Group Chief Executive Officer & Executive Director, Ryanair
Squawk Pod: Chinese deals & jet fuel: U.S. Ambassador to China & RyanAir CEO - 05/18/26 | Audio Only
After President Trump’s meeting with President Xi in Beijing, U.S. Ambassador to China David Perdue, who was in the room with both leaders, discusses the trade agreements between nations and America’s stance on Taiwan. The largest low-cost air carrier on the European continent RyanAir says it’s well hedged amid a global jet fuel crunch, but CEO Michael O’Leary warns that other airlines may face pricing challenges through the end of the summer. Plus, there’s a run on Swatch watches, and Berkshire Hathaway’s 13F is out, offering a peek at Greg Abel’s first decisions as CEO.
David Perdue - 16:2...
About Michael O'leary
Michael O'Leary, Group CEO of Ryanair, reported a Q1 FY27 profit after tax of €538 million, a 34% decline from the prior year, which he attributed to a doubling of unhedged fuel costs and a 6% drop in average fares partly due to the Middle East conflict and Easter timing. He noted that traffic grew 6% to 61.3 million passengers, and that Ryanair has hedged 80% of FY27 jet fuel at $67 per barrel and 15% of FY28 fuel at $85 per barrel. O'Leary stated that the airline will not wait for passengers delayed by passport queues, saying "the plane is going without you" if they are not at the boarding gate on time. O'Leary criticized the UK government's Air Passenger Duty as a "ludicrous" tax, arguing its abolition would boost tourism, and dismissed a Treasury response as evidence that officials "don't live in the real world." He also opposed proposed EU passenger rights changes requiring airlines to advertise fares that include a second carry-on bag, arguing that more than 50% of passengers do not bring one and that the rule would force airlines to advertise higher prices than their lowest available fares. He described the regulation as "bureaucratic bunk" and said the EU has failed to address air traffic control delays or the emissions trading system tax on intra-EU flights.
Transcript (171 segments)
K
Katie Kramer0:04
Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, back from China, where are the deals? The White House touts a few trade agreements following President Trump's two-day summit, but Taiwan and a potential arms deal there appear to remain undecided.
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Joe Kernen0:21
What is our policy? Would we? A man in the room for the meetings with Xi Jinping, the US ambassador to China, David Perdue joins us.
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David Perdue0:30
President Trump and President Xi have a strong relationship. The conversations were really quite consequential. They were cordial but candid.
K
Katie Kramer0:38
It's set up to be the summer of jet fuel fear. Will higher costs cancel Americans' vacations or worse? Ryanair CEO Michael O'Leary on the global industry. If oil prices remain up at these levels, if the Strait of Hormuz remains closed until say September, October, there's going to be airline bankruptcies in Europe like you had Spirit over here in the states.
Plus, all the rest of today's news that got us squawking from whale watching to Swatch watches to AI in the markets.
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Andrew Ross Sorkin1:08
Is it frothy? There's some froth.
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Katie Kramer1:11
It's Monday, May 18th, 2026. SquawkPod begins right now.
A
Andrew Ross Sorkin1:25
Good morning and welcome to Squawkbox right here on CNBC. We are live at the NASDAQ market site in Times Square. I'm Andrew Ross Sorkin along with Joe Kernen on this Monday morning. Becky's off. Treasury yields, the 10-year's at 4.5, the two-year sitting just at about four. We should tell you that bond yields ended last week at their highest levels, I believe, in quite some time. I think it was a full year. Energy, by the way, we should show you what's going on there. The sector just finished its best week since late 2024. WTI crude to 106, Brent at 110.
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Joe Kernen2:02
I don't know if that's a best week.
A
Andrew Ross Sorkin2:03
It's been their best week.
J
Joe Kernen2:05
Not in oil stocks.
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Andrew Ross Sorkin2:06
If you own oil stocks, bad for everybody else.
J
Joe Kernen2:09
Yeah, we started getting a little bit, you know, we were nervous Friday. We probably, I don't know if we should be yet, but you get, you know, you get that above four and a half on the four, got 465 I think. You get 107 on the oil. You get, you know, people saying all they're seeing is call options. People aren't even hedging anymore. You got a new Fed chair. We're going to talk about that.
