October 9, 2025 • 24 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
-Sid Philip, Bloomberg Chief Correspondent for Global Aviation, discusses Delta Airlines earnings. Delta Air Lines Inc. reported better-than-expected earnings for the third quarter, helped by leisure travelers and a rebound in corporate travel.
-Kenneth Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses PepsiCo earnings. PepsiCo Inc. is working to cut costs and overhaul its portfolio to meet consumers' shifting tastes, while engaging in discussions with activist investor Elliott Investment Management.
-Craig Trudell, Bloomberg Global Autos Editor, discusses Ferrari issuing cautious forecasts that disappointed investors, marring a coming-out party for the company’s first electric vehicle.
-Geetha Ranganathan, Bloomberg Intelligence Analyst, discusses Paramount Skydance discussing its interest in acquiring Warner Bros. Discovery with Apollo Global Management, according to people familiar with the matter.
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Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:24):
Delta Airlines came out some better expected results for the quarter,
saying that helped by leisure travelers and a rebounding corporate travel.
How about that, said Philip joins us. He's deputy team
leader for Global Aviation. Join us live here in our
Bloomberg Interactive Brokers studio. Are we kind of back to
pre pandemic levels in terms of air travel?
Speaker 3 (00:43):
Also, there is a Dichoto me in the aviation industry
at the moment where we're seeing airlines profitability, especially at
the top end of the market in the premium and
corporate sector. So they're doing really well. So Delta air Lines,
United Airlines doing really well. At the other end of
the market, does the the likes of Spirit Airlines that's
in its second bankruptcy. You've got the other sort of
(01:04):
low cost carriers that are struggling to fill up seats,
and that's partly on account of the fact that low
cost carriers their customer base is still hurting from the
sort of tariffs and the economic uncertainty, whereas for the
top end of the market, they seem to be traveling
and as normal.
Speaker 4 (01:20):
Actually, yeah, it's the manifestation of the key shaped economy
right where the higher income consumer is doing much better
than the lower end consumer.
Speaker 5 (01:27):
The CEO of Delta at Bastion said.
Speaker 4 (01:30):
In the earnings report that our customer is financially in
a good spot. Said, who exactly is Delta's customer because
it's not the same as you said as for instance,
Spirit or Southwest or even you can argue United, sure.
Speaker 3 (01:44):
I mean Delta air Lines. I mean they frequently talk
about how their customer is in the sort of average
of over one hundred thousand earnings in one hundred thousand
dollars a year in terms of earnings, and they sort
of are looking for experiences. They're looking to sort of
travel premium. They're not looking to sort of go coach
and sort of nickel and dime their way through the
aviation experience. And they're sort of more willing to splurge
(02:06):
on experiences. And that's sort of the post pandemic revenge
traveler who is now continuing to sort of spend money
on travel, and they seem to be suggesting that airlines
are willing. People are willing to keep going and keep
traveling and keep spending money on experiences and holidays.
Speaker 2 (02:24):
If United beach their numbers this quarter, it's because what
I spent ticket or really spared no expense to get
over there, I needed the rest. Talk to us about
just visibility. These airlines they put they have some pretty
decent visibility on on their bookings.
Speaker 5 (02:39):
So they do.
Speaker 3 (02:40):
They've been talking about how the visibility into the into
the holiday quarta, into the fourth quarter of the year
is looking good at the moment they see they're seeing
demand being strong as they get into the close of
the year, and that's at least. Delta Airlines is talking
about how they expect corporate travel to continue to be
so a solid and robust in twenty twenty six. Are
(03:02):
saying that companies that they surveyed are seeing continued appetite
for corporate travels. So it remains to be seeing what
actually materializes. I mean, airlines had massive forecasts for record
growth this year and then sort of liberation they came
around and that sort of torpedo that and they've now
sort of come back to those levels, but will remains
(03:23):
as be seeing what surprises come out next year.
Speaker 4 (03:25):
I'm so glad you bring that up because earlier this
year Delta warned of an abrupt slowdown or I don't
know that it actually saw when it just said it
kind of was seeing it on the horizon. Has that
been completely a race and turned around?
Speaker 3 (03:39):
Now for the moment, it does look like it is smooth,
smooth skies for them. But at the same time, we
don't really know what's going to happen in the current
economic environment or what demand looks like as we go
into twenty twenty six, and that's something that we need
to watch as the airline sort of report their fourth
quarter results and sort of about their future vocalsts.
Speaker 2 (04:02):
What are the big airlines, the big ones you mentioned
United Deltas. What are they doing with capacity? Are they
adding capacity trimming it back? I mean, I don't know
if they're doing with routes. I don't know if they
have enough planes, all that kind of stuff.
Speaker 3 (04:13):
So they have been so Delta has been adding capacity,
They've been retiring older planes and taking on new planes,
and so they seem to be adding a little bit
of capacity.
Speaker 5 (04:23):
And we're also.
Speaker 3 (04:24):
Seeing, like so United talk about how they are upgrading
their fleet. They're replacing their old aircraft with seven eighty
seven's and Maxes, and so we are seeing the US
carriers upgrade their fleets, and that's sort of adding more capacity,
especially as they upgate aircraft, so they sort of replace
smaller narrow bodies with the larger eight three twenty one
(04:44):
or the Max nine, and that sort of adds more
seats and more capacity. But then at the same time,
they're also premiumizing the cabins, so they're adding more business
class cabins and more premium economy than they ever did before.
Speaker 5 (04:56):
Premiumizing. That is a new word. I had not heard
of it.
