WEBVTT - Novo Nordisk Gets US Approval for Wegovy Obesity Pill 0:00:02.759 --> 0:00:10.600 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.640 --> 0:00:14.600 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.960 --> 0:00:21.080 Business App. Listen on demand wherever you get your podcasts, 0:00:21.400 --> 0:00:23.160 or watch us live on YouTube. 0:00:23.880 --> 0:00:26.239 Well, we talked about how Nova Noordisk is one of 0:00:26.280 --> 0:00:28.800 the big movers today in early trading. The president and 0:00:28.920 --> 0:00:31.920 CEO of the drug maker says the company is going 0:00:31.960 --> 0:00:34.320 all in on weight loss drugs as his company is 0:00:34.360 --> 0:00:36.519 the first to come out with a pill to be 0:00:36.560 --> 0:00:37.840 sold in the US market. 0:00:37.880 --> 0:00:40.640 He spoke with our Katie Greifeld earlier today. 0:00:41.159 --> 0:00:44.159 This is really going to be super exciting for the 0:00:44.320 --> 0:00:47.239 millions of patients that have been waiting to get their 0:00:47.280 --> 0:00:51.120 hands on a gop one pill. And for the first time, 0:00:51.200 --> 0:00:54.240 we are having a pill that has an efficacy of 0:00:54.320 --> 0:00:57.520 some seventeen percent if you take the pill regularly, and 0:00:57.600 --> 0:01:00.840 one in three people are going to actually reduce up 0:01:00.880 --> 0:01:04.200 to twenty percent weight loss. I think that data speaks 0:01:04.240 --> 0:01:06.560 for itself, and we are super excited, of course to 0:01:06.560 --> 0:01:09.560 be the first to the market and we're going to 0:01:09.560 --> 0:01:11.880 give a go all in trying to make this a 0:01:11.959 --> 0:01:12.960 huge success. 0:01:13.360 --> 0:01:16.479 Well, moving forward, I mean beyond just these first few 0:01:16.520 --> 0:01:20.360 months after Eli Lilly does have their pill on the market, 0:01:20.560 --> 0:01:23.240 how do you plan to compete? What is your strategy 0:01:23.280 --> 0:01:26.039 there given my understanding is that there's likely going to 0:01:26.040 --> 0:01:28.319 be no restrictions when it comes to food, when it 0:01:28.360 --> 0:01:30.679 comes to drinks around Lilly's version. 0:01:32.200 --> 0:01:34.880 So, as I mentioned, there are no other phase three 0:01:35.240 --> 0:01:39.640 trials of oral gop one that has shown this level efficacy. 0:01:40.160 --> 0:01:43.039 This means that for the first time ever, people do 0:01:43.160 --> 0:01:49.400 not have compromise between either taking an efficacious injection or 0:01:49.440 --> 0:01:52.680 a convenient pill. For the first time ever, you have 0:01:52.800 --> 0:01:56.720 the same efficacy of seventeen percent in injection or at pill. 0:01:56.760 --> 0:01:58.320 You can take it on a daily basis as a 0:01:58.360 --> 0:02:00.960 pill or a weekly injection, and that I think is 0:02:01.000 --> 0:02:02.680 the key selling points. 0:02:03.080 --> 0:02:04.160 With WeGo v pill. 0:02:04.320 --> 0:02:09.720 We also have more than ten years of course experience 0:02:09.760 --> 0:02:12.880 with regards to safety data and what have you. That's 0:02:12.880 --> 0:02:15.120 why it's called the wegov pill, which means that this 0:02:15.320 --> 0:02:18.040 pill is not only going to reduce your weight, it 0:02:18.120 --> 0:02:22.480 also has protection for your cardiovascular systems. So this is 0:02:22.520 --> 0:02:25.280 a phenomenal pill, second to none, I would say, and 0:02:25.320 --> 0:02:27.000 we are very ready to compete with it. 0:02:27.360 --> 0:02:29.519 Let's talk about how you're going to sell it through. 0:02:29.520 --> 0:02:30.280 What channels? 0:02:30.320 --> 0:02:32.680 Will you sell this way go v pill and will 0:02:32.720 --> 0:02:35.000 all of those channels be available at launch? 