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Let's switch to the airline industry. We heard from Delta Airlines today. They gave a better than expected forecast and that's despite saying, hey, they took a four hundred million dollars of increased fuel charge in the month of March, reflecting what's going on in the world. So let's check in with somebody who follows this stuff. Sid Phillip Bloomberg, chief correspondent for Global Aviation Joint. Just here, what did we learned from from Delta today, said Morning Polt.
So, Delta Airlines is talking about how they've managed to raise their ticket prices and that sort of helped them offset the increase in jet fuel prices. I mean, we've seen jet field prices so almost double more than bubble since the war and Iran began, and that's really the
biggest chunk of costs for airlines. And what airlines are talking about is saying that they've managed to pass on those cost increases to the customers in the form of higher ticket prices, and that's really helped them sort of continue to weather the crisis and be able to sort
of manage a ramp up bookings. I mean, Delta talked about how in the last in the last since the war began, they've had five of their ten biggest sale days, and that sort of really shows that consumers are sort of locking in their travel at the moment.
That's great if you have the pricing power like a Delta Airlines, but what if you are a discount carrier that relies on low ticket prices to get your passengers, to get consumers to sign up. I mean, it's a different story, isn't it.
It is?
And so Delta Airlines obviously has a predominance of premium heavy travelers, so they sort of talk about how they're targeting businesses and corporate travel, which is sort of continue to see growth. They're also talking about how premium leisure travelers are continuing to buy tickets, but at the lower end of the spectrum, I mean, the Spirit Airlines and the others they might see their consumers that have balk at higher ticket prices and they may put off those trips.
Although we are sort of seeing Jet Blue. We heard from Jet Blue earlier today and they talked about how they are also seeing people continuing to book. So it does look like consumers are trying to sort of get ahead of future price increases by locking in travel for the summer and the rest of the year early.
So what's about the visibility. What are the airlines saying about the visibility of their bookings. I mean, that's also a metric that I know kind of gives you a sense of how confident they are in their business.
So at the moment, the airlines say that the bookings look visibly healthy, at the other end of the spectrum, I mean, they're still talking about how they're not quite sure where jet fuel prices will settle, and that's sort of really key in terms of bookings as well as
the jet fuel prices. So that's sort of those two things go hand in hand and determine how profitable the airlines will be, because remember, if they're able to sort of pass on higher ticket prices, but jet fuel prices continue to grow higher than those ticket prices, that's when the airlines start feeling the pain because then sort of
not being able to keep up with their costs. On the other hand, if they can sort of dick the higher prices and see costs come down, that'll sort of help them boost their profitability.
So one thing that you and your colleagues point out and your reporting is that US carriers, unlike those in Europe, don't.
Hedge fuel prices.
Once upon a time, some of them did, but most of them don't anymore. Why the change And do you think that because of what we're seeing in around, because of what we're seeing with the volatility the uncertainty around oil prices, that airlines might start to hedge those fuel prices again.
So the airlines have typically not hedge. I mean, famously, during COVID, a lot of airlines got stuck with hedges that were sort of in the wrong direction when jet field prices crashed, when demand plummeted, and so at at the moment, we haven't yet heard from airlines talking about
returning to the hedging policies. But Delta does point out that they own a refinery and that gives them somewhat of a natural hedge, and essentially they expect that to help them whether the increase in jet field prices.
He said, what are the airlines saying about the state of TSA today? A lot of We've seen a lot of stories, a lot of video plasts a week or so of really long lines at airports. Do they have an opinion on how this might play out?
I mean, the airlines, including the industry groups that Airlines for America has been talking about how there needs to be a deal that would basically allow DSA staff to get paid and basically start reducing those lines, because essentially the problem is that while it's not a safety or flight issue like the previous shutdown when the FAA had to sort of cancel flights into forty airports because of concerns about safety, this time it is sort of affecting
the comfort of passengers and causing those long life we've seen in various airports acrowns the country, And essentially the airlines have been saying that this will get worse as we get into the peak summer travel season, and so they're hoping for early resolution and a return to somewhat normal as they go into the busy travel peaks.
