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JPMorgan Investment-Banking Fees Drop on Underwriting Miss · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:24
  Speaker 2: Herman Chan has his CFA.
• 0:25
  Speaker 3: He's also been monitoring the bank earnings and JP Morgan
• 0:29
  Speaker 3: got us started today, although the stock, as John mentioned,
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  Speaker 3: is off by two and a half percent and banks
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  Speaker 3: are the worst performing group in the S and P
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  Speaker 3: five hundred. So Herman big takeaway for JP Morgan's latest results.
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  Speaker 4: Yeah, takeaway since that the performance was strong, So we
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  Speaker 4: were talking about really strong markets, trading revenue year every year, investment,
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  Speaker 4: Magina game with Solo lights, and then the balance sheet
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  Speaker 4: lending growth was really good.
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  Speaker 5: So solid quarter all around.
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  Speaker 4: Guidance was in line with what they had expected heading
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  Speaker 4: into quarter, but a couple of lingering things. Higher expenses
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  Speaker 4: for twenty twenty six as they continue to invest for growth.
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  Speaker 4: We're talking about nine billion dollar increase in expenses, and
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  Speaker 4: then the credit card cap is still lingering.
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  Speaker 5: Across the JP Morgan and the large banks.
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  Speaker 6: Herman, since everyone's been talking about the proposed cap by
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  Speaker 6: President Trump on credit card fees. What was the messaging
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  Speaker 6: from JP Morgan on the impact of that.
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  Speaker 4: Yeah, the messaging was that this would have drastic repercussions
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  Speaker 4: not only for JP Morgan, the banking industry, consumers, and
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  Speaker 4: overall GDP growth. So you think of credit as being
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  Speaker 4: the lubricator for economic activity, and when you slash card rates,
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  Speaker 4: that really will reduce the credit availability for a lot
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  Speaker 4: of JP Morgan's customers. So you can think of a
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  Speaker 4: large swath of them just not having credit card usage
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  Speaker 4: going forward under a ten percent rate cap.
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  Speaker 3: And JP Morgan is obviously a lot more sensitive to
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  Speaker 3: a potential cap on credit card interest rates than some
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  Speaker 3: of the other big banks. I mean, this is a
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  Speaker 3: bank that just purchased the Apple credit card business, or
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  Speaker 3: is taking on that Apple credit card business that Goldman
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  Speaker 3: Sachs gave up.
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  Speaker 5: That's right.
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  Speaker 4: So that's adding about two point that's adding twenty billion bounces,
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  Speaker 4: give or take.
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  Speaker 5: So that's something that will be helpful for them.
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  Speaker 4: But really, JP Morgan is one of the more active
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  Speaker 4: credit card issuers in our large cap bank coverage.
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  Speaker 5: City is the first, followed.
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  Speaker 4: By JP Morgan and then Bank of America's City and
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  Speaker 4: US Bank lag after that.
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  Speaker 6: What's the thing, Hermann that stood out most to you
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  Speaker 6: today from JP Morgan's results. Was there anything significant compared
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  Speaker 6: to prior quarters.
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  Speaker 5: Yeah?
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  Speaker 4: Really the takeaways were just how forthfore they were on
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  Speaker 4: the credit card rate cap issue, just reminding everybody that
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  Speaker 4: this is not just the JP Morgan and banks issue.
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  Speaker 5: This is going to have.
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  Speaker 4: Really big repercussions for economic activity in the United States
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  Speaker 4: and really will hurt some of the less advantage consumers
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  Speaker 4: that I think really this this ratecap would intend to help.
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  Speaker 4: And then the second one is really just they double
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  Speaker 4: down on the expense outlook, which surprised some folks when
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  Speaker 4: they unveiled that late last year. So nine billion dollars
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  Speaker 4: in higher expenses really driven by gross inflation, healthcare costs, etc.
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  Speaker 3: I want to go back to the President's effort to
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  Speaker 3: cap credit card interest rates, because from what I understand,
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  Speaker 3: it's not something that he has the authority to do.
