WEBVTT - BI Weekend: Boeing Deal, Microsoft Job Cuts, US Drug Prices 0:00:00.280 --> 0:00:11.240 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence 0:00:11.360 --> 0:00:13.440 with Alex Steel and Paul Sweeney. 0:00:13.560 --> 0:00:16.759 The real ap performance has been in US corporate high yield. 0:00:16.920 --> 0:00:19.320 Are the companies lean enough? Have they trimmed all the fats? 0:00:19.360 --> 0:00:22.520 The semiconductor business is a really cyclical. 0:00:22.120 --> 0:00:26.320 Business, breaking market headlines and corporate news from across the globe. 0:00:26.360 --> 0:00:28.840 Do investors like the M and A that we've seen? 0:00:29.000 --> 0:00:32.000 These are two big time blue chip companies. 0:00:32.240 --> 0:00:35.640 Window between the peak and cunt changing super fast. 0:00:35.880 --> 0:00:40.920 Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 0:00:42.320 --> 0:00:44.720 Of Today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.760 --> 0:00:46.479 business stories impacting Wall Street and. 0:00:46.440 --> 0:00:47.360 The global markets. 0:00:47.600 --> 0:00:49.519 Each and every week we provide in depth research and 0:00:49.600 --> 0:00:51.440 data on some of the two thousand companies and one 0:00:51.479 --> 0:00:54.800 hundred and thirty industries our analysts cover worldwide. Today, we'll 0:00:54.800 --> 0:00:57.360 look at why the tech giant Microsoft says it will 0:00:57.360 --> 0:01:00.640 cut six thousand workers. Plus we'll disc us how President 0:01:00.680 --> 0:01:03.960 Donald Trump is looking to lower drug prices in the US. 0:01:04.280 --> 0:01:06.360 But first we begin in the legal space. 0:01:06.640 --> 0:01:10.400 Recent research by Bloomberg Intelligence maintains that the Supreme Court 0:01:10.440 --> 0:01:13.600 would likely let President Donald Trump fire fed chair j 0:01:13.760 --> 0:01:18.120 palell even if market reaction discourages it. It's a subject 0:01:18.160 --> 0:01:21.720 of a bipiece titled scotus would likely let Trump fire 0:01:21.760 --> 0:01:24.320 Pal even if the markets don't. For more, co hosts 0:01:24.319 --> 0:01:26.720 Alex Steel and I were joined by the pieces author 0:01:26.800 --> 0:01:31.120 Elliott Stein, Bloomberg Intelligence litigation analyst. Your first asked Elliott, 0:01:31.160 --> 0:01:35.160 if it is constitutional for President Trump to fire fedchair Pal. 0:01:35.760 --> 0:01:38.800 We're not sure yet, but wait, yeah, the way the 0:01:38.880 --> 0:01:41.000 law is playing out is, you know, he's taken a 0:01:41.080 --> 0:01:45.759 very expansive view of executive authority and what the president 0:01:46.000 --> 0:01:46.480 can do. 0:01:47.200 --> 0:01:49.160 You know, we see it with the tariffs. We sorry 0:01:49.200 --> 0:01:49.680 with those. 0:01:49.760 --> 0:01:53.520 He's taken a lot of actions that presidents haven't done before, 0:01:54.640 --> 0:01:56.800 and they're being litigated. And one of the things that 0:01:56.840 --> 0:02:00.520 he's done is that he has tied to exert control 0:02:00.600 --> 0:02:03.760 over what used to be called independent agencies, so things 0:02:03.840 --> 0:02:07.240 like the FTC, the Federal Trade Commission, the NRB, the 0:02:07.320 --> 0:02:13.000 National Labor Relations Board. He has removed commissioners at these 0:02:13.040 --> 0:02:17.760 agencies even though the statutes that govern these agencies have 0:02:17.840 --> 0:02:20.640 what's called the fore cause removal restriction, meaning the president 0:02:20.680 --> 0:02:25.400 can only remove them for cause, and he's just firing 0:02:25.480 --> 0:02:26.480 them at will. 0:02:27.160 --> 0:02:28.919 He's also obviously. 0:02:28.520 --> 0:02:31.600 Threatened to do the same with Jerome Powell and maybe 0:02:31.639 --> 0:02:32.720 other members. 0:02:32.360 --> 0:02:33.040 Of the board. 