October 3, 2025 • 22 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
-Ed Ludlow, BTech Co-Anchor, discusses how BlackRock Inc.'s Global Infrastructure Partners is in advanced talks to acquire Aligned Data Centers, which could be valued at about $40 billion in a transaction. MGX, an AI investment company, is also involved in the talks and would invest independently as part of a transaction, with Mubadala having already invested in Aligned.
- Siddharth Philip, Bloomberg Chief Correspondent for Global Aviation, discusses how Boeing Co.'s 777X is slated to fly commercially for the first time in early 2027, a fresh setback to the US planemaker. The delay could result in potentially billions of dollars in accounting charges, with analysts estimating the non-cash accounting charge could run from $2.5 billion to as much as $4 billion.
-- Jody Lurie, Bloomberg Intelligence Credit Analyst, discusses her outlook for cruises. Bloomberg Intelligence says that Carnival, Royal Caribbean and Norwegian may need to be more vigilant about consumer demand for cruises in 2026.
-- Lindsay Dutch, Bloomberg Intelligence Consumer Hardlines Senior Analyst, discusses why toymakers are facing demand uncertainty ahead of the holidays. Bloomberg Intelligence says Hasbro and Mattel's 3Q results in late October will be pivotal, with holiday demand -- which drives up to two-thirds of annual sales.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarclay, and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 2 (00:23):
All right, we've been touting his presence all week.
Speaker 3 (00:26):
Ed Ludlow, Bloomberg Tech co host, is here in New
York for the week. He's about to take off, but
he did agree to speak with us before he does
so to talk about the stampede into data centers. Black
Rocks Global Infrastructure Partners the latest to move in that direction.
Speaker 4 (00:44):
This is a really important piece of reporting because it
will help a lot of investors and readers understand all
the other stuff that's going into this movement outside of
just the chips and the compute. Black Rocks GP Partners, Geek,
glow winstorpus big player. So what we're reporting, citing sources,
is that they would acquire Aligned, which is basically a
(01:04):
company that builds data centers the actual buildings, you know,
the metal, the concrete, the sand, the water, the cooling,
and then decides on their locations and manages basically a
portfolio of them. What's interesting is you see a familiar name, MGX,
the investment vehicle backed by the UAE.
Speaker 5 (01:23):
And its other sovereign wealth funds.
Speaker 4 (01:25):
So the idea here is that Black Rocks GIP acquires
it and in parallel a separate equity investment from MGX.
And what is this signal? It's this idea that we
know about the compute demand. So we're basically thinking that
there's going to be four trillion dollars worth of demand
for the chips and the server designs. But if you
(01:45):
start to think about the concrete, labor, building materials, energy
supply utilities, water cooling systems, you can expand that number
out to seven trillion. And this is some really big
names making moves to make sure they have the name
that can build the actual things and then manage them,
you know, as a piece of real estate and as
as an asset class.
Speaker 5 (02:06):
I suppose you know, I'm looking for tops in this
in this whole AI story, where's the top? And I'm
always like, man, when private equity gets.
Speaker 2 (02:16):
In, that was a big side part.
Speaker 5 (02:17):
Yeah, I don't know, I mean forty billion dollars for
real estate company? Is that what we're talking about.
Speaker 4 (02:22):
You know, I also want to be honest with you
guys in the audience, like, like real estate is I'm
not so o fay with real estate. It's not a
world that I cover because we've been talking about San Francisco, right, yes,
So let me let me make a sort of weird
parallel example the open Aie story we did this week
on the five hundred billion dollar valuation on in San Francisco.
Right now, everyone's like, this is going to is going
(02:44):
to create a huge bubble in the housing market. Why
because you have about several hundred newly minted millionaires from
that transaction.
Speaker 5 (02:52):
Seriously, wow, So like there's a not.
Speaker 4 (02:55):
Fun the capital flow to individuals and companies. Did you
guys see the story that's also about this morning about
Jeff Bezos of all people saying that the AI spending
boom is a bubble.
Speaker 5 (03:05):
Is oh, really interesting and his company is one of
the major spenders. Thank you.
Speaker 2 (03:10):
He says it's a bubble that will pay off.
Speaker 4 (03:13):
The bubble that will pay off is so like right now,
the equation for public market investors and debt market investors,
and I think the debt part's really important, is they
do want to see the evidence that top line growth
is materializing, particularly in software companies. If you're a bench capitalist,
you don't care, like that's not how that works. Growth
(03:35):
at all costs is okay. And so when we think
about opening ianthropic perplexity, all these names that we love
to talk about, you know, it's the money plowing in.
There's less focus on the money coming in out the
other side.
Speaker 5 (03:49):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (03:55):
You're listening to the Bloomberg Intelligence podcast. Catch us live
today's at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube through Boeing.
Speaker 5 (04:11):
Back in the news and after a string of some
real positive news items over the past six to twelve months,
got a little bit of step back here on a
triple seven plan here, So let's check and with Sid Phillip,
Deputy team leader for Global Aviation at Bloomberg News, said,
what's going on with Boeing and the seven seven seven aircraft?