0:02:36.480 --> 0:02:39.120 The quick answer is yes, we're going all in. We're 0:02:39.120 --> 0:02:42.440 of course going to sell this through our own websites, 0:02:42.560 --> 0:02:45.400 no WorkCare pharmacy, as well as all of our partners 0:02:45.720 --> 0:02:51.560 be a Row, Live, MD, Costco, weight watchers, everyone that 0:02:51.639 --> 0:02:55.119 you can imagine is going to start launching this at 0:02:55.120 --> 0:02:57.480 the same time on the day of the launch. Trum 0:02:57.600 --> 0:02:59.760 Our ex of course we'll be coming up soon as 0:02:59.760 --> 0:03:03.639 well well as well as of course the traditional channels 0:03:03.639 --> 0:03:06.280 that usually medicine is pro crud in us. 0:03:06.680 --> 0:03:09.520 All right, that was the CEO of Novo Nordisk. 0:03:09.639 --> 0:03:11.840 Let's bring in John Tozzy now he's a Bloomberg Healthcare 0:03:11.880 --> 0:03:16.440 reporter on this milestone for the Swiss drug maker. 0:03:16.480 --> 0:03:19.239 Because Novo Nordisk was the first. 0:03:19.080 --> 0:03:22.000 Mover here when it comes to the obesity treatments, but 0:03:22.160 --> 0:03:23.960 it quickly lost its lead to Eli Lilly. 0:03:24.040 --> 0:03:25.560 Does this put it back in the lead again? 0:03:26.280 --> 0:03:29.000 Yeah, I mean so for the Danish drug maker. I 0:03:29.080 --> 0:03:34.000 believe it's Danish. Yeah, No, I think it is. Listen, 0:03:34.080 --> 0:03:37.760 it is a milestone for sure. You know, patients have 0:03:37.800 --> 0:03:43.240 been waiting for an oral version of these weight loss drugs. 0:03:43.320 --> 0:03:46.800 This is the first pill to get approval in the 0:03:46.920 --> 0:03:50.760 United States. Ili Lily is not far behind. They've said 0:03:50.800 --> 0:03:53.440 they expect their pill to be a pill version of 0:03:53.480 --> 0:03:56.440 their weight loss drug zep bound to be approved as 0:03:56.480 --> 0:04:00.200 soon as March potentially in the US. So, you know, 0:04:00.200 --> 0:04:03.640 I think it's still quite a competitive space, but this 0:04:03.720 --> 0:04:06.440 is still certainly a milestone for Novo Nordisk. 0:04:07.440 --> 0:04:10.280 So I would think that this would be kind of 0:04:10.320 --> 0:04:12.960 a step function in demand for the industry to have 0:04:13.040 --> 0:04:15.200 these error products available because I'm guessing there's just a 0:04:15.240 --> 0:04:17.040 bunch of people out there that don't like to get 0:04:17.080 --> 0:04:20.760 injections and that's a non starter for them. What's what's 0:04:20.800 --> 0:04:23.400 the expectation what this could do for the marketplace when 0:04:23.440 --> 0:04:24.520 we get more and more of these. 0:04:24.440 --> 0:04:27.839 Oral Yeah, I mean, Novae CEO certainly said that they 0:04:27.920 --> 0:04:30.359 expect us to expand the market. I think will know 0:04:31.320 --> 0:04:33.880 pretty soon, right whether you know. I mean, first of all, 0:04:33.920 --> 0:04:36.200 the question of how many people currently using the injection 0:04:36.680 --> 0:04:42.000 convert to the pill form and how many new people 0:04:42.120 --> 0:04:44.840 start who have been reluctant for whatever reason. To take 0:04:44.880 --> 0:04:47.480 the injection, you know, whether it changes things like adherents. 0:04:47.520 --> 0:04:49.400 We know with these drugs that there have been you know, 0:04:49.480 --> 0:04:54.240 questions along how about how long people stay on the 0:04:54.320 --> 0:04:56.640 medications and whether they go on and off because of 0:04:56.680 --> 0:04:59.120 some side effects. So, you know, I think it is 0:05:00.400 --> 0:05:03.839 you know, potentially likely to expand demand. 0:05:03.839 --> 0:05:06.800 But we'll see, we'll see. 0:05:06.800 --> 0:05:10.560 And I remember Novo had a what they call the 0:05:10.600 --> 0:05:14.440 next gen treatment, cagri Semi, which didn't do well, and 0:05:14.480 --> 0:05:17.040 that tanked the stock. And it's partly why the stock 0:05:17.080 --> 0:05:20.440 has fallen by about half this year. Is that kind 0:05:20.440 --> 0:05:22.240 of an experiment that just went off the rails. And 0:05:22.279 --> 0:05:23.719 this was always kind of in the offing. 