0:02:33.240 --> 0:02:35.920 And his view is that the four cause removal restriction 0:02:36.000 --> 0:02:40.880 is unconstitutional because it impinges on his power as the 0:02:40.880 --> 0:02:44.960 president under Article two of the Constitution to essentially oversee 0:02:45.000 --> 0:02:50.520 the entire executive branch and the Supreme Court. In nineteen 0:02:50.560 --> 0:02:55.040 thirty five, there's President saying those four cause removal restrictions 0:02:55.040 --> 0:02:59.639 restrictions are constitutional. But more recently the Supreme Court has 0:02:59.680 --> 0:03:03.240 sort of try to narrow that precedent and said, at 0:03:03.320 --> 0:03:05.800 least with the couple agencies where you only have one director, 0:03:06.480 --> 0:03:10.040 those four cause removal restrictions are unconstitutional. And so the president, 0:03:10.120 --> 0:03:13.480 President Trump is sort of trying to expand that recent 0:03:13.520 --> 0:03:15.239 precedent to these other agencies. 0:03:15.680 --> 0:03:19.360 So do we have other I mean, so the Federal 0:03:19.360 --> 0:03:20.960 Reserve is one thing. Do we have other agencies that 0:03:21.000 --> 0:03:23.480 are in the legal process now where someone's been removed 0:03:23.480 --> 0:03:24.200 and we have a suit? 0:03:24.400 --> 0:03:28.120 Yeah, exactly. We actually have quite a few of them. So, 0:03:29.320 --> 0:03:32.320 you know, he has fired two commissioners at the FTC. 0:03:32.560 --> 0:03:37.360 Those are in litigation, sort of the most procedurally advanced 0:03:37.360 --> 0:03:40.800 cases at this point are cases where he fired commissioners 0:03:40.880 --> 0:03:44.160 at the NRB, the National Labor Relations Board, and also 0:03:44.360 --> 0:03:50.160 the Merit Systems Protection Board, which sort of oversees federal 0:03:50.600 --> 0:03:53.000 employees and whether you know they're being fired and hired 0:03:53.040 --> 0:03:58.520 for merit or not. Those two cases, we have actually 0:03:58.600 --> 0:04:02.160 several rulings, and what's interesting is that the judges in 0:04:02.240 --> 0:04:04.480 those rulings sort of follow along. 0:04:04.400 --> 0:04:06.040 Ideological lines and how they rule. 0:04:06.120 --> 0:04:09.480 So the trial court judge was a judge appointed by 0:04:09.480 --> 0:04:13.320 President Obama, and she said that the firing of those 0:04:13.320 --> 0:04:19.120 commissioners was improper, that it was violated the four cause removal. 0:04:21.160 --> 0:04:22.720 Those cases are now an appeal. It's going to be 0:04:22.720 --> 0:04:25.560 an argument next week. But we have sort of preliminary 0:04:25.600 --> 0:04:29.599 ruins from the appeals court. One panel of three judges, 0:04:29.800 --> 0:04:33.160 two of whom were appointed by Republican presidents, said that 0:04:33.720 --> 0:04:36.719 President Trump would have been likely to succeed on the merits. 0:04:37.800 --> 0:04:43.440 But then that ruling was then revisited by the entire court, 0:04:43.440 --> 0:04:47.240 which is dominated by judges is appointed by Democrats, who 0:04:47.240 --> 0:04:49.000 said that the firing was improper. 0:04:49.080 --> 0:04:51.159 So we're sort of seeing how this might play out. 0:04:51.279 --> 0:04:55.560 Is this are we really in a truly partisan judicial 0:04:55.640 --> 0:04:59.360 world or Is this just simply different interpretations or a 0:04:59.400 --> 0:05:01.760 stricter looser interpretations of the Constitution. 0:05:02.440 --> 0:05:03.799 It depends on the issue. 0:05:04.680 --> 0:05:07.039 I would say on this issue, it seems like the 0:05:07.120 --> 0:05:12.480 judges are essentially ruling along ideological lines, where you have 0:05:12.560 --> 0:05:15.279 judges appointed by Republicans saying that the fore cause removal 0:05:15.320 --> 0:05:19.960 restriction really does impinge on the president's executive authority, and 0:05:20.040 --> 0:05:22.360 you have judges appointed by Democrats saying, you know. 0:05:22.839 --> 0:05:24.400 It's okay to put some limits. 0:05:25.040 --> 0:05:27.640 The four cause of removal restriction would still allow the 0:05:27.640 --> 0:05:30.400 president to fire someone if they did something improper. 