Speaker 6 (04:30):
Good morning, So the seven seven seven aircraft has been
long delayed. So the aircraft was meant to enter service
in twenty twenty and the latest we heard from Boeing
was entering into service in twenty twenty six. Now we
understand that's going to go to twenty twenty seven, and
that sort of means that for Boeing, it's a massive
impact on cash because this aircraft has been years in
(04:52):
development and Boeing is looking to sort of convert all
those orders into cash flow, and so that just postpones it.
And we understand that Boy's and be having to take
a multi billion dollar charge on this program at the
next earnings because of the delay and essentially the fact
that they can't get cash in through the door for
those aircraft.
Speaker 3 (05:12):
So this is essentially a profit warning from Boeing before
its latest results. Which companies, which airliners are most affected
by the delay of this Triple seven.
Speaker 6 (05:24):
So the Triple seven X is a brand new aircraft
that's meant to replace the older A three eighty and
the seven four seven is the biggest aircraft that Boeing
has worked on, and essentially this would replace those aircraft.
And so the airlines like Lufthansa, we've seen Emirates place
the biggest customer for this cut. Our airways as ordered
some and so essentially the airlines that do long hold
(05:46):
services carrying lots lots of people, those are the ones
that are really affected. And essentially that delays the retirements
of older aircraft and the introduction of more sort of
fuel efficient, brand new aircraft.
Speaker 5 (06:00):
I guess just just once more revives kind of the
concern about the engineering and production capabilities of Boring that
were highlighted over the last several years. Adam, is that fair,
do you think? Or were they kind of put a
lot of that behind them here.
Speaker 6 (06:18):
They have put a lot behind them, and the indication
from Boeing I mean the CEO Kerry Otberg sort of
flagged these issues and he sort of said that this
was more a paperwork issue rather than an engineering setback issue.
But at the same time, this aircraft has been long delayed.
I mean, it was slated to enter into service in
twenty twenty, and so it's already five years late and
(06:40):
now it's possibly going to be seven years late. And
so it does sort of talk about the certification delays
that Boy's got to get through, including on the seven
three seven Max where the Max seven and the Max ten,
which are the smallest and the largest variants of the
MAX have still to be certified, and that is again
a very important sort of source of ash for Boeing,
(07:01):
and so it is one of the challenges that Kelly
Otberg has to get through as Boeing sort of goes
into the next phase of growth and essentially turns the
corner on its various challenges it's had in the last
couple of years.
Speaker 3 (07:13):
So put this into context for us, where does Airbus
stand with the release of its latest versions.
Speaker 2 (07:19):
Of its airliners.
Speaker 3 (07:20):
If Airbus is also being held up by different reasons,
then maybe this isn't so bad for Boeing.
Speaker 6 (07:25):
Yeah, so Airbus has a different problem. They have issues
with production and so they're unable to produce enough planes.
And so while Airbus doesn't have any aircraft currently in certification,
I mean the latest aircraft that triples the eight through
twenty one XLR has entered into service, they have a
different issue. They have issues with supply of parts and
(07:46):
they can't make those planes fast enough to get them
to customers. So the customer is really sort of struggling
on both ends, because on one end, if you've got
an ebbs audobook, you're waiting on delayed aircraft. If you're
a Boeing customer, you're waiting on aircraft that are still
to be certified. In both cases, you can't have those
planes in your fleet and flying around for you and
(08:07):
making money for you. So for the airline, regardless of
whether it's a certification delay or whether it's a production delay,
it is a delay.
Speaker 2 (08:13):
It is a delay.
Speaker 3 (08:14):
And we keep talking about this duopoly between Boeing and Airbus,
but is there any other aircraft manufacturer that could kind of.
Speaker 2 (08:20):
Fill the hole in the meantime for these airliners.
Speaker 6 (08:24):
Unfortunately not, I mean, the diopol is here to stay
for the conceivable future. And Comac, the Chinese aircraft manufacturer,
is talking about building. I mean they are building the
competitor to the seven three seven and the eight three twenty,
but they're building in very small numbers and it's going
to be a very long term before they're able to
scale up and match the production cadence that Boeing and airbusill.
(08:47):
And they don't have a white body aircraft. And similarly,
Brazil's Embryer builds smaller regional jets and so they aren't
really a competitor. So at the moment, the only options
for airlines if they want an aircraft, either buying or
ebbus and the boat struggling with all the books sold
out until the end of the decade, and essentially it's
going to be a tough struggle for them.
Speaker 5 (09:08):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (09:15):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (09:29):
Carnival Cruise Line, the stock is up sixteen percent so
far this year, just a bit of the ahead of
the S and P five hundred. But if you look
at other measures, there might be some concern and so
let's do that right now with Jody Lori. She has
Bloomberg Intelligence credit analysts on the outlook for this industry.
And Jody, you're looking at some alternative data, and the
(09:51):
alternative data suggests maybe there's a bit of moderation coming
for Carnival and its competitors.
Speaker 7 (09:58):
Yes, Scarlett al d go and we look at the
cruise lines and one of the things we like to
focus on is new versus returning cruisers, and that data
is sort of indicative of how much adoptability there is
in the sector.
Speaker 8 (10:11):
Now, if you remember, cruise lines are only two to three.
