Aireon’s Space-Based System Tracks Planes In Real Time

at Bloomberg dot com. Well. On April two, a technology company plans to go live with a space based aircraft surveillance system which will track plans globally in real time for the first time ever. Now plans are tracked by radar, but sev of the planet is uncovered by radar, which is especially problematic over oceans. I did not know that joining us here to walk us through this new technology

is Don Toma, CEO of Arion, based on McClean Virginia. Don, this sounds like a game changer technology to me, is it. That's great? That's right, Paul, thanks for having having me on the program. Now this is really being hailed as a major technological advancement in aviation. As you mentioned, your of the world is not tracked by any any means at this point in real time and meaning there's no

surveillance for air traffic controllers. And you know, typically the world has been using radar technology that has been developed back in the nineteen thirties and forties as the primary means of of tracking aircraft for air traffic control. But the world's air traffic control organizations are in a program to upgrade that technology to a g P, a GPS based system for tracking the aircraft. And what Arean is

doing is bringing that technology to the entire world. Currently it's limited to some certain regions like the continental US, your parts of Europe, parts of Australia, etcetera. But you know, starting next week will begin providing this service to air traffic controllers all over the world immediately. So, John, when I first started reading about this, my my initial question

was what took so long? Because we've had space satellites for a long time that track lot of things, So why shouldn't we have some sort of all encompassing surveillance system. And then it struck me maybe this is a security issue and international issue, and I'm wondering what that challenge was like getting this up and running in order to get clearance to surveill areas that were not within the

United States. Yeah, that's a that's a good question. As I mentioned, part of this part of the reason why this is possible now is first that the world's air

traffic control organizations are making this upgrade. You may have heard next gen for the next gen program, the next Generation air traffic Control program within the US UM, but the US, Europe, Australia, Singapore, a few other countries have mandated that all aircraft by have on board a transponder that will broadcast out that GPS information from the aircraft at a very frequent, very precise level. So first you had to have all the aircraft equip with this new

technology to make it possible. But then you you have the limitations of where you can put towers to receive that information. So, as I mentioned, the US has deployed six thirty five towers, Australia's air space has covered. Other countries have put this this technology in, but it really limits the access to it to roughly thirty percent of the world that you know that has you know, this type of ground based technology. So really the the innovation came due to the fact that not only were the

aircraft craft being equipped but a ridium. You know, the Satellite Communications Company was in the process of launching their

next generation satellite network. So part of that innovation came when we said, well why don't we when I would used to be at a ridium when we were looking at the plans for the next generation, and we said, why don't we use this global satellite based infrastructure two that sees every place on Earth and has connections that gets that information back in real time to put these A D s B or these these receivers on board the satellites to receive the information being transmitted by the aircraft.

So we put the company together, We raised the investment with our partners at nav Canada and the air traffic control organizations of Italy, Ireland, Denmark and the UK formed the company and seven years later we have completed the launch of that system and are now ready to go operational live with it. So it's a lot of different components that really drove the you know, the implementation of this capability. So come April two, talk to us about the adoption. Here do you have to go sell it

kind of country by country? How do you get this technology out into the marketplace? Well, it's a it's a good question, Paul. Then the issue here is that this is such a game changer, you know, in in you know, in the aviation that countries have been working with us

for a very long time. So currently, on April two, will go live with the Canadian air traffic control organization nav Canada and the UK air Traffic control organization called NETS, and we'll begin using this service in northern Canada and

in the North Atlantic. Now, the North Atlantic is a very busy set the air space flights a day, you know, it's it's running out of capacity because there's so much traffic going back and forth between the Europe, Europe and North America, you know, and this is an innovation that not only improves the safety of air travel, but also allows them to add additional flight paths for aircraft into

that that airspace. So we'll go live with those two right away, but right behind them, we have nine other air traffic control organizations representing twenty eight countries around the world that will be are currently receiving the data, doing their own test and valuation validation of the service, and we'll begin operationally using it throughout just in thirty seconds. How do you make money. Very very easy to think

of us as a subscription service. So instead of an air traffic control organization deploying your radars or ground based infrastructure, we basically collect the data and provided to them as a subscription service, so they pay us a fee for providing them the surveillance data for their airspace. Really interesting, Don Thomas, thank you so much for being with us.