0:05:30.839 --> 0:05:33.040 In terms of say the Supreme Court issuing and a 0:05:33.120 --> 0:05:37.040 ruling that then is ignored, is there precedent for that 0:05:37.200 --> 0:05:38.400 like over history? 0:05:38.880 --> 0:05:41.279 Well, we've actually sort of seen it with TikTok right, 0:05:41.400 --> 0:05:44.520 where the Supreme Court upheld the TikTok ban and the 0:05:44.520 --> 0:05:48.560 president instructed his attorney general to ignore the ruling and 0:05:48.839 --> 0:05:53.040 ignore the ban. So we have sort of started to 0:05:53.080 --> 0:05:56.840 see some issues like that. But in this case I 0:05:56.920 --> 0:06:01.920 expected Supreme Court to if if he fight well on 0:06:01.960 --> 0:06:04.200 this issue, generally I expect the Supreme Court to side 0:06:04.240 --> 0:06:05.200 with President Trump. 0:06:06.080 --> 0:06:09.400 Interesting, so what happens when a president defies the Supreme Court. 0:06:09.440 --> 0:06:11.520 Like in TikTok, nothing right so. 0:06:11.560 --> 0:06:17.720 Far, nothing so TikTok's still The remedy is for Congress to. 0:06:17.720 --> 0:06:20.640 Impeach the president and then the Senate. 0:06:20.320 --> 0:06:25.080 To convict, highly unlikely in this political environment. 0:06:25.120 --> 0:06:28.320 I also like pushed out the rights. It sort of 0:06:28.320 --> 0:06:31.560 feels very blurry. It doesn't feel like he completely ignored 0:06:31.560 --> 0:06:32.880 it's it's like we're working on it. 0:06:33.120 --> 0:06:34.400 We're just pushing out the deadline. 0:06:34.440 --> 0:06:38.119 That feels a little differense Yes, that's essentially what he's doing. 0:06:38.160 --> 0:06:41.080 But at the same time, there's a law that Congress. 0:06:40.640 --> 0:06:44.359 Passed that said, you know, it has to be banned 0:06:44.360 --> 0:06:47.680 by a particular date. The Supreme Court upheld that law, 0:06:48.000 --> 0:06:51.400 and he's essentially ignoring the details of the law. I 0:06:51.440 --> 0:06:54.159 agree with you, he is using that as a reason, 0:06:54.640 --> 0:06:57.080 but the law is still on the books and it's. 0:06:56.880 --> 0:07:01.160 In violation our Thanks to Elliot Stein, Bloomberg Intelligence litigation analyst, 0:07:01.560 --> 0:07:03.080 we moved next to some of the news in the 0:07:03.080 --> 0:07:06.280 aerospace industry this week. We heard that China has removed 0:07:06.279 --> 0:07:09.520 a month long ban on airlines taking delivery of Boeing planes, 0:07:09.720 --> 0:07:12.040 and this follows a breakthrough in trade talks between the 0:07:12.120 --> 0:07:16.280 US and China that temporarily slash terrace on each side. 0:07:16.320 --> 0:07:19.480 The resumption of deliveries to China will be an immediate 0:07:19.480 --> 0:07:22.360 boost of Boeing, with around fifty Boeing jets to be 0:07:22.400 --> 0:07:25.480 delivered to China this year. For more co hosts, Alex 0:07:25.480 --> 0:07:28.160 Steele and I were joined by George Ferguson, Bloomberg Intelligence 0:07:28.200 --> 0:07:32.000 Senior Aerospace, Defense and Airlines analyst. We first asked George 0:07:32.000 --> 0:07:33.640 for his take on this week's news. 0:07:34.240 --> 0:07:36.200 I think what it means for Boeing in the short 0:07:36.320 --> 0:07:40.120 term is that they could probably get you know, some 0:07:40.200 --> 0:07:43.600 of these inventory airplanes they've built. They're sitting on Tarmax, 0:07:43.600 --> 0:07:46.280 they're maintaining them, costs bowing a lot of money. They 0:07:46.360 --> 0:07:50.240 can get them delivered into China. Serium expects thirty four 0:07:50.280 --> 0:07:53.080 of those airplanes to go in through the remainder of 0:07:53.080 --> 0:07:56.000 the year. They can get them delivered into China, get 0:07:56.000 --> 0:07:58.280 them off their books, you know, sort of get rid 0:07:58.280 --> 0:08:01.240 of that extra expense they it costs for them to 0:08:01.320 --> 0:08:03.960 manage those airplanes, so they could just get onto focusing 0:08:04.040 --> 0:08:07.120 on the factory floor and building brand new airplanes. So 0:08:07.400 --> 0:08:10.400 I think it's a positive. We'll see how long it lasts. 