Speaker 7 (10:14):
Percent of the total leisure sector, and so it's still
a relatively small percentage. But as you noted in the introduction,
people book out way earlier, so you get insight into
the psyche of the consumer going into next year in
the following year based on how they're booking. We are
seeing that returning cruisers are still booking pretty strong. We're
seeing that pre cruise onboard spending is still strong. But
(10:38):
I kind of question what that actual onboard spend is
going to look like in twenty six as the consumer
feels they're wallet a little bit more strained, as inflation
sort of really dips into not just the lowest income consumer,
but more of the middle market consumer.
Speaker 9 (10:53):
Jody, as a credit analyst, would you rather see one
of your cruise companies build a new ship, put a
new ship in the water, or pay back debt?
Speaker 8 (11:03):
What I rather see?
Speaker 7 (11:05):
So I don't think that that's a one or the
other situation. You know, obviously, while they were working through
all of their balance sheet upheaval over the past few years,
paying down debt was definitely more favorable. But I think
that the companies can kind of do both because what
new ships do is they provide additional cash in the
(11:25):
door through onboard or through through bookings advanced bookings, and
so what that means is that they don't necessarily have
to rely on the debt markets to fill those cash
gaps the same way that they do when say they're
not able to cruise. Now, something to note about Carnival
and you know the cruise lines in general, is from
a capital structure standpoint and from a credit perspective, they've
(11:46):
actually done pretty well. And Carnival actually just finally got
upgraded to investment grade this week by Fitch. So it's
actually been a pretty strong tailwind for the company.
Speaker 8 (11:56):
From the credit perspective.
Speaker 7 (11:57):
That will likely feed into the relative value of the bonds.
But in terms of that growth story, that large momentum,
that might be stalling a little bit.
Speaker 3 (12:08):
So cruise operators want to get a Paul Sweeney or
Lisa Matail to become a cruiser, and not just a
cruiser for the first time, but to become returning cruisers.
How expensive is it for them to acquire these kinds
of customers.
Speaker 7 (12:22):
How expensive is it for them to acquire these customers.
I think it really depends. It depends on the cruise
line itself. And I think what's so interesting is that
we are seeing much of a differentiation in terms of
the different brands, to the point that we're now seeing
Four Seasons and Rich Carlton come into the space in
the form of really high end luxury yachts. We're seeing
(12:44):
Viking continue their position as very hid unfriendly, mostly just
older couples wanting to go on ships and having everything included.
And Royal Cribbean is finally entering into that space. So
when that happens, I'm a little curious to see who
decides to go to celebrity over Viking and if that
creates some sort of cannibalism in the sector. It's more
(13:08):
what's interesting is when you think about it in comparison
to Vegas, where you see that slow down in Vegas,
and the fact that a lot of the cruise lines
have been structuring their new island locations as this alternative
to Vegas. It has a very Vegas vibe, to the
swim up bar, to all the sort of activities you
can do all this sort of a la carte situations. Yeah,
(13:29):
I mean that's that's really where a lot of the
cruise lines are spending their money. And whether customers are
going to see that as a better alternative to Vegas
remains to be seen.
Speaker 5 (13:38):
All right. Last month, I don't know if I told
you this jury Judia, I was.
Speaker 9 (13:41):
Cruising the Amafi coast and I did no, I was
just we took a okay, but what I did see
is the ritz yacht and intrigued too. It was amazing.
So Jody talked us about that where you go and make,
you know, hell company go into the cruise business because
(14:02):
that look pretty.
Speaker 5 (14:03):
Cool that boat.
Speaker 7 (14:05):
Yeah, and they only have a few ships. Were talking
three ships at the moment. And for Marriott, I think
they're sort of dipping their toe in the water. No
pun intended just to kind of see the appetite, because
there is a certain customer if you talk the high
high end customer. They don't want to be on a
big ship. They don't want to be on the gigantic
icon class ship. That is not their speed. Even those
(14:28):
smaller ships are still a little bit too much for them.
I mean, why should they participate with the Pleaves, but
they don't want to have to own a yacht themselves,
so it's a nice middle ground for them. So I
do think that there is a little bit of an
opportunity there.
Speaker 8 (14:42):
I'm not so sure it's going to get super.
Speaker 7 (14:45):
Large in terms of the number of ships that they have,
but it definitely creates a different situation.
Speaker 2 (14:51):
Yeah, the intimacy, the exclusivity is what.
Speaker 3 (14:53):
Makes it appealing, especially to someone like Paul, who was
nodding along as you were describing all that you talked
earlier about on vard word spending. Talk to us about
the economics of having everything included, so you pay one
price and like all your needs are met, versus a
la carte pricing where they're really trying to get you
to spend more and splurge for different things, whether it's
extra drinks or excursions that you tack onto the crews itself.
Speaker 7 (15:18):
And that Scarlett dips into a lot of the data
that we looked at through al D and by that
I mean is that we looked at ticket versus on
board spending data and what we're seeing is for the
brand name ships, so meaning the Royal Caribbean, the Carnival,
the Norwegian, the brands, those in particular might be reducing
(15:38):
the amount that they gain in terms of ticket price,
meaning the amount that they generate in revenue so that
they can get people on the ship and then charge
them and on board spending and on board spending they
actually they benefit a little bit from in terms of
cash flows. From a margin perspective, it's pretty attractive and
anytime you can get somebody to open their wallet and
spend money as attractive.