Speaker 2 (04:59):
But economy coming back from Italy was actually like the
old first class in terms of really I was shocked
at how much room there was this.
Speaker 5 (05:07):
How how far back can you recline?
Speaker 6 (05:10):
Just the normal one?
Speaker 2 (05:11):
Okay, but it was just way more like mouse And
it wasn't that much money. It was a couple hundred
bucks to uperate, So that was pretty interesting.
Speaker 4 (05:18):
No, and that's that's a big part of Delta's push right,
pushing these premium products in the cabin.
Speaker 5 (05:23):
What about on the ground.
Speaker 4 (05:24):
What is Delta doing on the ground to really harness
its customers desire for a premium experience.
Speaker 3 (05:30):
So they bartnering with they have that partnership with Uber
the they've sort of added more of those Delta one lounges,
and they're sort of doing those credit card partnerships, and
those are all sort of ways to keep customers sticky
and keep them engaged because, I mean, the moment you're
sort of signed into the ecosystem, you're more likely to
book with them and sort of not really use price
(05:52):
comparison websites. You're more likely to sort of keep.
Speaker 5 (05:55):
Going customer for life kind of thing.
Speaker 2 (05:58):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:05):
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 2 (06:19):
You know, I'm a coke guy. Be with PEPSI in
front of me. Fine, I'm just as happy I can
realize it. But Ken Chase. He follows this stuff for living.
Ken Chase, the senior consumer products analysts of Bloomberg Intelligence. Pepsi,
reported some numbers a little bit better than expected. Here, Ken,
tell us what you heard from our good friends at PEPSI.
Speaker 6 (06:36):
Yeah, Hi, Paul, Well, PepsiCo report a number today, numbers
today that we're pretty much in line, maybe a little
bit above expectations. But I think they also masked persistent
weak market conditions of the US across its broad food, snack,
and beverage businesses. The company pretty much, you know, hit
(07:00):
their numbers, as I said, but it didn't do much
to relieve the pressure it's getting from activists, an activist
who's asking the company to do more. Basically, flat performance
is just not good enough for something that's perceived or
a company that's perceived as a growth company. I guess
the good news is their language during the call, though,
did provide investors a bit of optimism. It sounds like
(07:23):
the company is getting it. They said they're going to
ramp up innovation, they're going to be more aggressive with
cost cutting. They're listening to the activist points and they
said buy a Laerds. They agree with many of them.
So those are all, you know, good things to hear.
You know, from an investor point of view, it's just
a matter of executing and actually following through with them,
I think is where the jury is out.
Speaker 4 (07:45):
So I guess ken the question is is this enough
for Elliott the activist semester which took about a four
billion dollar steak in PepsiCo and called for a strategic
review a streamlining of a snack portfolio in particular, Well.
Speaker 6 (07:59):
I think think the CEO of PepsiCo mentioned that they
are on the same page on a lot of fronts,
but what they didn't say is one of the big
things that Elliott is calling for is basically, you know,
the beverage business to refranchise itself, sort of what Coca
Cola does, to let the bottlers be independent rather than
own those very capital intentsive businesses. They didn't go there.
(08:21):
I'm sure that's going to be a big sticky point.
What they are in agreement, though, is that innovation is
needed to be even more on Trent. You know, I
covered PepsiCo. I've covered PepsiCo for a long time. They
are probably on the forefront of the most innovative companies
across the beverage world that I cover, and yet they're
even ramping it up even more aggressively across food, aggressively
(08:43):
across beverage to be as on trend as possible. And
on that note, you know, Bloomberg Intelligence came out with
its annual consumer Beverage survey just on Monday, and some
of the big findings that we're seeing is that advanced,
high duration, wellness, and value are more more important than
ever in the world of beverages. And it was interesting
(09:03):
to hear PepsiCo pretty much address all three of those
areas with their new product innovation. So that's encouraging.
Speaker 2 (09:10):
At the end of the day, can as a company
like Pepsi, is that nothing more than really a GDP
kind of growth story. There's not much more you can
do to goose it above that? Or is that or
can they do better? Maybe that may be true in
the US pool. I mean, it's such a large business,
it's in most channels, it's you know, it's been around
(09:30):
a long time obviously, but I think most people looking
at this company would say, look, you have great opportunities
outside the US. There's much less price competition. You know,
outside the US, people are embracing you know, these consumer
goods and these brands outside the US. So that's one
of the things Elliet is actually saying, provide you know,
feed the capital needed outside the US to grow these
(09:53):
business in these big growing markets, you know, like China
and India and so on, Latin America. These are really
big growing markets. And to the extent that they could
play more in those markets I think would be good
for the enterprise in the whole.
Speaker 4 (10:09):
But for those markets, would they need to take a
similar approach as what they do in the US. Be
more innovative, keep up with this shifting consumer taste towards
healthier offerings, higher protein, portion controlled, less sugary drinks, or
can they go with their old playbook.
Speaker 6 (10:25):
I think it's a combination of doing what they're doing.
You know, in some of these markets they have to
adhere to local tastes. My guess is that a lot
of these consumers are seeking the same kind of things
the US though is or I should say, you know,
wellness value, but the portfolios are not quite as broad
(10:46):
outside the US. So I think it's tailoranto's the local
areas and bringing some of their learnings from the US
to these markets over time.
Speaker 2 (10:58):
Ken talk to us about the They got about a
four percent dividend yield on PEPSI. That seems pretty solid.
What's their policy on dividends these days?
Speaker 6 (11:07):
Oh, they're committed. I mean they know that a big
shareholder base, you know, is income investors. So they are
there committed. In every quarter like this one, they said, Look,
we're committed to have a multi prong capital allocation policy.
