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tv   Whatd You Miss  Bloomberg  January 13, 2022 4:30pm-5:01pm EST

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romaine: let's take a look at how mark is performed on this day. we continue to see weakness in all of the major indices. the s&p 500 down 1.4% on the day. the real story is what we saw on the nasdaq. the nasdaq composite and 100 each closing down by 2.5%. a lot of this tied to what we are seeing in the yield space. you are looking at a 10 year yield camped out around 170. i happen taking a look at some of the moves we have been seeing in the nasdaq 100. remember, we are only nine days into the trading year so far and we have had two days were we have seen 2% drops on the nasdaq
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that hyper volatility appears to be the set up as we await for more clarity with regards to the economic data and earnings and fed policy. that is the market wrap for today. "what'd you miss?" starts right now. ♪ caroline: i am caroline hyde. today's triple take looks at the airlines. we dig into the three things hitting airlines right out from earnings to omicron and 5g. it is fighting to restore levels back to where they were before covid hit today, we got numbers from delta. promising? taylor: it is all promising when balancing the short-term with the long-term. short-term, it is not looking good with another loss in the quarter as you look at the
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impact of the omicron variant. but positive when you think about analysts saying the long-term picture is delta sounded more bullish. still looking at the full year profitability. again, try to restore some of the reduced service by the second half of 2022. omicron and the impacts of it remain temporary. romaine: healthy profit was the word they used from the second quarter onwards. interesting commentary. this comes on a day where we are getting a lot of concerns over staffing shortages. we want to bring in our first guest on what is going on out there in this sector. elaine becker is a market that has a market perform rating on delta -- has a market perform rating on delta. delta seemed confident about the idea of a return to profitability. they made it clear there will be
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bumps the next 60 days, and there were with regards to the airline recovery as we try to work our way through whatever this latest bout of covid has brought upon us. elaine: exactly so. it is pretty consistent with our view. we thought january would be pretty tough because of a combination of the weather and omicron and airlines reducing their flight schedules, including delta. they took down some flight schedules. they did not talk a lot about it today, but the reduced january. beginning presidents' day weekend, so that is mid-february, we should see good results right through march and then spring break at the passover and easter holidays in april, and then may you start to see the rent up to summer june through august. yeah. that is exactly what we think is going to happen. that is pretty much what they said. in this case, march will make
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the quarter. caroline: for the business traveler, it is important. interesting traveling over the holiday time is how popular business was. people were worried about their health and willing to spend the extra amount to get their space. will not permanently change the way retail consumers approach air travel versus a consumer that is not going to back as quickly as every airline has? helane: i think you are right. people are definitely willing to pay up for the extra legroom. i think they were always willing to pay up for extra like at a little more space in the seat. it is just that the differential between the lower economy or main cap affairs at the high business class was so large that it was hard to wrap your head around paying that difference. you were kind of hoping for the
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upgrade. i think now the difference is smaller between the highest and the lowest fares. the lowest business class for premium cost fear is more competitive -- fare is more competitive with main cabin. so people say it is not that big of an increase. i will go ahead and pay up so i get on first and get the overhead bin and get comfortable in my seat and i am happy. taylor: yeah, certainly i know we have all been there at one point or another. talk to us more about profitability and price elasticity airlines and then a labor shortage or a labor workforce that certainly is demanding more. the impact of that on profitability and the willingness and ability to pass that onto the consumer. helane: we are thinking about that like three different ways i guess. first is cost headwinds.