Speaker 8 (15:59):
Now the big sur risk of that is.
Speaker 7 (16:01):
If you, you know, if you appeal to a customer
that might feel a little bit more strained, They'll be
fine spending the ticket price, but they might not want
to spend as much on every single excursion that comes
their way. They might go for the sort of base
ship opportunity that's becoming less and less attractive. The companies
are making it so that that main dining hall experience
(16:21):
isn't what you want to do, and so we might
be at a little bit of an impasse when you
have customers getting on the ship saying I don't want
to spend so much, but the cruise line's saying, well,
if you really want the good experience, you have to spend.
Speaker 8 (16:33):
More, so we'll see how that plays out into twenty six.
Speaker 5 (16:37):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (16:44):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (16:58):
This we're getting right smack into it, getting into the
holiday shopping season. I know it's only the beginning of October,
but we're starting to see it and the question is
what's it going to be like in there, particularly for
the toy part of the market. Lindsay Dutch Joints Is.
Speaker 10 (17:13):
She's Bloomberg Intelligence Consumer Hardlines Senior analyst, and here we go.
Toy makers face demand, uncertainty and risk ahead of holiday buying. Lindsay,
talk to us about kind of the toy business as
we go into this all important holiday shopping season.
Speaker 2 (17:31):
Hip, Well, thanks for having me.
Speaker 11 (17:33):
I think the outlook for toys is really interesting, and
I'm really excited to hear more from management teams when
we get the third quarter earnings in late October. The
demand picture looks very uncertain You know, this was supposed
to be an up year for toys, but you know,
tariffs and just broader economic uncertainty has really weighed on
(17:55):
the sector. But I think the bigger issue in particular
this year is, you know, because of the tiff announcements
in April and lots of uncertainty, big retailers you're talking Walmart, Target,
basically held back on placing their orders which they would
normally place for holiday in the second quarter.
Speaker 2 (18:16):
Where there did.
Speaker 11 (18:17):
Place the orders, they're receiving them in the third quarter.
Speaker 2 (18:21):
So we did, you know, get that back.
Speaker 11 (18:24):
But because of that delay and because these retailers are
really looking to sell through their inventory, I think that
the opportunity for reorders for some of those like hot
holiday toy items is limited and that's really going to
weigh this year on those toy makers.
Speaker 3 (18:41):
Is there going to be a shortage of toys that
people want to buy? Is that going to be a
problem in twenty twenty five.
Speaker 11 (18:48):
I mean that could be a possibility if something is
like really really hot, we could go back to those
days where you're like standing at the store or early
on a black Friday morning to get the you know,
one of twenty that Walmart has. There's a possibility for
that because I don't really think that there's going to
be a lot of reordering. I do think the toymakers
(19:10):
are trying to prepare, they are taking on inventory because
the other thing that Walmart and Target did is because
of the tariffs, they would have typically imported, you know,
in their contract with Mattel or Hasbro or they would
have imported the product like direct to their own warehouse,
but they kind of switched their plan a little bit,
(19:30):
and it's really the toymakers that are importing it to
the US and sort of replenishing the Walmart or Target
warehouse from like domestically. So there's also a shift in
sort of how the order is being placed, and so
it just is creating a really uncertain environment in the
back half.
Speaker 3 (19:47):
Lindsay, what about the closing of the deminimous exemption. You know,
before this, a lot of Americans were buying directly from
websites overseas and just getting stuff shipped to them from China,
from the from other parts.
Speaker 2 (20:00):
Of the world.
Speaker 3 (20:01):
And now that the consumers will be taxed on it,
they face a tariff that avenue might have been closed
off so that leaves them going to the traditional distributors
as a result.
Speaker 2 (20:11):
How do you see that playing out?
Speaker 11 (20:14):
Yeah, I think that could have an effect. I mean
when you think about these big toy makers, has Bro, Mattel,
even Spinmaster, which is a little bit on the smaller side,
you know, a lot of their product is flowing through
big box national retailers, so it might not have a
huge impact on them specifically. We could see the consumer,
(20:36):
you know, switch avenues a little bit, but Walmart, Target
are still and those big national retailers are still huge.
And where people do go to shop for toys. I
mean we still also have Toys r Us trying to
make a comeback, and Macy's stores and Kohl's also being
a bigger push into toys. So you could see a
(20:56):
little bit of shift in I guess where the consumer shops.
But we don't see that having a major impact on
these companies.
Speaker 9 (21:04):
And are the toy makers viewing tariffs as a one
time thing they have to deal with or are they
thinking that it might be something longer term.
Speaker 11 (21:14):
They have been working to diversify supply chains for some
time now. It's kind of wild to think about, but
when we came into this year. Hasbro and Mattel we're
forty to fifty percent of their toys manufactured in China.
That was actually almost half of the broader industry average.
And you know, when you think about toys in general,
(21:35):
upwards of eighty to eighty five percent we're made in China.