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  Speaker 3: This is something that Congress has to pass. Yet he's
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  Speaker 3: talking about this January twentieth deadline. How does that work?
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  Speaker 3: I mean, he's calling for it, but calling for it
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  Speaker 3: doesn't mean that he can do it.
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  Speaker 4: Right, So a lot of it seems to be posturing
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  Speaker 4: at this point of just pushing himself to address some
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  Speaker 4: of the broader affordability issues. Is heading into midterm elections,
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  Speaker 4: is how I view it.
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  Speaker 3: So why don't the banks point that out or not
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  Speaker 3: point that part out, but call them ount on the
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  Speaker 3: fact that this would take an act of Congress to
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  Speaker 3: do anything about it, right.
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  Speaker 5: Well, they're not.
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  Speaker 4: There was a question posed during the earnings call if
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  Speaker 4: somebody from the administration had reached out the JP Morgan,
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  Speaker 4: and they said that, as far as they know, nobody has,
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  Speaker 4: so a lot of it seems to be just tweeting
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  Speaker 4: by edicts at this point. So we'll see if that
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  Speaker 4: shakes out to be something else more definitive. But we
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  Speaker 4: would expect the banks to push back and really wait
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  Speaker 4: for any congressional legislation to come in to really cap
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  Speaker 4: the rates.
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  Speaker 6: Herman, this slowed down and investment banking revenue down five
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  Speaker 6: percent from a year earlier. Do you expect that to
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  Speaker 6: pick up later this year given the expectation for more
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  Speaker 6: deal making.
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  Speaker 5: Yeah, that's right.
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  Speaker 4: The fourth quarter seems to be more of a blip
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  Speaker 4: to us fourth quarter. We're investment making usually is seasonally
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  Speaker 4: soft given the holiday season. It sounds like from their
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  Speaker 4: comments that a few deals were pushed out into the
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  Speaker 4: first quarter, So these deals didn't.
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  Speaker 5: Go away, they were just delayed.
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  Speaker 4: And looking ahead into twenty twenty six, we see robust
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  Speaker 4: activity investment banking. You can just think about the IPO
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  Speaker 4: calendar that that's really firming up. And then for M
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  Speaker 4: and A activity, we think lower rates will help. This
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  Speaker 4: deregulation effort by the administration is helping increase consolidation not
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  Speaker 4: only in banks but in other industries as well. And
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  Speaker 4: then we've seen a sponsor activity of private agreeplayers really
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  Speaker 4: jump back in. So those are really strong factors for
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  Speaker 4: improving investment banking activity next year.
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  Speaker 3: So, Herman, how does this set us up for the
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  Speaker 3: other big bank earnings which we'll be reporting over the.
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  Speaker 2: Next day or two.
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  Speaker 3: How are you seeing how is this changing expectations for say,
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  Speaker 3: City Bank of America Goldman Sacks Morgans.
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  Speaker 4: That's right, So JP Morgan really set a high bar
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  Speaker 4: for markets and trading, so about seventeen percent year over year.
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  Speaker 5: That's gonna be tough for others to meet.
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  Speaker 4: But that's where the bogie is at this point in
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  Speaker 4: terms of investment banking, we probably expect some others to
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  Speaker 4: do a bit better than the year over year decline
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  Speaker 4: for JP Morgan.
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  Speaker 5: So more to come on that front.
• 6:24
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 6:45
  Speaker 3: Let's shift gears and talk about big tech because the
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  Speaker 3: news this week is that Apple is partnering up with
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  Speaker 3: Google Alphabet, the parent company, to power the iPhone's AI
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  Speaker 3: technology using Gemini. Gemini, of course, has become kind of
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  Speaker 3: the you know, the software that everyone's looking at right
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  Speaker 3: now is a big winner in the whole AI battle.