0:08:10.400 --> 0:08:11.840 But it's definitely a positive. 0:08:12.160 --> 0:08:14.760 Was this sort of baked into the US China trade 0:08:14.760 --> 0:08:16.400 talk or was this irrespective? 0:08:16.440 --> 0:08:18.760 Do you have an idea now, I'm not sure what's 0:08:18.800 --> 0:08:21.680 baked into the US China talks. I do think that 0:08:21.720 --> 0:08:25.360 there's an opportunity here for Boeing to get to even 0:08:25.480 --> 0:08:28.880 new orders from China. We haven't really seen material orders 0:08:28.880 --> 0:08:32.800 out of China since twenty eighteen, so last decade before 0:08:32.800 --> 0:08:35.840 the pandemic. Relations have been a bit strained since then. 0:08:37.160 --> 0:08:40.040 I think it's just it's one more piece of evidence 0:08:40.080 --> 0:08:43.040 that shows Look, as the US and China get into 0:08:43.120 --> 0:08:46.360 negotiations over trade, you're going to see heavy fracturing, and 0:08:46.400 --> 0:08:48.360 then you know, we see the markets kind of get 0:08:48.480 --> 0:08:53.200 very distressed about that. But behind the scenes, there's discussions about, 0:08:53.360 --> 0:08:56.560 you know, putting that relationship back together, and Boeing probably 0:08:57.080 --> 0:09:00.800 factors in high in those negotiations, and so I think 0:09:00.840 --> 0:09:04.120 you could go from a, hey there's despair here to hey, 0:09:04.120 --> 0:09:06.400 look there's a three hundred airplane order for Boeing coming 0:09:06.440 --> 0:09:08.679 out of China. So it's going to be a real 0:09:08.760 --> 0:09:10.520 up and down I think roller coaster. 0:09:10.280 --> 0:09:14.679 Here, George, are there airplane manufacturers in China? 0:09:14.880 --> 0:09:17.400 Or do they depend solely on Boeing and Airbus. 0:09:18.280 --> 0:09:22.920 They depend largely on Boeing and Airbus. There is a manufacturer, Comac, 0:09:24.040 --> 0:09:27.319 you know, they've been building a seven thirty seven, a 0:09:27.440 --> 0:09:34.240 three twenty you know, you know, substitute. They call it 0:09:34.280 --> 0:09:37.959 the Comac C nine one nine. The airplane's rolling out slowly. 0:09:38.000 --> 0:09:41.320 I think we saw fifteen or twenty deliveries last year. 0:09:41.640 --> 0:09:44.440 This is a country that probably needs at least one 0:09:44.559 --> 0:09:47.880 hundred and fifty narrow bodies a year, so not going 0:09:47.920 --> 0:09:51.160 to fulfill all their needs. There's about that many flying 0:09:51.240 --> 0:09:53.680 right now, and when we look at the flying statistics 0:09:54.080 --> 0:09:57.640 for that airplane, it's not flying as frequently as a 0:09:57.760 --> 0:10:00.280 three twenties and seven thirty seven. So it's it seems 0:10:00.320 --> 0:10:03.920 to us that the maturity that product isn't there yet 0:10:03.960 --> 0:10:07.839 for the Chinese to substitute out all of the Western jets. 0:10:07.760 --> 0:10:10.400 Right, So there's still a little bit of a way 0:10:10.480 --> 0:10:12.320 to go. You also have to wonder it's just in 0:10:12.360 --> 0:10:15.560 general the comeback that Boeing has been able to make. George, 0:10:15.559 --> 0:10:17.720 how would you describe the situation that Boeing is and 0:10:17.800 --> 0:10:19.600 now versus a couple of years ago? 0:10:20.800 --> 0:10:22.440 Yeah, you know, I think this year is what we 0:10:22.520 --> 0:10:24.960 expected last year to be before the door came off 0:10:25.000 --> 0:10:28.240 on the or the door plug and the Alaska chat. 0:10:28.640 --> 0:10:31.559 We're starting to see good flow through the factory and 0:10:31.960 --> 0:10:34.600 the delivery numbers we've seen. We're starting to see them 0:10:34.640 --> 0:10:38.400 deliver that inventory of built airplanes. Like I said that 0:10:38.520 --> 0:10:43.000 Dragon costs pretty heavily. We're hearing good things about supply chain. 0:10:43.360 --> 0:10:47.640 They're going to pull Spirit Arrow Systems into Boeing by midyear. 