There's been a lot of diversification acceleration of diversification efforts
happening this year. You know, re distribution of sourcing, you know,
how they're sourcing US sold product. There's also been changes
in pricing and you know, are we going to be
(21:55):
able to sell this product in the US or not
because of tariffs. So there's been a lot of change
this year. We don't have disclosure on exact numbers anymore,
but I think that, you know, the companies will continue
to try to sort of maximize their efforts. But Hasbro
and Mattel have said that taroffs will be about one
(22:16):
hundred million dollars in twenty five in terms of costs.
That's even with price increases going into effect, and that
that cost could be about the same or more in
at least twenty six.
Speaker 1 (22:28):
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Speaker 2 (00:23):
All right, we've been touting his presence all week.
Speaker 3 (00:26):
Ed Ludlow, Bloomberg Tech co host, is here in New
York for the week. He's about to take off, but
he did agree to speak with us before he does
so to talk about the stampede into data centers. Black
Rocks Global Infrastructure Partners the latest to move in that direction.
Speaker 4 (00:44):
This is a really important piece of reporting because it
will help a lot of investors and readers understand all
the other stuff that's going into this movement outside of
just the chips and the compute. Black Rocks GP Partners, Geek,
glow winstorpus big player. So what we're reporting, citing sources,
is that they would acquire Aligned, which is basically a
(01:04):
company that builds data centers the actual buildings, you know,
the metal, the concrete, the sand, the water, the cooling,
and then decides on their locations and manages basically a
portfolio of them. What's interesting is you see a familiar name, MGX,
the investment vehicle backed by the UAE.
Speaker 5 (01:23):
And its other sovereign wealth funds.
Speaker 4 (01:25):
So the idea here is that Black Rocks GIP acquires
it and in parallel a separate equity investment from MGX.
And what is this signal? It's this idea that we
know about the compute demand. So we're basically thinking that
there's going to be four trillion dollars worth of demand
for the chips and the server designs. But if you
(01:45):
start to think about the concrete, labor, building materials, energy
supply utilities, water cooling systems, you can expand that number
out to seven trillion. And this is some really big
names making moves to make sure they have the name
that can build the actual things and then manage them,
you know, as a piece of real estate and as
as an asset class.
Speaker 5 (02:06):
I suppose you know, I'm looking for tops in this
in this whole AI story, where's the top? And I'm
always like, man, when private equity gets.
Speaker 2 (02:16):
In, that was a big side part.
Speaker 5 (02:17):
Yeah, I don't know, I mean forty billion dollars for
real estate company? Is that what we're talking about.
Speaker 4 (02:22):
You know, I also want to be honest with you
guys in the audience, like, like real estate is I'm
not so o fay with real estate. It's not a
world that I cover because we've been talking about San Francisco, right, yes,
So let me let me make a sort of weird
parallel example the open Aie story we did this week
on the five hundred billion dollar valuation on in San Francisco.
Right now, everyone's like, this is going to is going
(02:44):
to create a huge bubble in the housing market. Why
because you have about several hundred newly minted millionaires from
that transaction.
Speaker 5 (02:52):
Seriously, wow, So like there's a not.
Speaker 4 (02:55):
Fun the capital flow to individuals and companies. Did you
guys see the story that's also about this morning about
Jeff Bezos of all people saying that the AI spending
boom is a bubble.
Speaker 5 (03:05):
Is oh, really interesting and his company is one of
the major spenders. Thank you.
Speaker 2 (03:10):
He says it's a bubble that will pay off.
Speaker 4 (03:13):
The bubble that will pay off is so like right now,
the equation for public market investors and debt market investors,
and I think the debt part's really important, is they
do want to see the evidence that top line growth
is materializing, particularly in software companies. If you're a bench capitalist,
you don't care, like that's not how that works. Growth
(03:35):
at all costs is okay. And so when we think
about opening ianthropic perplexity, all these names that we love
to talk about, you know, it's the money plowing in.
There's less focus on the money coming in out the
other side.
Speaker 5 (03:49):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (03:55):
You're listening to the Bloomberg Intelligence podcast. Catch us live
today's at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube through Boeing.
Speaker 5 (04:11):
Back in the news and after a string of some
real positive news items over the past six to twelve months,
got a little bit of step back here on a
triple seven plan here, So let's check and with Sid Phillip,
Deputy team leader for Global Aviation at Bloomberg News, said,
what's going on with Boeing and the seven seven seven aircraft?
Speaker 6 (04:30):
Good morning, So the seven seven seven aircraft has been
long delayed. So the aircraft was meant to enter service
in twenty twenty and the latest we heard from Boeing
was entering into service in twenty twenty six. Now we
understand that's going to go to twenty twenty seven, and
that sort of means that for Boeing, it's a massive
impact on cash because this aircraft has been years in
(04:52):
development and Boeing is looking to sort of convert all
those orders into cash flow, and so that just postpones it.
And we understand that Boy's and be having to take
a multi billion dollar charge on this program at the
next earnings because of the delay and essentially the fact
that they can't get cash in through the door for
those aircraft.
Speaker 3 (05:12):
So this is essentially a profit warning from Boeing before
its latest results. Which companies, which airliners are most affected
by the delay of this Triple seven.
