Bloomberg Surveillance TV: April 16, 2025

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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and am Marie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the

Look?

I think you know, as I've said, like time is not on the mark get side, and time is not on the real economy side. The longer that this gets drawn out, you're doing real damage. As corporations and individuals are sort of frozen in place waiting for the actual policy is So.

The interesting thing about the.

Ninety day pause and the recategorization of some of the electronic tariffs is that it does remove some of the left tail risk in the market, but it doesn't really remove the left tail risk in the real economy, which is getting damaged every day. So at first we were optimistic on that ninety day pause like everybody else, and then when you start thinking about what this actually means, it means it's gonna go on for much longer. So Q one's gonna come and find you had pre buying

The soft data is rock bottom, and again, you.

Know where can this go from rock bottom?

Right?

So you're there.

In fact, we did a chart, we did a chart for our team about you know what happens when consumer sentiment hits rock bottom. Well, it turns out the SMP tends to rally right after that. And we went back about forty years with this. So you know, the soft data is not telling us anything that we don't know.

But we're here and.

You know, the concern really is that unless you start seeing the outlines of what a deal looks like with Japan with the broad outlines, yes, details can take six months, twelve months, but what does it look like that would further remove left tail risk on the market. And I think here you're fairly priced. You're fairly priced at about fifty four hundred for where earnings are going.

He saut of Eastern Time US retail sales US retail sales for March. Is it too early to expect some weakness to show up in those.

Figures given the fact that the sentiment data was already cratering in March. If there's some some read through, you should start to see something going on. I find what's fascinating actually is the fact that tariff is on everybody's lips. The American public, which tends to tune out a lot of political stuff, is talking about tariffs everywhere, and so

What do you need to see to try to get more confidence in some sort of risk rally. And I say this at a time where we do have a number of earnings that are coming out pretty positive. UBS's CIO came out with a list of five reasons why they actually are getting pretty positive for US equities in a six to twelve months basis, and they include April tariff showers, may fiscal flowers. This is really fun the FED put and the data by US exceptionalism, especially when

I think it's been totally overplayed, meaning meaning the rest of the We are the buyer for the rest of the world. You know, we have the best consumer on earth two percent of US GDP. The consumer can be down, can take a break, but ultimately this is what drives the global economy. And if there is concern about where US policy is going, well, boy, the rest of the

At the same time, people talk about the response to tariffs from the US and it comes to fiscal spending. You've seen that in the You've seen that in Europe, You've seen that in Japan, you've seen that in China. Why can't you just follow the fiscal spending at a time when a lot of people are saying that tariffs will hurt the United States as much as some of these other trading partners.

So the fiscal spend is a great story as a trade. In the end, we do long term wealth creation, we do long term wealth present so that for US would represent a nice trade for the next twelve months. That's probably the right framework to.

Look at it.

But if you look at how the markets are performed since Liberation Day, actually the US has outperformed rest of world. With the understanding that the US is actually in a better position here than the rest of the world, specifically on the trade issue.

So fiscal can only get you so far.

As we've seen in the US, you can prop up the economy for a couple of years and then you really have to deal with the underlying productivity and barriers to growth that you have, for instance in Europe, that you have to deal with. So they're going to put a trillion dollars into the economy, how productive will that capital be?

So where are the regulations going?

Trying to get some visibility on policy down in Washington, and now we've got legal issues. So if you're just joining us, I want to share this story with you again. The California coverity Gavin Newsom has set a state is suing to hold President Donald Trump's tariffs, citing home to consumers and businesses, Home to consumers and businesses. Now, this is something people have been talking about for a while.

Well, I think given the fact that the United States the administration has come out and said that this is due to IEPA a national security concern.

That likely that will be upheld in court.

And I think this is one of the things that Jamison Greer, the USTR Trade Representative has been very focused on making sure that anything they come out with can legally be upheld in court. But the courts are going to fight it out, and certainly Governor Newsom, i think eyeing maybe a twenty twenty eight bid, is going to do whatever he can to try to make this point very clear.

This is almost exactly what Libby Canssel and PIMCO said to you and I on Sunday evening. This is what she was anticipating these kind of things. And this is the first and I'm sure it won't be the last.