We're going to you know, invest in the business, you know, innovation,
like I said, but they're also going to buy stockback
(11:28):
on a you know, selected basis. They're going to commit
to their growing dividend, and their balance sheet would support
them doing that. I mean, the balance sheet is in
good shapes and good investment grade, and so I see
this company continue to have a balanced allocation going forward.
Speaker 2 (11:46):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (11:53):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, cock Play and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 2 (12:07):
We were talking about the auto business in Ferrari or Ferrari,
thinking this brings to mind, I don't know how these
companies are going to go for the next five years,
ten years in terms of that evolution, because it's kind
of fits and starts.
Speaker 5 (12:20):
They can't figure out next year, and some point.
Speaker 2 (12:21):
The market rewards them for it. At some point the
market penalizes before Craig Trudell it's his job to make
a sense out of all this. He's a Global autos
editor for Bloomberg News. So, Craig, can you see news
from Ferrari about its cautious forecast maybe just kind of
cautious commera territory on EV's. What does it tell you
here from Ferrari?
Speaker 7 (12:41):
Yeah, I mean, I think the market was taking in stride,
you know, the the caution on EV's. I think even
you know, sort of among the investor base and certainly
the analysts too, there's some real concerns about, you know,
just how sort of incongruous Evs are with Ferrari, and
some questions about whether you know, whether they should even
(13:01):
bother uh going in that in that direction. Uh, you know,
I think I think the shares were down a little bit,
what you know, earlier this morning when they were talking
about that. I think where we saw the stock really
just take it on the chin, was when they came
out with their their outlook you know, for through twenty
thirty and I you know, I think that the profit
(13:22):
uh you know, growth was was underwhelming. I should you know,
sort of say it. It also is the case that
they are still you know, calling for growth. I think
some analysts were maybe hoping for for uh you know,
also some some increase in volumes, but it's not really
you know what what Ferrari is about. They you know,
are sort of like clockwork, you know, making a pretty
(13:44):
set number of vehicles every year and uh, charging an
awful lot of money for them, and and uh that's
that's really been you know, something that's that's paid off.
And I think, you know, just the other thing to
sort of keep in mind here when you look at
what these shares have done, you know since they listed.
You know, the shares in Milan have been trading since
early twenty sixteen, the New York ones a little bit
(14:07):
earlier than that. But this is a stock that has
absolutely been on a tear all those years since. And
so you know, I yes, a sixteen percent to decline
and one day, you know, sort of makes your eyes pop.
But this is a company that is still valued very richly,
and that makes a little bit more sense in hindsight.
Speaker 4 (14:26):
And Frari also of course coming out with its first
EV too, and that might be accounting for some of
the caution in terms.
Speaker 5 (14:32):
Of what it sees going forward.
Speaker 4 (14:35):
In the story, you and your colleagues Craig talk about
how not just Ferrari, but Portia and Mercedes Benz have
also struggled with the electric transition. Why are wealthy buyers
somewhat resistant to switching over to plug in EV's what's
behind that?
Speaker 7 (14:50):
Yeah, it's a really good question. I think you know,
there was just this sort of working assumption that you know,
the only thing that you were going to have to
overcome was caught, and so you know, there was this,
i think, sort of conventional wisdom. Well, oh, we'll just
have you know, the folks who are most able to
afford this incremental additional costs, they'll they'll fit the bill,
(15:14):
and we'll be sort of off and running as an
industry and gradually sort of work our way down price wise.
I think if if you're a luxury car buyer and
you're having to pay a significant premium over you know,
looking at at models that are that are the same
one combustion and one electric, the electric ones a lot more.
(15:35):
You know, it is still a decision and sort of
a rational decision to a sort of second guess whether
or not you want to go electric. And I think
that's what what you're seeing is is that you know,
BMW and Mercedes until and unless they sort of you know,
price their models closer to one another, you're you're going
to have, you know, some pushback on the part of
(15:56):
the consumer to make that transition, even as as we
make progress and things like charging infrastructure and some of
these hurdles that you have to overcome that or unique
to EBS.
Speaker 2 (16:06):
My biggest question for you know, the supercars going electric
is I think a big part of the reason people
buy the Ferraris the Lamborghinis is for the cool sound
when they're coming down the street. What's Ferrari doing with
with that part of it?
Speaker 7 (16:23):
Yeah, it's it's interesting and we saw sort of, you know,
and we had the indications that Ferrari was working on
something in this regard to to try and sort of
preserve the noise that you can make driving a Ferrari
that they patented, you know, systems to kind of create
essentially artificial noise, or at least to play up the
(16:43):
noise that is made by you know, electric motors in
electric vehicles. You know, I think that being said, well,
we see Ferraris externally make you know, nearly as much
noise as a Ferrari supercar. I suspect that the answer
to that is probably no. But I've been I've been
very entertained that, you know, Dodge came out with an
(17:04):
electric vehicle last year, and I saw a report recently
that you know, an owner in Canada was ticketed for
a noise violation with his electric Dodge vehicle. So, you know,
maybe maybe it's for the best actually that this will
become a thing of the path.
Speaker 2 (17:20):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (17:27):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarcklay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (17:41):
Let's talk a little bit about the media business there.
It's undergoing a certain degree of consolidation here as it
tries to deal with the rising tide of YouTube among
other streaming type services and digital services that have really
displaced many of the traditional media businesses. And one of
those is Paramount Global that was so bought by sky Dance.