0:10:47.640 --> 0:10:49.480 That was a big part of their problems. I think 0:10:49.480 --> 0:10:53.560 pulling them in helps them control quality at Spirit. So 0:10:53.600 --> 0:10:57.160 I think this story this year should be all about 0:10:57.559 --> 0:11:01.720 improving quality, improving throughput in the factory in the back half, 0:11:01.800 --> 0:11:04.720 some good cash generation. So I think this year is 0:11:04.720 --> 0:11:07.240 whatever they thought last year would be, which could be 0:11:07.240 --> 0:11:07.920 a pretty good year. 0:11:08.520 --> 0:11:10.640 So where are you, George and your model in terms 0:11:10.679 --> 0:11:13.840 of seven thirty seven kind of build rate here? Because 0:11:13.880 --> 0:11:16.720 I know that just with the economic model for Boeing 0:11:16.720 --> 0:11:19.600 that just drives cash flow the more planes I can 0:11:19.640 --> 0:11:20.559 get through the line. 0:11:21.240 --> 0:11:23.720 We're looking for like a forty five to fifty percent 0:11:23.840 --> 0:11:27.480 increase in seven thirty seven deliveries this year, so really 0:11:27.520 --> 0:11:29.200 head a increase, and again that's going to be the 0:11:29.240 --> 0:11:32.520 big driver of cash generation for the company over the 0:11:32.600 --> 0:11:35.800 year and probably the ex the year. A build rate 0:11:35.840 --> 0:11:40.000 per month of thirty eight, we think even maybe into 0:11:40.040 --> 0:11:43.000 the forties kind of build rate, which is an area 0:11:43.000 --> 0:11:44.960 where they should be able to generate some profits. 0:11:45.360 --> 0:11:48.720 Our thanks to George ferguson Bloomberg Intelligence, senior Aerospace, Defense 0:11:48.760 --> 0:11:51.679 and Airlines analysts. Coming up, we'll continue with more on 0:11:51.720 --> 0:11:55.920 the planemaker Boeing, which landed its biggest ever aircraft order. 0:11:56.240 --> 0:11:59.080 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:11:59.120 --> 0:12:01.839 different research on two thousand companies and one hundred and 0:12:01.840 --> 0:12:04.920 thirty industries. You can access Bloomberg Intelligence. 0:12:04.520 --> 0:12:07.160 Via b I go on the terminal. I'm Paul Sweeney. 0:12:07.400 --> 0:12:08.600 This is Bloomberg. 0:12:12.880 --> 0:12:16.600 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:16.679 --> 0:12:19.760 weekdays at ten am Eastern on Apple, Coarclay, and Android 0:12:19.800 --> 0:12:23.080 Auto with the Bloomberg Business App. Listen on demand wherever 0:12:23.160 --> 0:12:26.679 you get your podcasts, or watch us live on YouTube. 0:12:27.480 --> 0:12:31.160 We continue with more news from the planemaker Boeing. This week, 0:12:31.200 --> 0:12:34.880 Boeing landed its biggest ever aircraft order, with Qatar Airways 0:12:34.920 --> 0:12:37.360 agreeing to purchase up to two hundred and ten wide 0:12:37.440 --> 0:12:40.880 body aircraft, including the seven eighty seven Dreamlier and the 0:12:40.960 --> 0:12:44.360 seven seventy seven X model. It's a deal worth ninety 0:12:44.480 --> 0:12:47.440 six billion dollars and this comes a year after Boeing 0:12:47.480 --> 0:12:51.120 slogged through a deep executive shakeup and prolonged crisis. 0:12:51.480 --> 0:12:51.800 For more. 0:12:51.920 --> 0:12:54.600 Co hosts Alex Steele and I were joined by Sid 0:12:54.600 --> 0:12:58.040 Phillip Bloomberg, Deputy team leader for Global Aviation. You first 0:12:58.120 --> 0:13:00.440 as Sid for his take on this week's news. 0:13:00.720 --> 0:13:03.800 This is a significant deal for Boeing because they can 0:13:03.800 --> 0:13:07.439 sort of add another sort of milestone order to their backlog, 0:13:07.600 --> 0:13:10.560 especially for their seven eighty seven, which is the sort 0:13:10.559 --> 0:13:12.719 of state of the art white body jet, as well 0:13:12.760 --> 0:13:16.160 as potentially for the Triple seven X, which is again 0:13:16.200 --> 0:13:18.440 a jet that Kataraways has ordered and is still to 0:13:18.440 --> 0:13:21.920 be certified. And so as airlines sort of look to 0:13:21.920 --> 0:13:24.640 the next generation of aircraft that they're looking to order, 0:13:24.880 --> 0:13:26.800 this is sort of these are these You're going to 0:13:26.840 --> 0:13:29.800 see these mega deals coming up where everyone's looking to 0:13:29.840 --> 0:13:33.280 sort of replace their current generation planes with newer models 0:13:33.320 --> 0:13:35.960 which are more advanced, better fuel economy, and that sort 0:13:35.960 --> 0:13:38.240 of great for Boeing in terms of just building out 0:13:38.280 --> 0:13:41.080 that backlog and sort of selling out aircraft past the 0:13:41.160 --> 0:13:41.840 end of the decade. 