And this is ultimately the real question with exemptions. How much does that open up the Trump administration to legal challenges based in the fact that is it a national emergency or not. There has been a lack of direction in terms of exactly why some of the tariffs have gone on, which might go to some of the legal fight. That said, even if they you get undermined, there are other provisions that this president can use to try to get these tariffs through.

So again, the.

Whack a mole of tariffs, it's not going to go away. It's just going to get dragged out in a court system.

Alicia, Everyone's become an expert in trade relations, and now they need to become an expert in trained law. As an investor, how do you navigate this mess at the moment?

Really difficult, really difficult.

Look, I think with the VIX at sixty and the SMP hitting about forty eight hundred, that's typically a signal to close your eyes and buy because you're downside from forty eight hundred in the worst case scenario is probably a forty.

Four one hundred or forty five.

Worst case scenario like deep recession earnings get cut to two thirty or something like that, is probably a forty four to forty five hundred from forty eight hundred, and it's asymmetric risk to the upside there, particularly when vics hit sixty. So we're looking at technical analysis for that kind of thing. The two hundred week moving average on the SMP, which is held for about fifty years, is at forty six hundred, so forty eight hundred, you've essentially

So that's what we're looking at.

Here are fifty four hundred again where we think earnings are going, which you know it'll come down over the street. You're probably fairly priced for now for the kinds of uncertainty, very.

Difficult to model.

I think it's really good to remember though, there's also a right tail risk.

We all sit here and talk about the left tail risk.

We can't model it. It's a terrible policy. It's inflationary, it's tagflationary, we're going to go into a deep recession. But there's also the right tail and I think in markets there's always a two way trade. And I think now you're starting to get the conversation about Okay, what could the upside look like?

And I think we just need to remember it.

I'm glad you mentioned the VIX because the Treasury Secretary mentioned the VIX in my interview on Monday and he said it's likely peaked and it's spiked. Do you agree with him it's past it or do you think we could see the VIC spike again.

On a probability basis, we've probably spiked. There can't be any certainties here would I do know when the market's down about twenty percent and the VIX is at sixty, I have better odds than not in deploying capital at that point. And so that's what I would say, should something, I'd say the real risk here is there is there some kind of financial contagent? Right the bond market and the FX market have moved so quickly, acting like the equity market. Frankly, you know what's out there that.

We're not seeing.

That that's leverage that could create a broader financial risk. If this is a policy induced error and a policy induced sell off, those can be fairly quick. Maybe you have a bit of a U shape recovery, but more or less we're intact. The issue is if this becomes a financial contagent. So yes, VIX at sixty should be a buy signal. The SMP at forty eight hundred more risks you know, to the upside than downside. It's still downside risk, but you're asymmetric risk. It's really the financial

Let's get to this. If you don't know how long talks are going to last, what do you do in between. We keep hearing this phrase, wait and see what kind of CAPEX decisions can you make in the meantime.

So we're very concerned about that because already intentions to invest and intentions for CAPEX have dropped. If you look at all the survey data, that's what we're seeing. So it's a pretty it's a pretty brutal policy in terms of forward investment. And that's really where the problem is coming. That each day that this goes on and time is just not on the side for the real economy. You know, just as a reminder of the market always bottoms before the real economy does.

It happened in COVID, it happens all the time.

Is just to remember that that's that's out there, but there is real damage happening today right now. It's great that China and the US are negotiating, but it's impossible to make a decision if you're a COO or a CFO where to put investment. It's impossible, And so I'm concerned that you might have a freezing in the real economy here. I think I think the risk is real, and I think it's happening right now. It's certainly the

Right, there's this other question.

It's not just how this trickles out into the actual economy. Is are there certain sectors that are going to be so exposed so as to be not really desirable for you. I'm thinking of auto manufacturers, retailers.

Yeah, look for that.

In terms of an investment thesis, you just really have to look at how far the stocks have fallen and where the multiples are, because there is the price at which you pay because it's been completely de risk So the auto sector looks like it's been completely de risked. Here, the market's very efficient in pricing it with the worst case scenarios.

