WEBVTT - Cowen's Becker Sees Demand Picking Up For Airlines (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,

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<v Speaker 1>Bloomberg nine to the country's Channel one nine and around

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<v Speaker 1>This is taking Stock, coming off on taking Stock. Airline

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<v Speaker 1>executives are meeting in Dublin. They'll be talking about oil prices, terrorism,

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<v Speaker 1>international travel. And it was supposed to be a happy meeting,

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<v Speaker 1>a celebratory meeting, is it. Well, we'll find out more

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<v Speaker 1>about the future of the airline industry with Helene Becker,

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<v Speaker 1>senior analyst at Cowen and Company. We'll find out if

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<v Speaker 1>she thinks this ebbing demand trend will last or not.

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<v Speaker 1>Let's get to Charlie Pellett now in the Bloomberg newsroom.

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<v Speaker 1>He's got a Bloomberg business lass and I thank you

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<v Speaker 1>very much, Kathleen, thank you him. The dowin SMP trading

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<v Speaker 1>lower nezdaka just we're versing. It is now higher, barely

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<v Speaker 1>up by half a point, little change their forty nine

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<v Speaker 1>thirty four right now and then as that compositive index

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<v Speaker 1>SMP five hundred index down five, a drop of three

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<v Speaker 1>tenths of one percent, and with twenty nine minutes to

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<v Speaker 1>go ahead of the close, the Dow is down one

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<v Speaker 1>oh eight, a drop of six tenths of one percent,

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<v Speaker 1>So stocks are slipping. Stronger spending data bolstering the case

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<v Speaker 1>for higher interest rates as early as this summer. Plenty

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<v Speaker 1>of economic data for investors to sort through today, consumer

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<v Speaker 1>spending climbing in April by the most in almost seven years,

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<v Speaker 1>up one percent on Bloomberg Intelligence, Chief US Economists car

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<v Speaker 1>Rickadono was interviewed about the spending report. The data right

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<v Speaker 1>here on taking stock so not quite so strong when

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<v Speaker 1>you start to look beneath the surface, because what we

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<v Speaker 1>saw was a big increasing gasoline prices, uh, and so

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<v Speaker 1>that led to a rise in spending on non durable goods.

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<v Speaker 1>So if you adjust that away, it's not quite so strong. Also,

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<v Speaker 1>a big increase in spending on utilities as we had

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<v Speaker 1>more normal weather conditions last month after a warm ut

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<v Speaker 1>start to the year, so that led to some bounce back.

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<v Speaker 1>So I wouldn't characterize this as great, but I put

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<v Speaker 1>it in the good category as some PK. Schiller says,

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<v Speaker 1>home prices in twenty cities rose faster than projected in

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<v Speaker 1>March from a year earlier, adding to signs of healthy

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<v Speaker 1>demand at the onset of the industry's busy selling season.

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<v Speaker 1>On the conference Board said consumer confidence unexpectedly fell in

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<v Speaker 1>May to the lowest level in six months. Down industrials

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<v Speaker 1>down one oh three, a drop of six tenths of

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<v Speaker 1>one percent, Gold off a dollar little change to twelve fourteen,

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<v Speaker 1>up point one percent, and a three thirty two on

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<v Speaker 1>Wall Street. Now, let's look at other news from around

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<v Speaker 1>the world. Thank you, Charlie from the Bloomberg Newsroom. I'm

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<v Speaker 1>rainy in essentio. This news update is brought to you

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<v Speaker 1>by the Jeep Grand Cherokee, the most awarded suv ever.

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<v Speaker 1>that we've submitted in the New York Court. A grim

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<v Speaker 1>economic outlook for Puerto Rico. The island territory is waiting

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<v Speaker 1>Morris in the Bloomberg newsroom in Washington. Puerto Rico's budget

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<v Speaker 1>director says they can't pay off their debt and provide

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<v Speaker 1>essential services at the same time. Louise Cruz Battista Warren's

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<v Speaker 1>nearly thirty undred public employees would have to be laid

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<v Speaker 1>off if the island must meet all its debt obligations.