Speaker 6 (05:24):
So the Triple seven X is a brand new aircraft
that's meant to replace the older A three eighty and
the seven four seven is the biggest aircraft that Boeing
has worked on, and essentially this would replace those aircraft.
And so the airlines like Lufthansa, we've seen Emirates place
the biggest customer for this cut. Our airways as ordered
some and so essentially the airlines that do long hold
(05:46):
services carrying lots lots of people, those are the ones
that are really affected. And essentially that delays the retirements
of older aircraft and the introduction of more sort of
fuel efficient, brand new aircraft.
Speaker 5 (06:00):
I guess just just once more revives kind of the
concern about the engineering and production capabilities of Boring that
were highlighted over the last several years. Adam, is that fair,
do you think? Or were they kind of put a
lot of that behind them here.
Speaker 6 (06:18):
They have put a lot behind them, and the indication
from Boeing I mean the CEO Kerry Otberg sort of
flagged these issues and he sort of said that this
was more a paperwork issue rather than an engineering setback issue.
But at the same time, this aircraft has been long delayed.
I mean, it was slated to enter into service in
twenty twenty, and so it's already five years late and
(06:40):
now it's possibly going to be seven years late. And
so it does sort of talk about the certification delays
that Boy's got to get through, including on the seven
three seven Max where the Max seven and the Max ten,
which are the smallest and the largest variants of the
MAX have still to be certified, and that is again
a very important sort of source of ash for Boeing,
(07:01):
and so it is one of the challenges that Kelly
Otberg has to get through as Boeing sort of goes
into the next phase of growth and essentially turns the
corner on its various challenges it's had in the last
couple of years.
Speaker 3 (07:13):
So put this into context for us, where does Airbus
stand with the release of its latest versions.
Speaker 2 (07:19):
Of its airliners.
Speaker 3 (07:20):
If Airbus is also being held up by different reasons,
then maybe this isn't so bad for Boeing.
Speaker 6 (07:25):
Yeah, so Airbus has a different problem. They have issues
with production and so they're unable to produce enough planes.
And so while Airbus doesn't have any aircraft currently in certification,
I mean the latest aircraft that triples the eight through
twenty one XLR has entered into service, they have a
different issue. They have issues with supply of parts and
(07:46):
they can't make those planes fast enough to get them
to customers. So the customer is really sort of struggling
on both ends, because on one end, if you've got
an ebbs audobook, you're waiting on delayed aircraft. If you're
a Boeing customer, you're waiting on aircraft that are still
to be certified. In both cases, you can't have those
planes in your fleet and flying around for you and
(08:07):
making money for you. So for the airline, regardless of
whether it's a certification delay or whether it's a production delay,
it is a delay.
Speaker 2 (08:13):
It is a delay.
Speaker 3 (08:14):
And we keep talking about this duopoly between Boeing and Airbus,
but is there any other aircraft manufacturer that could kind of.
Speaker 2 (08:20):
Fill the hole in the meantime for these airliners.
Speaker 6 (08:24):
Unfortunately not, I mean, the diopol is here to stay
for the conceivable future. And Comac, the Chinese aircraft manufacturer,
is talking about building. I mean they are building the
competitor to the seven three seven and the eight three twenty,
but they're building in very small numbers and it's going
to be a very long term before they're able to
scale up and match the production cadence that Boeing and airbusill.
(08:47):
And they don't have a white body aircraft. And similarly,
Brazil's Embryer builds smaller regional jets and so they aren't
really a competitor. So at the moment, the only options
for airlines if they want an aircraft, either buying or
ebbus and the boat struggling with all the books sold
out until the end of the decade, and essentially it's
going to be a tough struggle for them.
Speaker 5 (09:08):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (09:15):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (09:29):
Carnival Cruise Line, the stock is up sixteen percent so
far this year, just a bit of the ahead of
the S and P five hundred. But if you look
at other measures, there might be some concern and so
let's do that right now with Jody Lori. She has
Bloomberg Intelligence credit analysts on the outlook for this industry.
And Jody, you're looking at some alternative data, and the
(09:51):
alternative data suggests maybe there's a bit of moderation coming
for Carnival and its competitors.
Speaker 7 (09:58):
Yes, Scarlett al d go and we look at the
cruise lines and one of the things we like to
focus on is new versus returning cruisers, and that data
is sort of indicative of how much adoptability there is
in the sector.
Speaker 8 (10:11):
Now, if you remember, cruise lines are only two to three.
Speaker 7 (10:14):
Percent of the total leisure sector, and so it's still
a relatively small percentage. But as you noted in the introduction,
people book out way earlier, so you get insight into
the psyche of the consumer going into next year in
the following year based on how they're booking. We are
seeing that returning cruisers are still booking pretty strong. We're
seeing that pre cruise onboard spending is still strong. But
(10:38):
I kind of question what that actual onboard spend is
going to look like in twenty six as the consumer
feels they're wallet a little bit more strained, as inflation
sort of really dips into not just the lowest income consumer,
but more of the middle market consumer.