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  Speaker 3: So let's bring in on rog Rana, our Bloomberg Intelligence
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  Speaker 3: technology analyst on this and onnrag. You know, people are
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  Speaker 3: already crowning Google as a winner here in the AI battleground,
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  Speaker 3: and it definitely looks like Gemini is picking up momentum,
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  Speaker 3: picking up market share. What specific advantages does Google bring
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  Speaker 3: with the Gemini to Apple, So you.
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  Speaker 7: Know, we'll give first of all credit to Mark German
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  Speaker 7: from breaking this back in November when he said, you know,
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  Speaker 7: Google will work closely with Apple or on this model.
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  Speaker 7: Now we go back in history. You know, Apple doesn't
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  Speaker 7: have that big of their own foundational model on which
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  Speaker 7: it's running or it's supposed to run some of these technologies.
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  Speaker 7: But Apple and Google go back long way. They have
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  Speaker 7: a very very good agreement on search, which pays Apple
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  Speaker 7: billions of dollars. So you know, there was some legal
• 8:02
  Speaker 7: issue around it. So we always knew that once that
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  Speaker 7: legal issue goes away, Apple may be working closely with
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  Speaker 7: Google to basically outsource a lot of their foundational models
• 8:12
  Speaker 7: into the technology that they have. They have. Now it's
• 8:15
  Speaker 7: possible that the next CD upgrade, which is most likely
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  Speaker 7: going to be in the March April timeframe, could be
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  Speaker 7: that one big moment that we are all looking for
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  Speaker 7: Apple to finally come out and say that okay, you know,
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  Speaker 7: we are not a laggard in AI, that they also
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  Speaker 7: have a product that's pretty good.
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  Speaker 6: Ana rag I saw a tweet actually from the official
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  Speaker 6: Google account announcing this deal, and Elon Musk replied. He
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  Speaker 6: said that this seems like an unreasonable concentration of power.
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  Speaker 6: For Google obviously has a vested interest here, given you know,
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  Speaker 6: his participation in xai. But does he have a point.
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  Speaker 6: What are the regulatory risks around this deal?
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  Speaker 7: Yeah, I mean he won't have a point if his
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  Speaker 7: model was being used at that point. So I mean
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  Speaker 7: everybody's trying to pitch Apple to use that model. But
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  Speaker 7: you know, at the end of the day, Apple actually,
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  Speaker 7: for the first time, if you go back a year
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  Speaker 7: and a half ago, they used open ai. I mean
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  Speaker 7: you can still use open ai when you go to
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  Speaker 7: sea and ask a question and it can take you
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  Speaker 7: out of there. But for Apple, it has to be
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  Speaker 7: integrated within the iOS, within the software, but they won't
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  Speaker 7: do it to an outside vendor where they don't control
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  Speaker 7: the data. So what Apple's going to do here, They're
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  Speaker 7: going to use the foundational models from Google, but they're
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  Speaker 7: going to run a lot of that either on the
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  Speaker 7: device or their own private, private cloud data centers, which
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  Speaker 7: means they will still protect the privacy of that question
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  Speaker 7: and not let it have access to other players as well.
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  Speaker 2: Yeah, the privacy angle is really big for Apple.
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  Speaker 3: It's kind of its mark of distinction here among the
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  Speaker 3: big tech players. ANRAG Apple has seen this exodus of
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  Speaker 3: talent AI talent going to other big tech companies in
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  Speaker 3: recent months. Does this multi year deal with alphabet with
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  Speaker 3: Google change any of the Does that stanch the bleeding
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  Speaker 3: at all?
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  Speaker 7: Yeah? For me, it does only because I am now
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  Speaker 7: buying the model outright from somebody who's doing all the
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  Speaker 7: hard work. So I'm not in the business of model development.
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  Speaker 7: If I can use the best model that's out there
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  Speaker 7: into my product and I pay them some money, and
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  Speaker 7: the humor amount is about a billion dollars a year,
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  Speaker 7: which is, to be honest, nothing compared to how many
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  Speaker 7: billions these companies are spending to come up with their
• 10:26
  Speaker 7: own large language model. And that's what actually Apple said
• 10:29
  Speaker 7: in the search case and says, I'm not in the
• 10:31
  Speaker 7: search business. If Google has the best search I will
• 10:33
  Speaker 7: outsource that technology into my products from them.