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<v Speaker 1>US House lawmakers have agreed to a bill to establish

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<v Speaker 1>a financial control board and to oversee the island's government

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<v Speaker 1>while helping restructure its debt, but they're on a break

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<v Speaker 1>I'm Charlie pad That's a Bloomberg business flash you're listening

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<v Speaker 1>to taking start with Kathleen Hayes and Pimpbox on Bloomberg Radio.

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<v Speaker 1>The International Air Transport Association reported a four point six

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<v Speaker 1>percent increase in global air passenger demand in April. That

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<v Speaker 1>sounds good, but it was the slowest growth since January

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<v Speaker 1>of twenty fifteen. Let's find out more about the industry

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<v Speaker 1>with Helene Becker, senior analyst at Count and Company. Helene,

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<v Speaker 1>always a pleasure, Thank you for being with us. What

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<v Speaker 1>do you make of this uh four point six percent

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<v Speaker 1>rise in global air passenger demand in April. Is that

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<v Speaker 1>something that is set to continue this decline? No? Oh good, Okay,

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<v Speaker 1>we can all go back now. Thanks for having me

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<v Speaker 1>um on the show again. And no, I don't think so.

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<v Speaker 1>I think April was very specific. You had, um, you

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<v Speaker 1>had some strikes over in Europe by some of the

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<v Speaker 1>European airlines. You also had, you know, a m Easter

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<v Speaker 1>shift into March, so you had a little bit of

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<v Speaker 1>a tough year over year calm. So it made the

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<v Speaker 1>numbers look um knock hit as good as they are.

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<v Speaker 1>We think May it's a better month normally May it's

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<v Speaker 1>worst in April, and June's better than May, you know,

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<v Speaker 1>kind of on par with April. And this time we

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<v Speaker 1>should have April be the worst month of the quarter

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<v Speaker 1>and mana June sequentially better. So Delta reports traffic Thursday

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<v Speaker 1>morning before the open, that will be the first May

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<v Speaker 1>number we got and we're expecting it to sequentially be

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<v Speaker 1>better than it was in April. Of course, as we

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<v Speaker 1>just said it was, April was the slowest pace since

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<v Speaker 1>you know, over a year ago. January. In our Bloomberg

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<v Speaker 1>story quotes the CEO of the I A t A,

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<v Speaker 1>the International Air Transport Association, saying the stimulus from lower

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<v Speaker 1>oil prices appears to be tapering off global economics with

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<v Speaker 1>situations subdued, demand growing. But maybe we're shifting down a gear.

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<v Speaker 1>What are prices doing? Could prices have anything to do

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<v Speaker 1>with bb people not being quite as eager to buy

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<v Speaker 1>a plane? Take well, prices are still you know, down

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<v Speaker 1>quite a lot year every year, and oil prisses are

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<v Speaker 1>back up, I guess about off their January lows. So

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<v Speaker 1>as the year goes on, we expect to see less

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<v Speaker 1>capacity growth from the airlines and higher air fares. But

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<v Speaker 1>right now, especially coming into the summer months, fares have

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<v Speaker 1>been relatively low and demand has been very strong. I mean,

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<v Speaker 1>you know, you guys reported on stories over the last

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<v Speaker 1>few weeks about lines at at T s A, at security,

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<v Speaker 1>and you know, the airlines are working very hard to

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<v Speaker 1>keep people moving. We're expecting two two hundred and thirty

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<v Speaker 1>million people to travel over the next three months, and

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<v Speaker 1>you know, that should be a record for UM for

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<v Speaker 1>US carriers. Now, Helene, I know you you you follow

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<v Speaker 1>the carriers as opposed to let's say, air Bus and Boeing.