Yeah, speaking of the busy travel season, of the summer. Also at this conference, a lot of industry executives were making the point that if the strait of her moves were not secured by Memorial Day, that would be a key timeframe in which consumers might start to see ticket prices really go up even more than perhaps they already have.
Exactly that would sort of take the long That would basically mean that higher fuel prices are here to stay for the slightly longer term, or we're not really sure when those fuel prices start coming down, and that's when consumers will.
Say, Hey, do I.
Really need to take three trips? Maybe I can just do with two, or I can sort of not fly at all the summer.
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Other company news here Today, our friends at Craft Hindes they were going to.
Split up, right, Yeah, but now they called it off. Yeah, they called it off.
This They have a new CEO and I think he feels like can invest in some of these brands and drive growth that way, which is a different strategy than what we've seen from some other consumer products companies, because, let's face it, they're under pressure here. I think a lot of people like me are have traded down, our trading down some of the store brand, the private label brands,
private label brands. That's putting pressure on some of those brands that they've spent generations trying to create these brand values through advertising in other ways. Christina Peterson joins US food industry reporter for Bloomberg News. Christia talk to us about what's going on at Craft Hines. What's the latest news there.
Yeah, as you guys mentioned that they halted their plans to split. Their new CEO, Steve Kaling, is trying a new tactic by investing six hundred million dollars in their research and development. They're marketing, lowering some of their prices, and as part of that effort to restore growth in the company, they are unveiling some new healthier products and some of the brands that have really struggled but are
showing some signs of growth. So we are going to be able to purchase a higher protein version of Kraft mac and Cheese later this month, and then in April they are unveiling a pre sun lower sugar hydration beverage and a snack sized version of Lunchables. So these are some of the brands that craft Higns has been weighed down by. But when they are investing in some money, they've seen a little bit of growth coming into those brands.
Okay, adding protein makes sense given the shift among consumers towards more protein packed foods. But isn't the bigger shift about people wanting to avoid food that is seen as perhaps not as healthy as fresh food. I mean, we're still talking about packaged goods, right.
Yeah, I mean I think that is the sort of inherent risk here. I asked the CEO about this, and he said he thinks people are leaving the center aisles of the store where you buy package food because they want better for you options, and that as a packaged food company, what they can do is try and do better for you through a shorter ingredient list what food companies called clean labels, by adding more of these kind of trendy macronutrients, leaning into protein, leaning into fiber, but
You're right, no one's going to confuse this for Kale. So they're betting that there are times when convenience and taste will win over consumers.
That's the only thing that drives me. I don't know what they're talking about here, but I understand.
You're all Kale all the time.
Oh yeah, exactly, Christina. What's the specifically for Craft Highs. I mean a lot other companies in the package goods industries have pursued separation plans. Is there a sense within the industry whether that's a good strategy not a good strategy. Maybe Craft finds things they can be a little bit smarter about it.
I think that there was a general agreement that splitting Craft Hinds into two separate companies at that moment in time did not actually make a lot of sense because both halves were seen as somewhat weak. If you had one company that was doing really well and one half of the company that was struggling, then you could siphon
that off and protect the stronger half. But in this instance, I think people thought it did make sense to pump the brakes on that and see if you could restore growth and at least part of the company before splitting them apart. So even if you know Oscar Meyer Meets or Maxwell Hoouse Coffee can't be restored, maybe some of the other parts of the business can be. And then if they were to pursue a sale down the road, a split down the road, that would make more sense.
So just trying to like bring the company back to life before you auction it off.
Well, you mentioned a couple of brands there, mac and Cheese being something that Craft Times is willing to invest in. The Lunchible's brand is also something that they're kind of beefing up, and Caprice Son as well, which I think we all remember from packing our kids lunchboxes and having them ourselves, but also the other brands within its portfolio,
including Maxwell Hooll's Coffee and Oscar Meyer Delli Needs. Like those are things that has a company largely given up on it and if they're not going to refresh those.