• 10:37
  Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
• 10:43
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 10:47
  Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android
• 10:50
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• 10:54
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 10:58
  Speaker 3: Scarlettfu and Alex Samanova for Paul Sweeney. I'm kind of
• 11:01
  Speaker 3: tired of shopping. I've done so much of it in
• 11:04
  Speaker 3: the past month or so, overwhelmed.
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  Speaker 5: I don't believe that for a second.
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  Speaker 2: I'm not into it.
• 11:10
  Speaker 6: It's allowing to walk into a store these days.
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  Speaker 2: Yeah, price plants are way too high.
• 11:16
  Speaker 3: And then also I'm just tired of it because I
• 11:18
  Speaker 3: did so much of it in the last couple of weeks.
• 11:20
  Speaker 3: But maybe technology will help me. Maybe it'll make it easier,
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  Speaker 3: It'll take some of the friction out. We want to
• 11:25
  Speaker 3: bring in Travis Hesse, a CEO of Commerce which is
• 11:27
  Speaker 3: treated on the NASAC under the ticker CMRC. Travis are
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  Speaker 3: going to tell us how AI is changing shopping, but
• 11:33
  Speaker 3: in particular, this has to do with what Google has
• 11:37
  Speaker 3: been doing with this thing called a universal Commerce protocol.
• 11:41
  Speaker 3: Explain how that will make my shopping needs easier.
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  Speaker 8: Well, given the extent of which Google plays in all
• 11:49
  Speaker 8: of our lives and how people think of them, it's
• 11:52
  Speaker 8: essentially setting the foundation and the standard for brands and
• 11:56
  Speaker 8: retailers and other organizations to be able to scale agentic
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  Speaker 8: commerce across all of the surfaces that Google AI would hit.
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  Speaker 8: So think of the contextualized conversations everyone's having through answer
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  Speaker 8: engines today. Those conversations are then dynamically recommending not only
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  Speaker 8: experiences in facts, but certainly shopping and brands based on
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  Speaker 8: the enrichment of data against those surfaces. And Google is
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  Speaker 8: enabling a standard by which consumers would be able to
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  Speaker 8: buy in a standardized, safe, secure way. As it serves
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  Speaker 8: up discovery, you'll be able to buy seamlessly across those surfaces.
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  Speaker 6: Travis, can you walk us through how AI will change
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  Speaker 6: the shopping experience in practical terms, Let's say I'm looking
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  Speaker 6: for a bag? How do I go about using your platform?
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  Speaker 8: The consumer behavior has changed more than anything. So the
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  Speaker 8: amount of eyeballs and behavior going to the answer engines
• 12:43
  Speaker 8: is probably the fastest adopting technology we've seen. So because
• 12:47
  Speaker 8: the consumers are going there and they're having these conversations,
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  Speaker 8: brands and retailers are having to respond in kind, and
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  Speaker 8: they tend to have a fair amount of brand ethos,
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  Speaker 8: so they're very concerned about where they show up, how
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  Speaker 8: they show up, and who they show up next to.
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  Speaker 8: Is it the cornerstone of this, So a lot of
• 13:01
  Speaker 8: the foundational stuff you're hearing about now is to set
• 13:04
  Speaker 8: up that trust. So when you're shopping for that bag,
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  Speaker 8: it's giving you a response that you can objectively trust.
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  Speaker 8: It's not serving up who paid the most to be
• 13:12
  Speaker 8: listed or injected in that conversation. The thesis behind this
• 13:15
  Speaker 8: is based on your own behavior within those answer engines,
• 13:19
  Speaker 8: and of course other behavior within Google, whether that's through
• 13:22
  Speaker 8: Chrome or through other Google products. They have a unique
• 13:24
  Speaker 8: advantage there because of the amount of surfaces an individual
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  Speaker 8: might use to synthesize that in a hyper personalized way.
