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I don't really fully appreciate sensitivity to language in Canada, and once again it came again today, and I don't think the CEO of Air Canada does as.
Well, and that might be the problem.
Yes, exactly right. So the Air Canada CEO is gonna stepping down after a furor over the crash condolence video that it was only really in English, not in French, and of course for the twenty one percent of the people in Canada that have French as their primary language, that's a problem.
And one of the two pilots who was killed in the crash was from Quebec, and this flight was actually headquartered in the Montreal region. I believe it came from Montreal as well. He did say bonjour and mercy.
I can do that, but that's it.
Yeah.
Matthew Jon joins us here Bloomberg Montreal Bureau Chief. Matthew, thanks so much for joining us. What's happening at Air Canada.
I think we have to go back a few years ago to understand what's going on. So in twenty twenty one, Michael Russeau was CFO and then became in twenty twenty one the CEO of Eric Canada. He made a speech in front of business leaders in Montreal. Montreal is a bidy Goual city, right but within French speaking Quebec. It's the only territory essentially in North America where people still
talk French and Quebri. Kars wants to preserve that, and there are some laws in place to preserve it because there's a lot of pressure from English coming in and a lot of influence.
Right.
So after his speech, Michael Rousseau talks to reporters and some reporters are asking him, why did you deliver your speech only in.
Name, Why not even a few words in French? And he's essentially said that he's been.
Able to live in Montreal for more than a decade without speaking French.
It was proud of that.
That sparked outrage and over the years it was a constant criticism about him from French Canadians.
French speaking Quebecers.
Then last Monday he makes this video statement entirely in English.
Like you said, he said, bonjour and mercy. That's high and thank you. Right.
There was some captions in French at the bottom. But considering that one of the boat pilots killed was a French speaker, antoine fare and you have a lot of employees working at Eric Canada or from Quebec, so it sparked outrage in the province because it was the last stow. Essentially, then you have Prime Minister Mark Karney coming in saying that Eric Canada has a responsibility to always communicate in both languages.
Regardless of the situation.
That is subject to the Official Languages Act in Canada. There's a law in place the two languages in Canada are French and English. So that's essentially what happened there. And you even have the National Assembly of Quebec passing a motion last week asking for Michael Rousseau to resign.
So that brought us essentially to today.
Matthew, I'm looking at the Airic Canada ticker on the Bloomberg terminal. If you go to the DIES page, it gives you all the basic information, and what you see there is that Eric Canada is based in Quebec, in Quebec city Saint Laurent, which I'm probably mispronouncing. So this is a company that's probably based in Quebec itself.
Why was this not an issue from the get go?
Why did he become CEO even with this language deficiency.
That's a real good question.
A lot of CEOs are appointed in Montreal and with the promise to learn a little bit of French. Michael Russo said that he took more than three hundred hours of classes in French and today all he's able to say is bonjo and merci. So a lot of cuemakers are just seeing that as a lack of consideration or even something like that's very condescending on this part regarding the French language. So, I mean, it was appointed with
the promise probably that it would learn French. I mean as a CEO, it did deliver at the beginning with our Canada delivering the company from the COVID pandemic. Over the past few months year or so, the company has underperformed global peers, but it delivered from a CEOs point
of view, if you want. But on the French Langritish side like it really failed here and he failed especially last week and today the company had to issue his notice to shareholders for the annual meeting on May first, and the documents and the filings you have the compensation of the CEO in twenty two so Michael Russo earned a compensation of thirteen point one million dollars Canadian dollars in twenty twenty five, of five six percent from a year ago. So that would have added another layer into
this debate. And it's our understanding that Eric and I wanted to end this, and there was especially a global search for a new CEO anyway because it was planning to retire.
That search started in January.
So probably that they just announced this sooner than expected. And now he's expected to retire at the end of the third quarter of this year, which is on September.
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Matter platforms at eighteen percent this month, putting them on pace for the worst performance since October twenty two. I think there's some legal risks in there, maybe some spending on artificial intelligence. I don't know. Mandy sing joins us here. He's Global tech research head for Bloomberg Intelligence. What's going on with Meta these days? Because it was a story that was working on cost cutting on number one and number two AI seemed to be a really viable work
caase to augment their advertising platforms. It's gone on with the stop yeah.
