WEBVTT - Carnival Cuts Profit Outlook as Iran War Pushes Up Fuel Cost 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple Coarcklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.560 or watch us live on YouTube. 0:00:24.040 --> 0:00:27.760 Let's turn our gaze to the cruising business. I know 0:00:27.880 --> 0:00:29.280 nothing about the cruising business. 0:00:29.520 --> 0:00:32.240 That will change in October when I take my first cruise. 0:00:32.320 --> 0:00:34.120 I know he's finally taking the plunge. 0:00:33.840 --> 0:00:34.840 Finally taking the plunge. 0:00:34.840 --> 0:00:36.680 But with the guy we have here now, our next 0:00:36.680 --> 0:00:38.720 guest is an expert on all this stuff. Brian Eggery 0:00:38.800 --> 0:00:42.360 covers all the fun stuff gaming, casinos, hotels, and cruises 0:00:42.400 --> 0:00:44.479 for a Bloomberg Intelligence Carnival. 0:00:44.720 --> 0:00:45.879 What's going on in carnival here. 0:00:46.640 --> 0:00:48.839 So they came out with but otherwise would have been 0:00:48.880 --> 0:00:51.720 a very good quarter in terms of bookings demand. Eighty 0:00:51.720 --> 0:00:55.480 five percent of the year sold actually raised revenue old guidance, 0:00:56.160 --> 0:00:58.200 but they had a cut ebit dog guidance because the 0:00:58.240 --> 0:00:59.680 cost it from fuel due. 0:00:59.520 --> 0:01:00.320 To the war I ran. 0:01:01.040 --> 0:01:04.360 And so the underlying demand part of the business is 0:01:04.440 --> 0:01:04.840 quite good. 0:01:05.080 --> 0:01:05.280 You know. 0:01:05.319 --> 0:01:08.800 The concern would be if that warn't persists. They are 0:01:08.880 --> 0:01:12.080 modeling in a level of fuel costs assumption for the 0:01:12.120 --> 0:01:13.959 second half that might not be conservative enough. 0:01:14.480 --> 0:01:16.840 The thing that people like about these cruise lines and 0:01:16.880 --> 0:01:19.440 cruise line operators is that they have a lot of 0:01:19.520 --> 0:01:22.759 visibility into their bookings because people book years in advance 0:01:23.520 --> 0:01:25.880 or months in advances in the case of Paul Sweeney 0:01:26.080 --> 0:01:27.160 and his upcoming cruise. 0:01:28.160 --> 0:01:30.759 But that also locks in the revenue that they brought in. 0:01:31.200 --> 0:01:34.240 Do cruise lines add a fuel surcharge later on because 0:01:34.480 --> 0:01:36.679 you know oil prices have gone up so much, or 0:01:36.760 --> 0:01:38.040 is it something they just have to eat? 0:01:38.080 --> 0:01:38.200 Well? 0:01:38.200 --> 0:01:41.039 I think the revenue youild management part of it is 0:01:41.120 --> 0:01:44.720 always the science behind it because eighty five percent of 0:01:44.760 --> 0:01:48.160 booking sold. If you oversell too much and demand goes up, 0:01:48.160 --> 0:01:49.960 you're left with inventory that could have been sold at 0:01:50.000 --> 0:01:54.880 a higher price, or you're missing inventory. You're not saying 0:01:54.880 --> 0:01:58.200 so much in terms of fuel cost surcharge, but I 0:01:58.200 --> 0:02:01.960 mean the reality is even with one hundred and fifty 0:02:02.000 --> 0:02:06.680 million dollars in offsetting cost savings from efficiencies, their estimate 0:02:07.240 --> 0:02:10.560 is that the full year impact on their adjusted income 0:02:10.680 --> 0:02:13.799 from the fuel price increases we've seen since December could 0:02:13.800 --> 0:02:16.800 be about five hundred million dollars, and our concern is 0:02:16.840 --> 0:02:20.359 that assumes eighty to ninety rent in the second half, 0:02:20.720 --> 0:02:22.800 and what if that's much higher, that's the concern. 