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  Speaker 8: So think of it as not only shopping either, but
• 13:34
  Speaker 8: think of it going in your favorite store and someone
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  Speaker 8: as you walk in can scan a code and immediately
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  Speaker 8: knows what you own, what you like, where you're going,
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  Speaker 8: what you're looking for, so they could curate something for
• 13:43
  Speaker 8: you immediately, where that friction is removed through the process.
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  Speaker 8: Think of that virtually in this particular capacity. That's the
• 13:50
  Speaker 8: future state.
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  Speaker 3: So all the information that Google has on me, they
• 13:54
  Speaker 3: are also selling. Who are they selling it to?
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  Speaker 8: Oh that's not from me?
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  Speaker 3: I mean the reason I ask is because it depends
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  Speaker 3: on me logging into Google for them to give me
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  Speaker 3: those personalized recommendations. If I don't choose to log in,
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  Speaker 3: then I end up with the equivalent of a Google
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  Speaker 3: search on a public computer.
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  Speaker 7: You do.
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  Speaker 8: I think the models are changing. Certainly the old model
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  Speaker 8: was you're searching for terms, and certainly organizations are optimizing
• 14:18
  Speaker 8: through SEO to be listed organically at the top, or
• 14:20
  Speaker 8: they're through paid search basted. That still exists today, certainly
• 14:24
  Speaker 8: in this behavior that drives that. But where this is
• 14:26
  Speaker 8: evolving to is called GEO, so generative optimization, which is
• 14:30
  Speaker 8: really going to be a combination of structured data, which
• 14:33
  Speaker 8: is like product catalog data, skew, color size, all those
• 14:36
  Speaker 8: dynamics dimensions coupled with unstructured data, which are brand guidelines,
• 14:41
  Speaker 8: call center, transcripts, blogs, articles, all the things that would
• 14:45
  Speaker 8: contextualize that brand and that product, if you will. That's
• 14:49
  Speaker 8: being enriched oftentimes by us on the fetonomic side, which
• 14:52
  Speaker 8: is part of our portfolio, and then syndicated across these
• 14:55
  Speaker 8: different surfaces, be that Google or Open AI or Microsoft
• 15:00
  Speaker 8: or whomever. And it's going to continue to expand as
• 15:02
  Speaker 8: the channels have expanded over the last several years.
• 15:04
  Speaker 6: Travis, we have the National Retail Federation conference underway. Believe
• 15:08
  Speaker 6: today's the last day what kind of AI trends and
• 15:11
  Speaker 6: retail trends. Have you been monitoring out of it?
• 15:13
  Speaker 8: It's all about AI this year. That's what's hot exactly
• 15:17
  Speaker 8: this right. I think there's two sides of the spectrum.
• 15:20
  Speaker 8: There's a lot of buzz, which is exciting, but at
• 15:22
  Speaker 8: the same time, it's confusing a lot of people because
• 15:25
  Speaker 8: everyone is doing everything and it's hard to kind of
• 15:27
  Speaker 8: reconcile what's meaningful to the business. I think for larger
• 15:31
  Speaker 8: organizations that we work with, brand manufacturers and retailers, trust,
• 15:35
  Speaker 8: brand ethos, and security are top of mind. So for them,
• 15:39
  Speaker 8: it's less about the sizzle, it's more about the stake
• 15:41
  Speaker 8: and the foundational elements. I think the importance of the
• 15:43
  Speaker 8: Google announcement is they are taking a very pragmatic approach
• 15:46
  Speaker 8: to this, to lay the tracks so this can scale
• 15:49
  Speaker 8: and scale properly with trust, with security, and most importantly
• 15:53
  Speaker 8: with a frictionless experience for customers. Because the brands don't
• 15:56
  Speaker 8: want to lose that customer data. They still want to
• 15:58
  Speaker 8: maintain that experience. Even though they're not fully controlling the
• 16:01
  Speaker 8: surface by which they're showing up against. It's not like
• 16:04
  Speaker 8: they're showing up against their own websites, so they're in
• 16:07
  Speaker 8: a surface they don't completely control. They're controlling part of
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  Speaker 8: it through the data enrichment in syndication, but they're not
• 16:12
  Speaker 8: controlling all of it. So they're very, very concerned that
• 16:16
  Speaker 8: that experience is a positive one and a frictionalist one.