Don Tom chief executive officer of Arian, which is based in McLean, Virginia, offering space based aircraft surveillance tracking planes globally, which to me, honestly my first impression. Again, I mean, given how many satellites are up there, it's interesting that this is the first of its kind. There has been a big discussion about how the migration from rural areas to urban areas will likely continue in the years to come.

The question is number one, will it? And number two, how does that affect your investments both in real estate and beyond. Joining us now, Melissa Reagan, head of research for New Vine Real Estate, overseeing a hundred billion dollars of assets in New York, Joining us here in our Bloomberg Interactive Broker Studios. Melissa, thank you so much for being with us, Let's just start with this premise that there will be increased urbanization where you do see people

moving from urban and suburban areas into cities. How much do you think that will continue? Yeah? Sure, thinks um you know, listen, we believe it will continue. And this is not just in the next couple of years, but really over the coming decades. Uh and and why so think about what cities offer. They offer an economic based jobs. It's where the vibrancy of these cities, it's where people want to live. It's where when you think about what's

a what's a really growing area right now? Technology right, well, we know that that is actually cluster based. Right so once you're not in your this technology coming that techno, you're like, y'all want to cluster together. And that's happened. That happens in cities. And so we think this is a decades long trend that will continue. Well, one of the things that I think is a concern for some

people is just infrastructure through cities today. Some of the largest cities that are you know, maybe drawing populations, do they have the infrastructure to support it? Uh? Yes, and no, so I would say, but also with that as an opportunity. So when you think about a place like New York and you think about its mass transit, one of the best probably mess transit systems across the entire world in fact. But but it's from a but but but you missed

the butt. But it's but it's aging. But it's aging, and therein is the opportunity kind and therein lies the opportunity right when you think about how to how to invest around infrastructure, municipal financing and things like that. So, um, I would say there's there's yes and no, and there's opportunities within that. I will just say that I was on the train the other day and it was stopped and my nine year old son called the m t

A to complain, saying that it was unacceptable. Because yes, anyway, moving right along, I will say a lot of the investing strategy also depends on real estate valuations. And there's a question especially is the affordability uh question rises it's getting harder for people to buy homes in cities. How does that affect your thesis here? Actually pretty well? Uh so from a from a commercial real estate person back to think about it, I mean, we're not in the home.

We're not in buying homes, We're buying apartment buildings, right, and so the demand for apartments and we've seen this, I mean, vacancy rates for apartments are your twenty year lows. Why is that? Because home prices are are are high and so it's an affordability issue and so it's really driven demand, particularly in the urban cores for apartments. So, given your urbanization theme, what are some of the markets

that surprised you were attractive markets? Iman? I know people think of New York, San Francisco, but what were some of the markets that kind of surprised you as boy

these are interesting? Yeah, So that's been fascinating in fact, and so we have this sort of way we look at cities kind of globally and we take that into the U S and we think about, you know, where are people moving to millennials, concentration of wealth and places like Salt Lake City pop up Nashville, but even in places like Orlando, these are not places that an institutional real estate investor would have thought of twenty years ago.

It just there was a nope, not interested. But given our analysis and the way we see the world moving, this is where millennials want to be There's a quality of life there, there's a connectivity there. And so those are the cities that actually and there's I could name ten more of those that would be like, really, that's that's really interesting. So this all makes sense. I buy it. I'm buying the picture that you set out there for a longer term. Is now the time to be getting

in given where we are in the housing cycle. So I think there's two components that in terms of the you know, there's the residential site, there's the residential market. Um and and already there there's been softening. But from a commercial perspective, which is entirely different. Um, we actually look at it from a very long term perspective, right, and so kind of almost outside of a cycle perspective and saying that these are the cities people want to be in that is not going to end and thereby