0:05:24.440 --> 0:05:26.720 I mean I think, uh, you know, companies have been 0:05:26.760 --> 0:05:31.320 looking for an oral GLP one weight awes drug, you know, 0:05:31.520 --> 0:05:34.680 for uh, you know, for years. I think this has 0:05:34.760 --> 0:05:37.520 been a goal of the of the market. I mean, 0:05:37.560 --> 0:05:41.560 there is an oral pill for the diabetes indication. 0:05:41.760 --> 0:05:44.120 Ye sorry, all right, that's good. 0:05:44.160 --> 0:05:45.400 I mean I think this will just it'd be big 0:05:45.440 --> 0:05:47.600 for a lot of folks and hopefully the cost will 0:05:48.640 --> 0:05:50.400 continue to come down and now I'll make it available 0:05:50.440 --> 0:05:51.040 for more and more people. 0:05:51.080 --> 0:05:52.600 John Tazzi Healthcare Report Bloomberg News. 0:05:52.600 --> 0:05:54.480 Thanks so much for joining us here again, a good 0:05:54.560 --> 0:05:57.840 day go for Novo Nordisk bloodmore coming up. 0:05:57.880 --> 0:05:58.600 This is Bloomberg. 0:06:01.040 --> 0:06:04.720 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:04.800 --> 0:06:08.200 weekdays at ten am Eastern on Applecarplay and Android Auto 0:06:08.279 --> 0:06:11.359 with the Bloomberg Business App. Listen on demand wherever you 0:06:11.400 --> 0:06:14.800 get your podcasts, or watch us live on YouTube. 0:06:15.320 --> 0:06:17.039 All right, here's the story that kind of caught me 0:06:17.080 --> 0:06:20.000 by surprise. I just wasn't on my radar screen. Sax 0:06:20.160 --> 0:06:23.839 Mull's bankruptcy year after raising billions for a turnaround. 0:06:24.000 --> 0:06:24.839 When did that happen? 0:06:25.600 --> 0:06:27.880 I know they've been having problems with paying off their 0:06:27.920 --> 0:06:29.960 debt and just kind of trying to restructure everything. 0:06:30.000 --> 0:06:32.200 But this has been like a slow moving train rad. 0:06:32.160 --> 0:06:33.720 I mean, it's a phenomenal brand. 0:06:33.720 --> 0:06:33.840 Here. 0:06:33.960 --> 0:06:36.120 Let's get to get the latest reporting on this. 0:06:37.160 --> 0:06:41.120 Basu joints us here Bloomberg News credit reporter so Reshman. 0:06:41.160 --> 0:06:42.839 What's going on with our friends at sas. 0:06:43.360 --> 0:06:46.279 Sax is running out of money and the over the 0:06:46.279 --> 0:06:50.120 weekend we saw some lenders go into enter into confidential 0:06:50.160 --> 0:06:54.600 discussions to discuss the company's new money needs. 0:06:55.160 --> 0:06:57.640 And what are the options on the table. At this point, a. 0:06:57.720 --> 0:07:01.240 Chapter eleven is a possibility. Given the company is running 0:07:01.240 --> 0:07:04.760 out of cash. It's been having issues with its suppliers, 0:07:05.040 --> 0:07:08.440 so right now everyone's kind of scrambling to figure out 0:07:08.440 --> 0:07:10.240 how to salvage the company. 0:07:10.760 --> 0:07:12.360 So talk to us about what they've been doing over 0:07:12.400 --> 0:07:14.920 the last several years and trying to stage this off 0:07:14.960 --> 0:07:16.600 and maybe raise some other capital. 0:07:16.640 --> 0:07:19.200 What's what's been the recent pass life for this company? 0:07:19.280 --> 0:07:22.680 Well, Sex has always had some issues with its vendors, 0:07:22.880 --> 0:07:26.080 and in late twenty twenty four they decided to partner 0:07:26.160 --> 0:07:30.760 up with Neiman Marcus in a two point seven billion deal, 0:07:30.880 --> 0:07:33.680 but the integration has not been growing great and the 0:07:33.720 --> 0:07:38.720 company is still struggling with negative EBITA, dealing with late 0:07:38.800 --> 0:07:41.320 payments to vendors. So it's just been having a lot 0:07:41.360 --> 0:07:43.680 of issues, a lot of pressure points coming all together 0:07:43.800 --> 0:07:45.400 once right before the holidays. 