I mean, look, they have underperformed relative to the MACS seven peers, and on top of that, they had that addiction lawsuit that they lost along with the Google. So from that perspective, it could create that negative sentiment that I don't think is going away anytime soon, simply because when you look at their free cash flow expectations for this year, I mean they're spending almost one hundred and thirty five billion dollars in capex. That'll take them to
almost you know, native free cash flow territory. And last year they had almost forty five billion dollars in free cash flow. So look, when you have you know, this much investment and people aren't even clear what the focus is on. Yes, they are building data centers. That's a real asset, but we know it's a depreciating asset. And when I look at their model relative to open Ai, Google and Anthropic, they.
Don't even have a model, so they don't have a large language model of their own.
They have a large angleg model, but in the leaderboards it's nowhere. Okay, So from that perspective, like look at how well Claude has done, you know, in terms of coding agents and their anthropic claud is almost adding billion dollars in.
Revenue every week.
I didn't know that.
Well, there are some league sources and when you look at you know, the token usage, that's the one metric that everyone is tracking right now for these llms is how much is that token usage growing? And some of that can be reflected in the revenue run rates, others is tied to training these llms, But at the end of the day, that's a real metric in terms of how your model is getting used. Meta doesn't even have
a model that is being utilized externally. So the promise was Meta will use the llms within their own ecosystem, and that will drive revenue. And so what saved Meta, otherwise the stock would have been down even more is their top line is still quite healthy. You know, they've guided to mid twenty percent top line growth, but that will reduce in the back half because of tougher commps.
So I think that's the challenge. And that lawsuit. I mean, this has never happened in terms of Meta losing a lawsuit around their product being addictive and dangerous and so we already know they are banned in Australia and in the EU there is a proposal to ban the app for under sixteen. So from that perspective, if you are losing that demographic that is one of the highest using
demographics for your platform, that becomes a challenge. And now there could be more lawsuits, you know, along the similar lines to the ones where they had, you know, where they go against them.
So the first time, really one of the first times, I'm not to sayd for someone of the first time were some of these the legal issues for a technology company are really material potentially because I mean you asked myself, included you ask everybody on the street. I spent too much time on my phone. If they have children, they will site that I'm thinking is one of their top top worries.
Yeah, and.
I think that's a global situation. Any parent anyone in the world would probably say that.
Yeah.
And now the judge said it actually harms in this case, so it's true. And I mean, the million dollar fines are not that big, but suddenly if you've got two thousand more lawsuits like.
That, then it all adds on.
I was just similar risk for a Google for I don't know. I mean, you could argue YouTube, you spend too much time on YouTube.
But in YouTube's case, the you know, the harm was more in terms of AutoPlay than the content or the filters. So in terms of the you know, the type of content, I think the verdict said that it was more harmful from the meta side compared to YouTube, where it was more like, yes, it shouldn't be autoplaying content or things along those lines. Not not about the type of content, but there's a very fine line. And I do agree, you know, YouTube and Instagram are similar in that regard.
But we'll see more lawsuits.
All right, just real quicker you get an ai IPO this year, like is it anthropic or is it.
Most likely it's going to be Entropic four q IPO and they really at the rundred that they are in. I mean everyone in the private market right now is queuing to get you know, a small slice of that a transaction which we're.
Expecting, so Entropic would be one.
What else does chpt goo?
Yeah, I mean if Entropic is going public, I think right now open Ai fields they're losing share to Entropic given they had a headstart. So from that perspective, I do think open Ai will likely go public if Nthropic announces they're going public.
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Let's get right to it. Ed Price joins us here in studio. He's a non resident senior fellow at NYU. Edward day thirty one into this war and Iran. I think if you ask ten different people out there, they might give you ten different reasons. What are our objectives for being there? I'm not sure they were clearly articulated, so that makes it maybe even more difficult to articulate how we get out of there. What's your view of how the warn Iran has developed over the past four weeks.
Thanks Paul. Well. Let me first of all start by saying that I hope and pray are a service personnel as safe, so I don't revel in this at all. I think that the initial strikes that we carried out on Iran were successful in the sense, like I said last time, they are our enemies and we killed them, and we can't forget that as a bottom line. I think you're right now to say what is the second phase of this war? And it does look like there's a growing consensus that it's not being handled very well
and possibly also a mistake. And you have people august, people like Larry Fink pointing to the price of oil, which does seem to be the coloration point, the muster point for those who are concerned. Paint a quick counter factual. In February twenty twenty two, Russia attacked Ukraine. Imagine if China had gone after Taiwan and Iran had gone after
Israel on the same day. So I know that this war looks messy right now, but there is a counterfactual in which our enemies overwhelm us and we lose that war. I think that Russia and Iran are losing.