0:13:42.920 --> 0:13:45.840 What is the delivery time for something like this, But 0:13:46.040 --> 0:13:49.040 it's clearly had some operational execution issues exactly. 0:13:49.040 --> 0:13:51.040 I mean Boeing has been struggling to deliver both the 0:13:51.080 --> 0:13:53.520 seven eight seven as well as seven three seven Max 0:13:53.600 --> 0:13:56.319 and get the seven Triple seven X, which is their 0:13:56.400 --> 0:14:00.320 latest sort of generation aircraft certified. So it is not 0:14:00.360 --> 0:14:02.960 clear on the details for what the sort of intricacies 0:14:03.000 --> 0:14:05.959 of this Qatar deal are, but potentially these will sort 0:14:06.000 --> 0:14:08.240 of play out and go out into the next decade 0:14:08.280 --> 0:14:10.839 because I mean, they've got a significant backlogo aircraft that 0:14:10.880 --> 0:14:13.280 need to deliver in the short term. So this is 0:14:13.320 --> 0:14:15.040 not going to be an aircraft deal that sort of 0:14:15.040 --> 0:14:17.440 happens in the next two or three years. Is going 0:14:17.480 --> 0:14:20.080 to be a drawn out deal that goes into the 0:14:20.120 --> 0:14:20.920 next decade. 0:14:21.120 --> 0:14:23.600 Well, Bombing's finally digging itself out of its hole from 0:14:23.600 --> 0:14:25.600 the last several years, so that kind of goes to 0:14:25.640 --> 0:14:29.440 the big question said, it's all about production, you know, 0:14:29.480 --> 0:14:31.920 getting planes off that and people just like George Ferguson 0:14:31.920 --> 0:14:34.480 fro Bloomberg Intelligence says, just focus on the seven thirty 0:14:34.520 --> 0:14:35.520 seven Max deliveries. 0:14:35.560 --> 0:14:36.280 That's the number. 0:14:37.320 --> 0:14:39.680 Is there a sense that Boeing's making improvements there? 0:14:40.160 --> 0:14:43.000 We have seen Boeing deliveries inch up, and we've sort 0:14:43.000 --> 0:14:45.800 of they've had sort of milestone in terms of just 0:14:45.880 --> 0:14:49.320 hitting better production levels on the sevent three seven, And 0:14:49.680 --> 0:14:52.680 we've heard from Aline customers, including United Airlines, saying that 0:14:53.040 --> 0:14:55.080 the deliveries of the seven three seven Max are sort 0:14:55.120 --> 0:14:57.800 of going up and they're waiting on the seven eighty seven, 0:14:58.040 --> 0:15:01.000 which is the aircraft that we understand that airways ordered. 0:15:01.560 --> 0:15:03.640 That's also going to be sort of key to getting 0:15:03.640 --> 0:15:05.760 production and profitability going. 0:15:06.840 --> 0:15:09.920 What other kind of pitch can Boeing make to outstrip 0:15:09.960 --> 0:15:12.360 air Bus? Because in a duopoly market, and I appreciate 0:15:12.400 --> 0:15:14.400 that China has some smaller players, but if you're dealing 0:15:14.400 --> 0:15:17.560 with a duopoly, like I mean, people got to buy 0:15:17.600 --> 0:15:19.320 your planes exactly. 0:15:18.880 --> 0:15:21.280 I mean, we have a duopoly in at the moment. 0:15:21.360 --> 0:15:24.000 And does that change it all? You think? It sort 0:15:24.040 --> 0:15:24.560 of has. 0:15:24.440 --> 0:15:27.320 Changed a little bit in terms of just the sort 0:15:27.360 --> 0:15:29.880 of there's a lot of politics behind aircraft orders again, 0:15:29.920 --> 0:15:32.960 and that's something that we've seen where Trump's been announcing 0:15:33.000 --> 0:15:35.320 these mega Boeing orders. I mean, he announced a deal 0:15:35.400 --> 0:15:38.760 for thirty planes in Saudi Arabia, and so there is 0:15:38.800 --> 0:15:40.960 a lot of politics attached to aircraft orders. But at 0:15:40.960 --> 0:15:43.680 the same time, both Airbus and Boeing are sort of 0:15:43.680 --> 0:15:45.920 sold out of aircraft until the end of the decades. 