0:07:46.120 --> 0:07:48.560 Who are the investors that have a lot at stake 0:07:48.720 --> 0:07:51.440 in this debt situation for Sex. 0:07:51.520 --> 0:07:53.320 Yeah, it's a lot of you know, the Wall Street 0:07:53.400 --> 0:07:57.400 lenders that are involved in this name, and they've just 0:07:57.480 --> 0:07:59.400 seen you know, they're having a really tough time right 0:07:59.440 --> 0:08:03.160 now with like brounds, et cetera. So they're seeing you know, 0:08:03.240 --> 0:08:06.720 in Sacks, we're now seeing the debt trading in like 0:08:06.760 --> 0:08:07.720 the single digits. 0:08:08.520 --> 0:08:10.040 How much debt do they have outstanding? 0:08:10.440 --> 0:08:13.360 So they have more than two They did a two 0:08:13.360 --> 0:08:15.920 point two billion deal and on top of that, they 0:08:16.400 --> 0:08:19.440 did rescue financing back in August which added another like 0:08:19.480 --> 0:08:21.280 six hundred million, So. 0:08:21.200 --> 0:08:23.440 There's this is real money for the banks are on 0:08:23.480 --> 0:08:23.920 the hook for. 0:08:24.120 --> 0:08:26.000 Yeah, this is a lot. This is a lot of 0:08:26.040 --> 0:08:27.560 pain that's going to be going around. 0:08:28.960 --> 0:08:30.560 So how do you see this shaping up? 0:08:30.600 --> 0:08:32.640 What will you be looking for in twenty twenty six 0:08:32.720 --> 0:08:35.839 as this continues to be a story where SAX is 0:08:35.880 --> 0:08:38.840 working with creditors trying to persuade them to you know, 0:08:39.360 --> 0:08:44.559 pitch in more or restructure their existing agreements. 0:08:45.559 --> 0:08:49.559 We'll be looking to see how the company and its 0:08:49.600 --> 0:08:52.240 lenders are going to structure the new money raise, whether 0:08:52.360 --> 0:08:56.360 or not that's going to take the form of a 0:08:56.400 --> 0:08:59.520 bankruptcy loan or a dip. And we'll also be looking 0:08:59.559 --> 0:09:02.320 to see who's ultimately going to take the keys, if 0:09:02.320 --> 0:09:04.320 we're going to see a change of control, and if 0:09:04.440 --> 0:09:08.160 lenders are going to assume control of the company. We're 0:09:08.200 --> 0:09:10.839 looking to be seen whether or not we see SAX 0:09:10.920 --> 0:09:12.920 and Nieman kind of separate from each other. 0:09:13.960 --> 0:09:16.240 I mean, boy, some of this is brutal here. 0:09:17.200 --> 0:09:19.960 So they have interest payment one hundred million dollars due 0:09:20.320 --> 0:09:23.959 like December thirtieth, nine hundred and forty one million dollar 0:09:24.440 --> 0:09:27.280 portion of sex second out notes. Not sure what a 0:09:27.320 --> 0:09:29.160 second out note is. And I've been in that business 0:09:29.200 --> 0:09:31.360 a long time. Trades for seven and a half cents 0:09:31.400 --> 0:09:31.880 on the dollar. 0:09:32.400 --> 0:09:35.160 Yeah, that's that's that is brital. That's just stress level. 0:09:35.679 --> 0:09:37.680 Yeah, and about seven hundred and sixty two million of 0:09:37.760 --> 0:09:40.040 more senior debt was quoted at forty eight cents. 0:09:40.040 --> 0:09:41.440 So yeah, market's telling you. 0:09:41.600 --> 0:09:43.560 Yeah, the market's saying that there's not a lot of 0:09:43.640 --> 0:09:46.360 value here. Like Sacks and Neeman markets were kind of 0:09:46.559 --> 0:09:48.839 known for their real estate value. But what we're seeing 0:09:48.960 --> 0:09:52.840 is that's really maybe not the case. So that's something 0:09:52.840 --> 0:09:55.800 that's going to be deliberated over the next coming weeks. 0:09:55.840 --> 0:09:58.320 How much is that real estate worth? How much are 0:09:58.720 --> 0:09:59.920 is the company's name worth? 