0:02:23.720 --> 0:02:26.400 What's what are these cruise lines saying about their underlying 0:02:26.639 --> 0:02:32.120 demand at some point some of these inflation pressures if 0:02:32.160 --> 0:02:34.720 they do remain here a little bit longer than and 0:02:34.800 --> 0:02:37.720 maybe we initially thought fuel and in particular about other 0:02:37.760 --> 0:02:40.920 areas as well, why does that typically impact the top 0:02:40.919 --> 0:02:41.919 line for those guys. 0:02:42.080 --> 0:02:45.040 So I think generally think speaking, cost inflation can have 0:02:45.080 --> 0:02:47.360 an impact. The assertion of the industry would be that 0:02:47.400 --> 0:02:51.320 they are relatively affordable as per day compared to other 0:02:51.400 --> 0:02:55.519 forms of vacationing and travel, and so that's been a 0:02:55.560 --> 0:02:59.560 big underpinning behind their assumption. They continue to get more 0:02:59.680 --> 0:03:01.320 consum repenetration. 0:03:02.280 --> 0:03:05.360 And you know, people might have pre booked their cruises, 0:03:05.400 --> 0:03:08.280 but the amount that they spend is also another big, 0:03:08.320 --> 0:03:13.040 big revenue increase for these cruise line operators. I mean, 0:03:13.040 --> 0:03:15.520 that's where they make up a lot of ground. How 0:03:15.520 --> 0:03:17.519 do you expect that to play out if oil prices 0:03:17.560 --> 0:03:19.280 stay high? I mean, people are still going to go 0:03:19.320 --> 0:03:21.000 on their cruises, but they're not going to spend for 0:03:21.160 --> 0:03:22.520 the all you can drink package. 0:03:22.840 --> 0:03:25.240 Yeah, I mean that may be a concern. Right now, 0:03:25.240 --> 0:03:27.800 the oield out look is quite favorable. It's still solid 0:03:27.840 --> 0:03:31.440 wellst single digits. Over time, an increasing portion of the 0:03:31.480 --> 0:03:35.160 overall revenuees come from either on board ticket spending or 0:03:35.200 --> 0:03:39.760 pre cruise purchases of excursions and other amenities and all 0:03:39.840 --> 0:03:42.560 that could be subject to vulnerability if there's a major 0:03:42.640 --> 0:03:44.240 change in discretionary spending. 0:03:45.440 --> 0:03:48.280 On fuel for these big cruises. They don't use a 0:03:48.320 --> 0:03:52.360 lot of the alternative fuels, do they. They're just burning 0:03:52.400 --> 0:03:54.720 that big bunker funnel play stuff. 0:03:54.720 --> 0:04:00.040 It mixes over time increased more more towards LNG and 0:04:00.560 --> 0:04:04.560 other forms of I guess more efficient fuel and clear fuel. 0:04:04.800 --> 0:04:06.560 I think one of the cruise lines downs now it's 0:04:06.600 --> 0:04:08.760 its first hydrogen powered ships, so they are looking at 0:04:08.800 --> 0:04:12.280 alternative uses, and a big offset to these cost increases 0:04:12.320 --> 0:04:15.440 has been few cost efficiencies. You know, the amount of 0:04:15.880 --> 0:04:20.760 metric tons of fuel consumed per passenger capacity to day 0:04:21.200 --> 0:04:23.360 has over time gone down. So they've tried to get 0:04:23.360 --> 0:04:26.840 some offset and have gotten some offset from increased efficiencies 0:04:27.640 --> 0:04:30.880 both from the general way they operate, but as well 0:04:30.880 --> 0:04:32.000 as more efficient ships. 0:04:32.080 --> 0:04:33.679 Well, they knows. I'm sitting on the beach in Aruba 0:04:33.720 --> 0:04:35.320 and I can see the smokestack from the. 0:04:35.480 --> 0:04:38.559 Court there of Aruba and as it shops are docked 0:04:38.600 --> 0:04:40.880 and it's just building the black. 0:04:40.720 --> 0:04:42.440 And you're thinking, well, I'm going to enjoy those people one. 0:04:42.480 --> 0:04:45.880 Day exactly exactly, But boy, I could just say that's 0:04:45.920 --> 0:04:47.920 just BRUI and they don't hedge they or do they? 0:04:48.080 --> 0:04:51.520 Carnival has not hedged historically. They've had over in past 0:04:51.600 --> 0:04:55.360 years have had some collars Norwegian and Royal Caribbean new 0:04:55.400 --> 0:04:57.599 hedge and so you know there is a cost benefit 0:04:57.640 --> 0:04:59.960 analysis to whether or not you put hedges in place. 0:05:00.200 --> 0:05:02.560 Yeah, because George Ferguson was just telling us that the airlines. 