are yields are stronger. 0:16:11.160 --> 0:16:12.200 I kind of get the sense. 0:16:12.000 --> 0:16:15.160 That America just doesn't get to pick up from Europe 0:16:15.200 --> 0:16:19.200 like United in Delta do because I think they've just 0:16:19.240 --> 0:16:22.120 got a strong partner there in British Airway that kind 0:16:22.120 --> 0:16:25.240 of really runs Heathrow. So American gets some of it, 0:16:25.280 --> 0:16:27.920 but they don't ever seem to get as much as 0:16:28.040 --> 0:16:30.840 United in Delta do out of Europe. So they all 0:16:30.880 --> 0:16:32.040 have sort of their nuances. 0:16:32.400 --> 0:16:35.040 CCO is leaving, how long do they get back on track? 0:16:35.560 --> 0:16:39.200 So you know, again, what we see is a marketplace 0:16:39.240 --> 0:16:42.440 that isn't just this isn't an American anomaly. It's a 0:16:42.440 --> 0:16:45.160 little bit of an American anomaly, but it's a larger 0:16:45.240 --> 0:16:48.880 broader trend, and that is consumers running out of gas 0:16:48.920 --> 0:16:52.000 a bit here, especially the lower end consumer, and a 0:16:52.000 --> 0:16:55.280 lot of capacity coming to the US domestic market, the 0:16:55.320 --> 0:16:58.680 beach markets and transatlantic so I think the rest of 0:16:58.680 --> 0:17:02.720 them are coming American direction. America isn't going their direction 0:17:02.800 --> 0:17:06.240 over the near term. Over this summer, we'll see. 0:17:05.960 --> 0:17:06.199 All right. 0:17:06.200 --> 0:17:09.359 Thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense and 0:17:09.400 --> 0:17:10.280 Airlines analyst. 0:17:10.600 --> 0:17:13.120 On Bloomberg Intelligence Radio, we bring you all the top 0:17:13.119 --> 0:17:15.600 analysts providing in depth research and data on two thousand 0:17:15.640 --> 0:17:17.400 companies and one hundred and thirty industries. 0:17:17.560 --> 0:17:19.840 We also have something here at Bloomberg called Bloomberg New 0:17:19.920 --> 0:17:22.280 Energy Finance, and the idea behind it is to provide 0:17:22.359 --> 0:17:27.600 data on commodities, power, transport, industries, buildings, agriculture and new technology. 0:17:27.840 --> 0:17:31.840 This week we looked into offshore winds. The industry, particularly 0:17:31.840 --> 0:17:33.440 in the US, has been struggling. 0:17:33.520 --> 0:17:36.440 This comes as inflation and supply chain challenges have driven 0:17:36.520 --> 0:17:40.879 up capital expenditure, while financing costs have spiraljuterizing interest rates 0:17:40.960 --> 0:17:41.280 for more. 0:17:41.280 --> 0:17:45.119 We were joined by Oliver Metcalf BNEF, head of Wind Research. 0:17:45.480 --> 0:17:48.800 We first asked Oliver where things stand now with offshore 0:17:48.880 --> 0:17:49.840 winds in the US. 0:17:50.040 --> 0:17:52.440 It's been a difficult last twelve months for the US 0:17:52.440 --> 0:17:55.840 off shore wind industry. We saw around nine gigawatts of 0:17:55.840 --> 0:17:58.600 off take contracts, so contracts for the generation of these 0:17:58.640 --> 0:18:01.840 projects get canceled. That's around a third of the contracts 0:18:01.840 --> 0:18:03.960 that were assigned in total for the US off your 0:18:03.960 --> 0:18:07.160 wind pipeline. You mentioned there it was because of high inflation. 0:18:07.560 --> 0:18:10.320 High interest rates have really hit the technology as well. 0:18:10.400 --> 0:18:14.560 So it's a really capitally intensive technology and so a 0:18:14.600 --> 0:18:17.480 higher cost of financing hits off your wind especially hard 0:18:17.560 --> 0:18:20.760 compared with other technologies. We're beginning to see a bit 0:18:20.760 --> 0:18:23.679 of a turning of the fortunes. So we're seeing the 0:18:23.720 --> 0:18:27.720 first couple of commercial scale off your wind projects start 0:18:27.760 --> 0:18:29.320 to come online in the US. One has already come 0:18:29.359 --> 0:18:31.639 online off the coast of New York, and one that 0:18:31.680 --> 0:18:34.840 will feed Parento Massachusetts is under construction at the moment. 0:18:35.280 --> 0:18:38.199 So some good stories beginning, and we're also seeing states 0:18:38.240 --> 0:18:41.280 willing to adjust their subsidy mechanisms to account for some 0:18:41.320 --> 0:18:43.960 of the pain that projects have been feeling recently. So 0:18:44.040 --> 0:18:47.680 offer developers more protection in the contracts, the off take 0:18:47.680 --> 0:18:50.719 contracts they're offering, and just simply higher prices that these 0:18:51.000 --> 0:18:52.720 developers need to make their return. 0:18:53.200 --> 0:18:56.560 So talk to us about just wind power. How is 0:18:56.640 --> 0:19:01.879 that from an efficiency perspective versus and versus other stuff 0:19:01.880 --> 0:19:03.720 that's out there? How competitors is wind? 0:19:04.240 --> 0:19:06.640 So you get kind of higher productivity from a wind 0:19:06.640 --> 0:19:10.640 turbine compared with a solar panel, and that's even more 0:19:10.640 --> 0:19:14.120 productive offshore, and so offshore wind you have more consistent 0:19:14.200 --> 0:19:17.520 wind speeds, stronger winds as well. So that means kind 0:19:17.520 --> 0:19:20.040 of if you imagine a wind turbine operating one hundred 0:19:20.040 --> 0:19:22.840 percent of the time, that's kind of theoretical maximum. You 0:19:22.840 --> 0:19:25.880 can get between forty to sixty percent of that generation 0:19:26.000 --> 0:19:29.640 typically on a wind project. Now that sixty percent isn't 0:19:29.680 --> 0:19:32.120 too far off the kind of percentage we could see 0:19:32.119 --> 0:19:35.359 from a kind of conventional generator, a gas or a 0:19:35.359 --> 0:19:35.919 cold plant. 0:19:36.200 --> 0:19:38.600 What about like nuclear, It's a nuclear a lot better. 0:19:38.440 --> 0:19:40.920 Than that nuclear it's much harder to ramp up and down, 0:19:41.000 --> 0:19:43.840 and so they tend to operate completely as base loads, 0:19:43.840 --> 0:19:46.399 so you get really high what we call capacity factors 0:19:46.440 --> 0:19:48.560 for nuclear so it's operating almost all the time if 0:19:48.600 --> 0:19:49.680 it's if it's part of the mix. 0:19:49.880 --> 0:19:52.600 So part of the issue is the off take contract. 0:19:52.680 --> 0:19:55.680 So basically, if I'm a developer, you know, Paul goes 0:19:55.720 --> 0:19:57.359 and says, Okay, I'm going to buy this wind from 0:19:57.400 --> 0:19:58.959 you for this amount of time. He's going to pay 0:19:59.000 --> 0:20:00.960 me this, which gives me clear then how I can 0:20:00.960 --> 0:20:03.360 go and invest that money? But my cost go up 0:20:03.440 --> 0:20:06.320 and I'm kind of left naked at that point. How 0:20:06.400 --> 0:20:09.720 is that being resolved? You mentioned subsidies, but like what else? 0:20:09.800 --> 0:20:12.680