(18:03):
Larry Ellison's family now looking to take a look at
Warner Brothers Discovery, another publicly traded company. Maybe those two
might get together. Check in with Githa rang Aanath and
she's the media analyso over Bloomberg Intelligence. Githa talk to
us about the likelihood of Paramount merging with or acquiring
Warner Brothers Discovery and how that might look.
Speaker 8 (18:28):
Yeah, thank you so much, Paul. So it's been a
while actually, so there's been these on again, off again reports.
The first time the news broke was almost a month ago.
It was on September eleventh that there was this swall
Street Journal article which suggested that Paramount was kind of
exploring this bid. There hasn't actually been any formal bid
from Paramount, however, you know, the shares of both those
(18:51):
companies have kind of really gone up very nicely on
the news, kind of just telling us how important it
is for both of them to have this consolate. If
you look at Paramount. Obviously they just went through that merger.
There is really very little details when it comes to
what is, you know, kind of the strategy for this business.
They definitely need something big. Having a studio like Warner
(19:12):
having a service like HBO Max, it really kind of
puts them on that global media map, so they I
think they definitely need it in order to kind of
make this big splash in the media ecosystem. But there,
you know, as days pass along and we don't get
a bit, it just seems like the probability of this
happening gets smaller and smaller.
Speaker 4 (19:32):
Yeah, it's curious because we've been waiting for so long
and the industry has been ripe for consolidation, and David Zazov,
who of course runs Warner Brothers Discovery, has been talking
about how consolidation is something that he anticipates and he
wants to see happen. Is there role here for regulators?
Is this something that they would weigh in on. Is
Brendan Carr going to play any kind of role here.
Speaker 8 (19:56):
So a Paramount, Yes, there is potentially a role for
for any and all types of regulatory scrutiny in the Paramount.
A Warner Brothers deal or a potential deal, the FCC's
involvement likely wouldn't be as heavy just because there is
no merger of two broadcast assets, so Warner Brothers only
has streaming studio and cable networks, no broadcast networks like
(20:20):
a Paramount which owns the CBS broadcast network. So they
should get like a fairly you know, quick green signal
from the FCC. Well, all mergers are ultimately, you know,
kind of a subject regulatory scrutiny. But let's remember Paramount
has just gone through this whole process with the regulators,
kind of getting that skydance, so they kind of know
how to navigate their whole way around, you know, the
regulatory ecosystem, if you will. So I don't think it
(20:42):
should be much of a problem at all, Scarlett.
Speaker 2 (20:44):
Now the New York Post, I saw some reporting, and
by the way, then your post.
Speaker 5 (20:48):
They do a great job covering.
Speaker 2 (20:49):
The media sector, particularly on the M and A front,
always have, always have. They're suggesting maybe paramount S Guidance
might be talking with some private equity players about participating
any potential deal, and I think they mentioned Apollo as
one that they were talking with. What does that mean
to you.
Speaker 8 (21:06):
What that means to us is that, you know, obviously
funding is a problem here. I mean, this is a
big deal, Paul. You know, there was an initial a
price range that was suggested by CNBC of about twenty
two to twenty four dollars a share. I think David
Zaslav is looking for something much much higher than that.
You know, the New York Post themselves had reported that
he was probably looking for something in the range of
(21:28):
forty dollars a share. Not sure whether he's going to
be yeah, not sure whether he's going to get that,
but regardless, I mean, this is a huge deal. I mean,
even at that twenty two to twenty four dollars, we're
looking at about a sixty billion dollar deal. So funding
is definitely going to be, you know, an issue. And
that's kind of what it suggests the news article from
yesterday suggests to us, Because if Paramount is kind of
(21:50):
scouting for all of these different partners, they've talked to Apollo,
as you just suggested, they're talking to Legendary. You know,
funding doesn't seem to be as easy as you know,
maybe we initially thought.
Speaker 5 (22:02):
And also Warner Brothers is carrying a lot of debt.
Speaker 4 (22:04):
I know Zaslov has made a priority of reducing leverage
and he you know, has executed on a lot of that,
but there is still quite a bit of debt involved here.
Speaker 5 (22:14):
How willing is Skydance to take that on.
Speaker 8 (22:18):
They are willing to take that on because Scarlett, you know,
Warner Brothers is actually in the midst of their own restructuring.
So what they had planned, even before all of this
Paramount news broke, they had planned to actually split their company.
So they have a TV network's business and they have
their streaming and studio business, so kind of the no
growth assets and the high growth assets, they're kind of
splitting those two out, and majority of the debt. They
(22:40):
started with about fifty five billion dollars in debt, they've
kind of whittled that down to about thirty thirty two billion,
but majority of that thirty two billion dollars debt was
actually supposed to travel with the TV network's business, with
Paramount kind of coming in and making a bid for
the entire company. Even before that split actually took place,
just kind of signaled that they wanted to get, you know,
the entire business, and they were willing to take all
(23:01):
of the debt, not wait for the split and wait
for you know, kind of the debt to go away
and then just go scoop in on the on the
streaming assets. So they definitely know about the situation and
seemed like they were willing to take it.
Speaker 2 (23:13):
Another company that's talked that I announced they're splitting their
networks away with Comcasts. Where are we on that?
Speaker 8 (23:20):
So that seems to be coming pretty close now in
contrast to the whole Warner Brothers Discovery split. The nice
thing about the Comcast cable network split, which is by
the way going to be called worsened, is that it
doesn't have a lot of debt, so it has it's
really a well capitalized company. Uh they're throwing about they're
(23:40):
throwing they're throwing off about three billion dollars in ebit DA,
but debt is only going to be close to about
two and a half to three billion dollars. So really
well capitalized. The problem is with the cable network business,
as you well know, Paul, that just the options are
not looking that great U you know, affiliate revenue as
we know, and is it decline with cord cutting again,
advertising is going to be you know that most these
ad dollars are going away from linear TV to digital outlets,
(24:03):
so again the outlook is just very bleak, but you
know that company should come on the market sometime pretty soon.
