December 11, 2023 • 37 mins
Brad Jacobs, Executive Chairman of XPO Logistics (NYSE: XPO), joins to discuss returns to the show to reveal the industry and targets of his new investment venture. Wendy Schiller, Professor at Brown University, joins to discuss President Biden’s waning poll numbers amid support for Israel, Zelenskiy visiting Washington Tuesday, and the foreign aid stalemate on Capitol Hill. Scarlet Fu, Bloomberg News anchor and host of Bloomberg Radio’s “Business of Sports, joins to discuss the major sports headlines this weekend, including LIV Golf’s latest and Shohei Ohtani’s record contract. Peter Ingram, CEO of Hawaiian Airlines, joins to discuss their deal to merge with Alaska Airlines. Hosted by Paul Sweeney, John Tucker, and Jennifer Ryan.
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Episode Transcript
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Speaker 1 (00:00):
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Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
my co host Matt Miller.
Speaker 1 (00:40):
Every business day we bring you interviews from CEOs, market pros,
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Speaker 2 (00:48):
I'm the Bloomberg Markets podcast called Apple Podcasts or wherever
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All right, he's back, folks. He said he'd be back,
and he's back. Brad Jacobs, Executive Chairman of XPO You
know what in Lovin on the New York Sock Exchange XBO.
He's got a new company, which he's been talking. I
guess he kind of hinted at the last time he
(01:09):
ses to tease. Thank you very much, Brad, Thanks so
much for joining us. We really appreciate you coming back.
Talk to us about the new opportunity you've seen. I mean,
you've done roll ups of the waste management business, the
rental business, the logistics business.
Speaker 3 (01:22):
Now what building products distribution?
Speaker 2 (01:25):
Building products distribution? Okay, so if you can.
Speaker 4 (01:27):
Think about any house or a commercial facility, or a
hospital or a school or a church, all the stuff
that goes into making that building, so that could be
the roof, the flooring, the windows, the tiles, the doors,
the fire hydrant, the infrastructure, the.
Speaker 3 (01:45):
Pipes, HVAC. All that stuff has to go through the
supply chain and its huge, huge markets eight hundred billion
dollars in size between here and Western Europe, and it's
been growing about seven percent.
Speaker 5 (01:58):
All right, So what what do you bring to it
that that's new.
Speaker 3 (02:01):
We'll bring a lot that's new. First of all, we're
going to create a very large company and get all
the advantages of scale and size that come with that.
Second of all, we're going to apply technology We're going
to apply technology, especially AI, for dynamic pricing, for managing
the warehouses better, making them more automated, to do route optimization,
for the delivery trucks, to do interactions with the customer.
(02:23):
E commerce right now is mid single digits percent. It
should be the majority.
Speaker 5 (02:27):
And in building materials, Paul, all I want is a
straight tube by five. I know that's can you make
that happen. It's a big deal. It's a big deal
where you source your materials because even though it's commoditized,
I just find as the end user, it's not always
the same product.
Speaker 3 (02:45):
Well, I'm glad to hear that there's a problem to
solve in this chain, and we will solve that.
Speaker 2 (02:51):
Talk to us about kind of the I guess in
the past, part of your strategy has been rolling up well,
rolling up a fragment in industry. Is that in fact
the case here? Talk to us about kind of the
fragmentation and kind of how you plan to deal with that.
Speaker 3 (03:06):
So there's about thirteen thousand distributors here in the United States,
excuse me, seven thousand here the United States. It's about
thirteen thousand in Europe. So there's twenty thousand distributors between
here and Western Europe. So it's very, very very fragmented.
The largest company would be Fergusing. It's about thirty billion dollars.
Great company, done very good, very well. But I plan
(03:26):
to make a company even bigger than that.
Speaker 2 (03:28):
Boy, how do I invest in this on? I'm not
going to miss this one.
Speaker 5 (03:32):
Well, as Paulman, it's not your first rodeo. What is
the experience that you picked up at the other companies
with which you were involved and how does it apply
to this.
Speaker 3 (03:41):
Well, it's a similar business plan in the sense that
it's going to be primarily based on consolidation acquisitions, So
acquiring companies at a relatively good price, a price that's
a lower multiple demo we're trading app and then improving
those companies. So if you look at XPO Logistics, for example,
we bought eighteen companies. They were doing roughly a billion
(04:02):
dollars in EBITDA between all of them, and after a
few years they were doing over two billion dollars VIVI do.
So we improved the companies that we bought. That's the
same thing we're going to do here.
Speaker 5 (04:10):
Do you become then a friend or enemy or a
frindemy of a home depot or Lows home.
Speaker 3 (04:18):
Depot and a lesser extent. Low's plays in a specific
niche of this market, mostly the pro contractor, and they'll
be one of many competitors twenty thousands of precise all.
Speaker 2 (04:29):
Right, So I know we're talked to you the last
time management teams. Assembling a management team is one of
your primary responsibilities jobs, the most important thing, most important things.
Talk to us about how you're going to kind of
do that here.
Speaker 6 (04:43):
So I wrote a book, as you know, yep, and
it's called how to Make a few billion dollars. And
the key thing if you read that book is the
quality of the people. Make sure you have people who
are really smart, really hard working, very good at what
they do, collaborative, good team members, people are really sharp
and focused. And if you can get that quality of
world class management hired, and if you can create a
(05:06):
culture where everyone values the relationships between each other and
treats each other with respect and transparency, you can accomplish
a real lot. I'm going to have that same exact
principle here. That's one of the most important principles.
Speaker 3 (05:19):
For success in my opinion. And by the way, we
named it QXO qx quality. Yep, we kept the X
and O because we're going to use some of the
same winning principles that made XPO and g XO and
RXO successful.
Speaker 5 (05:32):
How far behind is the buildings supply industry in terms
of adapting and using technology.
Speaker 3 (05:40):
As an as an industry as a whole, it's behind.
Maybe it's in like the second inning. There are a
handful of companies doing pretty well. So last week Builders
First Source had an investor day. I read the transcript
and sought on webcast. Heard it on the webcast. I
like what they said about what they're doing in technology.
But they're the exception.
Speaker 7 (05:58):
They're the anomaly.
Speaker 3 (05:58):
Most companies are not using technology in any big way.
In the warehouses. Most of them are not using technology
enough on the route optimization. Most of the building products
distributors are not using technology enough for pricing decisions, for
pricing optimization. And these are big, big variables that can
enhance the customer experience dramatically and take out lots of
unnecessary cost.
Speaker 5 (06:20):
Well, does this mean you pass the costs on to
the end users?
Speaker 3 (06:23):
To the contrary, I hope we save money for the
end user because we're going to take out waste, takeout
inefficiency in the whole supply chain, and we'll share that.
We'll share that with the customer. We'll have better margins,
but we could share some of that improve margin with
the customer.
Speaker 5 (06:36):
What kind of revenues are you predicting at this point?
Speaker 3 (06:40):
By the end of the first year, we should be
on a revenue run rate of at least a billion dollars.
At the end of the second year, we should be
on a revenue run rate of at least five billion dollars.
And over the next decade, we expect to get this
into the tens of billions of dollars in revenue size.
Speaker 2 (06:55):
So where are we with QXO now, you just press
release comes out today. Where do you start? Where's your
capital come from? How do you go from here? How
do you build this company?
Speaker 3 (07:05):
Well, it was on your show last week and we
talked about how we're putting a billion dollars of equity
into a very small cap company called silver Soun. That's right,
and we're going to wait till that deal closed is
in a few months, and then we're going to spin
that company back to the original legacy shareholders. We're going
to give them a little dividend two and a half
million dollars. We're gonna give them a less than half
(07:25):
percent share in our new company. We we'll have our
new company, we'll own ninety nine percent of it, and
we will use that money to go out and do
some acquisitions and start building the business, and over time
we'll tap the capital markets as we've done over the decades.
Speaker 2 (07:39):
How do you typically fund your deals equity versus debt,
given now that the debt is so much more expensive
than it was over the last ten to fifteen years.
Speaker 3 (07:46):
More equity than debt than in the past. In the past,
I've been comfortable going up to two to four times
of leverage. Here, I'm thinking more roughly half of that.
And the reasons are two full One, as you said,
interest rates are higher, although twenty years going to straight
for right here, Yeah, just recently. It was in the
last ten years they got almost nothing. Secondly, is the
(08:08):
world has a lot of macro issues going on, wars
and geopolitical tension, and it's more prudent to have less
leverage in my opinion.
Speaker 5 (08:15):
What's your title going to be, what's your role in
all this? And are you giving up your business, your
other businesses.
Speaker 3 (08:22):
I'm certainly not going to give up my other businesses.
I'm executive chairman of XPO and I planned to keep
doing that, And I'm non executive chairman of RXO and
of GXO, and I love all fear of those companies dearly,
and I think I help them in the roles that
I play there. In terms of what my title and
position is going to be here, it's going to be
the same time I've had since I've been twenty three.
I'm going to be chairman and CEO, and I'm going
(08:42):
to run the company. I'm going to leave the management team.