And I think we have it again.

We have to remember the market's always bottom before the real economy does.

So.

Sentiment data has been rock bottom really for about five or six weeks now. Again, the American public knows the word tariff, which I find fascinating. Fascinating because sometimes I don't know who the Defense Secretary is, and so we've seen the sentiment data really be terrible. The issue is, can the hard data, at this point declining do more damage to markets than what we're already anticipating and its investors.

That's where we have to live.

We've gone neutral on equities, We've moved some of the allocations to short term fixed simply because we too are really uncertain. It's very hard to have conviction except on price and valuations.

President Biden forgot who the Defense Secretary was once upon a time, to remember when we lost him for about a week he was lost.

He was under anesthesia.

Yeah, that's right, and he didn't call the White House to tell them he was.

Going to be under anesthesia. So yeah, I think it was twenty four for eight hours. It's that How long is we lost a defense secretary?

Got to find space for jokes here, brahma elis Lafina bm wi. Wow, the leader is going to see Rick reader of Black Rock Writing. Taking opportunistic positions in good quality companies in the equity market has and should continue to pay off for investors with longer time horizons. I'm pleased to say that, Rick johin US Now for more, Rick Reader, it's been too long, my friend. Let's go straight to it. I just want to understand what you've been seeing with the team over the last week or so.

So? I mean, boy, it's been an incredible period.

I mean, so you know, to start with, I mean the treasury market to move back in the treasure.

Of Friday was extraordinary.

This pressure on the treasury market, concern about international selling that there was pretty amazing. And then we bounced back pretty nicely as some calm has come back in and then you know, the volatile and the equity market of the daily volatile a little bit calmer. This week does present you know, it's similar to what I've said there before. It does present some opportunity in these markets.

It is, I will tell you.

The uncertainty though, has led to liquidity in these markets.

That's pretty rough. Right now. When you go to execute, you've got.

To be very thoughtful and very tactical about how you do it, because markets are very jumpy and very uncertain these days.

And Rick, typically the place you go full liquidity is the treasury market, deep predictable. That's why people buy treasuries. Rick, can I get your view on what you think was happening last week? Do you believe that was foreigners pulling back? Is there a question mark over the US safe haven status or is that just certain traits and winding things blowing up.

It's a great question.

I mean, so, first of all, you know when you have this pressure on the currency market, and by the way, it's super acute when you think about equities going down the same time that the currency is going down.

Usually the dollar appreciates when you're in this risk off mode.

So you've unquestionably seen the pressure on equities and international disposition.

Of the equity of a number of US equities.

In the rates market, it's a bit more blurred, but there's no question about it. There is some concern we fund so much of our treasury debt internationally, there is some concern with the currency depreciating.

And then quite frankly that the back end of the.

Curve going through these periods of spasm where inflation is higher. You know, even if the FED cuts, what does it do for the back end. There's an argument that when you've been the FED cuts, the back end becomes less tethered, and in fact you get a steepening.

Of the curve.

So yes, I think there's some international disposition for sure, as the currency weakens. But I think broadly it's its uncertainty, and it's just hard.

You see watch days like Friday.

You know, it's just hard stepping in, particularly in the back end, with this uncertainty still out there.

So Ray welt, what point would you step in?

So so I like gowning the belly of the yield curve and I like gowing. And you know, the front end has gotten pretty well priced. I mean you've got to and I think the way you all described it, you know, the Fed, you're pricing an awful lot of cuts for the FED this year and you haven't seen that hard data deseration. I do think you'll see that

To see it. But the billy of the yield curve, there are some opportunities.

And frantly, Europe is more interesting because you don't have the inflation impact in Europe.

The ECB's got to cut more aggressively.

So I actually think, you know, we've you know where we've seen some real opportunities.

Actually European rates very different.

And by the way, you don't you don't have the international disposition there. In fact, that's where you have probably international I'm sure have you have international buying. So European rates is a place recently we've liked quite a bit.

Can we take this a step further?