that is the opportunity. Okay, fair enough. Although in New York City, which is a very vibrant city, it's the most populous city in the United States, we have storefront after storefront that's empty, that's vacant, that is eating into the value of that commercial real estate. So I have to wonder how this thesis square is worth retail worth the model is completely shifting. Yeah, absolutely, Listen agreed a hundred percent that in retail land there are structural shifts

under way. Winners and losers there, and so that what you're seeing when you walk through New York City and the vacant storefront losers, but then there's a whole other winner, right, But but think about it, there's a winner. But that's just the world is divided in retail, right, and that's where it's going. But but here's the hard part of that.

So you're saying, that's great, there's winners and losers. Who's going to be the winner, right, And so most of my day is spend thinking about who's who is the winner in that in retail And so when we think about it, we think about necessity, think about a single tenant, right, or you think about grocery, or you think about what serves an urban community from a necessity local sustainable, authentic, like what what does the millennial want? And they want

that authentic, local, sustainable offering. So the winners and losers, and it's picking the right winner, which is not which is the day job and is really hard right. Well, Melissa, one of the things that I've noticed you mentioned Salt Lake and I was just kind of going through that market recently in that airport and they're building a huge, brand new airport and it's still there's silicon slopes. I was just about to say, and it's technology. When I

think about it, technology Austin, Texas, it was technology. Is technology kind of what you look for to see sustainable, long term growth. It's certainly that's one component of it. I wouldn't say that's the only component, because there can be other things that you know, there's finance and certainly just business professional jobs. But technology has become at the forefront because I think about it. Used to be when you thought about technology, it was really Sanrancisco in Austin,

but that's not true. Today. It's New York, it's it's Salt Lake City, it's Chicago, it's it's Atlanta, it's natural it's everywhere. Um So it is one thing we look at it and say it's like the only factor, but it's definitely one thing we look at. Do you think that the interest in warehouses and in uh aging homes and facilities that that has gone too far? Are at this point. It is now where the opportunity lies anymore in the warehouse sector. Yeah, oh no, I think so.

I get that common a lot of seeing well, isn't warehouse sort of you know, it's it's it's peak pricing, or isn't all the demand you know, fully baked in um? Actually no, I think they're if you believe remember my retail comment winners and losers. What is driving that the e commerce rate of retail sales? And I don't think that's going away, Like I think people are going to

continue to shop online. It creates winners and losers in retail, but it is a long term structural winner behind industrial um. And I don't see if that tail wind stops then then yes, we've got issues we need to look at in the industrial space, but I don't see that stopping.

Interesting Melissa, Thank you so much. Melissa Reagan ahead of research for Neuvin Real Estate, joining us in our Bloomberg Interactive Broker's studio talking about urbanization and it's at least it's one of the things you know, you think about it. I hear about it in so many different cities, whether it's in Atlanta or a Richmond, because you know, not necessarily big top ten markets, but if they've got a technology hub or maybe healthcare hub, um, that is what

can drive growth in some of those markets. Look, it's for the younger people, it's the jobs. For the older people, it's access to healthcare and easy you know, food and transportation. So a lot of arguments for this. Well, interest rates globally continue to grind lower. We actually have negative interest rates and major economies such as Japan, Germany, Switzerland. So help us get a sense of how to navigate through

this unique environment. We welcome Dr Brendan Brown. Dr Brown is a Senior fellow at the Hudson Institute and publisher of the newsletter Monetary Scenarios UH and he is based in London. Dr Brown, thank you so much for joining us. So what do you make of this persistent negative yields

in against some major markets like Switzerland, Germany and Japan. Well, the negative rates in Europe and Japan essentially are are result of serious monetary manipulation, and the central banks in Europe and Japan have made it clear in response to the softening of the global economy that we're going to go even further into these radical monetary policies um in

in the total picture. It's difficult to see these negative rates is telling you or anything seriously about the real economy, because it's a long time since bond markets in those countries have had any economic meaning. Well, Brennan, one thing that I'm struck by is the fact that, yes, this is a symptom of central bank policies in the region. True has been for a long time, not necessarily free