Does that mean that they are for sale? For sure?
They have said that they will invest in order to protect their market share, but they are not as far as we know now, thinking a lot of resources in to get new consumers there to grow their market share. The CEO has said that he would not rule anything out in terms of a sale or divestment, and they are you in the portfolio kind of broadly speaking, to
see what works and what isn't working. He said they're not actively engaged and looking for buyers for those brands, but that they would not rule anything out.
What's the market's feedback on this new CEO or has been there's too soon to really hear anything.
Well, you know, it's a tricky time. Shares of craft higns have been down since the split was paused, but it's also been a tough time for the food industry. Just in general. Consumers are strapped. The conflict in the Middle East has sent oil prices rising. There are concerns that that will stress already strapped consumers out further. In general, the large food companies have been selling less food, so
there is just concern broadly in the market. So I think people are willing to give Steve Kaylene a shot. And in general, you know, he is not highly of He presided over the split of Kellogg, so I think there was initially an expectation that he do the same with Kraft Times. I think people are interested to see if his gamble works but there is some skepticism that these are the brands that will be able to be perceived as better for you. That seems a little.
Make a little bit of a lift.
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A little m and a trade on the tape here Today, the MasterCard will acquire the stable point infrastructure startup bv NK for as much as one point eight billion dollars. Have no idea what that is, so I'm going to go to somebody who does. Catherine Chiglinsky, US finance team leader for Bloomberg News, joining us Lacker in our Bloomberg Interactive Brokers studio. Katherine, what is MasterCard buying? What is bv nk.
Well, it really does a lot of the stable coin infrastructure, So I think that's been a huge bet for them. Right Like MasterCard and its rival Visa have long dominated the payment infrastructure world, and this deal with bvank and MasterCard. I think really just allows MasterCard to actually boost its sort of digital payments operation without actually having to build the truct some of the technology itself, which I think is a real boon for it.
There's also, you know, kind of this strategy that MasterCard has taken over the last few weeks, few months, because earlier this month they launched a what they call a global partnership network with a whole bunch of digital asset crypto related firms for more collaboration. It sounds like, you know, they're moving in that direction, but I don't know what it really means in terms of what changes for consumers.
Yeah, well, I don't think a ton will change for consumers, because I think MasterCard is still very much wedded to the idea that like regular payments are its bread and butter. I do think, though, that they want to be a player in all these different markets, and especially as we see the adoptions of digital currencies increase, you know, I think they want to have at least the back end
so that they can handle a lot of that. So I think those partnerships and this BV and K deal really are helping them sort of toggle both end so that they can get bigger with the growing market and have that technology ready so that as it continues to grow and they can really seize on it.
You know, when I first started learning about fintech, one analyst said, just buy Visa, Mastercret. I mean, no matter what the technology is, it's going to flow on their platforms to some degree. How is that playing out? How is how are our mass card en Visa and maybe even A. Do they feel like they're participating in this transition to financial technology and digital in many ways?
Yes, Like I do think that they have been, you know, seeking different ways to get there, to establish footholds in these markets. In other ways, you are still seeing deals like you're still seeing them by BV and K. I think there is still room for them to grow. But in the end, yes, will they find a way to sort of have their how have their fingers in all
these different markets? I one hundred percent belief, so just because yeah, it really is this benefit of even if you know most of our markets are still relying on sort of regular payment systems, they want to be you know, intertwined with sort of this digital asset.
Push has MasterCard clarified what its M and A strategy is. I mean there's partnerships that it's formed with this you know network, this global partnership network that it announced, and then there's actual M and A. At what point do they buy something wholesale versus just form a partnership.
Yeah, well, I think there's a careful divide obviously. I think it has a lot has to do with price these days for these assets, especially when you think about how hyped up sort of the digital asset space is. So I assume, you know, like many companies are going to be pretty careful about exactly which ones they buy and which ones they partner with. You know, I think some of their partnerships have also been really to expand
it widely. And I think but with like BV and K, I think they're getting you know, specific data infrastructure that's going to help sort of beef up their back end.