Speaker 5 (08:44):
And what makes you target this industry specifically? You've got
about thirty seconds or so left.
Speaker 3 (08:49):
I looked at over five hundred opportunities and many many
different industries, and this is the one that checked every
single box of what I was looking for. Something that
was large, something that was act position rich, something that
was up my alley in terms of my skill set.
Something with it was growth seven percent organic growth, and
an industry and a customer set that is familiar to me.
(09:11):
United Rentals is a big overlap with the construction customers.
Speaker 2 (09:13):
For example, fascinating Brad thanks so much for joining us again.
We appreciate you coming back and bringing us up to
date on your new opportunity. Brad Jacobsy's executive chairman of XPO.
Speaker 7 (09:26):
You're listening to the Team Ken's are Live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg dot Com,
the iHeartRadio app and the Bloomberg Business app, or listen
on demand wherever you get your podcasts.
Speaker 2 (09:40):
The Business of Sports, John, it's scarlettfou and a couple
other slugs. I think Michael Barr and some guy who's
an emerging markets guy. How he gets a Damien c
does it all? He does it all. But they talk
about the business of sports. I've got a lot of
business of sports questions. I'm a golfer. I'm a fan
of the game of golf, fan of the business of
(10:01):
the golf. I don't understand what's going on with this
live golf thing. I thought the PGA and the Live
we're merging. Everybody's gonna be happy altogether. And then John
Rahm says he's going to go and take three hundred
large from live golf. Can you, Scarlet Fiel, you cover
all this for us? Can you tell us what's happening here.
Speaker 8 (10:19):
Well, he's a reigning Master's champ, the number three player
in the world, so he ads this legitimacy to going
over to Live and he's the biggest signing by far
yet And you're right. Live Golf and PGA Tour are
working towards a deal, but nothing's happened yet. They have
to give an update by December thirty first, and it's
not clear what shape this deal will take, although we
do know that PGA has been talking with other investors,
(10:42):
including a report this morning from Jillian Tan that a
Fenway Sports Group led consortium has been chosen to enter
into final talks to be a co investor, a US
co investor in this Live Golf PGA Tour entity.
Speaker 5 (10:54):
Every one of these sports stories as of late, the
common denominator is money, and with it this specific case
golfers signing with Live. Something in me tells me that
this is some sort of Faustian bargain that these golfers
are made. Am I being too cynical or fausia not realistic?
Speaker 8 (11:13):
If the PGA Tour is in active negotiations with Live
Golf to merge whatever obstacles they threw up there, and
whatever concerns they cited has kind of gone by the wayside.
They opened the door to golfers negotiating with Live Golf directly.
We know that John Rahm had said in the past
that he was not interested in the money. He said
(11:34):
he and his wife were not concerned about the money,
you know, that Live could offer them. He's always been
very interested in history and legacy, and he said back
in twenty twenty two. Right now, the PGA Tour has that. Now,
once it became apparent that the PGA Tour was negotiating
with Live Golf, maybe it doesn't have that history and
legacy anymore because it's open season it is.
Speaker 2 (11:54):
I mean, if the PGA is going to merge with Live,
they're going to take a direct investment from the set
Investment Fund. So you've already lost that The fundamental argument
that the PGA had against Live is now, by the way, say,
because you're in fact taking that money. So now if
I'm John Rahm, I'm like, why do I wait?
Speaker 5 (12:13):
Where the regulators and all this? What's there?
Speaker 8 (12:15):
The DOJ is looking into this, and you know, again
they have that December thirty first deadline with which to
update the government. We do know that Jaymonahan and the
PIF governor, yasir Al Ramayan Our scheduled to meet this
week for negotiations, so maybe there'll be some reporting out
of that.
Speaker 5 (12:33):
Here's the independent of each other. Can they possibly Could
the PGA possibly survive on its own against an entity
like Live?
Speaker 2 (12:42):
I don't know.
Speaker 8 (12:42):
They don't have bottomless pockets like Live. Live is backed
by the Saudi government.
Speaker 2 (12:46):
But I'll tell you what the PGA has that Live
doesn't have, which is a network television contract. I mean,
if you want to watch Live, you got to go
find it on the CW with's your a bunch of
hotstruct stations around. They have no and so it is.
I mean, I'm an avid golf fan. I will watch
the round of some tournament in Poughkeepsie if it's the
PGA Tour. I didn't haven't seen one shot of You could,
(13:07):
but you just don't want to. It's a combination. I
don't really care to. The PJS takes care of it
for me, and you know, I don't know so, but
there's enough people that are following Live. I think that
it's a thing and it doesn't matter what the TV
contract is as long as you have I guess that's
Saudi money behind you.
Speaker 9 (13:25):
Yeah.
Speaker 8 (13:25):
Well, I mean they can always disrupt that at some point,
and technology is moving the direction of people are not
necessarily going to be signing up for the cable bundles
and signing up for CW streaming will become more and
more attractive over time.
Speaker 5 (13:37):
Yep. All right, So what next for the Saudi government
in its investments?
Speaker 8 (13:42):
Maybe the Saudi government should look into Shoho Tani.
Speaker 2 (13:44):
Yes, so now again, money money, It's all about a
lot of money in this case, seven hundred million dollars.
Speaker 8 (13:51):
Over ten years. This is the largest contract of any
in any US professional sports league. It tops Aaron Judge
his contract as a free agent nine year, three hundred
and sixty million, Mike Trout who got an extension twelve year,
or four hundred twenty six and a half million, even
Patrick Mahomes ten year, four hundred and fifty million, Lionel
Messi when he resigned with Barcelona. So this is a
(14:13):
you know, ball Well no, I didn't want to use
that word. Well, I mean, it's a racket busting contract
about that.
Speaker 2 (14:20):
It's amazing. I mean, I mean, did they what's the
money behind the Dodgers, and I think about the Yankees.
I think about the YES Network, and they make a
ton of a.
Speaker 8 (14:28):
Very lucrative sports TV CONTRACTIA contract. But I mean, this
is also the second biggest media market in the nation,
right after New York. And on top of that, unlike
the Yankees, they've done very very well on the field.
They won the World Series in twenty twenty. They haven't
missed a season since twenty two.
Speaker 2 (14:46):
Well, that's amazing. That's kind of like the Yankees of
the nineties in their early two thousand day.
Speaker 5 (14:51):
Is he worth it is?
Speaker 8 (14:52):
Yeah, he's worth it.
Speaker 5 (14:53):
Okay, give me some stats, so the comparation's with me.
Speaker 2 (14:57):
But how about this.
Speaker 8 (14:57):
He won the MVP twice. He is an incredible hitter
and he's an incredible pitcher. If he just became one
a hitter or one a pitcher, he would be an
All Star in either, except that he could make.
Speaker 2 (15:09):
People are saying, I mean he is as good or
better than Babe Ruth. That's how far those are.
Speaker 8 (15:16):
Those are the comparisons. And this summer when he was
playing around the league, everywhere he went there were fans
showing up and it was like showtime. You know, and
they're just like tons of fans everywhere, and it was
it was basically a tour to see, like how can
we uh appeal to him and show him that like
he should come play for the Mets, or he should
come play for Detroit or whatever city you want to mention?
Speaker 5 (15:38):
Is there any chance he'll start dating Taylor Swift exactly?
Speaker 8 (15:45):
Kelsey is not giving up on his situation at all.
Speaker 2 (15:49):
Ok, All right, what else he has for the business
of sports? Coming out for the businesses? Now you have,
I mean our listeners and our viewers on YouTube. Scarlet's
watching wearing a New York Rangers jacket. So is that
the team number one for you?
Speaker 8 (16:03):
Team number one?
Speaker 2 (16:04):
You got to Cornell? So does that mean you're you're
just a die hard hockey fan.
Speaker 8 (16:08):
I've always been a hockey fan, Okay. And when I
went to school, I actually didn't go to any of
the games because, yeah, because it was really hard to
get a ticket.
Speaker 2 (16:15):
You had to hard to get a hockey ticket.
Speaker 8 (16:17):
Yeah, you had to sleep outside and to get the ticket. Yeah,
I mean back in the day, this is what it entailed.
Speaker 2 (16:25):
And I didn't do that. Yeah. Wow.
Speaker 8 (16:28):
But then they started playing all the hockey games or
the big game Red Hot Hockey in Madison Square Garden
on Thanksgiving weekend and it became a bigger thing. Okay,
so that's been going on for a couple of years,
and I know I came on to talk about that.
That's really fun.
Speaker 2 (16:41):
That's a fun all right. So you're a Ranger fan.
Unbelievable years so far.
Speaker 8 (16:44):
For this so far, but seasons early, I mean seasons young,
and anything could happen.
Speaker 5 (16:49):
Who's your team?
Speaker 2 (16:50):
Well, I don't know. I mean the Rangers, I mean
I mean Yankees, guy, Giants.
Speaker 5 (16:55):
You're from New Jersey. You've had a root for your Devils.
Speaker 2 (16:58):
Yeah, you know, I've been to. I took the kids
to a lot of game. It's actually a great thing
to take kids with. Point's expensive.