0:05:02.279 --> 0:05:05.600 Don't head you, well, they got messed up during the pandemic, 0:05:05.880 --> 0:05:08.600 right and they all came out worse for it. 0:05:08.680 --> 0:05:11.520 So yep, all right, Brian, thanks so much, Brian Nigger 0:05:12.680 --> 0:05:15.440 appreciate that senior gaming and logic analyst Bloomberg Intelligence joining 0:05:15.520 --> 0:05:16.720 us live here in our Bloomberg and area. 0:05:16.839 --> 0:05:18.479 I have a cool question hermy cruises do you go 0:05:18.520 --> 0:05:18.920 on a year? 0:05:19.800 --> 0:05:20.160 A year? 0:05:20.600 --> 0:05:24.040 That's that's over time. I have gone on a number 0:05:24.040 --> 0:05:28.960 of cruises double door Uh, well maybe. Of course, I've 0:05:29.000 --> 0:05:31.520 been covering the sector for longer than yeah, as long 0:05:31.520 --> 0:05:35.279 as Paul has been doing this too, So yes, long time. 0:05:35.240 --> 0:05:35.719 Long time. 0:05:35.800 --> 0:05:36.000 Yeah. 0:05:36.040 --> 0:05:38.440 So I've been out on the Disney cruise a couple 0:05:38.440 --> 0:05:40.880 of times when they have a new ship. We'd fly 0:05:40.920 --> 0:05:42.720 out to l A hop in the thing. They take 0:05:42.800 --> 0:05:43.480 us out overnight. 0:05:43.640 --> 0:05:46.159 Oh yeah, but that's that's as an analyst exactly. 0:05:46.680 --> 0:05:50.040 So yeah, I mean I have taken a vacation cruise 0:05:50.040 --> 0:05:50.839 separate from my roles. 0:05:50.880 --> 0:05:51.600 Yeah, there you go. 0:05:52.720 --> 0:05:55.640 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:59.279 --> 0:06:02.960 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:03.040 --> 0:06:06.159 weekdays at ten am Eastern on Apple Cocklay and Android 0:06:06.160 --> 0:06:09.479 Auto with the Bloomberg Business app, Listen on demand wherever 0:06:09.520 --> 0:06:13.080 you get your podcasts, or watch us live on YouTube. 0:06:13.640 --> 0:06:15.640 Well, if you're anything like me, you probably feel like 0:06:15.640 --> 0:06:18.560 you spend too much time on your phone, particularly with 0:06:18.600 --> 0:06:22.359 the scrolling through the social media sites. New Year's resolutions 0:06:22.360 --> 0:06:24.840 every year usually include, you know, let's spend some less 0:06:24.880 --> 0:06:26.640 time on the personal device. 0:06:26.680 --> 0:06:29.200 But that doesn't always work. It's tough to do. 0:06:29.480 --> 0:06:31.640 There's actually been the subject of a lot of litigation 0:06:31.800 --> 0:06:35.040 against some of these social media platforms, Meta, Alphabet, those 0:06:35.080 --> 0:06:37.640 types of folks, and there's been some cases coming down 0:06:38.040 --> 0:06:41.560 against these companies as well. So let's see what it 0:06:41.640 --> 0:06:43.839 means for a lot of these social media companies and 0:06:43.839 --> 0:06:46.560 tech companies in general. Matthew Sheltenham joins us here. He's 0:06:46.600 --> 0:06:49.960 media litigation analyst Bloomberg Intelligence. Hey, Matt, it seems like 0:06:50.000 --> 0:06:53.440 we've had a couple of court rulings come down against 0:06:53.480 --> 0:06:56.880 some of these social media companies. Summarize what's going on 0:06:56.920 --> 0:06:59.880 out there and does those a risk to these companies? 0:07:00.800 --> 0:07:03.640 Yeah, So this is litigation that has been developing for 0:07:03.680 --> 0:07:07.400 the past three to four years, and it's finally in 0:07:07.440 --> 0:07:11.000 the first couple cases in line reached the stage of 0:07:11.240 --> 0:07:16.680 juris making decisions. So Meta had a loss in New 0:07:16.720 --> 0:07:21.080 Mexico State court when a jury announced a verdict of 0:07:21.120 --> 0:07:24.480 three hundred and seventy five million dollars. We also, as 0:07:24.520 --> 0:07:28.240 you said, had this California jury come down with a 0:07:28.280 --> 0:07:31.840 personal injury suit on behalf of a woman who claimed 0:07:31.840 --> 0:07:35.840 that she was harmed by the