You talk about how US treasury markets tend to be the deepest, most liquid, and then you talk about how rocky liquidity has been and how execution risk has become an increasing consideration for you. Have we gone to the point where on some of these days the European rates market has actually been more liquid than the US rates market?

Good question.

So more liquid I don't know if certainly the back end of the yeld curve it takes price to get to get execution. I don't know if it's more liquid it certainly feels to me like you have this ballast of you've got an ECB moving, you've.

Got a yield curve that's also that's already pretty steep in Europe.

And by the way, if you're a dollar investor, you get a cross currency swap benefit. And because the curves so steep, you roll down. So you know, there are a lot of reasons why I'm sure others as well as ourselves have felt like it's a safer place to be even though you're going to get European funding of fiscal and issues of the next couple of years.

That just takes some time.

But I don't you know, I still say the truagery market generally is much deeper, but you know, you're up.

You definitely see.

More buyers coming in internationally as well as what we see in the States.

It seems like the picture that you're painting is a regime change. The picture that you're painting is shifting away from the United States and following a real flood of money into some of the overseas markets, and frankly not betting that the long end of the yield curve will provide the ballast that it has in the past. Can you talk about what else has changed? Does this really undermine or reshape the way you look at sixty forty or the position of gold in your portfolio.

That is a long it's a great discussion. That's a long discussion. A ton has changed.

Like you say, we've added in the portfolios, on in our fixed income or other portfolios, we've added gold.

We think gold is a is a is.

A good hedge generally, you know, quite frankly, you have to do during periods like this, you tactically.

Hold more cash in the portfolios.

We've done that back end of the yield curve and interest rates and as a hedge when you've got inflation moving potentially signmiulantly higher, not really a big benefit to the portfolio.

And then the other one, when you get rates backing up.

You can get your yield much more attractively using high quality assets. So even though you know you're you know, some pressure on parts of the high yield market, pressure is in the left loan market, you can actually still create them. In one of our ETF is bing ETF, we're able to create over seven percent yield and actually improve the quality of portfolio. Run more cash that becomes

So I like the idea, build some more.

Cash, use some tools that are different than in the past, and then quite frankly, just get higher quality and more liquidity in the portfolio.

Rick, do you think the rhetoric around the fact that some investors are saying they're dumping dollar, dumping treasuries, that the US is losing safe haven reserve asset level?

Do you think that rhetoric is overblown?

I'd say sentiment can change really quickly.

I mean, we're in this period now where there's clearly a concern about the currency, and there's clearly a concern about how do we bring the debt down, how do we get how do we get interest rates down? So I'd say near term, you know, there is a question listen. I think reserve currency status status is something that is absolutely critical to the United States. We fund a lot

Year is going to change.

I think we've got a couple of months here where there's a lot of uncertainty an economy that's probably in the recession today in terms of certainly where corporate spend will be.

And then but I think as you get to the back half of the.

Year, things can really evolve. So listen, I think you're chipping away at reserve currency, but I don't think there's a natural alternative. So and I you know, and I think I think things can change, hopefully they do.

Rick hopefully they do. But that last point that I think is important. If we are in recession today, do you think risk assets are approprily priced for that scenario?

So I would say, I would say today, listen, I think that I think the tail, the.

Tail has the taist has gotten fatter.

I think quality assets they are pretty reasonable. There's a lot of quality assets we've had to agency mortgages, et cetera. Listen, I think you've got to put a wider range on the equity market today than you've had before. You've got an economy that's pretty uncertain, and you've got to you know, I think you've got to keep your.

Beta bit more restrained. Today.

Quite frankly, one of the most interesting trades in the last couple of weeks has.

Been to sell puts.

You know, not to necessarily increase, but you know, the best time to sell insurance is after a hurricane, and they've been some great trades.

Actually sell downside. We are gosh.

You know, if we go down another ten fifteen twenty spending on single name go down ten fifteen twenty percent, you get paid handsomely for taking that. So keep your beta restrained, hunker down a bit in terms of risk, but then find someplace like Gosh. I would add if we came down, if we if markets went down significantly, So.

Anyway, a bunch of things to do in this market, I think.

But I just think you have to expand your the where you think your return objectives are going to be, in the probability around it.