Speaker 8 (17:03):
Yeah, the Devils are very exciting though. Yes, young players,
they're really they're doing a lot.
Speaker 2 (17:09):
Yeah, but I mean Madison Square Garden going to the
protection Duke Blue Devil's next Wednesday at the Garden against Baylor. Oh,
next time, and that'll be fine.
Speaker 5 (17:19):
Longtime listener called Wright sin Googenheim money behind the LA Dodgers.
There you go, that's right, that's from mister.
Speaker 2 (17:26):
Cinch Ye thank you. Yep, that's I remember that deal
getting done. All right, Scarlet Food, thank you so much.
We appreciate Scarlet Fush. She's a host of Bloomberg Television
and Bloomberg Radio's Business of Sports. Michael Barr Damien Sassaur
take a backseat to Scarletfoodle's let let's let let's let's
be honest.
Speaker 8 (17:43):
You're like the other way around.
Speaker 7 (17:44):
You're listening to the tape. Can's are live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg Radio, tune
in app, Bloomberg dot Com, and the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station just say Alexa playing Bloomberg eleven.
Speaker 2 (18:03):
All right, let's switch gears, go a little bit political.
Get President Zelensky coming to the States, coming to d C.
Meeting with lawmakers to try to unlock some of that
aid for Ukraine. Let's bring in Wendy Schuler. She's a
professor at Brown University. Wendy, I mean give us a
sense of in Washington, d C. Where Ukraine fits in
(18:25):
with all the other news, whether it's from the Middle
East or just the coming election, it seems like the
Ukraine and the support of Ukraine has kind of lost
a little bit of the limelight here Where are we?
Speaker 10 (18:37):
Yeah, man, I.
Speaker 11 (18:38):
Think the momentum, I wouldn't say collapsed, but I think
the momentum has slowed considerably. And rather than have a
sort of a singular conflict that we've been very involved
in and very supporter of Ukraine against Russia, now another
conflict has opened up that has really soaked up all
the attention, all the emotion and passion, and that of
(18:59):
course the Middle East Israeli Gaza conflict.
Speaker 10 (19:03):
So that has really become a problem for the.
Speaker 11 (19:05):
Biden administration and the tendency in the Republican Party, particularly
with the Alistair McCarthy and the replacement with someone who's
more conservative.
Speaker 10 (19:14):
And more insular in their.
Speaker 11 (19:16):
View about the United States role globally in terms of
military conflict and support.
Speaker 10 (19:22):
That has happened at the same time, and so you.
Speaker 11 (19:25):
Know that Caucus is not particularly persuaded that we should
be spending billions of dollars to continue to support Ukraine.
And notice that they have not yet, although they want
to separate the Israeli eight out, they haven't passed the
Israeli aid.
Speaker 5 (19:39):
Either let's jump ahead to election day and when a
voter walks into the poll and pulls the lever of
the switch or whatever it is, now, are they thinking
about Ukraine? Are they thinking about funding for israel? I?
Speaker 11 (19:54):
Think a small group of people in particularly the Gaza conflict,
a small group relative to the United States voting population.
A small group will have intense preferences and they will
remember either favorably or unfavorably, what the Biden administration has done,
and then they will now listen potentially to Trump or
Nikki Hanley Rondo Santis on what the government should do
(20:17):
so that. I don't think those people swing an election nationally,
but there are some communities in swing states where they
could really make a difference in their voting Ukraine. I
don't think has ever been an issue that as at
the forefront or top of mind that swings electoral decision making.
Speaker 2 (20:35):
Kind of on that front, Wendy, there's a couple of
polls that one from CBS News, one from the Wall
Street Journal. Biden's support of Israel alienates more Democrats in
the new poll. What kind of calculus is the president,
you know, kind of working on here? As it relates
to his support for Israel.
Speaker 11 (20:54):
Well, I think here we really see as we watch,
you know, for the next months before the US pop
up has had a daily dose of Donald Trump. I mean,
we just haven't been exposed to the daily dose yet.
If he wins Iowa, as we now sort of expect
him to, and if he wins New Hampshire, we are
going to get multiple daily doses of Donald Trump, and
(21:16):
I think the polls will probably reflect a shift a
couple of months down the line.
Speaker 10 (21:21):
All on that comparison.
Speaker 11 (21:23):
But right now, the Democrats face a real problem because
at the congressional level they are divided on Israel and Gaza,
and that division is obviously very public.
Speaker 10 (21:32):
So going into the twenty twenty four races.
Speaker 11 (21:34):
You've got house races, you've got a chance to take
the House back, you've got Senate seats you're desperate to preserve,
and you've got the Biden reelection all converging. And you
don't have consensus within the Democratic Party on each of
those levels on what the best policy path for is.
And that's a considerable problem. Donations, endorsements, and again, people
who are intense about this, those preferences are going to
(21:56):
harden in the next couple of months, and you're not
going to be able to shake them once they do.
Speaker 5 (22:01):
That Daily does said you're speaking of is the implication
that his supporter or maybe not the core, but people
are going to get a little tired of this.
Speaker 11 (22:11):
Well, so this is the you know, we look at
independent voting, especially in swing states, and we say, what
has the pattern been twenty eighteen, twenty twenty, twenty twenty two,
they did not vote for either Trump or Trump endorsed
candidates in big numbers. The Democrats had the advantage among
independent voters. Right now, the polling shows that advantage has eroded,
not disappeared, but eroted.
Speaker 10 (22:32):
You know, as he comes back into the limelight and
independence are.
Speaker 11 (22:36):
Reminded of why they have not voted for Trump or
Trump surrogates in the last three elections. That's where I
think the polling becomes more favorable, if you can put
it that way, for Biden, in the sense that he's
a chance to win those voters back into the Democratic
camp at least at the presidential alone.
Speaker 2 (22:54):
How do you think this Republican I don't know. Competitive
landscape is going to shake out here is going to
be you know, if and when former President Trump comes
back and wins in Iowa and or New Hampshire's you
suggest that'll just everybody will kind of bow out at
that point because he will take all the oxygen out
of the air.
Speaker 10 (23:13):
Yeah, you know, that's a great question.
Speaker 11 (23:14):
It really depends on South Carolina obviously, and they've got
proportional delegation allocation in the Republican Party and winner take
all as you move further down the line in the
primary season.
Speaker 10 (23:23):
So that's how Trump.
Speaker 11 (23:24):
Stayed alive in twenty sixteen. He didn't do all that
while in the early primaries, but he stayed alive and
then managed to win many more delegates. So the question is,
not only does he soak up all the oxygen per se,
but he sets the agenda for the Republican Party. He
becomes the symbolics postperson for all Republicans running in twenty
twenty four, And now they're slowly going down to like
a four seat margin or a six seat margin. Their
(23:46):
margin has shrunk and where they won seats California and
New York are not likely to be as favorable to
them in twenty twenty four presidential election. More voters get
out the door on both sides, and if you have
a competitive, slightly leaning Democratic district that flipped, that's very
tough to maintain. So I think it looks bad for
the Republicans on the House side. Also, I'm not sure
they can govern. Will we shut the government down in
(24:08):
early spring or late winter? Will they pass the death
ceiling or filibuster that They've got all the same challenges
going forward in leadership, and I.
Speaker 10 (24:15):
Think it's going to be a very tough landscape.
Speaker 11 (24:17):
On the other hand, the Democrats are defending twenty seats,
the Republicans are defending ten in the United States Senate,
So the odds look very good for the Republicans on
the Senate side, and the Senate Republicans have really stayed
as far away as they possibly could from the House Republicans.
Speaker 10 (24:33):
Whether you can do that with Trump at the.
Speaker 11 (24:34):
Top of the ticket, that is the big political puzzle
I think facing the Republican Party going to twenty twenty.
Speaker 5 (24:39):
Four, this might be a little at a left field.
But is there any doubt that Kamala Harris is the
running mate for Joe Biden?
Speaker 11 (24:47):
So I have said on Bloomberg that I think Joe
Biden is running as long as he's walking, talking, and breathing,
I still think he's running.
Speaker 10 (24:56):
Maybe there's a little bit more doubt there.
Speaker 11 (24:58):
But Kamala Harris is a big quest question mark, not
from her perspective but from the Biden team. You know,
if you really need a Hail Mary and Biden's still
the head of the ticket, do you find a way
to have something else for her to do and she
stays vice president until next year, but find a different
candidate to be VP. So the hail Mary might be
Raphael Warnock of Georgia. There is no race of note
(25:22):
in Georgia in twenty twenty four, and certainly no African
American candidate at the top of the ticket statewide. That's
a big difference between twenty and twenty twenty two for
the Democrats.
Speaker 10 (25:31):
So I think Jordan slips, Georgia slips away. But if
you have Ralphael Warnock, who's won statewide twice.
Speaker 11 (25:36):
In Georgia at on the ticket instead of Kamala Harris,
I think that changes that ticket's odds. So I think
the team will have to creative because right now it
doesn't look like it's a compelling enough team to make
sure the same people got out the door in twenty
twenty and make sure they'll get out the door in
twenty twenty four.