0:10:00.200 --> 0:10:01.880 Reshmie, let me ask you a question because I know 0:10:01.880 --> 0:10:04.200 a lot of our listeners are AMEX Platinum card holders, 0:10:04.240 --> 0:10:08.280 which means they get a fifty dollars credit at Sacks 0:10:08.320 --> 0:10:10.360 every six months and they'll be going into the stores 0:10:10.400 --> 0:10:13.520 to use that. Does this affect the operations on the ground, 0:10:13.600 --> 0:10:17.280 Will customers see any difference when they go into Saxsmith Avenue? 0:10:17.440 --> 0:10:19.080 Well, I mean right now, we're seeing a ton of 0:10:19.120 --> 0:10:22.040 promotions taking place right now, and that's something that we've 0:10:22.080 --> 0:10:25.679 seen in retail for years now, a very promotional environment. 0:10:25.880 --> 0:10:28.440 So there's going to be a lot of discounts out there. 0:10:29.080 --> 0:10:32.400 Are there other Sacks type stories out there that you're 0:10:32.440 --> 0:10:36.720 monitoring the name that could be a real credit problem. 0:10:37.080 --> 0:10:40.600 Credit problem maybe Container Stores is the one that we 0:10:40.720 --> 0:10:44.000 are kind of keeping an eye out. They filed for bankruptcy, 0:10:44.040 --> 0:10:46.560 they exited, but there's you know, we're seeing a lot 0:10:46.600 --> 0:10:48.440 of discounts taking place there as well. 0:10:48.640 --> 0:10:51.559 But this feels very different from you know, the problems 0:10:51.559 --> 0:10:53.400 that First Brands or Tree Colore had, which kind of 0:10:53.440 --> 0:10:55.600 came from out of nowhere. This feels, I was saying 0:10:55.600 --> 0:10:57.680 to Paul, like a slow moving train wreck. We've known 0:10:57.720 --> 0:11:00.920 about these problems at Sacks and Cantake for a while 0:11:01.000 --> 0:11:03.040 and it's a matter of just the two sides working 0:11:03.040 --> 0:11:03.800 it out right. 0:11:03.880 --> 0:11:06.960 Like Sachs and Niman, the integration has just gone so 0:11:07.160 --> 0:11:09.600 wrong in so many ways and it's really not capturing 0:11:09.640 --> 0:11:13.679 the synergies that maybe lenders had initially hoped for when 0:11:13.720 --> 0:11:14.360 they did the deal. 0:11:14.559 --> 0:11:16.400 Is there a call maybe for just a new management 0:11:16.440 --> 0:11:18.240 team that kind of come in there, if there is in. 0:11:18.160 --> 0:11:21.880 Fact a reorganization here or filing, I mean. 0:11:22.000 --> 0:11:25.400 We could definitely see lenders taking control of the company 0:11:25.440 --> 0:11:27.760 and installing their own people. 0:11:27.920 --> 0:11:30.719 All right, Rushmi, thanks so much. Appreciate that that was 0:11:30.760 --> 0:11:31.959 the story. I was not aware of. 0:11:32.000 --> 0:11:35.040 Rashmi Basu. She's a credit reporter for Bloomberg News joining 0:11:35.080 --> 0:11:37.880 Slacker in our Bloomberg Interactive Broker studio. And you know, 0:11:37.920 --> 0:11:39.920 if you bring somebody in here and you say, oh 0:11:39.920 --> 0:11:41.920 my gosh, is this a trend? And what do we 0:11:41.960 --> 0:11:47.040 hear with first brands and clear no, it is idiosyncratic. 0:11:46.320 --> 0:11:50.120 Right yes, and one off well, and that really shocked 0:11:50.160 --> 0:11:52.079 people because it felt like it came from out of nowhere. 0:11:52.080 --> 0:11:53.559 They didn't have a sense that this was happening. 0:11:53.679 --> 0:11:57.240 Clearly, the integration with Neiman Marcus has been kind of troubling, 0:11:57.320 --> 0:11:59.320 so people had a sense that this was not going 0:11:59.320 --> 0:12:01.640 so well. And we know that the department stores as 0:12:01.679 --> 0:12:04.520 a whole just don't have a business model that resonates 0:12:04.520 --> 0:12:05.520 with younger consumers. 