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you mentioned the two big ones, labor cost and fuel cost. we are definitely seeing those cost pressures in the first part of the year. oil prices being $87 a barrel and jet fuel could be $230 to $250 a gallon. that is not consistent with other airlines. definitely pressure. to your point, everyone has opened labor contracts right now. delta is a negotiation with their pilots. american with pilots and flight attendants and mechanics. united with pilots. this will be a major issue for 2022. nobody wanted to negotiate during the pandemic. you cannot blame anybody. nobody knew what was going to happen. the past few years have been so fraught that postponing negotiations meet a lot of sense. delta's pilots said they are resuming negotiations with management next week so we should start to see
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resolutions but we are not expecting anything before the end of the year. and then as far as demand goes and how we are thinking about it, airlines are going to have no choice but to raise ticket prices because of these cost pressures. number two, from a market perspective, margins come under pressure unless they can get the revenue side along with the demand side. when you think about europe, which we are still holding out hope that europe will be really strong this summer. you remember last year when greece was the first country to open up. americans literally flocked to greece. and then iceland was the second and said you are welcome here. you don't have to test or quarantine. i know we went to ecuador and did not have to quarantine, just test to go back to get it was a great time -- to go back. it was a great time. countries will open up and you have three years worth of
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demand. romaine: that is good. you joke about doing your travel. we have all look to vacations or some sort of leisure travel in one way or another. i am not hearing of a lot of folks booking business travel. delta said they are confident they will see pent demand for business travel. our week -- are we? helane: i don't know how to enter that question because i feel like it should be yes. we should see some pent-up demand. 60% of 2019 levels at the end of the year. they think that will grow. i think maybe we get back to 80%, 85% of pre-pandemic levels by the end of this year. i think 40,000 people went to consumer electronics show last week compared to 170,000 in 2019. obviously, business travelers want to travel.
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you made the comment that you and me and others are planning ever leisure trips and vacations, so how can we say to our bosses we do not want to travel for work? feel really uncomfortable doing that, but we will take a vacation somewhere great. i think you will see business travel come back, just not as robustly and not as quickly because every variant shifts back return to office. once everybody thinks about getting back to the office, how do we accept visitors? how do we say, ok, how can i be onset with you guys again? will you allow me to come by, or do i have to show you i have been vaccinated, boosted, and everything else? i think that is pretty consistent around the u.s. at least. we will see. i am reaching out to clients to see if they want me to visit them, to see if i can get back on the road. romaine: we all are.
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we would love to catch up with you maybe in a couple weeks and get an update on anything you have been looking at. one of the best in the business covering the airline industry. we'll continue this conversation right now and bring in bob, president of an airline consulting firm. bob, we are having this position about getting back on planes, whether for leisure travel or business travel, but anyone who has traveled over the past few months knows that a lot this is not about demand. it is about the supply of workers, whether baggage handlers, flight attendants, pilots, and whatnot, and we know airlines have had a little struggle in keeping up with that side of the equation. bob: it has been a reliability problem. it is absolutely the case. there is a lot of demand out there and some parishes are doing a better job of supplying it to make the trips happen. we have had some failures unfortunately.
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some of which were out of the control of the industry but realistically could have been better forecasted or estimated. taylor: another big headwind was 5g. we had a delay. we had verizon and a few other carriers agreed to a few week delay as we start to think about the impact of 5g in taking off and landing. what do you see as a big risk? bob: this is kind of a classic class between a very safety conscious industry in aviation globally and a telecommunications and discrete that really wants to monetize the dollars they spent in u.s. frequency auctions for c band 5g service. they want to sell you a faster video download. the problem is that going back almost 40 years, what is
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integral to how airlines fly, not just airline airplanes, but the private jets and the business aircraft and general aviation and helicopters, some of which are operated by at&t and verizon and t-mobile, they all use their operations and safety on something that could be interfered with. if it is interfered with by adjacent 5g bed with, they do not have what they have had for 40 years, and that is the issue. caroline: to be fair, i am sure verizon and at&t any providers would not want any do away with security or precautions to put in place, but they have made an investment to help the economy grow with faster connectivity. can you give us any real life
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examples of where the connectivity of the radio signals that airlines use happen impacted? 5g has been rolled out in other countries and to some extent with success. bob: it has been rolled out in other countries. there are some very instructional changes made to the 5g rollouts in canada as well as in europe. for example, the rollouts there protect the final 90 seconds of flights throughout the airport as to what u.s. telecoms proposed, which is about 15 seconds they also operate at much lower power in the several miles surrounding the airport. not the 6000 watts 5g operates at in the u.s., but 60 watts cases so 1/100 of the power. the antenna that are used are tilted downwards so they are aimed towards the ground as opposed to horizontally, which
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gets them better range. the telecoms to my mind have been minimizing the safety risks, which have already been implement it and are in place in europe and canada for their u.s. rollouts. it is really surprising to me. they really should know better. it affects their owns operations. romaine: obviously, there has been a lot of lobbying coming from one particular side of this. sometimes with the pushback, you have to give in temporarily. do you see a resolution to this anytime soon? bob: i do see resolution and it is likely to go in the direction canada and the eu have gone, which is to say we will reduce the power in the 90 seconds surrounding airports. we will reorient antennae to not potentially interfere with aircraft on the horizon. and we will make sure we operate
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at power levels that are appropriate to not interfere in the critical phases of flight. i think what is missed here unfortunately, protecting all phases of flights. for example, it will still be an issue with air traffic control and advisory services en route. it will still affect some of the modern gps and radio departure and arrival procedures. and there are operations conducted off air but in large city centers. we have a situation today where the heliport of the mayo clinic in indianapolis could not except commercial helicopter operations because of 5g. all helicopter and all medical transport.