Speaker 2 (25:55):
All right, just thirty seconds left, I mean, is what
kind of campaign do you think the president by and
we'll run.
Speaker 10 (26:02):
You know, we used to call.
Speaker 11 (26:02):
It the Rose Garden strategy, where the presidents didn't leave
the White House they said they were too busy.
Speaker 10 (26:07):
Obama did that in twenty twelve in thirty seconds.
Speaker 11 (26:10):
Let's see how I can do this, And then he
didn't get out the door really until late September October
when Romney was tied with him in the polls.
Speaker 10 (26:16):
So I think they're going to do the same thing.
Speaker 11 (26:18):
I think Biden is not going to travel that much
and only get out the door late in the game,
and we'll see how he does on the campaign trail
versus the quote unquote vitality that we're seeing from Donald
Trump right now.
Speaker 2 (26:28):
All right, Wendy Schilder, thank you so much. We appreciate
it as always, Wendy Schiller, professor at Brown University, kind
of giving us kind of the political lay of the land.
Twenty twenty four. John's gonna be here in a matter
of days, and that's just election year.
Speaker 5 (26:44):
Momentum, and the lead that the former president has over
his Republican rivals is really astounding at this point.
Speaker 2 (26:51):
Yeah, it's just extraordinary. So it looks like that will
be former President Trump, at least at this stage, looks
to be the nominee. We'll see how it plays out
over the coming months, and there's some primaries and all
that kind of stuff that the politicos like to focus on.
Speaker 7 (27:07):
You're listening to the tape. Can's our live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg Radio, the
tune in app, Bloomberg dot Com, and the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (27:26):
We want to get to our C suite discussion, Big
M and a trade in the airline business Alaska Airlines
and Hawaiian Airlines. Alaska said that it will be buying
Hawaiian for one point nine a billion dollars eighteen dollars
a share plus nine hundred million dollars of Hawaiian's debt.
Joining us right now to talk about this transaction. Peter Ingram,
(27:49):
the CEO of Hawaiian Airlines joining us via zoom from Hawaii.
Good for you, my friend. So let's talk about this, Peter,
talk to us about this transaction. The market's unsure whether
this deal is going to go through. What's the message
you're giving to the market today about why this deal
should be done.
Speaker 9 (28:09):
Well, we feel very good about the deal that was announced.
I think it's a good deal for Hawaiian Airlines Hawaiian
Holding shareholders. It's also positive for Alaska. I think it
sets the company out, the combined company up very well
to compete effectively in a very dynamic airline market. And
(28:29):
obviously we're going to work through the regulatory process over
the next twelve to eighteen months, but we expect this
transaction to close.
Speaker 12 (28:38):
I want to pick up on that a little bit,
because of course, the Alaska Airlines investors were really spotted
that right away. This issue about getting this past the regulators,
and this is not an administration that's very friendly to
these big mergers. So what's the main point that investors
should be thinking about, you know, to put some meat
on this idea that the regulatory process will go through.
Speaker 9 (28:59):
Okay, Well, I think the regulators will look at this,
you know, as an individual transaction, and look at it
on its own merits, and what they're going to see
is that you've got two airlines that have very complementary networks.
We have, you know, big areas of our network where
we don't currently compete with Alaska. They also have huge
(29:22):
parts of their network where we don't overlap at all.
The amount of overlap is very limited, and I think
when people look in into that and dig into it,
that's what they're going to see.
Speaker 2 (29:32):
Alaska Airlines, some of their shareholders are skepule of this transaction,
suggesting that Hawaiian will not return to twenty nineteen cash
flow levels. We've got Southwest coming into the market. Talk
to us about kind of, you know, the profitability of
your company in today's market.
Speaker 9 (29:51):
Well, we feel very good about our standalone business plan.
This was a deal that came along and provided us
a new alternative, but we were working very aggressively to
better our own standalone prospects. Demand remains very strong in
our core markets between the US mainland and Hawaii. We've
(30:12):
seen good recovery in the Japan part of our business,
which is a key piece that had lagged recovery during
the pandemic, but really started to come on since May
of this past year. Continue to be the market leader
in our neighbor island business, which represents roughly twenty percent
(30:34):
of our revenue pre pandemic. So as long as we
compete effectively, I think there's a good market position for
Hawaiian airlines.
Speaker 12 (30:43):
I mean, you mentioned Japan. I'm wondering if you can
talk a little bit more about flights coming in from Asia,
because with this strong dollar, it might be something that
is putting a bit of pressure on you there.
Speaker 9 (30:54):
I think that will hold the demand back a little bit. Obviously,
you know, when we were pre pandemic, the end was
trading one hundred and five one hundred and ten to
the dollar. Now it's in the mid one forties, so
that's a considerable amount of inflation that a Japanese visitor
looks at when they're coming to Hawaii. But we saw
(31:15):
strong recoveries in Australia from South Korea and now even
you know, Japan has come back over the course of
this year, and we think that'll that'll prove to be
a steady recovery going into next year. The affinity of
the Japanese travelers have more Hawaii is really unparalleled. There
(31:39):
were about a million and a half visitors each year
before the pandemic, and it may take a little time
to climb back to those levels, but we think demand
is going to be very strong over the long term.
Speaker 2 (31:51):
Peter, I'm taking a look at your balance sheet and
I see you've got about one point three billion dollars
of debt maturing in twenty twenty six, A big bullet.
There's the what's the plan for that assuming this transaction
does not go through? And how much of your balance
sheet kind of brought you to the table to sit
down with the last Airlines.
Speaker 9 (32:08):
Again, we were really confident and remain confident in our
standalone plan. We've got considerable fleet assets that are unencumbered.
We've got new seven eight sevens coming on against which
we can borrow, and that one point two billion dollars
of that maturity in twenty twenty six is represented by
(32:29):
a loyalty bond of financing that was raised against our
brand and our loyalty program, and so with that coming due,
we would have those cash flows to be able to
do a financing, and it was under collateralized as it was,
so I think the prospects for us continuing to be
(32:49):
able to fund the business are very very strong.
Speaker 12 (32:52):
One thing I wanted to ask you a little bit
about is your costs, particularly your fuel costs. I mean,
regardless of whether or not this deal goes through, this
is something that's been plaguing a lot of people in
your space, and so can you talk to me a
little bit about what your expectations are there and how
you're going to manage it.
Speaker 9 (33:07):
Well, I don't have a crystal ball and where fuel
prices are going, but I do know that if we
look back over the last couple of weeks, we've actually
seen some relief in the fuel price numbers, and that
you know, as we forecast, we just use a forward
curve going forward, So right now the outlook is a
little bit better than it used to be. But you know,
(33:29):
fuel prices are a part of our industry have been
for a very very long time. For most airlines. It
is either the largest cost item or the second largest
cost behind salaries and wages. So we will do what
we can to conserve. We have a hedging program that
helps us smooth out some of the volatility, but we
(33:50):
aren't making bets on where the fuel prices go. I
don't think that's what our investors want us to be doing.
Speaker 2 (33:58):
Peter, as you and Alaska Air execs sit down with
the regulators, what are you prepared to do to get
this deal approved in terms of maybe routes that may
need to be divested or how flexible can you guys.
Speaker 9 (34:11):
Be I'm not going to get into any of the
specifics on that, and some of that, you know, obviously
would would be up to the Alaska team to comment on.
But the fact of the matter is that these are
two networks that are very complementary. There is a very
limited amount of overlap. We think the market is incredibly competitive,
(34:35):
lots of airlines serving Hawaii, and we expect it to
be very competitive going forward. That's the nature of our business.
Speaker 12 (34:43):
Last year, the holiday travel season produced a lot of delays,
a lot of difficulties, and in the airline that came
under pressure for that was Southwest. How do you feel
like the industry is fixed up this year to meet
any difficulties in weather patterns and do you feel like
Southwest is still on the back foot here? Is this
something you can take advantage of?
Speaker 9 (35:02):
Well, just comment on our airline. You know, we're very prepared.
We you know, make sure that we schedule within what
the capabilities of our fleet and our staffing levels are,
and we feel very good about how we're positioned in
that regard. Our reliability has been very strong historically, and
(35:23):
particularly over the last couple of months as we've recovered
from some infrastructure challenges that played Tontolulu Airport earlier in
the year. We've been number one and on time performance
with a very low level of cancelations, and we expect
to execute well in the months ahead.
Speaker 2 (35:41):
Peter, just thirty seconds, just remind us what's the timing
of this transactional last air.
Speaker 7 (35:48):
Well.
Speaker 9 (35:49):
The next step is for us to file a proxy
statement and complete our shareholder vote, which we expect to
happen in the first quarter of next year, and then
after that is really up to the regulatory process and
the Department of Justice to review. We'll be working on
(36:10):
filing the information with them and responding to whatever requests.
We think given the current regulatory environment in the country,
it could take twelve to eighteen months to complete the
entire process, but we think it could also go quicker
than that.