social media's features. There, 0:07:35.880 --> 0:07:39.200 the jury came down with an initial three million dollar 0:07:39.280 --> 0:07:43.920 award against Meta and Google's YouTube and then added three 0:07:44.000 --> 0:07:47.400 million dollars of punitive damages. On top of that, these 0:07:47.400 --> 0:07:50.120 are just the very tip of the iceberg. There are 0:07:50.240 --> 0:07:53.920 a number of other cases lined up to go to 0:07:54.080 --> 0:07:56.760 juries this year, and the whole goal here is to 0:07:56.800 --> 0:08:01.040 try to shape a settlement. Potentially, these are bell weather 0:08:01.200 --> 0:08:05.480 cases to try to give information about Okay, do these 0:08:05.520 --> 0:08:08.520 cases have legs or not? And how should that how 0:08:08.520 --> 0:08:12.080 should everyone think about trying to quantify them to settle them. 0:08:12.520 --> 0:08:15.120 So I think pretty much if your parent out there 0:08:15.160 --> 0:08:17.400 would say, boy, my kids just spend way way too 0:08:17.480 --> 0:08:19.480 much time on their devices. 0:08:18.920 --> 0:08:22.840 Here, what is that? What do these companies say, I mean, 0:08:22.880 --> 0:08:25.160 because otherwise they're just going to be in litigation forever. 0:08:25.880 --> 0:08:28.800 Absolutely. I mean, I think you're looking at a lot 0:08:28.840 --> 0:08:30.920 of tough headlines here because you have a lot of 0:08:30.960 --> 0:08:34.240 parents on these juries and maybe these these you know, 0:08:34.320 --> 0:08:36.800 social media isn't the most popular thing right now, so 0:08:37.160 --> 0:08:40.359 it's going to be sort of an assault of headlines 0:08:40.400 --> 0:08:43.120 for the companies here. Now, the companies say, look that 0:08:43.440 --> 0:08:46.360 you know, there are lots of problems in the world. 0:08:46.440 --> 0:08:47.960 We're not responsible for it. 0:08:47.960 --> 0:08:50.920 In fact, we add a lot of value to the 0:08:50.960 --> 0:08:54.880 world as well, And there are real legal problems that 0:08:55.280 --> 0:08:58.319 the companies say with these cases. One is that the 0:08:58.360 --> 0:09:00.800 companies say, look, we have a first amend right to 0:09:01.559 --> 0:09:04.800 speak and to develop our product. We have a liability 0:09:04.800 --> 0:09:07.880 shield under federal law section two thirty. All of that 0:09:07.920 --> 0:09:11.400 sort of looms behind these jury decisions, and you can 0:09:11.559 --> 0:09:13.959 you can guarantee that the companies are going to appeal 0:09:14.000 --> 0:09:18.319 these initial decisions to higher courts on those tough legal questions. 0:09:18.640 --> 0:09:22.000 So you know, the amounts being awarded here are immaterial 0:09:22.080 --> 0:09:24.440 to these companies. Six million dollars here, three hundred million 0:09:24.440 --> 0:09:26.880 dollars there through, and seventy five million dollars there. I mean, 0:09:26.920 --> 0:09:29.880 they're just not material to the finances of these companies. 0:09:30.120 --> 0:09:34.480 Is there a scenario where we could get really, really 0:09:34.600 --> 0:09:37.760 multi billion dollar type things that might get these attention 0:09:37.800 --> 0:09:38.559 to these companies? 0:09:39.040 --> 0:09:43.440 So these personal injury lawsuits probably not. You know, this 0:09:43.559 --> 0:09:47.600 California case was brought by by a single person, and 0:09:47.640 --> 0:09:50.640 there's no vehicle really to bring it as a class 0:09:50.679 --> 0:09:55.520 action because damages are so individualized. The thing to watch 0:09:55.559 --> 0:09:59.600 here are the state attorney's general lawsuits and also slightly 0:09:59.600 --> 0:10:03.760 behind them, lawsuits brought by school districts, because they both 0:10:04.240 --> 0:10:09.880 offer opportunities to pool a number of supposed victims and 0:10:10.000 --> 0:10:12.200 to bring claims on their behalf. So I think Meta 0:10:12.240 --> 0:10:16.040 has been