Speaker 9 (10:53):
Jody, as a credit analyst, would you rather see one
of your cruise companies build a new ship, put a
new ship in the water, or pay back debt?
Speaker 8 (11:03):
What I rather see?
Speaker 7 (11:05):
So I don't think that that's a one or the
other situation. You know, obviously, while they were working through
all of their balance sheet upheaval over the past few years,
paying down debt was definitely more favorable. But I think
that the companies can kind of do both because what
new ships do is they provide additional cash in the
(11:25):
door through onboard or through through bookings advanced bookings, and
so what that means is that they don't necessarily have
to rely on the debt markets to fill those cash
gaps the same way that they do when say they're
not able to cruise. Now, something to note about Carnival
and you know the cruise lines in general, is from
a capital structure standpoint and from a credit perspective, they've
(11:46):
actually done pretty well. And Carnival actually just finally got
upgraded to investment grade this week by Fitch. So it's
actually been a pretty strong tailwind for the company.
Speaker 8 (11:56):
From the credit perspective.
Speaker 7 (11:57):
That will likely feed into the relative value of the bonds.
But in terms of that growth story, that large momentum,
that might be stalling a little bit.
Speaker 3 (12:08):
So cruise operators want to get a Paul Sweeney or
Lisa Matail to become a cruiser, and not just a
cruiser for the first time, but to become returning cruisers.
How expensive is it for them to acquire these kinds
of customers.
Speaker 7 (12:22):
How expensive is it for them to acquire these customers.
I think it really depends. It depends on the cruise
line itself. And I think what's so interesting is that
we are seeing much of a differentiation in terms of
the different brands, to the point that we're now seeing
Four Seasons and Rich Carlton come into the space in
the form of really high end luxury yachts. We're seeing
(12:44):
Viking continue their position as very hid unfriendly, mostly just
older couples wanting to go on ships and having everything included.
And Royal Cribbean is finally entering into that space. So
when that happens, I'm a little curious to see who
decides to go to celebrity over Viking and if that
creates some sort of cannibalism in the sector. It's more
(13:08):
what's interesting is when you think about it in comparison
to Vegas, where you see that slow down in Vegas,
and the fact that a lot of the cruise lines
have been structuring their new island locations as this alternative
to Vegas. It has a very Vegas vibe, to the
swim up bar, to all the sort of activities you
can do all this sort of a la carte situations. Yeah,
(13:29):
I mean that's that's really where a lot of the
cruise lines are spending their money. And whether customers are
going to see that as a better alternative to Vegas
remains to be seen.
Speaker 5 (13:38):
All right. Last month, I don't know if I told
you this jury Judia, I was.
Speaker 9 (13:41):
Cruising the Amafi coast and I did no, I was
just we took a okay, but what I did see
is the ritz yacht and intrigued too. It was amazing.
So Jody talked us about that where you go and make,
you know, hell company go into the cruise business because
(14:02):
that look pretty.
Speaker 5 (14:03):
Cool that boat.
Speaker 7 (14:05):
Yeah, and they only have a few ships. Were talking
three ships at the moment. And for Marriott, I think
they're sort of dipping their toe in the water. No
pun intended just to kind of see the appetite, because
there is a certain customer if you talk the high
high end customer. They don't want to be on a
big ship. They don't want to be on the gigantic
icon class ship. That is not their speed. Even those
(14:28):
smaller ships are still a little bit too much for them.
I mean, why should they participate with the Pleaves, but
they don't want to have to own a yacht themselves,
so it's a nice middle ground for them. So I
do think that there is a little bit of an
opportunity there.
Speaker 8 (14:42):
I'm not so sure it's going to get super.
Speaker 7 (14:45):
Large in terms of the number of ships that they have,
but it definitely creates a different situation.
Speaker 2 (14:51):
Yeah, the intimacy, the exclusivity is what.
Speaker 3 (14:53):
Makes it appealing, especially to someone like Paul, who was
nodding along as you were describing all that you talked
earlier about on vard word spending. Talk to us about
the economics of having everything included, so you pay one
price and like all your needs are met, versus a
la carte pricing where they're really trying to get you
to spend more and splurge for different things, whether it's
extra drinks or excursions that you tack onto the crews itself.
Speaker 7 (15:18):
And that Scarlett dips into a lot of the data
that we looked at through al D and by that
I mean is that we looked at ticket versus on
board spending data and what we're seeing is for the
brand name ships, so meaning the Royal Caribbean, the Carnival,
the Norwegian, the brands, those in particular might be reducing
(15:38):
the amount that they gain in terms of ticket price,
meaning the amount that they generate in revenue so that
they can get people on the ship and then charge
them and on board spending and on board spending they
actually they benefit a little bit from in terms of
cash flows. From a margin perspective, it's pretty attractive and
anytime you can get somebody to open their wallet and
spend money as attractive.
Speaker 8 (15:59):
Now the big sur risk of that is.
Speaker 7 (16:01):
If you, you know, if you appeal to a customer
that might feel a little bit more strained, They'll be
fine spending the ticket price, but they might not want
to spend as much on every single excursion that comes
their way. They might go for the sort of base
ship opportunity that's becoming less and less attractive. The companies
are making it so that that main dining hall experience
(16:21):
isn't what you want to do, and so we might
be at a little bit of an impasse when you
have customers getting on the ship saying I don't want
to spend so much, but the cruise line's saying, well,
if you really want the good experience, you have to spend.