Speaker 2 (36:24):
Peter, thank you so much. For joining us. We really
appreciate getting a few minutes of your time. Peter ingram
He is the see of Hawaiian Airlines, recently announced that
Alaska Airline will be acquiring the folks at Hawaiian Airline
and probably the highlight for Peter ingram As. He is
an NBA from Duke University's Fucal School of Business.
Speaker 1 (36:44):
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Speaker 2 (00:35):
Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
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All right, he's back, folks. He said he'd be back,
and he's back. Brad Jacobs, Executive Chairman of XPO You
know what in Lovin on the New York Sock Exchange XBO.
He's got a new company, which he's been talking. I
guess he kind of hinted at the last time he
(01:09):
ses to tease. Thank you very much, Brad, Thanks so
much for joining us. We really appreciate you coming back.
Talk to us about the new opportunity you've seen. I mean,
you've done roll ups of the waste management business, the
rental business, the logistics business.
Speaker 3 (01:22):
Now what building products distribution?
Speaker 2 (01:25):
Building products distribution? Okay, so if you can.
Speaker 4 (01:27):
Think about any house or a commercial facility, or a
hospital or a school or a church, all the stuff
that goes into making that building, so that could be
the roof, the flooring, the windows, the tiles, the doors,
the fire hydrant, the infrastructure, the.
Speaker 3 (01:45):
Pipes, HVAC. All that stuff has to go through the
supply chain and its huge, huge markets eight hundred billion
dollars in size between here and Western Europe, and it's
been growing about seven percent.
Speaker 5 (01:58):
All right, So what what do you bring to it
that that's new.
Speaker 3 (02:01):
We'll bring a lot that's new. First of all, we're
going to create a very large company and get all
the advantages of scale and size that come with that.
Second of all, we're going to apply technology We're going
to apply technology, especially AI, for dynamic pricing, for managing
the warehouses better, making them more automated, to do route optimization,
for the delivery trucks, to do interactions with the customer.
(02:23):
E commerce right now is mid single digits percent. It
should be the majority.
Speaker 5 (02:27):
And in building materials, Paul, all I want is a
straight tube by five. I know that's can you make
that happen. It's a big deal. It's a big deal
where you source your materials because even though it's commoditized,
I just find as the end user, it's not always
the same product.
Speaker 3 (02:45):
Well, I'm glad to hear that there's a problem to
solve in this chain, and we will solve that.
Speaker 2 (02:51):
Talk to us about kind of the I guess in
the past, part of your strategy has been rolling up well,
rolling up a fragment in industry. Is that in fact
the case here? Talk to us about kind of the
fragmentation and kind of how you plan to deal with that.
Speaker 3 (03:06):
So there's about thirteen thousand distributors here in the United States,
excuse me, seven thousand here the United States. It's about
thirteen thousand in Europe. So there's twenty thousand distributors between
here and Western Europe. So it's very, very very fragmented.
The largest company would be Fergusing. It's about thirty billion dollars.
Great company, done very good, very well. But I plan
(03:26):
to make a company even bigger than that.
Speaker 2 (03:28):
Boy, how do I invest in this on? I'm not
going to miss this one.
Speaker 5 (03:32):
Well, as Paulman, it's not your first rodeo. What is
the experience that you picked up at the other companies
with which you were involved and how does it apply
to this.
Speaker 3 (03:41):
Well, it's a similar business plan in the sense that
it's going to be primarily based on consolidation acquisitions, So
acquiring companies at a relatively good price, a price that's
a lower multiple demo we're trading app and then improving
those companies. So if you look at XPO Logistics, for example,
we bought eighteen companies. They were doing roughly a billion
(04:02):
dollars in EBITDA between all of them, and after a
few years they were doing over two billion dollars VIVI do.
So we improved the companies that we bought. That's the
same thing we're going to do here.
Speaker 5 (04:10):
Do you become then a friend or enemy or a
frindemy of a home depot or Lows home.
Speaker 3 (04:18):
Depot and a lesser extent. Low's plays in a specific
niche of this market, mostly the pro contractor, and they'll
be one of many competitors twenty thousands of precise all.
Speaker 2 (04:29):
Right, So I know we're talked to you the last
time management teams. Assembling a management team is one of
your primary responsibilities jobs, the most important thing, most important things.
Talk to us about how you're going to kind of
do that here.
Speaker 6 (04:43):
So I wrote a book, as you know, yep, and
it's called how to Make a few billion dollars. And
the key thing if you read that book is the
quality of the people. Make sure you have people who
are really smart, really hard working, very good at what
they do, collaborative, good team members, people are really sharp
and focused. And if you can get that quality of
world class management hired, and if you can create a
(05:06):
culture where everyone values the relationships between each other and
treats each other with respect and transparency, you can accomplish
a real lot. I'm going to have that same exact
principle here. That's one of the most important principles.
Speaker 3 (05:19):
For success in my opinion. And by the way, we
named it QXO qx quality. Yep, we kept the X
and O because we're going to use some of the
same winning principles that made XPO and g XO and
RXO successful.
Speaker 5 (05:32):
How far behind is the buildings supply industry in terms
of adapting and using technology.
Speaker 3 (05:40):
As an as an industry as a whole, it's behind.
Maybe it's in like the second inning. There are a
handful of companies doing pretty well. So last week Builders
First Source had an investor day. I read the transcript
and sought on webcast. Heard it on the webcast. I
like what they said about what they're doing in technology.
But they're the exception.
Speaker 7 (05:58):
They're the anomaly.
Speaker 3 (05:58):
Most companies are not using technology in any big way.
In the warehouses. Most of them are not using technology
enough on the route optimization. Most of the building products
distributors are not using technology enough for pricing decisions, for
pricing optimization. And these are big, big variables that can
enhance the customer experience dramatically and take out lots of
unnecessary cost.
Speaker 5 (06:20):
Well, does this mean you pass the costs on to
the end users?
Speaker 3 (06:23):
To the contrary, I hope we save money for the
end user because we're going to take out waste, takeout
inefficiency in the whole supply chain, and we'll share that.
We'll share that with the customer. We'll have better margins,
but we could share some of that improve margin with
the customer.
Speaker 5 (06:36):
What kind of revenues are you predicting at this point?
Speaker 3 (06:40):
By the end of the first year, we should be
on a revenue run rate of at least a billion dollars.
At the end of the second year, we should be
on a revenue run rate of at least five billion dollars.
And over the next decade, we expect to get this
into the tens of billions of dollars in revenue size.
Speaker 2 (06:55):
So where are we with QXO now, you just press
release comes out today. Where do you start? Where's your
capital come from? How do you go from here? How
do you build this company?
Speaker 3 (07:05):
Well, it was on your show last week and we
talked about how we're putting a billion dollars of equity
into a very small cap company called silver Soun. That's right,
and we're going to wait till that deal closed is
in a few months, and then we're going to spin
that company back to the original legacy shareholders. We're going
to give them a little dividend two and a half
million dollars. We're gonna give them a less than half
(07:25):
percent share in our new company. We we'll have our
new company, we'll own ninety nine percent of it, and
we will use that money to go out and do
some acquisitions and start building the business, and over time
we'll tap the capital markets as we've done over the decades.
Speaker 2 (07:39):
How do you typically fund your deals equity versus debt,
given now that the debt is so much more expensive
than it was over the last ten to fifteen years.
Speaker 3 (07:46):
More equity than debt than in the past. In the past,
I've been comfortable going up to two to four times
of leverage. Here, I'm thinking more roughly half of that.
And the reasons are two full One, as you said,
interest rates are higher, although twenty years going to straight
for right here, Yeah, just recently. It was in the
last ten years they got almost nothing. Secondly, is the
(08:08):
world has a lot of macro issues going on, wars
and geopolitical tension, and it's more prudent to have less
leverage in my opinion.
Speaker 5 (08:15):
What's your title going to be, what's your role in
all this? And are you giving up your business, your
other businesses.
Speaker 3 (08:22):
I'm certainly not going to give up my other businesses.
I'm executive chairman of XPO and I planned to keep
doing that, And I'm non executive chairman of RXO and
of GXO, and I love all fear of those companies dearly,
and I think I help them in the roles that
I play there. In terms of what my title and
position is going to be here, it's going to be
the same time I've had since I've been twenty three.
I'm going to be chairman and CEO, and I'm going
(08:42):
to run the company. I'm going to leave the management team.
Speaker 5 (08:44):
And what makes you target this industry specifically? You've got
about thirty seconds or so left.
Speaker 3 (08:49):
I looked at over five hundred opportunities and many many
different industries, and this is the one that checked every
single box of what I was looking for. Something that
was large, something that was act position rich, something that
was up my alley in terms of my skill set.
Something with it was growth seven percent organic growth, and
an industry and a customer set that is familiar to me.
(09:11):
United Rentals is a big overlap with the construction customers.
Speaker 2 (09:13):
For example, fascinating Brad thanks so much for joining us again.
We appreciate you coming back and bringing us up to
date on your new opportunity. Brad Jacobsy's executive chairman of XPO.
Speaker 7 (09:26):
You're listening to the Team Ken's are Live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg dot Com,
the iHeartRadio app and the Bloomberg Business app, or listen
on demand wherever you get your podcasts.