sued by thirty to forty different state attorneys general, 0:10:16.360 --> 0:10:19.160 and a number of those cases are consolidated in federal 0:10:19.200 --> 0:10:23.120 court in California. That's a bigger ticket item, and so 0:10:23.200 --> 0:10:26.400 that's the one to watch. I think these individual personal 0:10:26.440 --> 0:10:29.680 injury suits are lowered down the line because of their 0:10:29.679 --> 0:10:33.760 individualized nature. Meta made sixty billion in profit last year 0:10:33.800 --> 0:10:36.320 and a six million dollar loss isn't a huge deal. 0:10:37.040 --> 0:10:38.920 Has it been a deal for the stocks at all? 0:10:39.160 --> 0:10:41.920 Is this an overhanged off for these stocks thinking that 0:10:42.960 --> 0:10:44.800 or is it? Could it be like the tobacco industry 0:10:44.800 --> 0:10:47.839 where investors are like, it's just it's just costed doing 0:10:47.880 --> 0:10:48.640 business kind of thing. 0:10:49.200 --> 0:10:51.680 Well, you know, it's been a tough couple of days 0:10:51.720 --> 0:10:55.960 for Meta stock, and there's just been a barrage of 0:10:56.080 --> 0:10:59.320 headlines on this, and as I said, this is just 0:10:59.400 --> 0:11:02.440 the beginning. But there are a lot of people that 0:11:03.360 --> 0:11:05.720 don't feel that great about social media right now and 0:11:05.920 --> 0:11:09.439 use these decisions as an opportunity to jump on top 0:11:09.480 --> 0:11:11.920 of it. And so in that sense, I think it's 0:11:11.960 --> 0:11:14.680 going to be a lingering and ongoing risk that helps 0:11:14.800 --> 0:11:19.000 drive a global settlement here to make this litigation go away. 0:11:19.800 --> 0:11:22.080 And I think that's the decision the company's going to 0:11:22.120 --> 0:11:24.280 have to make, is do we have to make this 0:11:24.360 --> 0:11:27.000 go away sooner rather than later, or do we test 0:11:27.040 --> 0:11:30.079 these legal theories which might be pretty strong to make 0:11:30.080 --> 0:11:31.600 the stuff go away, but it's going to take a 0:11:31.640 --> 0:11:33.720 long time for those appeals to play out. 0:11:34.040 --> 0:11:37.199 Stay with us. More from Bloomberg Intelligence coming up after this. 0:11:41.040 --> 0:11:44.720 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:11:44.840 --> 0:11:47.920 weekdays at ten am Eastern on Apple, Cocklay and Android 0:11:47.920 --> 0:11:51.240 Auto with the Bloomberg Business app, Listen on demand wherever 0:11:51.280 --> 0:11:54.400 you get your podcasts, or watch us live on YouTube. 0:11:55.160 --> 0:11:57.240 All right, let's bring in George Ferguson. He is our 0:11:57.280 --> 0:12:00.520 senior aerospace, defense and airlines analysts. And George, there was 0:12:00.520 --> 0:12:03.360 a headline earlier this week that got my attention, which 0:12:03.400 --> 0:12:07.720 is Jet Blue looking to team up with someone looking 0:12:07.760 --> 0:12:11.720 for a partner in some capacity. It was reported from Semaphore, 0:12:11.800 --> 0:12:14.800 and Jet Blue has tried this before. It tried to 0:12:14.880 --> 0:12:18.120 merge with Spirit Airlines or tried to buy Spirit Airlines 0:12:18.120 --> 0:12:20.440 and it failed in that quest. What do we know 0:12:20.480 --> 0:12:22.280 about Jet Blue's m and a ambitions. 0:12:23.559 --> 0:12:25.559 Yeah, So I mean, we haven't heard anything out of 0:12:25.640 --> 0:12:28.520 Jet Blue, right, but when you look at Jet Blue, 0:12:28.840 --> 0:12:32.400 you know, I think that one sort of their financial 0:12:32.400 --> 0:12:36.000 performance hasn't been great since the pandemic, partly due to 0:12:36.040 --> 0:12:41.199 this failed merger with Spirit Airlines, and so you could 0:12:41.240 --> 0:12:43.800 see as they're you know, looking out at the US 0:12:43.920 --> 0:12:48.080 market right now, or fuel prices have doubled, they probably 0:12:48.120 --> 0:12:51.679 think of demand's going to come down pretty hard. You know, 0:12:51.920 --> 0:12:53.600 it's going to be hard to sort of turn around 0:12:54.040 --> 0:12:58.720 financial improvement in that environment. And so I'm not sure 0:12:58.800 --> 0:13:01.439 you know who sent before talk to inside, but I 0:13:01.480 --> 0:13:04.080 don't think it's hard to see how Jet Blue would 0:13:04.080 --> 0:13:08.160 be starting to think about what might be different permutations 0:13:08.400 --> 0:13:11.199 of how they could get the carrier through what I 0:13:11.200 --> 0:13:13.720 think is going to be a difficult summer for the business. 