Speaker 1 (24:12):
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Speaker 2 (00:24):
Delta Airlines came out some better expected results for the quarter,
saying that helped by leisure travelers and a rebounding corporate travel.
How about that, said Philip joins us. He's deputy team
leader for Global Aviation. Join us live here in our
Bloomberg Interactive Brokers studio. Are we kind of back to
pre pandemic levels in terms of air travel?
Speaker 3 (00:43):
Also, there is a Dichoto me in the aviation industry
at the moment where we're seeing airlines profitability, especially at
the top end of the market in the premium and
corporate sector. So they're doing really well. So Delta air Lines,
United Airlines doing really well. At the other end of
the market, does the the likes of Spirit Airlines that's
in its second bankruptcy. You've got the other sort of
(01:04):
low cost carriers that are struggling to fill up seats,
and that's partly on account of the fact that low
cost carriers their customer base is still hurting from the
sort of tariffs and the economic uncertainty, whereas for the
top end of the market, they seem to be traveling
and as normal.
Speaker 4 (01:20):
Actually, yeah, it's the manifestation of the key shaped economy
right where the higher income consumer is doing much better
than the lower end consumer.
Speaker 5 (01:27):
The CEO of Delta at Bastion said.
Speaker 4 (01:30):
In the earnings report that our customer is financially in
a good spot. Said, who exactly is Delta's customer because
it's not the same as you said as for instance,
Spirit or Southwest or even you can argue United, sure.
Speaker 3 (01:44):
I mean Delta air Lines. I mean they frequently talk
about how their customer is in the sort of average
of over one hundred thousand earnings in one hundred thousand
dollars a year in terms of earnings, and they sort
of are looking for experiences. They're looking to sort of
travel premium. They're not looking to sort of go coach
and sort of nickel and dime their way through the
aviation experience. And they're sort of more willing to splurge
(02:06):
on experiences. And that's sort of the post pandemic revenge
traveler who is now continuing to sort of spend money
on travel, and they seem to be suggesting that airlines
are willing. People are willing to keep going and keep
traveling and keep spending money on experiences and holidays.
Speaker 2 (02:24):
If United beach their numbers this quarter, it's because what
I spent ticket or really spared no expense to get
over there, I needed the rest. Talk to us about
just visibility. These airlines they put they have some pretty
decent visibility on on their bookings.
Speaker 5 (02:39):
So they do.
Speaker 3 (02:40):
They've been talking about how the visibility into the into
the holiday quarta, into the fourth quarter of the year
is looking good at the moment they see they're seeing
demand being strong as they get into the close of
the year, and that's at least. Delta Airlines is talking
about how they expect corporate travel to continue to be
so a solid and robust in twenty twenty six. Are
(03:02):
saying that companies that they surveyed are seeing continued appetite
for corporate travels. So it remains to be seeing what
actually materializes. I mean, airlines had massive forecasts for record
growth this year and then sort of liberation they came
around and that sort of torpedo that and they've now
sort of come back to those levels, but will remains
(03:23):
as be seeing what surprises come out next year.
Speaker 4 (03:25):
I'm so glad you bring that up because earlier this
year Delta warned of an abrupt slowdown or I don't
know that it actually saw when it just said it
kind of was seeing it on the horizon. Has that
been completely a race and turned around?
Speaker 3 (03:39):
Now for the moment, it does look like it is smooth,
smooth skies for them. But at the same time, we
don't really know what's going to happen in the current
economic environment or what demand looks like as we go
into twenty twenty six, and that's something that we need
to watch as the airline sort of report their fourth
quarter results and sort of about their future vocalsts.
Speaker 2 (04:02):
What are the big airlines, the big ones you mentioned
United Deltas. What are they doing with capacity? Are they
adding capacity trimming it back? I mean, I don't know
if they're doing with routes. I don't know if they
have enough planes, all that kind of stuff.
Speaker 3 (04:13):
So they have been so Delta has been adding capacity,
They've been retiring older planes and taking on new planes,
and so they seem to be adding a little bit
of capacity.
Speaker 5 (04:23):
And we're also.
Speaker 3 (04:24):
Seeing, like so United talk about how they are upgrading
their fleet. They're replacing their old aircraft with seven eighty
seven's and Maxes, and so we are seeing the US
carriers upgrade their fleets, and that's sort of adding more capacity,
especially as they upgate aircraft, so they sort of replace
smaller narrow bodies with the larger eight three twenty one
(04:44):
or the Max nine, and that sort of adds more
seats and more capacity. But then at the same time,
they're also premiumizing the cabins, so they're adding more business
class cabins and more premium economy than they ever did before.
Speaker 5 (04:56):
Premiumizing. That is a new word. I had not heard
of it.
Speaker 2 (04:59):
But economy coming back from Italy was actually like the
old first class in terms of really I was shocked
at how much room there was this.
Speaker 5 (05:07):
How how far back can you recline?
Speaker 6 (05:10):
Just the normal one?
Speaker 2 (05:11):
Okay, but it was just way more like mouse And
it wasn't that much money. It was a couple hundred
bucks to uperate, So that was pretty interesting.
Speaker 4 (05:18):
No, and that's that's a big part of Delta's push right,
pushing these premium products in the cabin.