• 16:18
  Speaker 8: Otherwise it has ramifications. It drives cost up and call centers,
• 16:21
  Speaker 8: it drives maybe negative customer experience, it drives arts exactly
• 16:25
  Speaker 8: we're in turns bad things on the back end. So
• 16:27
  Speaker 8: that's the reconciliation people are trying to have. But yes,
• 16:30
  Speaker 8: the EI has sucked all the oxygen out of the
• 16:33
  Speaker 8: room at Javits. And it's a big rule.
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  Speaker 2: What will AI not change for shoppers?
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  Speaker 8: But will it not change for shoppers? I think the
• 16:44
  Speaker 8: behavior in the surfaces by which they're going to they're
• 16:48
  Speaker 8: still going to go to. Right. I think new ones
• 16:50
  Speaker 8: are showing up. I think the expectation personalization has been
• 16:54
  Speaker 8: promised for a long time. I think there's some hesitancy
• 16:58
  Speaker 8: there around the trust. So I think forcoming the trust
• 17:01
  Speaker 8: aspect of this and having that reinforced through continued behavior.
• 17:04
  Speaker 8: The shopping is very new. There was a big rush
• 17:06
  Speaker 8: to do this in holiday and the experiences weren't great,
• 17:10
  Speaker 8: so I think there's a little bit of hesitation. I
• 17:11
  Speaker 8: think you'll see a much more robust offering this holiday season.
• 17:15
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 17:22
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  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 17:32
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 17:36
  Speaker 3: Delta is the first airline to report earnings as well,
• 17:39
  Speaker 3: and according to the stock market reaction investors not to impress.
• 17:44
  Speaker 3: The shares of Delta are down about two point eight
• 17:47
  Speaker 3: percent after it's full year forecast came a little bit
• 17:50
  Speaker 3: lighter than anticipated. Let's bring in George Ferguson right now.
• 17:53
  Speaker 3: He is our senior Aerospace, Defense and Airlines analyst, joining
• 17:56
  Speaker 3: us from Princeton, New Jersey. George, you know, at the
• 18:00
  Speaker 3: start of twenty twenty five, Delta sounded very optimistic about demand,
• 18:05
  Speaker 3: about what pricing looked like, and the forecast that it
• 18:09
  Speaker 3: gave today kind of stands in contrast to that.
• 18:13
  Speaker 9: Yeah, I mean, at Bashlom, I think it was a
• 18:16
  Speaker 9: little reticent to get too deep into what he sees
• 18:19
  Speaker 9: happening in twenty twenty six. He said, you know, there'll
• 18:21
  Speaker 9: be surprises much like they received in twenty twenty five.
• 18:26
  Speaker 5: And you know, I just.
• 18:27
  Speaker 9: Think as people look at the results, you know, really
• 18:31
  Speaker 9: what we saw here from Delta was a continuation of
• 18:35
  Speaker 9: the you know, the premium and the loyalty revenue are
• 18:39
  Speaker 9: rolling in strongly, rolling in I think sort of five
• 18:42
  Speaker 9: to seven percent if I recall correctly, you know above
• 18:45
  Speaker 9: sort of GDP growth rates. But the back of the airplane,
• 18:50
  Speaker 9: you know, they call it the main cabin or basic
• 18:53
  Speaker 9: economy that's there was that revenue was down seven percent
• 18:56
  Speaker 9: in a quarter where Delta was growing a couple percent.
