Latest / Bloomberg Intelligence / Cowen's Becker Sees Demand Picking Up For Airlines (Audio)

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Cowen's Becker Sees Demand Picking Up For Airlines (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg eleventh, Rio to Washington,
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  Speaker 1: This is taking Stock, coming off on taking Stock. Airline
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  Speaker 1: executives are meeting in Dublin. They'll be talking about oil prices, terrorism,
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  Speaker 1: international travel. And it was supposed to be a happy meeting,
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  Speaker 1: a celebratory meeting, is it. Well, we'll find out more
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  Speaker 1: about the future of the airline industry with Helene Becker,
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  Speaker 1: senior analyst at Cowen and Company. We'll find out if
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  Speaker 1: she thinks this ebbing demand trend will last or not.
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  Speaker 1: Let's get to Charlie Pellett now in the Bloomberg newsroom.
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  Speaker 1: He's got a Bloomberg business lass and I thank you
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  Speaker 1: very much, Kathleen, thank you him. The dowin SMP trading
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  Speaker 1: up by half a point, little change their forty nine
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  Speaker 1: tenths of one percent, and with twenty nine minutes to
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  Speaker 1: oh eight, a drop of six tenths of one percent,
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  Speaker 1: So stocks are slipping. Stronger spending data bolstering the case
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  Speaker 1: for higher interest rates as early as this summer. Plenty
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  Speaker 1: of economic data for investors to sort through today, consumer
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  Speaker 1: spending climbing in April by the most in almost seven years,
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  Speaker 1: up one percent on Bloomberg Intelligence, Chief US Economists car
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  Speaker 1: Rickadono was interviewed about the spending report. The data right
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  Speaker 1: here on taking stock so not quite so strong when
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  Speaker 1: you start to look beneath the surface, because what we
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  Speaker 1: saw was a big increasing gasoline prices, uh, and so
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  Speaker 1: that led to a rise in spending on non durable goods.
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  Speaker 1: So if you adjust that away, it's not quite so strong. Also,
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  Speaker 1: a big increase in spending on utilities as we had
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  Speaker 1: more normal weather conditions last month after a warm ut
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  Speaker 1: start to the year, so that led to some bounce back.
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  Speaker 1: So I wouldn't characterize this as great, but I put
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  Speaker 1: it in the good category as some PK. Schiller says,
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  Speaker 1: home prices in twenty cities rose faster than projected in
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  Speaker 1: March from a year earlier, adding to signs of healthy
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  Speaker 1: demand at the onset of the industry's busy selling season.
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  Speaker 1: On the conference Board said consumer confidence unexpectedly fell in
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  Speaker 1: May to the lowest level in six months. Down industrials
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  Speaker 1: down one oh three, a drop of six tenths of
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  Speaker 1: one percent, Gold off a dollar little change to twelve fourteen,
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  Speaker 1: up point one percent, and a three thirty two on
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  Speaker 1: Wall Street. Now, let's look at other news from around
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  Speaker 1: I'm Charlie pad That's a Bloomberg business flash you're listening
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  Speaker 1: to taking start with Kathleen Hayes and Pimpbox on Bloomberg Radio.
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  Speaker 1: The International Air Transport Association reported a four point six
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  Speaker 1: percent increase in global air passenger demand in April. That
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  Speaker 1: sounds good, but it was the slowest growth since January
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  Speaker 1: of twenty fifteen. Let's find out more about the industry
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  Speaker 1: with Helene Becker, senior analyst at Count and Company. Helene,
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  Speaker 1: always a pleasure, Thank you for being with us. What
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  Speaker 1: do you make of this uh four point six percent
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  Speaker 1: rise in global air passenger demand in April. Is that
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  Speaker 1: something that is set to continue this decline? No? Oh good, Okay,
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  Speaker 1: we can all go back now. Thanks for having me
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  Speaker 1: um on the show again. And no, I don't think so.
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  Speaker 1: I think April was very specific. You had, um, you
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  Speaker 1: had some strikes over in Europe by some of the
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  Speaker 1: European airlines. You also had, you know, a m Easter
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  Speaker 1: shift into March, so you had a little bit of
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  Speaker 1: a tough year over year calm. So it made the
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  Speaker 1: numbers look um knock hit as good as they are.
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  Speaker 1: We think May it's a better month normally May it's
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  Speaker 1: worst in April, and June's better than May, you know,
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  Speaker 1: kind of on par with April. And this time we
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  Speaker 1: should have April be the worst month of the quarter
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  Speaker 1: and mana June sequentially better. So Delta reports traffic Thursday
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  Speaker 1: morning before the open, that will be the first May
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  Speaker 1: number we got and we're expecting it to sequentially be
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  Speaker 1: better than it was in April. Of course, as we
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  Speaker 1: just said it was, April was the slowest pace since
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  Speaker 1: you know, over a year ago. January. In our Bloomberg
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  Speaker 1: story quotes the CEO of the I A t A,
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  Speaker 1: the International Air Transport Association, saying the stimulus from lower
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  Speaker 1: oil prices appears to be tapering off global economics with
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  Speaker 1: situations subdued, demand growing. But maybe we're shifting down a gear.