Speaker 5 (05:23):
What about on the ground.
Speaker 4 (05:24):
What is Delta doing on the ground to really harness
its customers desire for a premium experience.
Speaker 3 (05:30):
So they bartnering with they have that partnership with Uber
the they've sort of added more of those Delta one lounges,
and they're sort of doing those credit card partnerships, and
those are all sort of ways to keep customers sticky
and keep them engaged because, I mean, the moment you're
sort of signed into the ecosystem, you're more likely to
book with them and sort of not really use price
(05:52):
comparison websites. You're more likely to sort of keep.
Speaker 5 (05:55):
Going customer for life kind of thing.
Speaker 2 (05:58):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (06:05):
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 2 (06:19):
You know, I'm a coke guy. Be with PEPSI in
front of me. Fine, I'm just as happy I can
realize it. But Ken Chase. He follows this stuff for living.
Ken Chase, the senior consumer products analysts of Bloomberg Intelligence. Pepsi,
reported some numbers a little bit better than expected. Here, Ken,
tell us what you heard from our good friends at PEPSI.
Speaker 6 (06:36):
Yeah, Hi, Paul, Well, PepsiCo report a number today, numbers
today that we're pretty much in line, maybe a little
bit above expectations. But I think they also masked persistent
weak market conditions of the US across its broad food, snack,
and beverage businesses. The company pretty much, you know, hit
(07:00):
their numbers, as I said, but it didn't do much
to relieve the pressure it's getting from activists, an activist
who's asking the company to do more. Basically, flat performance
is just not good enough for something that's perceived or
a company that's perceived as a growth company. I guess
the good news is their language during the call, though,
did provide investors a bit of optimism. It sounds like
(07:23):
the company is getting it. They said they're going to
ramp up innovation, they're going to be more aggressive with
cost cutting. They're listening to the activist points and they
said buy a Laerds. They agree with many of them.
So those are all, you know, good things to hear.
You know, from an investor point of view, it's just
a matter of executing and actually following through with them,
I think is where the jury is out.
Speaker 4 (07:45):
So I guess ken the question is is this enough
for Elliott the activist semester which took about a four
billion dollar steak in PepsiCo and called for a strategic
review a streamlining of a snack portfolio in particular, Well.
Speaker 6 (07:59):
I think think the CEO of PepsiCo mentioned that they
are on the same page on a lot of fronts,
but what they didn't say is one of the big
things that Elliott is calling for is basically, you know,
the beverage business to refranchise itself, sort of what Coca
Cola does, to let the bottlers be independent rather than
own those very capital intentsive businesses. They didn't go there.
(08:21):
I'm sure that's going to be a big sticky point.
What they are in agreement, though, is that innovation is
needed to be even more on Trent. You know, I
covered PepsiCo. I've covered PepsiCo for a long time. They
are probably on the forefront of the most innovative companies
across the beverage world that I cover, and yet they're
even ramping it up even more aggressively across food, aggressively
(08:43):
across beverage to be as on trend as possible. And
on that note, you know, Bloomberg Intelligence came out with
its annual consumer Beverage survey just on Monday, and some
of the big findings that we're seeing is that advanced,
high duration, wellness, and value are more more important than
ever in the world of beverages. And it was interesting
(09:03):
to hear PepsiCo pretty much address all three of those
areas with their new product innovation. So that's encouraging.
Speaker 2 (09:10):
At the end of the day, can as a company
like Pepsi, is that nothing more than really a GDP
kind of growth story. There's not much more you can
do to goose it above that? Or is that or
can they do better? Maybe that may be true in
the US pool. I mean, it's such a large business,
it's in most channels, it's you know, it's been around
(09:30):
a long time obviously, but I think most people looking
at this company would say, look, you have great opportunities
outside the US. There's much less price competition. You know,
outside the US, people are embracing you know, these consumer
goods and these brands outside the US. So that's one
of the things Elliet is actually saying, provide you know,
feed the capital needed outside the US to grow these
(09:53):
business in these big growing markets, you know, like China
and India and so on, Latin America. These are really
big growing markets. And to the extent that they could
play more in those markets I think would be good
for the enterprise in the whole.
Speaker 4 (10:09):
But for those markets, would they need to take a
similar approach as what they do in the US. Be
more innovative, keep up with this shifting consumer taste towards
healthier offerings, higher protein, portion controlled, less sugary drinks, or
can they go with their old playbook.
Speaker 6 (10:25):
I think it's a combination of doing what they're doing.
You know, in some of these markets they have to
adhere to local tastes. My guess is that a lot
of these consumers are seeking the same kind of things
the US though is or I should say, you know,
wellness value, but the portfolios are not quite as broad
(10:46):
outside the US. So I think it's tailoranto's the local
areas and bringing some of their learnings from the US
to these markets over time.
Speaker 2 (10:58):
Ken talk to us about the They got about a
four percent dividend yield on PEPSI. That seems pretty solid.
What's their policy on dividends these days?
Speaker 6 (11:07):
Oh, they're committed. I mean they know that a big
shareholder base, you know, is income investors. So they are
there committed. In every quarter like this one, they said, Look,
we're committed to have a multi prong capital allocation policy.
We're going to you know, invest in the business, you know, innovation,
like I said, but they're also going to buy stockback
(11:28):
on a you know, selected basis. They're going to commit
to their growing dividend, and their balance sheet would support
them doing that. I mean, the balance sheet is in
good shapes and good investment grade, and so I see
this company continue to have a balanced allocation going forward.