Well, it's the stock prices performed just about in lockstep Visa and MasterCard over the trailing five years on a compounded annual basis, their stocks up about seven percent per year.
Both of them.
But that's laggings and people that's our thirteen percent, So a little bit of an issue there. Performing kind of in lockstep with each other. Catherine, thank you so much.
Appreciate that.
Kathryn Chiglinsky, US Finance team leader, Bloomberg News talk to us about MasterCard buying in a little bit more into that fintech space here.
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We've been following this office market really since the pandemic, as you talk about an industry that was really hit hard by the pandemic and it's still recovering as we think about getting back to the offices, and different companies have different policies, but from a real estate invest perspective, what's the story these days?
What's check out?
With Jeff Langbam, Senior US RIAT analyst FRO Bloomberg Intelligence. Jeff, I know you guys and your team did some research on kind of the current state of the office market in the US. What did you guys find?
Yeah, not just the US, We actually did a survey of cities in the US and Europe and Asia and Australia, and the story was largely the same in all of these major cities, which is, companies want people back in the office and the way to get them back is to offer high quality new space and highly amenditized space and adjacent to transportation. And if you do that, then
the people will come. And then the other takeaway, which is interesting I think, is that as of right now, at least so far, employees sitting in office buildings view AI as an expansion opportunity, less so of a and less so a threat to office demand.
Okay, that that seems kind of counterintuitive. Explain why that is. Why is it an expansion opportunity?
Well, a couple of different reasons.
Well, the first, I guess the most obvious, as as it relates to leasing, is all these growing and forming AI companies need someplace to.
Have their headquarters.
So there was a lot of tech leasing happening in some of these big CDs that is directly related to this AI wave.
So that's one thing.
But as it relates to the survey itself, you know, a lot of the a lot of the jobs that may be deemed irrelevant from AI or maybe back office.
They don't. They don't.
They're not the jobs that are sitting in the high rise towers in New York.
And London and Hong Kong.
And maybe, you know, if companies can find incremental business opportunities, you know, by making themselves more efficient, there's actually a need to expand their space in those types of buildings to take advantage of that opportunity, even if it does mean some job redundancy elsewhere.
Jeff, I think I know an A quality office building when I see on simply because I work in an A plus quality building here. Bloomberg seven thirty one les what percentage of the inventory office inventory in the US would you say is a quality?
It's pretty low.
And what's interesting is there is such a need for more of it that even though there are a lot of empty or mostly empty older office buildings, there is now new building new construction starting to come out of the ground and being earmarked for new construction coming out
of the ground. And because there's no big blocks of available high end new space, and you know, we've got a couple of new buildings that are getting ready to start in New York and you know, you look back at two years or so ago, and that would have been crazy. Nobody would have thought that was that was possible. But that's where we are because there's just not the space that people want to lease.
There is no availability, all right.
So let's say like eighty percent is B and C. What happens all that stuff in every city?
Well, the hope is that a lot of it turns to residential and there is some of that, and there's increasingly more of that, but that's going to be a slow burn and and you know, it's going to take time for those buildings to convert, but as they do, that reduces inventory of office which is helpful and also helps ease the housing affordability and lack of availability crisis in some of these cities. So that's that's one thing
that will take, you know years. The other thing is that, you know, knock one down and build a new office building. You know, we're going to see some of that over the next couple of years as well.
Wouldn't it be easier to turn those B or C grade office buildings into A grade office buildings? I mean, assuming you have the location, you kind of got, you know, share out the interior and rebuild it.
Yeah, so obviously the location is is paramount, but you know, depending on what age building you're talking about, the ability to retrofit to what is really required now for a high end, high tech, environmentally friendly, you know, all of those things. I mean, it's it's an expensive proposition and
in some cases just structurally challenging to do. And in fact, you know, if you're if you've got a building that's largely vacant and you can get it cheap enough, you probably are buying it for effectively the land cost anyway, and so knocking it down, you know, really ends up being probably cheaper and easier in some ways than entirely retrofitting it.
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