Speaker 8 (16:33):
More, so we'll see how that plays out into twenty six.
Speaker 5 (16:37):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (16:44):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (16:58):
This we're getting right smack into it, getting into the
holiday shopping season. I know it's only the beginning of October,
but we're starting to see it and the question is
what's it going to be like in there, particularly for
the toy part of the market. Lindsay Dutch Joints Is.
Speaker 10 (17:13):
She's Bloomberg Intelligence Consumer Hardlines Senior analyst, and here we go.
Toy makers face demand, uncertainty and risk ahead of holiday buying. Lindsay,
talk to us about kind of the toy business as
we go into this all important holiday shopping season.
Speaker 2 (17:31):
Hip, Well, thanks for having me.
Speaker 11 (17:33):
I think the outlook for toys is really interesting, and
I'm really excited to hear more from management teams when
we get the third quarter earnings in late October. The
demand picture looks very uncertain You know, this was supposed
to be an up year for toys, but you know,
tariffs and just broader economic uncertainty has really weighed on
(17:55):
the sector. But I think the bigger issue in particular
this year is, you know, because of the tiff announcements
in April and lots of uncertainty, big retailers you're talking Walmart, Target,
basically held back on placing their orders which they would
normally place for holiday in the second quarter.
Speaker 2 (18:16):
Where there did.
Speaker 11 (18:17):
Place the orders, they're receiving them in the third quarter.
Speaker 2 (18:21):
So we did, you know, get that back.
Speaker 11 (18:24):
But because of that delay and because these retailers are
really looking to sell through their inventory, I think that
the opportunity for reorders for some of those like hot
holiday toy items is limited and that's really going to
weigh this year on those toy makers.
Speaker 3 (18:41):
Is there going to be a shortage of toys that
people want to buy? Is that going to be a
problem in twenty twenty five.
Speaker 11 (18:48):
I mean that could be a possibility if something is
like really really hot, we could go back to those
days where you're like standing at the store or early
on a black Friday morning to get the you know,
one of twenty that Walmart has. There's a possibility for
that because I don't really think that there's going to
be a lot of reordering. I do think the toymakers
(19:10):
are trying to prepare, they are taking on inventory because
the other thing that Walmart and Target did is because
of the tariffs, they would have typically imported, you know,
in their contract with Mattel or Hasbro or they would
have imported the product like direct to their own warehouse,
but they kind of switched their plan a little bit,
(19:30):
and it's really the toymakers that are importing it to
the US and sort of replenishing the Walmart or Target
warehouse from like domestically. So there's also a shift in
sort of how the order is being placed, and so
it just is creating a really uncertain environment in the
back half.
Speaker 3 (19:47):
Lindsay, what about the closing of the deminimous exemption. You know,
before this, a lot of Americans were buying directly from
websites overseas and just getting stuff shipped to them from China,
from the from other parts.
Speaker 2 (20:00):
Of the world.
Speaker 3 (20:01):
And now that the consumers will be taxed on it,
they face a tariff that avenue might have been closed
off so that leaves them going to the traditional distributors
as a result.
Speaker 2 (20:11):
How do you see that playing out?
Speaker 11 (20:14):
Yeah, I think that could have an effect. I mean
when you think about these big toy makers, has Bro, Mattel,
even Spinmaster, which is a little bit on the smaller side,
you know, a lot of their product is flowing through
big box national retailers, so it might not have a
huge impact on them specifically. We could see the consumer,
(20:36):
you know, switch avenues a little bit, but Walmart, Target
are still and those big national retailers are still huge.
And where people do go to shop for toys. I
mean we still also have Toys r Us trying to
make a comeback, and Macy's stores and Kohl's also being
a bigger push into toys. So you could see a
(20:56):
little bit of shift in I guess where the consumer shops.
But we don't see that having a major impact on
these companies.
Speaker 9 (21:04):
And are the toy makers viewing tariffs as a one
time thing they have to deal with or are they
thinking that it might be something longer term.
Speaker 11 (21:14):
They have been working to diversify supply chains for some
time now. It's kind of wild to think about, but
when we came into this year. Hasbro and Mattel we're
forty to fifty percent of their toys manufactured in China.
That was actually almost half of the broader industry average.
And you know, when you think about toys in general,
(21:35):
upwards of eighty to eighty five percent we're made in China.
There's been a lot of diversification acceleration of diversification efforts
happening this year. You know, re distribution of sourcing, you know,
how they're sourcing US sold product. There's also been changes
in pricing and you know, are we going to be
(21:55):
able to sell this product in the US or not
because of tariffs. So there's been a lot of change
this year. We don't have disclosure on exact numbers anymore,
but I think that, you know, the companies will continue
to try to sort of maximize their efforts. But Hasbro
and Mattel have said that taroffs will be about one
(22:16):
hundred million dollars in twenty five in terms of costs.
That's even with price increases going into effect, and that
that cost could be about the same or more in
at least twenty six.
Speaker 1 (22:28):
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