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that is an unfortunate fallout that has to be protected. taylor: very interesting. i think all of our ears perked up when you said that because the mayo clinic is something we all know. what do you see as the resolution to that? specifically in and around some of the airports. bob: the mayo clinic and similar situations will have to be considered as the equivalent of a major airport because they do conduct these commercial helicopter operations pretty much 24 hours. for this purpose, they are the equivalent of a major airport. for exhibit, chicago o'hare or new york laguardia. there will be a resolution. it is unfortunate that the telecoms folks paid $71 billion for this spectrum not really understanding what the disclaimer should have been since this problem has been known since the 1960's and has
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been written about extensively since 2012. this did not conclude until january 2021. caroline: feels like a failure of oversight. we will have to address with the other side of the story. really interesting. thank you very much. focused on consulting to that particular industry. coming up, we will dig into another area that airlines are navigating. a playmaker outselling airbus for the first time in three years, changing the landscape of the largest airplane makers. this is bloomberg. ♪
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romaine: today's triple take is
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focused on the airline industry. earlier this week about we sought airplane order numbers out of boeing and airbus for 2021, and i am told boeing came out on top for the first time in three years. caroline: we have some catching up to do, but you are right. other carriers helping. really stirring interest back for the max. managing to lock in more than 900 last year. this is about trying to win back some momentum. romaine: gross orders. i feel like there is a distinction there. caroline: u.s. versus europe, this is about airbus. delivering far more planes over the past few years. boeing were having to steal back some of the momentum when it comes to people on the max.
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taylor: let's ask the expert. george ferguson, what was behind the big increase for boeing? >> thanks for having me on. i think the biggest part of the increase is boeing was motivated to take orders. boeing, when they looked at 2022 and your delivery schedule, there were gaps ahead. they really went after some of their biggest and best customers and offered them pretty nice pricing to place some large orders and take pretty immediate deliveries. for example, southwest, 150 of those orders. they will have 70 aircraft in 2022. that could be up to six months. they had a gap in the delivery schedule and needed to fill it. romaine: there was a story on the bloomberg terminal, a bloomberg exclusive about the
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potential return of the 737 max to commercial flights in china this seemed to be based on an operational test fight that took place on january 9. what do you know about the market over there? george: that is really good news, and i think that is some of the reason why boeing went out and got aggressive on orders the last year because they did not know when the chinese were going to reauthorize them in china. china is a really important market for both boeing and airbus. back before the pandemic, it was turning to approach some 300 a year. a big source. last year, airbus delivered 120 family aircraft into that market about a quarter of all family deliveries. so now, it looks like china will reopen for boeing deliveries, which is good news as well. potential deliveries for 2022. now it seems like a better year
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for boeing because of that. caroline: 21 flying ban for the max after -- 20 month flying ban for the max after two fatal air crashes. boeing is only in excess of 4000. george: i think we look at backlogs and never get too excited. they never look as bad as you might think or as good. they have kept their core customers in the fold, which is very large. the challenge is when we get past the pandemic to raise the rates and deliver the airplanes. i think that is one of the reasons why airbus is moving towards higher production rates and turn the backlog orders into cash. but again, airlines, their fortunes change over time.
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i think it will be key to build more aircraft after the pandemic , raise production rates, improve profits, cash flow, probably more important. taylor: think u.s. always to george ferguson of bloomberg intelligence. stick with us. final thoughts next. this is bloomberg. ♪
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>> from the heart of where innovation, money, and power collide, in silicon valley and beyond, this is "bloomberg technology" with emily chang. ♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." coming up in the next hour, taking response ability. house committee invest getting the january 6 attack on the u.s. capitol has subpoenaed big tech social media giants, demanding
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