• 18:59
  Speaker 9: And so now I think we still see this premium trend,
• 19:03
  Speaker 9: and I think we're going to see a lot of
• 19:04
  Speaker 9: growth in premium seats this year. We've got Southwest converting
• 19:09
  Speaker 9: to to more of a full service carriers premium, Delta
• 19:12
  Speaker 9: plans to go premium, United plans to go premium. Alaska,
• 19:16
  Speaker 9: Jet Blue, everyone wants to go premium. So I think
• 19:19
  Speaker 9: there's probably some concern in the marketplace that maybe premium
• 19:23
  Speaker 9: gets crowded and pushes closer to that main cabin kind
• 19:28
  Speaker 9: of kind of fair rather than main cabin coming up.
• 19:32
  Speaker 2: Maybe too much supply, we'll see.
• 19:34
  Speaker 3: By the way, at Bastian, the CEO of Delta Airlines,
• 19:37
  Speaker 3: we'll be joining Bloomberg Television surveillance on Wednesday, that is tomorrow,
• 19:42
  Speaker 3: of course, at eight fifteen am Eastern Time, for a
• 19:44
  Speaker 3: live interview from Delta's headquarters in Atlanta.
• 19:47
  Speaker 6: And something that stood out to me Scarlett was that
• 19:49
  Speaker 6: Delta said they're bracing for risk to their forecast, noting
• 19:52
  Speaker 6: the geopolitical environment, whether it's international or domestic policy. George,
• 19:57
  Speaker 6: is this unusual for them to issue the kind of warning.
• 20:02
  Speaker 9: I mean again, I think we're at the beginning of
• 20:03
  Speaker 9: the year and management teams like the caveat things right,
• 20:07
  Speaker 9: and so I guess what I would say is we
• 20:11
  Speaker 9: had plenty of geopolitical challenges in twenty twenty five. You know,
• 20:15
  Speaker 9: we were watching transatlantic demand closely because you've got a
• 20:19
  Speaker 9: war raging in Ukraine. It's been doing that for a
• 20:21
  Speaker 9: bunch of years now. Didn't seem to slow down that demand.
• 20:26
  Speaker 9: That demand seemed to do okay some days. I wonder
• 20:29
  Speaker 9: if maybe there's more risk domestically right. One of the
• 20:32
  Speaker 9: other things we're watching is the president wants to cap
• 20:35
  Speaker 9: interest rates for the credit card companies at ten percent.
• 20:38
  Speaker 9: Loyalty through the MX program brings a lot of money
• 20:40
  Speaker 9: in for Delta, definitely a source of their competitive advantage.
• 20:46
  Speaker 9: And I think if you're capping interest rates, I think
• 20:49
  Speaker 9: some of those credit card programs have to change and
• 20:51
  Speaker 9: that would hurt some of those loyalty programs. So there's
• 20:54
  Speaker 9: I mean, there's risk all over the place all the time. Again,
• 20:56
  Speaker 9: the geopolitical didn't seem to hurt demand as much as
• 20:59
  Speaker 9: we would expect in twenty twenty five.
• 21:01
  Speaker 3: Right, It kind of always threatens to hurt demand, but
• 21:03
  Speaker 3: in the end, people still prioritize traveling and paying for traveling. George,
• 21:08
  Speaker 3: I'm looking at some headlines coming out on Delta at
• 21:10
  Speaker 3: the start of this hour, and one of the comments
• 21:13
  Speaker 3: from Delta was that the airline industry could see consolidation
• 21:16
  Speaker 3: in twenty twenty six. Which players would that most likely involve.
• 21:22
  Speaker 9: Yeah, so we're already starting to see some of that, right.
• 21:24
  Speaker 9: We had an announcement the other day that Allegiance and
• 21:28
  Speaker 9: Sun Country are going to put themselves together. They're two
• 21:31
  Speaker 9: smaller low cost airlines, some of them pretty quickly growing
• 21:36
  Speaker 9: there quickly growing, so they'll consolidate. You know, we've heard
• 21:40
  Speaker 9: discussion about Frontier potentially buying Spirit Airlines. We still have
• 21:45
  Speaker 9: to see, you know, the ultimate outcome for Spirit uring
• 21:48
  Speaker 9: Chapter eleven. We're trying to figure out what their structuring
• 21:50
  Speaker 9: looks like the second time they've been there. So you
• 21:53
  Speaker 9: can see on the edges, especially where in that low
• 21:58
  Speaker 9: cost marketplace, you can see consolidation beginning. It takes a
• 22:04
  Speaker 9: long time and that's the challenge, but you could see
• 22:08
  Speaker 9: some of that consolidation already begin. We don't see the
• 22:10
  Speaker 9: big players getting consolidated, but you got to put together.