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  Speaker 1: What are prices doing? Could prices have anything to do
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  Speaker 1: with bb people not being quite as eager to buy
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  Speaker 1: a plane? Take well, prices are still you know, down
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  Speaker 1: quite a lot year every year, and oil prisses are
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  Speaker 1: back up, I guess about off their January lows. So
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  Speaker 1: as the year goes on, we expect to see less
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  Speaker 1: capacity growth from the airlines and higher air fares. But
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  Speaker 1: right now, especially coming into the summer months, fares have
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  Speaker 1: been relatively low and demand has been very strong. I mean,
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  Speaker 1: you know, you guys reported on stories over the last
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  Speaker 1: few weeks about lines at at T s A, at security,
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  Speaker 1: and you know, the airlines are working very hard to
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  Speaker 1: keep people moving. We're expecting two two hundred and thirty
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  Speaker 1: million people to travel over the next three months, and
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  Speaker 1: you know, that should be a record for UM for
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  Speaker 1: US carriers. Now, Helene, I know you you you follow
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  Speaker 1: the carriers as opposed to let's say, air Bus and Boeing.
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  Speaker 1: But because of the stories having to do with competition
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  Speaker 1: between the two aircraft makers, I'm wondering if the current
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  Speaker 1: concern is a result of just outsized ordering buy airlines
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  Speaker 1: that met the demand and now the demand is maybe stabilizing,
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  Speaker 1: so they're not ordering as many planes. Is that accurate? Yes, yes,
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  Speaker 1: Actually that's a very good observation because the you know,
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  Speaker 1: most of the world's airlines ordered aircraft over the past
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  Speaker 1: four or five years, and the US carriers only just
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  Speaker 1: started ordering over the last day year, with the exception
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  Speaker 1: of American which placed that big order back in August
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  Speaker 1: of two thousand eleven. But on balance, most of the
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  Speaker 1: rest of the US airlines have only just ordered recently,
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  Speaker 1: and even there they've been very judicious about the aircraft
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  Speaker 1: orders they placed because they don't want to get into
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  Speaker 1: an overcapacity situation. So a lot of what they've ordered
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  Speaker 1: is designated for replacement actually are not for growth. Um.
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  Speaker 1: You know, using the one and a half to two
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  Speaker 1: x GDP multiplier, we're only expecting in a two percent
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  Speaker 1: GDP growth environment, traffic to grow three to four percent,
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  Speaker 1: and that's the peak, you know, off peak times, first quarter,
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  Speaker 1: fourth quarter, you know, except for Christmas, UM probably is
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  Speaker 1: going to grow, you know, one percent. So I got
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  Speaker 1: to balance that out. And the airlines certainly don't need
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  Speaker 1: a lot of new equipment. Helen. I don't want to
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  Speaker 1: jinx myself, but I've been had a several flights in
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  Speaker 1: the last few weeks and I have not encountered hashtag
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  Speaker 1: line gate. That's use the d S as a mess,
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  Speaker 1: hashtag line gate. These these growing long lines cross the US.
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  Speaker 1: What have you experienced in more broadly, how big of
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  Speaker 1: an issue is this? What is it? Is it a
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  Speaker 1: big problem for the airlines or not? So fair question.
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  Speaker 1: I think it's at the busiest airports. I think the
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  Speaker 1: worst of the lines was probably in Chicago. I like you,
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  Speaker 1: I had a bunch of flights over the last few
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  Speaker 1: weeks and I didn't experience long waits at all. And
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  Speaker 1: in three of the four cases, you know, over the
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  Speaker 1: last ten days, my flights were I I just walked
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  Speaker 1: through security in less than five minutes, and my daughter
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  Speaker 1: had one coming out of Baltimore. UM A week ago
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  Speaker 1: and her flight was I think she had a twenty
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  Speaker 1: minute wait. UM and one of my associates how to
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  Speaker 1: wait over the weekend of nothing. So, you know, I
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  Speaker 1: think it's it's been dissipated. The UM T s A
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  Speaker 1: has has worked very hard to improve the way at times,
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  Speaker 1: and the airlines have sent UM what we call, you know,
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  Speaker 1: helping people out to the airports to help UM infrequent
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  Speaker 1: travelers getting through the line. You know, this is the
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  Speaker 1: line you wait on. Take off your shoes, don't take
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  Speaker 1: off your shoes, take your bag out, take your laptop out, whatever,
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  Speaker 1: don't do it, do it UM. And I think that
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  Speaker 1: it's helped speed those lines. So I think, you know,
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  Speaker 1: lots of news, but I think it's beyond us now. Alrighty,
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  Speaker 1: Helene Becker, thank you so very much for joining a
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  Speaker 1: senior analyst at Cowen and Company. She says, don't be
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  Speaker 1: put off by some slower growth in demand for airline
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  Speaker 1: tickets in April. Me and JR. Gonna looks just fine.
• 10:53
  Speaker 1: I'm Cathine Hayesel on pim Fox. This is taking Stock
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