Speaker 2 (11:46):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (11:53):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, cock Play and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 2 (12:07):
We were talking about the auto business in Ferrari or Ferrari,
thinking this brings to mind, I don't know how these
companies are going to go for the next five years,
ten years in terms of that evolution, because it's kind
of fits and starts.
Speaker 5 (12:20):
They can't figure out next year, and some point.
Speaker 2 (12:21):
The market rewards them for it. At some point the
market penalizes before Craig Trudell it's his job to make
a sense out of all this. He's a Global autos
editor for Bloomberg News. So, Craig, can you see news
from Ferrari about its cautious forecast maybe just kind of
cautious commera territory on EV's. What does it tell you
here from Ferrari?
Speaker 7 (12:41):
Yeah, I mean, I think the market was taking in stride,
you know, the the caution on EV's. I think even
you know, sort of among the investor base and certainly
the analysts too, there's some real concerns about, you know,
just how sort of incongruous Evs are with Ferrari, and
some questions about whether you know, whether they should even
(13:01):
bother uh going in that in that direction. Uh, you know,
I think I think the shares were down a little bit,
what you know, earlier this morning when they were talking
about that. I think where we saw the stock really
just take it on the chin, was when they came
out with their their outlook you know, for through twenty
thirty and I you know, I think that the profit
(13:22):
uh you know, growth was was underwhelming. I should you know,
sort of say it. It also is the case that
they are still you know, calling for growth. I think
some analysts were maybe hoping for for uh you know,
also some some increase in volumes, but it's not really
you know what what Ferrari is about. They you know,
are sort of like clockwork, you know, making a pretty
(13:44):
set number of vehicles every year and uh, charging an
awful lot of money for them, and and uh that's
that's really been you know, something that's that's paid off.
And I think, you know, just the other thing to
sort of keep in mind here when you look at
what these shares have done, you know since they listed.
You know, the shares in Milan have been trading since
early twenty sixteen, the New York ones a little bit
(14:07):
earlier than that. But this is a stock that has
absolutely been on a tear all those years since. And
so you know, I yes, a sixteen percent to decline
and one day, you know, sort of makes your eyes pop.
But this is a company that is still valued very richly,
and that makes a little bit more sense in hindsight.
Speaker 4 (14:26):
And Frari also of course coming out with its first
EV too, and that might be accounting for some of
the caution in terms.
Speaker 5 (14:32):
Of what it sees going forward.
Speaker 4 (14:35):
In the story, you and your colleagues Craig talk about
how not just Ferrari, but Portia and Mercedes Benz have
also struggled with the electric transition. Why are wealthy buyers
somewhat resistant to switching over to plug in EV's what's
behind that?
Speaker 7 (14:50):
Yeah, it's a really good question. I think you know,
there was just this sort of working assumption that you know,
the only thing that you were going to have to
overcome was caught, and so you know, there was this,
i think, sort of conventional wisdom. Well, oh, we'll just
have you know, the folks who are most able to
afford this incremental additional costs, they'll they'll fit the bill,
(15:14):
and we'll be sort of off and running as an
industry and gradually sort of work our way down price wise.
I think if if you're a luxury car buyer and
you're having to pay a significant premium over you know,
looking at at models that are that are the same
one combustion and one electric, the electric ones a lot more.
(15:35):
You know, it is still a decision and sort of
a rational decision to a sort of second guess whether
or not you want to go electric. And I think
that's what what you're seeing is is that you know,
BMW and Mercedes until and unless they sort of you know,
price their models closer to one another, you're you're going
to have, you know, some pushback on the part of
(15:56):
the consumer to make that transition, even as as we
make progress and things like charging infrastructure and some of
these hurdles that you have to overcome that or unique
to EBS.
Speaker 2 (16:06):
My biggest question for you know, the supercars going electric
is I think a big part of the reason people
buy the Ferraris the Lamborghinis is for the cool sound
when they're coming down the street. What's Ferrari doing with
with that part of it?
Speaker 7 (16:23):
Yeah, it's it's interesting and we saw sort of, you know,
and we had the indications that Ferrari was working on
something in this regard to to try and sort of
preserve the noise that you can make driving a Ferrari
that they patented, you know, systems to kind of create
essentially artificial noise, or at least to play up the
(16:43):
noise that is made by you know, electric motors in
electric vehicles. You know, I think that being said, well,
we see Ferraris externally make you know, nearly as much
noise as a Ferrari supercar. I suspect that the answer
to that is probably no. But I've been I've been
very entertained that, you know, Dodge came out with an
(17:04):
electric vehicle last year, and I saw a report recently
that you know, an owner in Canada was ticketed for
a noise violation with his electric Dodge vehicle. So, you know,
maybe maybe it's for the best actually that this will
become a thing of the path.
Speaker 2 (17:20):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (17:27):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarcklay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (17:41):
Let's talk a little bit about the media business there.
It's undergoing a certain degree of consolidation here as it
tries to deal with the rising tide of YouTube among
other streaming type services and digital services that have really
displaced many of the traditional media businesses. And one of
those is Paramount Global that was so bought by sky Dance.
(18:03):
Larry Ellison's family now looking to take a look at
Warner Brothers Discovery, another publicly traded company. Maybe those two
might get together. Check in with Githa rang Aanath and
she's the media analyso over Bloomberg Intelligence. Githa talk to
us about the likelihood of Paramount merging with or acquiring
Warner Brothers Discovery and how that might look.
Speaker 8 (18:28):
Yeah, thank you so much, Paul. So it's been a
while actually, so there's been these on again, off again reports.
The first time the news broke was almost a month ago.