• 22:14
  Speaker 9: I think you're not going to see sort of a
• 22:16
  Speaker 9: United to Delta and American Southwest. They're not going to
• 22:20
  Speaker 9: We're not going to put any of those together. I
• 22:22
  Speaker 9: think that's too much, but I think a lot of
• 22:24
  Speaker 9: other stuff is potentially.
• 22:25
  Speaker 5: I play George.
• 22:27
  Speaker 6: We also got news that Delta is ordering thirty Boeing
• 22:30
  Speaker 6: seven eighty seven Dreamliner jets, aiming to boost the company.
• 22:35
  Speaker 6: How much do you expect this purchase to impact its
• 22:38
  Speaker 6: bottom line?
• 22:40
  Speaker 9: Yeah, so they're not going to see these airplanes until
• 22:43
  Speaker 9: twenty thirty, so it's a bit of a ways away.
• 22:46
  Speaker 9: They're replacing seven six sevens, which are old airplanes. We
• 22:51
  Speaker 9: have an average age of them about twenty seven years
• 22:54
  Speaker 9: right now. You know the seven eight is going to
• 22:56
  Speaker 9: be a lot more efficient. Delta games and numbers the
• 23:00
  Speaker 9: fifteen ish plus percent more efficient, so I think that
• 23:04
  Speaker 9: really helps the bottom line. Also very interesting to us
• 23:07
  Speaker 9: is that Delta is traditionally more of an airbus shop.
• 23:11
  Speaker 9: They buy a lot of Airbus product. The recent wide
• 23:14
  Speaker 9: bodies they've bought. Our Airbus is a three fifty and
• 23:17
  Speaker 9: Airbus is a three thirty. Again, the Boeing wide bodies
• 23:21
  Speaker 9: I just told you twenty eight ish years old. Interesting
• 23:24
  Speaker 9: to see them come in for the seven eighty seven.
• 23:27
  Speaker 9: That's really I think, been a category leader in that
• 23:30
  Speaker 9: small narrow body world. Boeing has over one thousand orders
• 23:35
  Speaker 9: for that airplane. We see rates continue to rise, which
• 23:38
  Speaker 9: will improve profitability at Boeing as they put more through
• 23:41
  Speaker 9: put in that seven eight. I thought it was a
• 23:43
  Speaker 9: bit of an endorsement for seven eight, even though Delta
• 23:46
  Speaker 9: is not going to say that. Probably.
• 23:47
  Speaker 3: Yeah, George, you mentioned that Delta is traditionally an airbus carrier.
• 23:51
  Speaker 2: Do you think we'll see more of that?
• 23:52
  Speaker 3: These airlines kind of splitting the difference between Boeing and Airbus.
• 23:57
  Speaker 9: You know, I think every airline has to be a
• 23:59
  Speaker 9: little it that way in order in order to keep
• 24:01
  Speaker 9: the manufacturers competitive. Right, If the manufacturer knows you just
• 24:06
  Speaker 9: got to come in for their product all the time,
• 24:09
  Speaker 9: I do think that hurts you. But a lot of
• 24:11
  Speaker 9: times that we see a lot of airlines have a
• 24:14
  Speaker 9: preponderance of a certain type of product. It keeps costs down,
• 24:18
  Speaker 9: right because you train your pilots for one type of
• 24:21
  Speaker 9: wide body for one type of narrow body, and helps
• 24:24
  Speaker 9: you keep your cost down. So there's and your maintenance
• 24:26
  Speaker 9: pushes easier. Yeah, fair Parts needs a lighter.
• 24:32
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