In an environment like this.

Things have changed a lot. Rick is good to see you as always, Rick Raider of black Rock There, Rick, thank you sir. We're doing against sing Wall Street's biggest banks, looking for some clarity on policy. JP Morgan's Chamei time and urging Trump to start talks with China and telling the ft quote, we should be careful. I don't think anyone should assume they have a divine right to success and therefore don't worry about it. Joining us now to

Well, listen, I mean there are so many, uh, there's so much noise, so many signals coming from the White House right now.

I think that market.

Players are just, you know, sort of trying to take a step back and figure out if they have a portfolio of companies, you know, what it is that they look like, if they're imports sensitive. Obviously, there's now a little bit more focus on what's coming out every single day of the White House. I think the imperative for the President and his team today as they're meeting with

Are you convinced that is the metric for success?

Well, I think you know there is.

At leasta you talked about sort of taking him literally, taking him seriously or hinted of that what you just said, And I look at this term of the Trump administration somewhat differently than the way we looked at the at the last one, and that almost you he is sticking to his literal word when we're talking about tariffs and trade here. So Jonathan, back to your question, if he's about trade deficits, because that's been one of the real metrics that he's put out there consistently.

That's what it's about.

So who are we going to see the Japanese buying more of our goods? Are we going to see that along with the opening up of their markets so that our exports can flow into these other countries.

The President ran though, on hutting everyday goods down in prices, things like grocery, things like gas. A recent CBS poll says a majority of American sea tariffs adding to prices, adding to inflation.

Can they wrap this up before the midterms?

Well, this is the and then this brings up the last point. I think that's really important about today and when we look at Capitol Hill when Congress gets bad, I think the administration and the Republicans need to act with dispatch. It's important that there is some success under the belt, demonstrably, so the markets see that.

In terms of dealing with countries.

And I think from the Republican standpoint in Congress, they've got to get this reconciliation bill done. Simplicity is their friend right now. Adding additional taxes doing those kinds of things is going to take weeks, if not months to bring everyone on board. And I think if we can just extend what President trumpet said was the greatest tax bill ever twoudy seventeen, they should just go ahead and do that.

If I had said to you, Congress right now is debating whether or not to raise taxes on people that make a million dollars a year, would you think that came from a Republican or a Democrat.

It is an extraordinary concept coming out of what I believe is still a very pro growth party. And I think, as I think you've been discussing this morning, the three legs of the stool of the Trump Economic Plan. One of them is taxes, the other deregulation, along with the trade agenda, all that has to come together to help growth in this country, to see incomes rise, wages, growth, wealth, all.

Of it opportunity.

And to sit here and say that we are going to be increasing marginal rates on individuals that ends up hurting small businesses. I mean, that's the trick there. When they start talking about millionaires. Remember we've got a lot of people in this country that file taxes, that have subs or LPs that are taxed at the individual level, but actually run businesses and I don't think they're going to get too far with that concept.

But what if they do.

This is a pillar of conservative orthodoxy not to raise taxes period on anyone.

What do you make of the.

Party in the direction of travel if they were to go ahead with this, Well.

Again, I'm not sure that they're going to go ahead with this. So they're discussing, Well, I'm not so sure how widespread that discussion is and what kind of enthusiasm there is. This is not a pro growth item, and I think more of the focus is going to be on how they come together on these pay fors because we saw again the important data point that occurred last

Heading into this year, the belief was that President Trump was going to be a pro business president who is going to focus on fiscal responsibility as well as celebrating national champions. We have seen policies that have reaped the opposite consequences in markets. Do you think that this president is still pro growth?

I do think He's a business guy. I mean, we all know he's a real estate developer from New York City that was very successful and had times here where just like any in the real estate business, there are

Although you have a unique position because you wear the hat of both being in government in a leadership position and also talking with tons of companies while being vice chair of molus.

Do they have the confidence to invest?

Do they feel like they can be expanding right now and have confidence and conviction that ultimately this whole mix will benefit where they're heading?

Well, I mean I would say, first of all, we're still America, right, I mean, there is still this unbelievable country that we've got with and we can go through the various aspects of what draws capital and investors here, rule of law, transparency, you name it, innovation, the rest.