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<v Speaker 1>But because of the stories having to do with competition

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<v Speaker 1>between the two aircraft makers, I'm wondering if the current

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<v Speaker 1>concern is a result of just outsized ordering buy airlines

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<v Speaker 1>that met the demand and now the demand is maybe stabilizing,

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<v Speaker 1>so they're not ordering as many planes. Is that accurate? Yes, yes,

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<v Speaker 1>Actually that's a very good observation because the you know,

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<v Speaker 1>most of the world's airlines ordered aircraft over the past

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<v Speaker 1>four or five years, and the US carriers only just

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<v Speaker 1>started ordering over the last day year, with the exception

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<v Speaker 1>of American which placed that big order back in August

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<v Speaker 1>of two thousand eleven. But on balance, most of the

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<v Speaker 1>rest of the US airlines have only just ordered recently,

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<v Speaker 1>and even there they've been very judicious about the aircraft

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<v Speaker 1>orders they placed because they don't want to get into

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<v Speaker 1>an overcapacity situation. So a lot of what they've ordered

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<v Speaker 1>is designated for replacement actually are not for growth. Um.

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<v Speaker 1>You know, using the one and a half to two

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<v Speaker 1>x GDP multiplier, we're only expecting in a two percent

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<v Speaker 1>GDP growth environment, traffic to grow three to four percent,

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<v Speaker 1>and that's the peak, you know, off peak times, first quarter,

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<v Speaker 1>fourth quarter, you know, except for Christmas, UM probably is

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<v Speaker 1>going to grow, you know, one percent. So I got

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<v Speaker 1>to balance that out. And the airlines certainly don't need

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<v Speaker 1>a lot of new equipment. Helen. I don't want to

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<v Speaker 1>jinx myself, but I've been had a several flights in

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<v Speaker 1>the last few weeks and I have not encountered hashtag

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<v Speaker 1>line gate. That's use the d S as a mess,

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<v Speaker 1>hashtag line gate. These these growing long lines cross the US.

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<v Speaker 1>What have you experienced in more broadly, how big of

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<v Speaker 1>an issue is this? What is it? Is it a

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<v Speaker 1>big problem for the airlines or not? So fair question.

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<v Speaker 1>I think it's at the busiest airports. I think the

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<v Speaker 1>worst of the lines was probably in Chicago. I like you,

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<v Speaker 1>I had a bunch of flights over the last few

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<v Speaker 1>weeks and I didn't experience long waits at all. And

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<v Speaker 1>in three of the four cases, you know, over the

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<v Speaker 1>last ten days, my flights were I I just walked

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<v Speaker 1>through security in less than five minutes, and my daughter

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<v Speaker 1>had one coming out of Baltimore. UM A week ago

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<v Speaker 1>and her flight was I think she had a twenty

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<v Speaker 1>minute wait. UM and one of my associates how to

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<v Speaker 1>wait over the weekend of nothing. So, you know, I

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<v Speaker 1>think it's it's been dissipated. The UM T s A

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<v Speaker 1>has has worked very hard to improve the way at times,

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<v Speaker 1>and the airlines have sent UM what we call, you know,

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<v Speaker 1>helping people out to the airports to help UM infrequent

0:10:22.240 --> 0:10:24.600
<v Speaker 1>travelers getting through the line. You know, this is the

0:10:24.640 --> 0:10:26.640
<v Speaker 1>line you wait on. Take off your shoes, don't take

0:10:26.640 --> 0:10:29.199
<v Speaker 1>off your shoes, take your bag out, take your laptop out, whatever,

0:10:29.720 --> 0:10:32.200
<v Speaker 1>don't do it, do it UM. And I think that

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<v Speaker 1>it's helped speed those lines. So I think, you know,

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<v Speaker 1>lots of news, but I think it's beyond us now. Alrighty,

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<v Speaker 1>Helene Becker, thank you so very much for joining a

0:10:43.400 --> 0:10:46.920
<v Speaker 1>senior analyst at Cowen and Company. She says, don't be

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<v Speaker 1>put off by some slower growth in demand for airline

0:10:50.240 --> 0:10:53.520
<v Speaker 1>tickets in April. Me and JR. Gonna looks just fine.

0:10:53.559 --> 0:10:56.040
<v Speaker 1>I'm Cathine Hayesel on pim Fox. This is taking Stock

0:10:56.080 --> 0:11:02.720
<v Speaker 1>on Blomberg Radio. Coming up on taking Stock, will be

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<v Speaker 1>speaking with Scott Clement's chief investment strategist private wealth management

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<v Speaker 1>for Brown Brothers Harriman. He'll tell us what are his

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<v Speaker 1>clients doing with their money next