0:13:14.360 --> 0:13:19.240 George. Typically, can airlines pass along fuel increases like we're 0:13:19.240 --> 0:13:22.360 seeing here these huge jumps and fuel prices. Can they 0:13:22.360 --> 0:13:24.559 pass that along to consumers or they that goes into 0:13:24.600 --> 0:13:25.440 their bottom line? 0:13:26.160 --> 0:13:29.079 So I think the opportunity to pass it along is 0:13:29.120 --> 0:13:32.520 pretty good this time, and typically they do. Typically they 0:13:32.559 --> 0:13:35.199 pass it along at a lag, and so the airlines 0:13:35.440 --> 0:13:38.280 usually will go through a bumpy ride, you know, in 0:13:38.320 --> 0:13:41.000 their profits for a little period of time for I 0:13:41.000 --> 0:13:43.320 don't know, a quarter or something like that, as they're 0:13:43.320 --> 0:13:45.880 getting ticket prices up. If you look at the US 0:13:45.920 --> 0:13:50.320 airline business right now, now, though nobody hedges inside the 0:13:50.320 --> 0:13:52.800 business anymore, it used to be there there was a 0:13:52.800 --> 0:13:55.559 smattering of airlines that hedged. Southwest is one of the 0:13:55.600 --> 0:13:59.079 bigger ones that hedged, and you might have some Alaska, 0:13:59.320 --> 0:14:02.960 some Jet Blue edging. Nobody really hedges anymore, and that 0:14:03.000 --> 0:14:06.480 means everybody has to increase ticket prices so that can 0:14:06.760 --> 0:14:09.240 remain profitable. And I think that means the move to 0:14:09.320 --> 0:14:12.440 higher ticket prices it goes faster this time. 0:14:12.920 --> 0:14:15.520 So when they increase ticket prices, is that something that's 0:14:15.640 --> 0:14:18.800 kind of static it? You know, once it goes up, 0:14:18.800 --> 0:14:21.560 it goes up, it doesn't come back down. Or would 0:14:21.760 --> 0:14:23.960 any of them consider adding kind of a fuel search 0:14:24.040 --> 0:14:26.040 charge a way a UPS or FedEx does. 0:14:27.080 --> 0:14:28.880 Yeah, I mean, like I always think of a fuel 0:14:28.920 --> 0:14:31.920 search charge as a way of reminding your customer that 0:14:32.000 --> 0:14:34.760 the reason you're increasing the cost of the product that 0:14:34.800 --> 0:14:37.680 you're delivering to them is because of fuel. And I 0:14:37.680 --> 0:14:43.040 think always yeah, exactly, So FedEx goes Hey, look, sorry 0:14:43.120 --> 0:14:46.040 about it. You know, the world economic environment is such 0:14:46.160 --> 0:14:47.760 that I'm gonna have to charge you more because fuel 0:14:47.760 --> 0:14:51.920 prices are higher. Look, I think at airlines. Airlines are 0:14:52.120 --> 0:14:56.400 very competitive business, and so airlines see a lot of 0:14:56.440 --> 0:15:00.080 movement up and down in ticket prices and so so 0:15:01.160 --> 0:15:04.400 I think because of that competitiveness, yes, you could see 0:15:04.440 --> 0:15:07.560 where they would rise here. And then you know, as 0:15:07.600 --> 0:15:10.320 soon as you start to get decreases in the price 0:15:10.360 --> 0:15:12.880 of fuel, we typically see some of the airlines that 0:15:12.920 --> 0:15:15.760 want to take market share. They'll lower fares, they'll add 0:15:15.800 --> 0:15:18.200 to the airplane, you add people to the airplane, and 0:15:18.240 --> 0:15:20.320 then the game starts over again. Right, we start moving 0:15:20.880 --> 0:15:24.880 the wrong direction in fairs. If you're a shareholder, George. 