Speaker 2 (09:40):
The Business of Sports, John, it's scarlettfou and a couple
other slugs. I think Michael Barr and some guy who's
an emerging markets guy. How he gets a Damien c
does it all? He does it all. But they talk
about the business of sports. I've got a lot of
business of sports questions. I'm a golfer. I'm a fan
of the game of golf, fan of the business of
(10:01):
the golf. I don't understand what's going on with this
live golf thing. I thought the PGA and the Live
we're merging. Everybody's gonna be happy altogether. And then John
Rahm says he's going to go and take three hundred
large from live golf. Can you, Scarlet Fiel, you cover
all this for us? Can you tell us what's happening here.
Speaker 8 (10:19):
Well, he's a reigning Master's champ, the number three player
in the world, so he ads this legitimacy to going
over to Live and he's the biggest signing by far
yet And you're right. Live Golf and PGA Tour are
working towards a deal, but nothing's happened yet. They have
to give an update by December thirty first, and it's
not clear what shape this deal will take, although we
do know that PGA has been talking with other investors,
(10:42):
including a report this morning from Jillian Tan that a
Fenway Sports Group led consortium has been chosen to enter
into final talks to be a co investor, a US
co investor in this Live Golf PGA Tour entity.
Speaker 5 (10:54):
Every one of these sports stories as of late, the
common denominator is money, and with it this specific case
golfers signing with Live. Something in me tells me that
this is some sort of Faustian bargain that these golfers
are made. Am I being too cynical or fausia not realistic?
Speaker 8 (11:13):
If the PGA Tour is in active negotiations with Live
Golf to merge whatever obstacles they threw up there, and
whatever concerns they cited has kind of gone by the wayside.
They opened the door to golfers negotiating with Live Golf directly.
We know that John Rahm had said in the past
that he was not interested in the money. He said
(11:34):
he and his wife were not concerned about the money,
you know, that Live could offer them. He's always been
very interested in history and legacy, and he said back
in twenty twenty two. Right now, the PGA Tour has that. Now,
once it became apparent that the PGA Tour was negotiating
with Live Golf, maybe it doesn't have that history and
legacy anymore because it's open season it is.
Speaker 2 (11:54):
I mean, if the PGA is going to merge with Live,
they're going to take a direct investment from the set
Investment Fund. So you've already lost that The fundamental argument
that the PGA had against Live is now, by the way, say,
because you're in fact taking that money. So now if
I'm John Rahm, I'm like, why do I wait?
Speaker 5 (12:13):
Where the regulators and all this? What's there?
Speaker 8 (12:15):
The DOJ is looking into this, and you know, again
they have that December thirty first deadline with which to
update the government. We do know that Jaymonahan and the
PIF governor, yasir Al Ramayan Our scheduled to meet this
week for negotiations, so maybe there'll be some reporting out
of that.
Speaker 5 (12:33):
Here's the independent of each other. Can they possibly Could
the PGA possibly survive on its own against an entity
like Live?
Speaker 2 (12:42):
I don't know.
Speaker 8 (12:42):
They don't have bottomless pockets like Live. Live is backed
by the Saudi government.
Speaker 2 (12:46):
But I'll tell you what the PGA has that Live
doesn't have, which is a network television contract. I mean,
if you want to watch Live, you got to go
find it on the CW with's your a bunch of
hotstruct stations around. They have no and so it is.
I mean, I'm an avid golf fan. I will watch
the round of some tournament in Poughkeepsie if it's the
PGA Tour. I didn't haven't seen one shot of You could,
(13:07):
but you just don't want to. It's a combination. I
don't really care to. The PJS takes care of it
for me, and you know, I don't know so, but
there's enough people that are following Live. I think that
it's a thing and it doesn't matter what the TV
contract is as long as you have I guess that's
Saudi money behind you.
Speaker 9 (13:25):
Yeah.
Speaker 8 (13:25):
Well, I mean they can always disrupt that at some point,
and technology is moving the direction of people are not
necessarily going to be signing up for the cable bundles
and signing up for CW streaming will become more and
more attractive over time.
Speaker 5 (13:37):
Yep. All right, So what next for the Saudi government
in its investments?
Speaker 8 (13:42):
Maybe the Saudi government should look into Shoho Tani.
Speaker 2 (13:44):
Yes, so now again, money money, It's all about a
lot of money in this case, seven hundred million dollars.
Speaker 8 (13:51):
Over ten years. This is the largest contract of any
in any US professional sports league. It tops Aaron Judge
his contract as a free agent nine year, three hundred
and sixty million, Mike Trout who got an extension twelve year,
or four hundred twenty six and a half million, even
Patrick Mahomes ten year, four hundred and fifty million, Lionel
Messi when he resigned with Barcelona. So this is a
(14:13):
you know, ball Well no, I didn't want to use
that word. Well, I mean, it's a racket busting contract
about that.
Speaker 2 (14:20):
It's amazing. I mean, I mean, did they what's the
money behind the Dodgers, and I think about the Yankees.
I think about the YES Network, and they make a
ton of a.
Speaker 8 (14:28):
Very lucrative sports TV CONTRACTIA contract. But I mean, this
is also the second biggest media market in the nation,
right after New York. And on top of that, unlike
the Yankees, they've done very very well on the field.
They won the World Series in twenty twenty. They haven't
missed a season since twenty two.
Speaker 2 (14:46):
Well, that's amazing. That's kind of like the Yankees of
the nineties in their early two thousand day.
Speaker 5 (14:51):
Is he worth it is?
Speaker 8 (14:52):
Yeah, he's worth it.
Speaker 5 (14:53):
Okay, give me some stats, so the comparation's with me.
Speaker 2 (14:57):
But how about this.
Speaker 8 (14:57):
He won the MVP twice. He is an incredible hitter
and he's an incredible pitcher. If he just became one
a hitter or one a pitcher, he would be an
All Star in either, except that he could make.
Speaker 2 (15:09):
People are saying, I mean he is as good or
better than Babe Ruth. That's how far those are.
Speaker 8 (15:16):
Those are the comparisons. And this summer when he was
playing around the league, everywhere he went there were fans
showing up and it was like showtime. You know, and
they're just like tons of fans everywhere, and it was
it was basically a tour to see, like how can
we uh appeal to him and show him that like
he should come play for the Mets, or he should
come play for Detroit or whatever city you want to mention?
Speaker 5 (15:38):
Is there any chance he'll start dating Taylor Swift exactly?
Speaker 8 (15:45):
Kelsey is not giving up on his situation at all.
Speaker 2 (15:49):
Ok, All right, what else he has for the business
of sports? Coming out for the businesses? Now you have,
I mean our listeners and our viewers on YouTube. Scarlet's
watching wearing a New York Rangers jacket. So is that
the team number one for you?
Speaker 8 (16:03):
Team number one?
Speaker 2 (16:04):
You got to Cornell? So does that mean you're you're
just a die hard hockey fan.
Speaker 8 (16:08):
I've always been a hockey fan, Okay. And when I
went to school, I actually didn't go to any of
the games because, yeah, because it was really hard to
get a ticket.
Speaker 2 (16:15):
You had to hard to get a hockey ticket.
Speaker 8 (16:17):
Yeah, you had to sleep outside and to get the ticket. Yeah,
I mean back in the day, this is what it entailed.
Speaker 2 (16:25):
And I didn't do that. Yeah. Wow.
Speaker 8 (16:28):
But then they started playing all the hockey games or
the big game Red Hot Hockey in Madison Square Garden
on Thanksgiving weekend and it became a bigger thing. Okay,
so that's been going on for a couple of years,
and I know I came on to talk about that.
That's really fun.
Speaker 2 (16:41):
That's a fun all right. So you're a Ranger fan.
Unbelievable years so far.
Speaker 8 (16:44):
For this so far, but seasons early, I mean seasons young,
and anything could happen.
Speaker 5 (16:49):
Who's your team?
Speaker 2 (16:50):
Well, I don't know. I mean the Rangers, I mean
I mean Yankees, guy, Giants.
Speaker 5 (16:55):
You're from New Jersey. You've had a root for your Devils.
Speaker 2 (16:58):
Yeah, you know, I've been to. I took the kids
to a lot of game. It's actually a great thing
to take kids with. Point's expensive.
Speaker 8 (17:03):
Yeah, the Devils are very exciting though. Yes, young players,
they're really they're doing a lot.
Speaker 2 (17:09):
Yeah, but I mean Madison Square Garden going to the
protection Duke Blue Devil's next Wednesday at the Garden against Baylor. Oh,
next time, and that'll be fine.
Speaker 5 (17:19):
Longtime listener called Wright sin Googenheim money behind the LA Dodgers.
There you go, that's right, that's from mister.
Speaker 2 (17:26):
Cinch Ye thank you. Yep, that's I remember that deal
getting done. All right, Scarlet Food, thank you so much.
We appreciate Scarlet Fush. She's a host of Bloomberg Television
and Bloomberg Radio's Business of Sports. Michael Barr Damien Sassaur
take a backseat to Scarletfoodle's let let's let let's let's
be honest.