So I think listen.

Right now, as we started, there's a lot of signals that are creating this sort of question on the minds of individuals, whether they are strategics, whether they are sponsors, and how to go about in terms of conducting their business. And that's why I say again, really really important that we see manifestation of success. You know, the President's really good at communicating. I hope we can see some communication of success and that people will begin to understand what the trade off here is.

This is ambitious stuff. Let's finish on this. Governor Youngkin is in your seat yesterday and we asked him this question. I'll phrase it differently. At the moment, there are two very left wing politicians in this country filling stadiums, getting support at a time in the Democratic Party is an absolute mess and support is rock bottom. I get that, But do you worry that if the president isn't successful that a number of years time this pendulum could swing

Look, all I know is the left is so in tatters, and the one pill or that they've got of any kind of unity is so extreme on the cultural side and the.

Design of where they see the world.

There is no way that the mass of this country, in terms of an electorate, is going to adhere to that extreme Bernie Sanders AOC agenda. There is just no way now not to say that there will be unhappiness if we don't see success again. Which is why I come back to the point it's important that we act with that we see some urgency and acting with dispatch in Washington.

Because you understand the risk here to bring up the em example, but you swing between Bolsonnaro and Lula, Bolscenaro and Lula, and you start to resemble what we see in Latin America. Repeatedly, we are America, we are America.

We are not Brazil, right.

So we have a long tradition of continued institutional guardrails protections.

We have the.

Deepest, broadest capital markets there are. I still believe that we can get through this. Again, as you said, this is a very ambitious goal that the President has set out to sort of rebalance. It is where we can head and the fact that there have been some people left out, and when you talk about these stadiums that are.

Filled by Bernie Sanders and.

Aoc accolodes, it is those people that are looking for the answers and frankly a lot of sort of people who feel left out if there are those stadiums. They are looking to the president to deliver on the promises that he's made.

It's an ambitious agenda. We've said it repeatedly on this program. For the good of the country. We hope he's successful. Eric is good to see it. Thanks for dropping by the former House majority leader there, Eric Hanson, the United and I see Scott Kirby. Scott, welcome back to the program.

Yeah, we did.

We appropriate to do something different. It starts with, you know, the environment has gotten more difficult. But first, you know, we did have you know, as you said in the intro, the best margins we've had in five years. We grew margins every year, one up, only two airlines that are profitable. And as we kind of went through it, we still see a viable path to getting to our as long as bookings remain stable as they are today, to getting

It's non traditional. We're the first ones that I ever know if.

They have done something like this, and so far the feedback has been has been really positive, and I think investors and others appreciate that we try to give them a more fulsome range as we give guidance since time, Scott, can.

You give us a sense if you are catering more to investor nervousness or whether you're responding to actual weakness you see in some of the forward bookings by clients.

So as I'm guessing your re friend to our capacity changes and we're going to pull about four points of capacity from the second half of this year, that's really just a pure tactical economic decision. We do see weakness, and because we see weakness, it means we're starting to cancel some of the utilization flying that red eye flight that was barely profitable and really peak strong times becomes unprofitable.

When the demand environment weekends a.

Little bit, customers have more choice to fly better times a day, and so they do, and so we're all we're really doing tactically is pulling some of that marginal flying. Marginaling good times turns negative and bad times, so we're just pulling that out of the system.

How much do you see going forward though, any kind of retrenchment from consumers whatsoever. A lot of people have been talking about how particularly international travel is going to come down with people from overseas now coming to the US. Are you seeing that forward bookings or has that kind of been more of a narrative than a reality, more.

Of a nerrative than a reality. We saw weakness starting at the end of January. We saw a step down, but it is stabilized in March, and even the first two weeks of April.

It has stabilized.

And the weakest area we see is actually the low end domestic consumer. Here in the United States, international has remained quite strong. International for what it's worth is eighty two percent US point of sale, so it's much more dependent on the US economy than foreigners coming to the United States. It's also less corporate than it used to be. And because of that, you know, the leisure traveler is

That's what we've seen so far.