0:12:05.640 --> 0:12:05.840 Yep. 0:12:05.920 --> 0:12:10.160 Absolutely, And if you don't have a digital strategy down 0:12:11.160 --> 0:12:13.640 then you're just in a world of hurt here and then. 0:12:14.000 --> 0:12:16.319 And it just I think being a former banker with 0:12:16.400 --> 0:12:19.240 the screams to me is just the capitol structure isn't 0:12:19.240 --> 0:12:20.960 appropriate for the business the way it is today. You 0:12:21.000 --> 0:12:23.079 can't capital, you can't have that much debt on this 0:12:23.160 --> 0:12:25.439 type of business. Maybe you could have a generation to go, 0:12:25.760 --> 0:12:28.400 but given the economics of the department store business, as 0:12:28.440 --> 0:12:31.040 you mentioned, it just doesn't feel like this story capital structure. 0:12:31.160 --> 0:12:33.960 So somebody's gonna have to pay, and it looks like 0:12:34.000 --> 0:12:36.720 those junior note holders it's seven and a half cents 0:12:36.760 --> 0:12:38.440 on the dollar they're going to pay, and even the 0:12:38.480 --> 0:12:41.800 senior stuff they're going to pay as well. So stay 0:12:41.800 --> 0:12:43.840 on top of that story for sure. SMP of fifteen, 0:12:44.320 --> 0:12:45.319 the Dow up a needing. 0:12:45.800 --> 0:12:47.079 This is Bloomberg. Good morning. 0:12:51.960 --> 0:12:55.640 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:12:55.760 --> 0:12:58.800 weekdays at ten am Eastern on Apple, Cocklay and Android 0:12:58.840 --> 0:13:02.160 Auto with the Bloomberg Business App. Listen on demand wherever 0:13:02.200 --> 0:13:05.720 you get your podcasts, or watch us live on YouTube. 0:13:06.120 --> 0:13:09.200 I haven't seen the Bloomberg reporting all morning about how 0:13:09.240 --> 0:13:11.480 many gajillions of people are gonna be flying this weekend. 0:13:11.600 --> 0:13:12.840 I mean, it's just crazy. 0:13:13.559 --> 0:13:15.720 I feel like this schedule has changed a little bit 0:13:15.720 --> 0:13:18.240 of calendar has changed since COVID because people are able 0:13:18.280 --> 0:13:20.920 to leave it a little bit earlier work from home, 0:13:21.000 --> 0:13:22.520 you know, for the few days before the holiday. 0:13:22.600 --> 0:13:24.920 Yeah, apparently like yesterday the day before where it was 0:13:24.920 --> 0:13:27.200 the crazy day. So that just kind of brings you 0:13:27.240 --> 0:13:29.120 to how are the airlines doing that there? And what's 0:13:29.120 --> 0:13:30.920 the out look for twenty twenty six for the airlines? 0:13:30.960 --> 0:13:34.480 Here George Ferguson, Senior Aerospace, Defense and Airlines anast from 0:13:34.480 --> 0:13:35.439 Bloomberg Intelligence. 0:13:35.760 --> 0:13:37.959 It says he's on Zoom from the Jersey office. I'm 0:13:37.960 --> 0:13:39.520 not buying it. I think it's a beach and you. 0:13:39.520 --> 0:13:43.280 Got a backdrop there that's CGI. But I look at him, 0:13:43.360 --> 0:13:46.360 he's in the Princeton office. I mean, all right, George, 0:13:46.400 --> 0:13:48.120 thanks for joining us here. I appreciate you putting the 0:13:48.160 --> 0:13:52.280 effort there, sir, talk to us about the airline business. 0:13:52.280 --> 0:13:54.400 How healthy is it today and kind of what's the 0:13:54.440 --> 0:13:57.040 outlook for tomorrow? Because every time I got on a plane, 0:13:57.080 --> 0:13:58.319 it's packed, dude. 0:13:59.480 --> 0:14:03.520 It is. But remember, you know, those revenue management officers. 0:14:03.520 --> 0:14:05.880 They don't like to let airplanes go down the runway 0:14:05.920 --> 0:14:09.240 less than eighty plus percent full anymore. So you need 0:14:09.280 --> 0:14:11.200 to tell me the price that everybody paid before I 0:14:11.240 --> 0:14:14.440 get really excited about packed airplanes. Anyways, I'll get off 0:14:14.480 --> 0:14:16.920 that soapbox right now. Look, I think you know, as 0:14:16.920 --> 0:14:19.360 we get into twenty twenty six, we're looking at schedules, 0:14:20.400 --> 0:14:22.320 we're seeing a lot of the growth coming from the 0:14:22.320 --> 0:14:26.160 big full service carriers. United especially continues to sort of 0:14:26.600 --> 0:14:28.640 pour on the gas here and put a lot of 0:14:28.680 --> 0:14:31.680 capacity in the marketplace. Delta a bit less than them, 0:14:31.720 --> 