0:15:46.040 --> 0:15:48.840 So it is sort of you you're notching up all 0:15:48.880 --> 0:15:51.400 these orders. But at the same time, the biggest thing 0:15:51.400 --> 0:15:53.960 that airlines are talking about is give me my plane, 0:15:53.960 --> 0:15:57.240 because that's really the biggest question where airlines are saying 0:15:57.280 --> 0:16:00.000 that plane deliveries are delayed, and the air Bus is 0:16:00.080 --> 0:16:03.320 repeatedly talked about. How supply chain issues continue to haunt 0:16:03.360 --> 0:16:06.280 the industry now five years after the pandemic. 0:16:06.400 --> 0:16:09.520 Yeah, which I can't imagine, although again I'm what I 0:16:09.600 --> 0:16:13.720 understand is one of the bottlenecks is labor getting the 0:16:13.960 --> 0:16:16.520 This is not just you know, sitting then assembly line 0:16:16.520 --> 0:16:19.320 and hitting a hammer. You've got to be really, really 0:16:19.400 --> 0:16:21.760 skilled at labor, and during the pandemic you lost a 0:16:21.800 --> 0:16:24.600 lot of that and retraining these folks are getting new 0:16:24.640 --> 0:16:25.080 people in it. 0:16:25.080 --> 0:16:26.640 I'm hearing that's a big problem. 0:16:26.760 --> 0:16:28.720 Labor is a major problem as well as I mean, 0:16:29.200 --> 0:16:33.000 just one part being shot holds up the entire production line. 0:16:33.000 --> 0:16:34.760 I mean, you have millions of parts that go into 0:16:34.840 --> 0:16:37.760 an aircraft, and e US and Boeing are the final 0:16:37.800 --> 0:16:40.280 assembly lines where the plane actually gets put together. But 0:16:40.320 --> 0:16:43.880 then if parts are not available in the sort of process, 0:16:44.280 --> 0:16:46.600 you can't actually build those planes. And that's where the 0:16:46.600 --> 0:16:50.200 bottlenecks come up because you have smaller suppliers who are 0:16:50.200 --> 0:16:54.160 struggling financially. You've got parts in short supply. I mean 0:16:54.240 --> 0:16:56.480 EBUS talks about it's sort of it's whack a mole 0:16:56.520 --> 0:16:59.680 where you get one part sorted out and something else, 0:17:00.240 --> 0:17:03.320 and so it's really a question of getting that supply 0:17:03.440 --> 0:17:05.719 chain to sort of hum along nicely and then actually 0:17:05.720 --> 0:17:08.680 building those planes and delivering those planes because you've now 0:17:08.680 --> 0:17:11.560 got record backlogs at both Boeing and Airbus. 0:17:11.760 --> 0:17:14.400 So are they exemmed from tariff issues? 0:17:14.920 --> 0:17:17.840 That's again a really important question. No one's quite clear 0:17:17.880 --> 0:17:20.520 about in terms of what the tariff impact is going 0:17:20.560 --> 0:17:23.440 to be because for fifty years almost that the aviation 0:17:23.560 --> 0:17:27.159 industry has largely functioned tariff free, and the tariffs added 0:17:27.200 --> 0:17:30.680 complexity to it. Because now everyone's not quite sure if 0:17:30.720 --> 0:17:33.760 aircraft are example, I mean, you've seen like all sorts 0:17:33.800 --> 0:17:37.679 of industry players and industry groups making representations to President 0:17:37.760 --> 0:17:40.560 Trump saying that we would like to have tariffs removed 0:17:40.600 --> 0:17:43.520 on aircraft and aircraft parts, and so we're trying to 0:17:43.560 --> 0:17:47.160 see where that sort of actually lands up, because potentially 0:17:47.359 --> 0:17:50.679 aircraft manufacturers and airlines may have to pay tariffs on 0:17:50.720 --> 0:17:53.040 planes depending on what they're in and what parts they have. 0:17:53.560 --> 0:17:56.159 Our thanks to Sid Phillip, Bloomberg Deputy team leader for 0:17:56.200 --> 0:17:59.639 Global Aviation. We move next to news in the tech space. 0:17:59.720 --> 0:18:02.560 This we heard that the tech giant Microsoft will cut 0:18:02.640 --> 0:18:05.600 six thousand workers across the company to reduce management layers. 