Speaker 8 (17:43):
You're like the other way around.
Speaker 7 (17:44):
You're listening to the tape. Can's are live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg Radio, tune
in app, Bloomberg dot Com, and the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station just say Alexa playing Bloomberg eleven.
Speaker 2 (18:03):
All right, let's switch gears, go a little bit political.
Get President Zelensky coming to the States, coming to d C.
Meeting with lawmakers to try to unlock some of that
aid for Ukraine. Let's bring in Wendy Schuler. She's a
professor at Brown University. Wendy, I mean give us a
sense of in Washington, d C. Where Ukraine fits in
(18:25):
with all the other news, whether it's from the Middle
East or just the coming election, it seems like the
Ukraine and the support of Ukraine has kind of lost
a little bit of the limelight here Where are we?
Speaker 10 (18:37):
Yeah, man, I.
Speaker 11 (18:38):
Think the momentum, I wouldn't say collapsed, but I think
the momentum has slowed considerably. And rather than have a
sort of a singular conflict that we've been very involved
in and very supporter of Ukraine against Russia, now another
conflict has opened up that has really soaked up all
the attention, all the emotion and passion, and that of
(18:59):
course the Middle East Israeli Gaza conflict.
Speaker 10 (19:03):
So that has really become a problem for the.
Speaker 11 (19:05):
Biden administration and the tendency in the Republican Party, particularly
with the Alistair McCarthy and the replacement with someone who's
more conservative.
Speaker 10 (19:14):
And more insular in their.
Speaker 11 (19:16):
View about the United States role globally in terms of
military conflict and support.
Speaker 10 (19:22):
That has happened at the same time, and so you.
Speaker 11 (19:25):
Know that Caucus is not particularly persuaded that we should
be spending billions of dollars to continue to support Ukraine.
And notice that they have not yet, although they want
to separate the Israeli eight out, they haven't passed the
Israeli aid.
Speaker 5 (19:39):
Either let's jump ahead to election day and when a
voter walks into the poll and pulls the lever of
the switch or whatever it is, now, are they thinking
about Ukraine? Are they thinking about funding for israel? I?
Speaker 11 (19:54):
Think a small group of people in particularly the Gaza conflict,
a small group relative to the United States voting population.
A small group will have intense preferences and they will
remember either favorably or unfavorably, what the Biden administration has done,
and then they will now listen potentially to Trump or
Nikki Hanley Rondo Santis on what the government should do
(20:17):
so that. I don't think those people swing an election nationally,
but there are some communities in swing states where they
could really make a difference in their voting Ukraine. I
don't think has ever been an issue that as at
the forefront or top of mind that swings electoral decision making.
Speaker 2 (20:35):
Kind of on that front, Wendy, there's a couple of
polls that one from CBS News, one from the Wall
Street Journal. Biden's support of Israel alienates more Democrats in
the new poll. What kind of calculus is the president,
you know, kind of working on here? As it relates
to his support for Israel.
Speaker 11 (20:54):
Well, I think here we really see as we watch,
you know, for the next months before the US pop
up has had a daily dose of Donald Trump. I mean,
we just haven't been exposed to the daily dose yet.
If he wins Iowa, as we now sort of expect
him to, and if he wins New Hampshire, we are
going to get multiple daily doses of Donald Trump, and
(21:16):
I think the polls will probably reflect a shift a
couple of months down the line.
Speaker 10 (21:21):
All on that comparison.
Speaker 11 (21:23):
But right now, the Democrats face a real problem because
at the congressional level they are divided on Israel and Gaza,
and that division is obviously very public.
Speaker 10 (21:32):
So going into the twenty twenty four races.
Speaker 11 (21:34):
You've got house races, you've got a chance to take
the House back, you've got Senate seats you're desperate to preserve,
and you've got the Biden reelection all converging. And you
don't have consensus within the Democratic Party on each of
those levels on what the best policy path for is.
And that's a considerable problem. Donations, endorsements, and again, people
who are intense about this, those preferences are going to
(21:56):
harden in the next couple of months, and you're not
going to be able to shake them once they do.
Speaker 5 (22:01):
That Daily does said you're speaking of is the implication
that his supporter or maybe not the core, but people
are going to get a little tired of this.
Speaker 11 (22:11):
Well, so this is the you know, we look at
independent voting, especially in swing states, and we say, what
has the pattern been twenty eighteen, twenty twenty, twenty twenty two,
they did not vote for either Trump or Trump endorsed
candidates in big numbers. The Democrats had the advantage among
independent voters. Right now, the polling shows that advantage has eroded,
not disappeared, but eroted.
Speaker 10 (22:32):
You know, as he comes back into the limelight and
independence are.
Speaker 11 (22:36):
Reminded of why they have not voted for Trump or
Trump surrogates in the last three elections. That's where I
think the polling becomes more favorable, if you can put
it that way, for Biden, in the sense that he's
a chance to win those voters back into the Democratic
camp at least at the presidential alone.
Speaker 2 (22:54):
How do you think this Republican I don't know. Competitive
landscape is going to shake out here is going to
be you know, if and when former President Trump comes
back and wins in Iowa and or New Hampshire's you
suggest that'll just everybody will kind of bow out at
that point because he will take all the oxygen out
of the air.
Speaker 10 (23:13):
Yeah, you know, that's a great question.
Speaker 11 (23:14):
It really depends on South Carolina obviously, and they've got
proportional delegation allocation in the Republican Party and winner take
all as you move further down the line in the
primary season.
Speaker 10 (23:23):
So that's how Trump.
Speaker 11 (23:24):
Stayed alive in twenty sixteen. He didn't do all that
while in the early primaries, but he stayed alive and
then managed to win many more delegates. So the question is,
not only does he soak up all the oxygen per se,
but he sets the agenda for the Republican Party. He
becomes the symbolics postperson for all Republicans running in twenty
twenty four, And now they're slowly going down to like
a four seat margin or a six seat margin. Their
(23:46):
margin has shrunk and where they won seats California and
New York are not likely to be as favorable to
them in twenty twenty four presidential election. More voters get
out the door on both sides, and if you have
a competitive, slightly leaning Democratic district that flipped, that's very
tough to maintain. So I think it looks bad for
the Republicans on the House side. Also, I'm not sure
they can govern. Will we shut the government down in
(24:08):
early spring or late winter? Will they pass the death
ceiling or filibuster that They've got all the same challenges
going forward in leadership, and I.
Speaker 10 (24:15):
Think it's going to be a very tough landscape.
Speaker 11 (24:17):
On the other hand, the Democrats are defending twenty seats,
the Republicans are defending ten in the United States Senate,
So the odds look very good for the Republicans on
the Senate side, and the Senate Republicans have really stayed
as far away as they possibly could from the House Republicans.
Speaker 10 (24:33):
Whether you can do that with Trump at the.
Speaker 11 (24:34):
Top of the ticket, that is the big political puzzle
I think facing the Republican Party going to twenty twenty.
Speaker 5 (24:39):
Four, this might be a little at a left field.
But is there any doubt that Kamala Harris is the
running mate for Joe Biden?
Speaker 11 (24:47):
So I have said on Bloomberg that I think Joe
Biden is running as long as he's walking, talking, and breathing,
I still think he's running.
Speaker 10 (24:56):
Maybe there's a little bit more doubt there.
Speaker 11 (24:58):
But Kamala Harris is a big quest question mark, not
from her perspective but from the Biden team. You know,
if you really need a Hail Mary and Biden's still
the head of the ticket, do you find a way
to have something else for her to do and she
stays vice president until next year, but find a different
candidate to be VP. So the hail Mary might be
Raphael Warnock of Georgia. There is no race of note
(25:22):
in Georgia in twenty twenty four, and certainly no African
American candidate at the top of the ticket statewide. That's
a big difference between twenty and twenty twenty two for
the Democrats.
Speaker 10 (25:31):
So I think Jordan slips, Georgia slips away. But if
you have Ralphael Warnock, who's won statewide twice.
Speaker 11 (25:36):
In Georgia at on the ticket instead of Kamala Harris,
I think that changes that ticket's odds. So I think
the team will have to creative because right now it
doesn't look like it's a compelling enough team to make
sure the same people got out the door in twenty
twenty and make sure they'll get out the door in
twenty twenty four.
Speaker 2 (25:55):
All right, just thirty seconds left, I mean, is what
kind of campaign do you think the president by and
we'll run.
Speaker 10 (26:02):
You know, we used to call.
Speaker 11 (26:02):
It the Rose Garden strategy, where the presidents didn't leave
the White House they said they were too busy.
Speaker 10 (26:07):
Obama did that in twenty twelve in thirty seconds.
Speaker 11 (26:10):
Let's see how I can do this, And then he
didn't get out the door really until late September October
when Romney was tied with him in the polls.
Speaker 10 (26:16):
So I think they're going to do the same thing.
Speaker 11 (26:18):
I think Biden is not going to travel that much
and only get out the door late in the game,
and we'll see how he does on the campaign trail
versus the quote unquote vitality that we're seeing from Donald
Trump right now.