market kind of gauge there. That said, the fact that the European economy is not taking off, in fact that is slowing down in many measurable ways, is raising a really existential question. Here are negative rates hurting more than they're helping, And so far the e c B is kind of saying, well, the jury is sort of out, but they're starting to play with the idea that perhaps

helping out banks in different ways. Can you speak a little bit about them and do you think that they are addressing the issue of the dutchmental effects of negative yields in an expedient way right now? Well, the main effect of negative rates on the economies comes through the currency, and the yen and the euro have been seriously depressed

by this negative rate regime. The puzzle here is, given the cheapness of the currencies, why investment in the export sectors in Germany in particular and Japan has only been lukewarm even at the peak of a boom last year. And I think what we're seeing there is that businesses realize that this is an artificial situation, and so they're not prepared to rev up fully and haven't been prepared to rev up fully on what may be a transitory manipulated rate. Now, on top of that, we've got the

position of the banks, and you mentioned Europe. In Japan in many ways, I think there's a greater hidden problem there. The Japanese banks and Japanese financial institutions, to escape negative rates, have been involved in more and more risky particularly cross border lending, and that could create a serious funding is to particularly in dollar funds, if we get into another

period of financial market downturnal stress. So Dr Brown, we've been talking about the weakness in Europe, and certainly the Brexit uncertainty has certainly been a contributor to that weakness. I have to ask you, you know you're based in London, You're right there in ground zero what is your sense of how this thing is going to play out in terms of Brexit over the next several days. I think it's leaning more and more towards no deal. But no

deal doesn't mean crash out or anything else. It probably means everyone staying where they are until there's a bit more clarity on the political direction. In particular, I would imagine that there could be a temporary standstill of the clock turned back to allow time for a leadership election to take place in the Conservative Party, and then we

see what happens. If I had to plot a central scenario through all that, it's going to be that we get a new leader of a Conservative party more in the Brexit side, and that new leader will want to start negotiations again on a deal rather than just taking the May Deal as it is. So there will be a period most likely of so called no deal Brexit. To me, reminds me of like a Monty Python sketch.

I mean, as Lee at a certain point, you know, let's vote on the vote of the vote of maybe meeting and maybe we can discuss something that might actually happen, and maybe we can extend the deadline a little bit further. But Brendan. I do have to wonder, especially as German bond yields continue to decline. Today they're they're taking a bit of a breather. But right now ten year bond yields in Germany lower than similarly dated bonds in Japan.

Are we seeing the full on Japanification of the Eurozone, in particular Germany, and what are the implications for raids going forward. I don't think with the Japanification, partly because I think that Japanification is a myth. Anyhow, Japan, if you adjusted of a democratic demographic factor, has been doing remarkably well and on some measures even better than the US in terms of employed person per head. But I think when you look at the German negative yields, why

are there minus nor point one zero? I would say the critical factor there is that the market has discounted consider r or likelihood of Italy leaving European monetary Union at some point in the next few years, if not sooner. So what you're seeing in the German bond market is in fact an option that what you might have there if you hold the German government bond at some point is a reincarnated Deutsche Mark. Now that that's that's why

we are where we are. But nonetheless, negative bond deals are a huge incentive to real estate speculation in Germany, and in a recent note I put out, I do draw attention to the construction boom and the real estate boom in Germany as being an important offset all the bad news we're getting on the export side. So do you feel well, let's just push it out there. In terms of the European Union, you talked about Italy maybe falling out. What is your view of the European Union

in general over the next five to ten years. Is it going to look materially different than today? Very much so. I think first a lot of that would will turn on the key developments in Germany and Italy, and I would say in particular that any sort of Brexit crisis or hard breakout or whatever could accelerate that through leading

to political quake Germany. In particular, middle sized businesses who are very dependent on the UK market may take what's happening here as a reason to push harder vote against Merkel as soon as the European elections in in late May. So I do see a growing divergence coming about between the German and Italian situation and that being crucial to how you pant out. Dr Brendon Brown, thank you so