We'll keep watching it, of course, but that's certainly what we've seen so far.

How much does this really put you in a position to consolidate market share right now? We keep seeing that among a lot of the leaders in different industries that this is time for them to compete on price, to compete on some of the offerings, and frankly squeak some of the other weaker players in the markets that you emerge on the other side a lot stronger.

Do you see that happening with United right now?

Well, Unit, we've had a five year strategy to win brand loyal customers and we've done that, so really nothing is changing now. We're not doing anything incremental, anything different. We're continuing the path that we have been on because it's worked. It's led to the best margins in good times. I think that lead is going to expand in tough times, not because we're doing anything special, but just because we'll

Scot as you know, there's a lot of tension right now between the United States and China that's been expressed in several rounds of towers from either side. We hope they can come to the table and have some talks, but so far not great for the maintenance of your plane, sir, and the exposure you have to China to Hong Kong. How are you managing that situation at the moment?

So United We actually we have more of our heavy maintenance work done here in the United States than any airline in the country.

We've been growing here in the US.

In fact, over a three year period, we're going to hire about five thousand technicians here in the United States, building huge new facilities in Houston and in Orlando.

And most of our work.

Is done in the Free Trade Zone outside of Hong Kong the work that has done in China.

So we're monitoring it day by day.

But you know, we have a high percentage here in the United States, more than anyone else, and feel good about our setup.

Because some CEOs have been quite outspoken about what they'd like to see from the administration on policy. Are you willing to do that? Is there are a reason why maybe you'd be a little bit more hesitant away in.

Well, I've spent a lot of time in DC this year, as I always do, but I've mostly been focused on listening instead of talking. And so I want to understand where the administration was coming from, what their goals were, how they were trying to get there. And I actually got by the end of March felt like I had

And I think I and most.

People that I talk to, you know, or things have slowed down, but we're all in a kind of a take a breath mode and let's wait till we get to whatever the new normal is going to be before we start making big long term decision.

We've all got to take a deep breath. Your stock is out this morning by about six and a half of percent. I wanted to talk about something with you that we've been talking about for a while on this program. Scott, As you know, one of the most disruptive parts of flying right now is the boarding process, and when you get on, everyone is wrestling to find space to put that bag over their seat. How do we address that situation, Scott co Sunny was a traanveler. It is the most

As a father of seven, I understand it trying to get out with a bunch of kids, and I'd say we're fixing that at United. The biggest thing we can do we had to put bigger bends on the airplane. We're about we're over fifty percent through the fleet at United, but we're putting bends on all the airplanes that are large enough that on one hundred percent full airplane, every single customer can bring a roller board on and put

How much more can you get people to pay for things that they used to know they could get. I know that Fronteriry used to do that with cans of soda and then they had to backtrack or checking bags. Are there other things that you can monetize or doesn't really come down to the credit took hard business, the loyalty program counting on the front of the cabin.

You know, yeah, you know.

I actually we're kind of going the opposite direction. If we haven't disaggregated the product, give customers.

What they want. If you want the premium product, you can get it.

You can go the regular economy product all the way down to basic economy.

But you know, we got Starlink coming next year.

We're going to have the best, the fastest WiFi in the sky and that's going to be free for our customer. So WiFi is going to be free, and it's going to be by far the best experience, the most bandwidth, the fastest speeds for any customers. And you know, in a lot of ways, increasingly, instead of being an airline that also has a loyalty business, we are becoming a loyalty business that runs an airline. I mean being able

The loyalty program.

But you know, the large airlines, particularly like United, you know, we really have the best, the deepest loyalty program. And I talked earlier about brand loyal customers, like customers that want to fly United Airlines, and that is the strength. That's what's given us the resilience to have strong earnings even in a tough macro environment. It's what's going to let us outperform even if the economy gets weaker from here.

That loyalty of customers.

Whether you call it the loyalty business or just having brand loyal customers, is the foundation that's letting an unined out perform.

A masterclass in communications from the firm in the last twenty four hours, Scott, appreciate your time. Thank you, Scott Kirby, the United Airlines CEO. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business app.