Theirs, but that didn't happen, and right now the US is in a bit of a mess, some would say, and Americans are rightly questioning what the objective is at this point to pass point, How does the US resolve this in the end?
What does victory look like?
So the obvious is the obvious answer to that is the one that Americans don't want to hear, which is that there'll be an escalatory ladder in which the United States has to pour more and more resource, more and more blood and treasure. And that means boots on the ground, and that means regime change. That is the way Thatgion the regime would fall, right, and that's the way the
region would be reconfigured. I'm slightly stumbling of my words because it's a terrifying prospect even to think about that, But that is the way that this war ends very successfully. I would say, however, that it's not a binary between win and loss. If the United States and Israel have degraded the power of the Iranian regime. They're not as powerful a player in a future confrontation. That is a general war scenario.
So could Some people are suggesting that at some point President Trump will look at everything that's been accomplished militarily, which is substantial, claim victory and leave that part of the world. Is that a scenario I think is possible, And I'm so under what time frame?
Well, President Trump, I mean, we've spent years discussing his mind together, and it is another terrifying prospect. I'm not sure what he's thinking. I think that he could very well act like a wounded tiger. At this point. He's an elderly gentleman. He's going to be out of power, if not office, in November, and so I think he's thinking, this is my last chance to make a splash. And he made very well move up that escalatory ladder simply through vanity. It's an ugly thing to say, but I
think he might do that. That would be my bet. But again, he might get distracted by something else. I mean, Rubio was talking about Cuba, and Trump is always thinking about things like ballrooms. So there's another sort of ADHD scenario here where he just loses interest.
What about oil prices?
We see oil prices surge and they're up I think ninety percent so far since the start of the war.
How does this go?
I mean, even if the US decides to come up with a definition for victory and retreat in any way or wind things down and Trump says we got what we wanted. If oil prices stay elevated because Iran controls the seriit of horror moves, how does that shake out for not just the global economy, but for geopolitics, for who's got leverage, who doesn't bad for the economy.
JPM Morgan just released an excellent report which is kind of like a doomsday scenario if oil gets anywhere near one hundred and fifty hundred and eighty. But it's so bad for China. So we talk a lot about how this is good for Russia because their oil revenue is funding their war in Ukraine. I imagine that's true at least in the short term. But China gets a lot of its oil, a lot of its energy out of
that area. And so one scenario is that China decides, look, enough is enough and communicates with the Americans to try and wind this thing up. It's also not in European interests, so I'm always cautious of what I think about is the financialization of geopolitics and strategy. Yes, the economists are right to warn us about the price of oil, but I think that's an independent variable. I think the most
important thing is Western security. And at the end of the day, like I say, the Iranians have been at war with US for effectively fifty years, and now we're fighting back.
So if the US, if President Trump were to claim victory and cease operations, is it a fair assumption that Israel will follow our lead.
I have absolutely no idea. I don't think Israel follows anybody's marching orders. If anything, we've followed theirs to some extent in the timing and nature of this operation. I don't think that's necessarily a bad thing, because Israel is a foundation or ally of the United States and of the West, and is effectively fighting people in that region that would otherwise be in Europe or in the United States.
It's that simple. But I am not an analyst of Israel, and I would defy anyone who claims they are to guess at the next move. I mean, look at the pager thing. Nobody saw that kind of behavior coming. So no idea.
What are you thinking?
How are you preparing yourself, bracing yourself for what could come?
What's on your mind? As we as we enter into the second month of this war.
We are struggling to describe World War three. Gary Kasparov calls it world War four because the Russians think of World War three has been the Cold War. I've called it the Central War Ukraine and Iran's word war. But this is a global conflict. It only gets worse, it only gets bigger. And that's why, with that very zoomed out lens, I look at what's going on in Iran
and think, on balance, this is the thing to do. Again, I repeat myself, If we had waited, if we had just sat in that boiling water like a frog and waited for a much more coordinated attack through these three powers, we could have been overwhelmed and morale could have been broken. All credit to the president. I'm a massive critic of his, but he is crazy enough to see a bad guy and do something about it.
So again, what are the oar firstwhile airline allies around the world.
What are they saying.
The only sense that they're saying, Okay, we're really getting hurt by this energy situation more than you, the United States, because you're net exporter of oil. Do you think that pressure has any bearing at all.
I don't think that the president is subject to any pressure of any kind. But the Germans are seriously rearming, and they're talking about a war with Russia in the near future.
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