0:15:24.560 --> 0:15:27.400 What are the airlines doing in terms of capacity? Are 0:15:27.400 --> 0:15:29.720 they adding capacity to the system, are they taking down? 0:15:29.760 --> 0:15:30.280 What are they doing? 0:15:31.080 --> 0:15:33.920 Yeah, so we're not seeing much yet. My colleague friends 0:15:33.920 --> 0:15:35.760 who wanted to flow put out a report this week. 0:15:36.040 --> 0:15:39.440 It's on our AI r l N dashboard. We haven't 0:15:39.480 --> 0:15:43.200 seen much movement. And my guess is that the airlines 0:15:43.240 --> 0:15:46.720 are probably waiting to see if this war could end quickly. 0:15:47.120 --> 0:15:49.640 If it ends quickly, you know, maybe they don't have 0:15:49.720 --> 0:15:52.640 to take any capacity out for summer season. Summers their 0:15:52.680 --> 0:15:55.800 peak season. They've probably sold a lot of it already. 0:15:56.600 --> 0:15:59.800 But I think if these higher fuel prices persist, I 0:16:00.040 --> 0:16:02.920 think you'll you'll see as you get through summer they'll 0:16:02.920 --> 0:16:06.000 have to start to cut capacity to keep fares fire. 0:16:06.280 --> 0:16:08.120 And that becomes part of the risk as well. For 0:16:08.200 --> 0:16:12.280 the companies like Jeff Blue, Spirit Frontier that are that 0:16:12.760 --> 0:16:16.560 you know, cater to the lower the lower tier the 0:16:16.560 --> 0:16:20.600 traveling public. You know, the challenge is their customers are 0:16:20.600 --> 0:16:23.480 probably going to be their budgets will be stretched a 0:16:23.520 --> 0:16:25.720 little bit more. And I think you know, if you're 0:16:25.800 --> 0:16:29.880 United and you're American, it's actually especially United in Delta 0:16:30.760 --> 0:16:33.160 and you've got a fair amount of premium travelers flying 0:16:33.200 --> 0:16:35.600 in your airplanes. They're going to they're they're not going 0:16:35.640 --> 0:16:38.160 to really be bothered, right by a twenty or thirty 0:16:38.200 --> 0:16:40.760 percent increase in their in their fair price. They're going 0:16:40.840 --> 0:16:43.240 to keep flying. And those airlines are they're going to 0:16:43.280 --> 0:16:46.600 continue to subsidize the back of the airplane that that 0:16:47.360 --> 0:16:49.880 discount traveler, and it's going to make it harder to 0:16:49.880 --> 0:16:52.840 fill airplanes. I think at the low cost carriers here 0:16:52.880 --> 0:16:53.160 for a. 0:16:53.080 --> 0:16:56.840 Bit stay with us. More from Bloomberg Intelligence coming up 0:16:56.880 --> 0:16:57.320 after this. 0:17:00.680 --> 0:17:04.359 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:04.440 --> 0:17:07.560 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:07.560 --> 0:17:10.880 Auto with the Bloomberg Business app. Listen on demand wherever 0:17:10.920 --> 0:17:14.480 you get your podcasts, or watch us live on YouTube. 0:17:14.880 --> 0:17:17.760 Because it is Friday, let's just take a step away 0:17:17.840 --> 0:17:20.720 from the market action, at least for a few minutes, 0:17:20.960 --> 0:17:22.720 the word and Iran and talk a little bit about 0:17:22.720 --> 0:17:23.880 the business of sports. 0:17:24.000 --> 0:17:27.000 Because the owners of NBA teams. 0:17:26.760 --> 0:17:32.000 Have voted to consider expanding their league and adding franchises 0:17:32.040 --> 0:17:34.320 in a couple of other cities. Let's bring in Randall Williams, 0:17:34.359 --> 0:17:38.720 Our Bloomberg Business of Sports reporter on this story. And Randall, 0:17:38.880 --> 0:17:41.800 we're now looking at possibly a Las Vegas franchise, a 0:17:41.800 --> 0:17:42.680 Seattle franchise. 0:17:43.000 --> 0:17:45.119 Yeah, and it was always going to be those two cities. 0:17:45.119 --> 0:17:47.840 The league was open to listening to more offers from 0:17:47.840 --> 0:17:50.639 other cities. You think Nashville, you think Kansas City, you 0:17:50.640 --> 0:17:54.040 think maybe Vancouver or Mexico City. But Seattle and Vegas 0:17:54.040 --> 0:17:56.560 are proven sports towns. Seattle used to have the SuperSonics. 