It was on September eleventh that there was this swall
Street Journal article which suggested that Paramount was kind of
exploring this bid. There hasn't actually been any formal bid
from Paramount, however, you know, the shares of both those
(18:51):
companies have kind of really gone up very nicely on
the news, kind of just telling us how important it
is for both of them to have this consolate. If
you look at Paramount. Obviously they just went through that merger.
There is really very little details when it comes to
what is, you know, kind of the strategy for this business.
They definitely need something big. Having a studio like Warner
(19:12):
having a service like HBO Max, it really kind of
puts them on that global media map, so they I
think they definitely need it in order to kind of
make this big splash in the media ecosystem. But there,
you know, as days pass along and we don't get
a bit, it just seems like the probability of this
happening gets smaller and smaller.
Speaker 4 (19:32):
Yeah, it's curious because we've been waiting for so long
and the industry has been ripe for consolidation, and David Zazov,
who of course runs Warner Brothers Discovery, has been talking
about how consolidation is something that he anticipates and he
wants to see happen. Is there role here for regulators?
Is this something that they would weigh in on. Is
Brendan Carr going to play any kind of role here.
Speaker 8 (19:56):
So a Paramount, Yes, there is potentially a role for
for any and all types of regulatory scrutiny in the Paramount.
A Warner Brothers deal or a potential deal, the FCC's
involvement likely wouldn't be as heavy just because there is
no merger of two broadcast assets, so Warner Brothers only
has streaming studio and cable networks, no broadcast networks like
(20:20):
a Paramount which owns the CBS broadcast network. So they
should get like a fairly you know, quick green signal
from the FCC. Well, all mergers are ultimately, you know,
kind of a subject regulatory scrutiny. But let's remember Paramount
has just gone through this whole process with the regulators,
kind of getting that skydance, so they kind of know
how to navigate their whole way around, you know, the
regulatory ecosystem, if you will. So I don't think it
(20:42):
should be much of a problem at all, Scarlett.
Speaker 2 (20:44):
Now the New York Post, I saw some reporting, and
by the way, then your post.
Speaker 5 (20:48):
They do a great job covering.
Speaker 2 (20:49):
The media sector, particularly on the M and A front,
always have, always have. They're suggesting maybe paramount S Guidance
might be talking with some private equity players about participating
any potential deal, and I think they mentioned Apollo as
one that they were talking with. What does that mean
to you.
Speaker 8 (21:06):
What that means to us is that, you know, obviously
funding is a problem here. I mean, this is a
big deal, Paul. You know, there was an initial a
price range that was suggested by CNBC of about twenty
two to twenty four dollars a share. I think David
Zaslav is looking for something much much higher than that.
You know, the New York Post themselves had reported that
he was probably looking for something in the range of
(21:28):
forty dollars a share. Not sure whether he's going to
be yeah, not sure whether he's going to get that,
but regardless, I mean, this is a huge deal. I mean,
even at that twenty two to twenty four dollars, we're
looking at about a sixty billion dollar deal. So funding
is definitely going to be, you know, an issue. And
that's kind of what it suggests the news article from
yesterday suggests to us, Because if Paramount is kind of
(21:50):
scouting for all of these different partners, they've talked to Apollo,
as you just suggested, they're talking to Legendary. You know,
funding doesn't seem to be as easy as you know,
maybe we initially thought.
Speaker 5 (22:02):
And also Warner Brothers is carrying a lot of debt.
Speaker 4 (22:04):
I know Zaslov has made a priority of reducing leverage
and he you know, has executed on a lot of that,
but there is still quite a bit of debt involved here.
Speaker 5 (22:14):
How willing is Skydance to take that on.
Speaker 8 (22:18):
They are willing to take that on because Scarlett, you know,
Warner Brothers is actually in the midst of their own restructuring.
So what they had planned, even before all of this
Paramount news broke, they had planned to actually split their company.
So they have a TV network's business and they have
their streaming and studio business, so kind of the no
growth assets and the high growth assets, they're kind of
splitting those two out, and majority of the debt. They
(22:40):
started with about fifty five billion dollars in debt, they've
kind of whittled that down to about thirty thirty two billion,
but majority of that thirty two billion dollars debt was
actually supposed to travel with the TV network's business, with
Paramount kind of coming in and making a bid for
the entire company. Even before that split actually took place,
just kind of signaled that they wanted to get, you know,
the entire business, and they were willing to take all
(23:01):
of the debt, not wait for the split and wait
for you know, kind of the debt to go away
and then just go scoop in on the on the
streaming assets. So they definitely know about the situation and
seemed like they were willing to take it.
Speaker 2 (23:13):
Another company that's talked that I announced they're splitting their
networks away with Comcasts. Where are we on that?
Speaker 8 (23:20):
So that seems to be coming pretty close now in
contrast to the whole Warner Brothers Discovery split. The nice
thing about the Comcast cable network split, which is by
the way going to be called worsened, is that it
doesn't have a lot of debt, so it has it's
really a well capitalized company. Uh they're throwing about they're
(23:40):
throwing they're throwing off about three billion dollars in ebit DA,
but debt is only going to be close to about
two and a half to three billion dollars. So really
well capitalized. The problem is with the cable network business,
as you well know, Paul, that just the options are
not looking that great U you know, affiliate revenue as
we know, and is it decline with cord cutting again,
advertising is going to be you know that most these
ad dollars are going away from linear TV to digital outlets,
(24:03):
so again the outlook is just very bleak, but you
know that company should come on the market sometime pretty soon.
Speaker 1 (24:12):
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