Speaker 2 (26:28):
All right, Wendy Schilder, thank you so much. We appreciate
it as always, Wendy Schiller, professor at Brown University, kind
of giving us kind of the political lay of the land.
Twenty twenty four. John's gonna be here in a matter
of days, and that's just election year.
Speaker 5 (26:44):
Momentum, and the lead that the former president has over
his Republican rivals is really astounding at this point.
Speaker 2 (26:51):
Yeah, it's just extraordinary. So it looks like that will
be former President Trump, at least at this stage, looks
to be the nominee. We'll see how it plays out
over the coming months, and there's some primaries and all
that kind of stuff that the politicos like to focus on.
Speaker 7 (27:07):
You're listening to the tape. Can's our live program Bloomberg
Markets weekdays at ten am Eastern on Bloomberg Radio, the
tune in app, Bloomberg dot Com, and the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (27:26):
We want to get to our C suite discussion, Big
M and a trade in the airline business Alaska Airlines
and Hawaiian Airlines. Alaska said that it will be buying
Hawaiian for one point nine a billion dollars eighteen dollars
a share plus nine hundred million dollars of Hawaiian's debt.
Joining us right now to talk about this transaction. Peter Ingram,
(27:49):
the CEO of Hawaiian Airlines joining us via zoom from Hawaii.
Good for you, my friend. So let's talk about this, Peter,
talk to us about this transaction. The market's unsure whether
this deal is going to go through. What's the message
you're giving to the market today about why this deal
should be done.
Speaker 9 (28:09):
Well, we feel very good about the deal that was announced.
I think it's a good deal for Hawaiian Airlines Hawaiian
Holding shareholders. It's also positive for Alaska. I think it
sets the company out, the combined company up very well
to compete effectively in a very dynamic airline market. And
(28:29):
obviously we're going to work through the regulatory process over
the next twelve to eighteen months, but we expect this
transaction to close.
Speaker 12 (28:38):
I want to pick up on that a little bit,
because of course, the Alaska Airlines investors were really spotted
that right away. This issue about getting this past the regulators,
and this is not an administration that's very friendly to
these big mergers. So what's the main point that investors
should be thinking about, you know, to put some meat
on this idea that the regulatory process will go through.
Speaker 9 (28:59):
Okay, Well, I think the regulators will look at this,
you know, as an individual transaction, and look at it
on its own merits, and what they're going to see
is that you've got two airlines that have very complementary networks.
We have, you know, big areas of our network where
we don't currently compete with Alaska. They also have huge
(29:22):
parts of their network where we don't overlap at all.
The amount of overlap is very limited, and I think
when people look in into that and dig into it,
that's what they're going to see.
Speaker 2 (29:32):
Alaska Airlines, some of their shareholders are skepule of this transaction,
suggesting that Hawaiian will not return to twenty nineteen cash
flow levels. We've got Southwest coming into the market. Talk
to us about kind of, you know, the profitability of
your company in today's market.
Speaker 9 (29:51):
Well, we feel very good about our standalone business plan.
This was a deal that came along and provided us
a new alternative, but we were working very aggressively to
better our own standalone prospects. Demand remains very strong in
our core markets between the US mainland and Hawaii. We've
(30:12):
seen good recovery in the Japan part of our business,
which is a key piece that had lagged recovery during
the pandemic, but really started to come on since May
of this past year. Continue to be the market leader
in our neighbor island business, which represents roughly twenty percent
(30:34):
of our revenue pre pandemic. So as long as we
compete effectively, I think there's a good market position for
Hawaiian airlines.
Speaker 12 (30:43):
I mean, you mentioned Japan. I'm wondering if you can
talk a little bit more about flights coming in from Asia,
because with this strong dollar, it might be something that
is putting a bit of pressure on you there.
Speaker 9 (30:54):
I think that will hold the demand back a little bit. Obviously,
you know, when we were pre pandemic, the end was
trading one hundred and five one hundred and ten to
the dollar. Now it's in the mid one forties, so
that's a considerable amount of inflation that a Japanese visitor
looks at when they're coming to Hawaii. But we saw
(31:15):
strong recoveries in Australia from South Korea and now even
you know, Japan has come back over the course of
this year, and we think that'll that'll prove to be
a steady recovery going into next year. The affinity of
the Japanese travelers have more Hawaii is really unparalleled. There
(31:39):
were about a million and a half visitors each year
before the pandemic, and it may take a little time
to climb back to those levels, but we think demand
is going to be very strong over the long term.
Speaker 2 (31:51):
Peter, I'm taking a look at your balance sheet and
I see you've got about one point three billion dollars
of debt maturing in twenty twenty six, A big bullet.
There's the what's the plan for that assuming this transaction
does not go through? And how much of your balance
sheet kind of brought you to the table to sit
down with the last Airlines.
Speaker 9 (32:08):
Again, we were really confident and remain confident in our
standalone plan. We've got considerable fleet assets that are unencumbered.
We've got new seven eight sevens coming on against which
we can borrow, and that one point two billion dollars
of that maturity in twenty twenty six is represented by
(32:29):
a loyalty bond of financing that was raised against our
brand and our loyalty program, and so with that coming due,
we would have those cash flows to be able to
do a financing, and it was under collateralized as it was,
so I think the prospects for us continuing to be
(32:49):
able to fund the business are very very strong.
Speaker 12 (32:52):
One thing I wanted to ask you a little bit
about is your costs, particularly your fuel costs. I mean,
regardless of whether or not this deal goes through, this
is something that's been plaguing a lot of people in
your space, and so can you talk to me a
little bit about what your expectations are there and how
you're going to manage it.
Speaker 9 (33:07):
Well, I don't have a crystal ball and where fuel
prices are going, but I do know that if we
look back over the last couple of weeks, we've actually
seen some relief in the fuel price numbers, and that
you know, as we forecast, we just use a forward
curve going forward, So right now the outlook is a
little bit better than it used to be. But you know,
(33:29):
fuel prices are a part of our industry have been
for a very very long time. For most airlines. It
is either the largest cost item or the second largest
cost behind salaries and wages. So we will do what
we can to conserve. We have a hedging program that
helps us smooth out some of the volatility, but we
(33:50):
aren't making bets on where the fuel prices go. I
don't think that's what our investors want us to be doing.
Speaker 2 (33:58):
Peter, as you and Alaska Air execs sit down with
the regulators, what are you prepared to do to get
this deal approved in terms of maybe routes that may
need to be divested or how flexible can you guys.
Speaker 9 (34:11):
Be I'm not going to get into any of the
specifics on that, and some of that, you know, obviously
would would be up to the Alaska team to comment on.
But the fact of the matter is that these are
two networks that are very complementary. There is a very
limited amount of overlap. We think the market is incredibly competitive,
(34:35):
lots of airlines serving Hawaii, and we expect it to
be very competitive going forward. That's the nature of our business.
Speaker 12 (34:43):
Last year, the holiday travel season produced a lot of delays,
a lot of difficulties, and in the airline that came
under pressure for that was Southwest. How do you feel
like the industry is fixed up this year to meet
any difficulties in weather patterns and do you feel like
Southwest is still on the back foot here? Is this
something you can take advantage of?
Speaker 9 (35:02):
Well, just comment on our airline. You know, we're very prepared.
We you know, make sure that we schedule within what
the capabilities of our fleet and our staffing levels are,
and we feel very good about how we're positioned in
that regard. Our reliability has been very strong historically, and
(35:23):
particularly over the last couple of months as we've recovered
from some infrastructure challenges that played Tontolulu Airport earlier in
the year. We've been number one and on time performance
with a very low level of cancelations, and we expect
to execute well in the months ahead.
Speaker 2 (35:41):
Peter, just thirty seconds, just remind us what's the timing
of this transactional last air.
Speaker 7 (35:48):
Well.
Speaker 9 (35:49):
The next step is for us to file a proxy
statement and complete our shareholder vote, which we expect to
happen in the first quarter of next year, and then
after that is really up to the regulatory process and
the Department of Justice to review. We'll be working on
(36:10):
filing the information with them and responding to whatever requests.
We think given the current regulatory environment in the country,
it could take twelve to eighteen months to complete the
entire process, but we think it could also go quicker
than that.
Speaker 2 (36:24):
Peter, thank you so much. For joining us. We really
appreciate getting a few minutes of your time. Peter ingram
He is the see of Hawaiian Airlines, recently announced that
Alaska Airline will be acquiring the folks at Hawaiian Airline
and probably the highlight for Peter ingram As. He is
an NBA from Duke University's Fucal School of Business.
Speaker 1 (36:44):
This is thanks for listening to the Bloomberg Markets podcast.
You can subscribe and listen to interviews at Apple Podcasts
or whatever.
Speaker 5 (36:52):
Podcast platform you prefer.
Speaker 1 (36:54):
I'm Matt Miller. I'm on Twitter at Matt Miller nineteen
seventy three and on bal Sweeney.
Speaker 2 (36:59):
I'm on Twitter pt Sweeney Before the podcast. You can
always catch us worldwide at Bloomberg Radio
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