0:14:35.400 America even a bit less than them. And as we 0:14:35.440 --> 0:14:37.600 get into the new year, we're going to have Southwest 0:14:37.640 --> 0:14:40.920 starting to sell premium seats, and everybody's got a plan 0:14:41.400 --> 0:14:45.000 for bringing more premium seats to the marketplace. So you know, 0:14:45.120 --> 0:14:48.080 when we just look at the full service carriers, they're 0:14:48.120 --> 0:14:51.400 going to grow higher than GDP levels. They are going 0:14:51.440 --> 0:14:54.360 to be I mean, actually not the latest GDP number, 0:14:54.360 --> 0:14:56.480 which is a bit hot, but we're going to see 0:14:56.480 --> 0:14:59.760 like three four percent seat growth in the first half 0:14:59.800 --> 0:15:02.920 from those big full service carriers. I think that means 0:15:02.920 --> 0:15:06.280 there's probably a risk premium seats are going to start 0:15:06.320 --> 0:15:09.760 to feel some pressure on fares, and that's been you know, 0:15:09.800 --> 0:15:13.840 the really big driver of this business, especially for those 0:15:13.840 --> 0:15:16.960 big full service carriers, has been driving their profitability on 0:15:17.000 --> 0:15:21.680 the on the you know, economy end. We're seeing Spirit 0:15:21.720 --> 0:15:24.920 airlines there sort of between this world and that world 0:15:24.960 --> 0:15:26.280 a little bit. We're trying to figure out if they're 0:15:26.280 --> 0:15:30.080 going to survive, might get bought by Frontier. They've dropped 0:15:30.080 --> 0:15:32.520 a bunch of airplanes. We're seeing some of these carriers 0:15:33.000 --> 0:15:36.560 cut capacity because of weakness in those seat prices. So 0:15:36.640 --> 0:15:40.120 I think we'll start to see at least some you 0:15:40.160 --> 0:15:43.560 know firming up of that of that basic economy as 0:15:43.600 --> 0:15:45.440 the market tries to get that back in balance. So 0:15:45.440 --> 0:15:46.600 I think that's what we're going to see in the 0:15:46.680 --> 0:15:47.640 first half of the new year. 0:15:47.800 --> 0:15:49.440 So it sounds like there's going to be a surplus 0:15:49.480 --> 0:15:52.680 of those premium seats and then that leaves big empty 0:15:52.680 --> 0:15:55.480 hole here for the frontiers and the spirits. Are they 0:15:55.920 --> 0:15:58.320 going to be forced to offer also some kind of 0:15:58.400 --> 0:16:01.400 premium version of what they currently have an offer? 0:16:02.240 --> 0:16:02.640 I don't know. 0:16:02.760 --> 0:16:04.960 I mean, I think everybody's trying to figure out a 0:16:05.000 --> 0:16:07.800 way to get more premium in their airplane. They're not 0:16:07.960 --> 0:16:10.680 you know, they're not forced, but they want they want 0:16:10.680 --> 0:16:14.400 that premium travel that's gonna just keep flying through, you know, 0:16:14.440 --> 0:16:17.280 through good and bad economic times and not have the 0:16:17.360 --> 0:16:19.800 challenges of inflation on their budget and things like that. 0:16:20.400 --> 0:16:22.680 So I don't know if they're forced, but we're definitely 0:16:22.760 --> 0:16:26.160 seeing all of them look at ways to increase the 0:16:26.200 --> 0:16:27.960 price they can get the customer to pay for a seat, 0:16:28.000 --> 0:16:30.200 whether it's block a middle seat, you know, so it 0:16:30.280 --> 0:16:32.760 might be three by three kind of airplane, they might 0:16:32.760 --> 0:16:35.600 block the middle seat. Some of them are talking about putting, 0:16:36.280 --> 0:16:38.600 you know, more reclined and nicer seats in the front 0:16:38.600 --> 0:16:42.280 of the airplane. So everybody, I think everybody as a 0:16:42.320 --> 0:16:45.640 plan for how to get more premium in their airplane. 