0:17:56.560 --> 0:17:59.040 In Las Vegas has a bunch of different sports teams. 0:17:59.080 --> 0:18:00.800 I would consider it this or it's capital of the 0:18:00.800 --> 0:18:03.600 world right now. So they'll be listening to bidders over 0:18:03.640 --> 0:18:05.399 the course of many months, and if they find the 0:18:05.480 --> 0:18:07.359 right price, and if the bidders get the right number, 0:18:07.440 --> 0:18:10.240 then we'll go from thirty to thirty two NBA teams. 0:18:10.400 --> 0:18:12.800 All right, If I want an NBA team, what's going 0:18:12.840 --> 0:18:13.880 to cost me to get in the door? 0:18:14.160 --> 0:18:16.479 I would guesstimate it is going to cost you at 0:18:16.560 --> 0:18:19.280 least eight billion dollars. They're saying seven to ten is 0:18:19.320 --> 0:18:22.960 the range. I think Seattle will go for probably between 0:18:23.000 --> 0:18:24.560 seven and eight and a half. And I think that 0:18:24.640 --> 0:18:26.840 Vegas team could easily reach nine to ten. 0:18:27.240 --> 0:18:29.840 And who are the obvious bidders here? Who are the 0:18:29.840 --> 0:18:32.520 people who are right away going to be putting together packages? 0:18:32.640 --> 0:18:32.960 Sure so. 0:18:33.000 --> 0:18:36.800 Samantha Holloway, who is David Bonderman's daughter, is the owner 0:18:36.840 --> 0:18:39.840 of the Seattle Kraken. She just formed this holding company 0:18:39.880 --> 0:18:43.000 called One Roof Sports and Entertainment. She owns the arena 0:18:43.119 --> 0:18:45.240 or that has partial ownership of the arena, which is 0:18:45.280 --> 0:18:48.960 Climate Pledge Arena in Seattle. She's the heavy favorite in Seattle. 0:18:48.960 --> 0:18:51.840 In Vegas, you have Bill Foley, who is the Vegas 0:18:51.840 --> 0:18:56.960 Golden Knights owner. He controls alongside MGM and aeg T 0:18:57.160 --> 0:18:59.439 Mobile arena. And so I think if you have arena 0:18:59.520 --> 0:19:02.080 ownership and you don't have to spend another billion and 0:19:02.119 --> 0:19:04.320 a half to two billion dollars, then that's going to 0:19:04.359 --> 0:19:06.240 enable you to get a bit ahead. 0:19:06.520 --> 0:19:06.800 Now there. 0:19:06.840 --> 0:19:08.800 Who knows, maybe someone does come in and say, look, 0:19:09.000 --> 0:19:11.440 I'll build a stadium in Las Vegas or in Seattle. 0:19:11.440 --> 0:19:13.480 I think it would be difficult, but those two would 0:19:13.520 --> 0:19:14.800 be my leading favorites right now. 0:19:14.960 --> 0:19:17.679 All right, so we're just had opening day for Major 0:19:17.760 --> 0:19:21.320 League Baseball. Let me take it down to the dark side. Oh, 0:19:21.320 --> 0:19:23.000 are we going to get a work stopitch next year? 0:19:23.080 --> 0:19:23.920 Major League Baseball? 0:19:23.960 --> 0:19:24.600 Absolutely? 0:19:25.400 --> 0:19:27.000 I think absolutely? I think so. 0:19:27.119 --> 0:19:29.439 I mean, look, you think about the collective bargaining sessions 0:19:29.440 --> 0:19:31.080 that we just finished with the WNBA. I think we 0:19:31.119 --> 0:19:33.720 talked about it last week. Everyone that I've talked to 0:19:33.800 --> 0:19:36.399 around sports has said that that is the prelude to 0:19:36.560 --> 0:19:38.920 what is coming with baseball, which is really a war 0:19:39.000 --> 0:19:41.560 of do they want to have the owners have a 0:19:41.600 --> 0:19:43.800 salary cap or do the players who are probably going 0:19:43.880 --> 0:19:46.119 to be negotiating for a minimum floor spending Because you 0:19:46.119 --> 0:19:48.720 have teams that are just content with not spending any 0:19:48.760 --> 0:19:51.200 money and being loser franchises. And then you have those 0:19:51.200 --> 0:19:54.120 same owners complaining about how you have franchises like the Yankees, 0:19:54.119 --> 0:19:56.600