much for being with us. Dr Brendon Brown, Senior Fellow at the Hudson Institute and publisher of the newsletter Monetary Scenarios. Joining us from London, I want to talk about one particular financial issue in New York City, and that is congestion pricing. It does seem like that plan is moving closer to reality. Joining us now, Henry Goldman, government importer for Bloomberg News. Joining us from New York City Hall. Henry, what is the latest on the congestion pricing proposals currently

working its way through state n city legislatures. Well, the there's sort of an agreement in principle between the Assembly, the Senate, and the governor that this is the way to go. UH. Why is it the way to go? Because New York City UH is facing a twin crisis where we've got traffic congestion in Midtown Manhattan. It's costing the city economy maybe twenty billion dollars a year according

to the Partnership for New York City. At the same time, we've got a matched transit crisis where we need an infusion of billions and billions of dollars, and so we need the revenue that congestion pricing could bring us. So that's basically why this thing is developed with such urgency. So, Henry, what is actually the timing here? It seems to have

been put on the fast track here. What's the timing? Well, this the state has a budget that needs to be approved by the legislature by April one, So April fools Day is the day when the legislature comes up budget that's too much. That's Rich April Fool's Day. We passed congestion pricing. Just kidding. Uh, this was a proposal that has been out there and floated for a long time. There are many other cities that have done at Singapore, Stockholm,

London is thinking of expanding or increasing the costs. Why is the opposition so much less powerful this time around? Probably because of the compelling nature of these twin crises. We've got just a city in Manhattan that's just congested to the point where people can't move, so appointments are missed and people are sitting in their cars, and gasoline is burning and asthma is getting you're making it sound like we're living in accessful It's really not that bad.

It is bad. The congestion in midtown Manhattan is costing the city's economy billions of dollars in missed appointments, in work that doesn't get done, in UH, wasted fuel, in medical costs of pollution. That's all on the congestion side. Then beyond that, we have a subway system that's a hundred years old. We went through a Summer of Hell last year where subway breakdowns became the routine. All of this has gigantic economic costs and health consequences. So it's

it's not a it's not a minor or trivial thing. So, Henry, how does actually work? Am I gonna be paying higher tolls now? Well? Uh, yes, the details have not been worked out, but yes, when you raise revenue, somebody pays.

Now who pays? People who are entering Manhattan's UH congestion zone south of sixty one Street, there will be electronic scanners or transponders or some technology that will scan licenses or use an easy path like device, and once you cross that boundary, you will be told a certain amount

of money that yet to be determined. There was a study a few years ago that said it at eleven dollars and fifty two cents that was enough to raise is maybe a billion dollars in revenue, and that billion dollars in revenue could then be leveraged in municipal bonds to borrow maybe fifteen billion dollars uh and pay the debt service on that. So that's the kind of money. Uh, that's a start. It's only a start in facing the transit needs of the city and the region because there

are commuter rail needs that must be taken care of. Now, So who's paying the people who drive south of sixty one Street. Now, let's say you're taking a bus into New York City. I'm sorry, that's a you're taking a car and you're gonna cross a bridge into New York City. Uh. Those people who are already paying eleven dollars or more on the bridge, they don't want to pay another eleven dollars or more to get into Midtown Manhattan. And there will probably be some system of credits that will allow

them to offset the price of taking that bridge. But the bottom line is, Henry, it seems like this is coming people are gonna pay um one way or the other. And uh again, it's been tried, as Lisa mentioned, in other parts of the world, and so this might be, you know, this might, Lisa, just be the perfect storm. So we'll have to see. Henry Goldman, thank you so much. Henry's a government reporter for Bloomberg News calling us from

New York City Hall. But it just seems like, you know, with what's going on with the mass transit and how much money Mass Transit needs, this just might be the revenue solution. So it might be a perfect storm where things can actually get done here. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform

you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney and Lisa bram Woyd's I'm on Twitter at Lisa Bramwoyit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.