0:16:45.640 --> 0:16:48.560 And again that's gonna mean like everything in the airline 0:16:48.560 --> 0:16:51.880 business will get off sides on premium before it's all done. 0:16:51.920 --> 0:16:54.440 I think it begins in the first half. I don't 0:16:54.440 --> 0:16:57.760 think premium seat prices are going to create Unfortunately, we're 0:16:57.760 --> 0:16:59.720 not gonna be able to go anywhere really super cheap 0:16:59.720 --> 0:17:01.880 flying in front of the airplane in the first half 0:17:01.880 --> 0:17:03.440 of the next year. But I don't think it'd be 0:17:03.440 --> 0:17:05.080 as good as it was in twenty twenty five. 0:17:06.600 --> 0:17:09.520 Wages, that's a big cost component for these airlines. I 0:17:09.520 --> 0:17:12.560 want my pilots happy and want them feeling like they're 0:17:12.840 --> 0:17:13.520 well paid. 0:17:14.080 --> 0:17:16.960 Talk to those about the wage the dynamic in the industry. 0:17:17.480 --> 0:17:19.879 Yeah, I mean, look, you know, we still see you know, 0:17:20.080 --> 0:17:21.840 I don't know that I want to call it a shortage, 0:17:21.880 --> 0:17:24.320 but you know, it's a it's a difficult balance between 0:17:24.880 --> 0:17:27.520 the number of pilots out there and what's needed by 0:17:27.520 --> 0:17:32.040 the airlines and the you know, the number of people 0:17:32.040 --> 0:17:35.720 coming into the industry and getting air transport licenses and 0:17:35.760 --> 0:17:39.040 things like that, and so the pilots are still decently paid. 0:17:39.840 --> 0:17:43.439 You know, they came off years decades ago. They just 0:17:43.480 --> 0:17:46.080 had many, many bad years. There was a surplus of them. 0:17:46.480 --> 0:17:48.560 So they've been catching up and they got these twenty 0:17:48.560 --> 0:17:51.879 percent increases in the last couple of contracts. And in 0:17:51.920 --> 0:17:54.080 the last contract we saw a twenty percent increase and 0:17:54.119 --> 0:17:56.920 then a four percent five percent, so actually it was 0:17:56.920 --> 0:17:58.760 a couple it was a five and a couple of 0:17:58.840 --> 0:18:04.400 fours before two percent salary gains increases. They're pretty nice 0:18:04.400 --> 0:18:07.640 in this economy, and the airlines really can't afford that 0:18:07.760 --> 0:18:10.119 kind of inflation. In their cost base. The pilots are 0:18:10.119 --> 0:18:12.359 a big part of it, and so they keep rolling 0:18:12.400 --> 0:18:15.720 out bigger airplanes. And that's another challenge in the marketplace. 0:18:15.800 --> 0:18:18.600 Right as you put a bigger airplane behind the pilot 0:18:18.640 --> 0:18:21.639 so you could defray their costs over more seats, you 0:18:21.720 --> 0:18:24.040 got to fly all those seats into these markets, and 0:18:24.400 --> 0:18:27.560 sometimes you're discounting more to fill the airplane. So that's 0:18:27.600 --> 0:18:31.639 a challenge and continues in the new year. We think 0:18:31.680 --> 0:18:35.480 the airlines would be managing cost inflation there and maintenance 0:18:35.520 --> 0:18:36.639 and gates everywhere. 0:18:36.920 --> 0:18:38.879 So wager is a big part of the airlines costs 0:18:39.320 --> 0:18:42.760 the biggest part, but then fuel is the second biggest 0:18:42.960 --> 0:18:45.720 or it can be and jet fuel has actually come 0:18:45.760 --> 0:18:48.720 down in twenty twenty five. Is that going to continue 0:18:48.720 --> 0:18:50.640 to be a tailwind in twenty twenty six. 0:18:51.200 --> 0:18:53.400 So you know, we kind of we looked at it recently, 0:18:53.520 --> 0:18:56.440 put it out on the Bloomberg Terminal BI Space AI RLN. 0:18:56.520 --> 0:18:59.720 We did some scenario analysis on this look. I have 0:18:59.720 --> 0:19:03.840 a hard time seeing fuel prices dip significantly lower than here. 0:19:03.920 --> 0:19:07.320 But I am no oil man. Right if I was, 0:19:07.359 --> 0:19:10.960 i'd own a football team, But I'm not oil man. 0:19:11.359 --> 0:19:13.240 I don't necessarily where those prices are going. All I 0:19:13.240 --> 0:19:15.360 could tell you is that they stick around two dollars, 0:19:15.840 --> 0:19:18.439