0:18:05.680 --> 0:18:08.119 This will amount to less than three percent of total 0:18:08.119 --> 0:18:10.520 headcount for more. Co hosts Alex Deal and I were 0:18:10.560 --> 0:18:14.520 joined by anorak Rana, Bloomberg Intelligence technology analyst. First ask 0:18:14.560 --> 0:18:17.800 anarog for his take on why Microsoft is cutting jobs. 0:18:18.240 --> 0:18:21.560 The numbers three percent does not say much, but at 0:18:21.560 --> 0:18:23.840 the same time, Microsoft is not hiring at the same 0:18:23.880 --> 0:18:26.080 pace that it used to. And I think one of 0:18:26.080 --> 0:18:29.520 the areas where it is deploying AI is coding or 0:18:29.680 --> 0:18:31.919 you know R and D. That's an area where we 0:18:31.960 --> 0:18:35.800 anticipate productivity to improve because of the tools we have, 0:18:36.560 --> 0:18:38.360 and not anticipating headcount to grow. 0:18:38.440 --> 0:18:38.600 Up. 0:18:38.960 --> 0:18:42.640 Second thing, Microsoft is investing very heavily in AI right now. 0:18:42.640 --> 0:18:45.359 The capex is going to be extremely high, you know, 0:18:45.440 --> 0:18:49.120 as North doos eighty billion dollars for the next twelve months, 0:18:49.320 --> 0:18:51.639 and you know that they have to offset some of 0:18:51.680 --> 0:18:55.040 that pressure on gross margins with cuts on the operating 0:18:55.080 --> 0:18:58.760 expense side so that the net operating margin doesn't get impacted. 0:18:58.800 --> 0:19:00.280 So I think I think it's a little bit of 0:19:00.320 --> 0:19:00.919 all the above. 0:19:01.520 --> 0:19:04.200 Was this a surprise, not really. 0:19:04.240 --> 0:19:06.800 I mean three percent to me does not come as 0:19:06.840 --> 0:19:09.720 a surprise. Three percent is you know, in an environment 0:19:09.840 --> 0:19:13.160 like right now where companies are not anticipating the real 0:19:13.200 --> 0:19:16.160 attrition rate. So on a normalized basis, if a company 0:19:16.240 --> 0:19:19.080 is seeing attrition employee attrition between ten to fifteen percent, 0:19:19.440 --> 0:19:21.480 we're not seeing that right now, so the company has 0:19:21.520 --> 0:19:23.399 to do something in order to get back to the 0:19:23.400 --> 0:19:27.000 normal range of their financial planning. So it is I said, 0:19:27.000 --> 0:19:29.840 this doesn't sound too much to me, but they could 0:19:29.880 --> 0:19:32.400 be a little bit more based on you know, who 0:19:32.480 --> 0:19:34.680 they are trying to get rid of. If it's higher 0:19:34.680 --> 0:19:37.000 on the paychecks, then I think it has to do with, 0:19:37.160 --> 0:19:38.840 you know, protecting your margins. 0:19:40.160 --> 0:19:42.840 An Rock talk to us about just what the investment 0:19:42.920 --> 0:19:45.920 thesis is regarding Microsoft right now, given some of the 0:19:45.960 --> 0:19:49.520 tariff uncertainty, given some of the geopolitics uncertainty, what's the 0:19:49.600 --> 0:19:51.080 call on Microsoft these days? 0:19:51.720 --> 0:19:53.320 You know, for the last few years we have been 0:19:53.359 --> 0:19:55.520 saying this is probably one of the cleanest stories in 0:19:55.600 --> 0:19:59.920 AI and software land because it doesn't get impacted with tariffs. 0:20:00.200 --> 0:20:03.840 There is some marginal secondary impact because of you know, 0:20:03.840 --> 0:20:06.359 if we do get into an economic slowdown, But the 0:20:06.400 --> 0:20:09.240 real benefit for them is they are hosting chat GPT, 0:20:09.640 --> 0:20:13.120 the most favorite app of consumers right now, and they 0:20:13.160 --> 0:20:15.320 get the benefit of that. So if you have let's say, 0:20:15.560 --> 0:20:17.560 you know that your user base goes from two hundred 0:20:17.600 --> 0:20:19.639 million users to three hundred to four hundred now we 0:20:19.680 --> 0:20:23.200 are close to about five hundred million users, it really 0:20:23.240 --> 0:20:26.240 helps Microsoft because they are hosting that app, and as 0:20:26.320 --> 0:20:29.560