A
Andrew Ross Sorkin2:34
So we lost one, we lost between one and a half percentage points on Friday and we're down again today. Is it the beginning of a drawdown? We talked about it Friday. I'm not willing to...
J
Joe Kernen2:47
You're not willing to say it is.
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Andrew Ross Sorkin2:49
I mean, I hope it isn't, but I don't...
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Joe Kernen2:51
If I'm nervous, I think that's probably good, right? When we're nervous, it's good.
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Andrew Ross Sorkin2:55
It probably could go right back up. Nvidia matters this week. But we did point out, you know, God, we were at pretty lofty levels back above 50,000 at one point. And the S&P and NASDAQ had a couple of huge days last week. Chips, Intel.
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Joe Kernen3:10
Yep. Is it frothy? There's some froth. It's a big week though for tech investors. Earning season well past its peak. But we're closing in on an inside look at the AI economy. You know what we're referring to. And I mean look at that on the right side of that chart. There's Nvidia which is now 227. And we pointed out it was adding a couple of days last week. It added a hundred billion dollars of market cap. Was barely up. Small moves for Nvidia. And yet it's, you know, like adding an S&P 500 company every couple days. Industry bellwether Nvidia is going to report on Wednesday. Analysts are expecting the company to beat street forecast, well then raise your forecasts, and then raise guidance. The stock nearing another all-time high heading into the results. Commentary from CEO Jensen Huang will be parsed for signals about the overall health of the computing market and other stocks could see moves based on what Nvidia says. Retail earnings are also on deck, they'll get a lot of those as the last main earning season winds down. Then all the retailers are on that different fiscal year. So we'll get all of those, you can see most of the big names. Commentary on the state of the consumer will also be evident there from Home Depot, Target, and Walmart. It's a relatively light week for economic data after we got those hideous CPI and PPI numbers last week, but we'll get some housing market signals, April pending home sales, housing starts, and building permits. We'll also get Fed minutes on Wednesday from the central bank's unusually divided decision where there were those three or four dissents. People, some people want to go up, other people want to still go down. All that that we saw late last month and Kevin Warsh, people say that when there's a new Fed chief he gets tested or he or she gets tested by the markets all the time. I don't know if that's true but...
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Andrew Ross Sorkin5:08
Not yet.
J
Joe Kernen5:09
Not tested yet but does it usually happen at the beginning of a new Fed chief's tenure? What happened?
A
Andrew Ross Sorkin5:15
What would it mean to be tested in this case? You mean like things bubble over in a...
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Joe Kernen5:20
Inflation maybe, the market maybe either the bond market or the stock market tests him. He at this point doesn't want to end up like 2022, 2021.
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Andrew Ross Sorkin5:33
That's true.
China is going to be buying at least 17 billion worth of US agricultural products in each of the next two years and billions more this year. That's according to a government fact sheet released over the weekend. The White House saying the commitment was made last week during meetings in Beijing between President Trump and Chinese President Xi Jinping. US and China are also planning to set up boards of trade and investment. And the White House also confirming China's president will visit the US this fall. And we're going to speak to David Perdue, the US ambassador to China later this hour. And in the wake of President Trump's visit to China and questions about a US arms deal with Taiwan, Taiwan's president is drawing attention to the island's key role in the world economy. In a Facebook post, he noted Taiwan's critical position in AI supply chains, and it makes stability a shared priority for democratic nations. Last week, President Trump described a potential multi-billion dollar weapon package for Taiwan as, in his words, a negotiating chip with China. And speaking over the weekend, US Trade Representative Jamieson Greer addressed the US relationship with Taiwan.
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Jamieson Greer6:47
The most important thing that needs to happen is we need to have no change in the status quo in the Taiwan Straits. And the president was really clear about this. There's no change in American policy on Taiwan. There's no change there. We expect that situation to be stable.
J
Joe Kernen7:03
In his Facebook post, the Taiwanese president said Taiwan would not provoke or escalate conflict. And so we've had Rubio and Jamieson Greer both saying that, you know, the strait has to stay the way it is and we want stability and we want and our policy is not changing. Strategic ambiguity, but it all sounds like no one would be thrilled if China decided to start whatever the steps would be to bring Taiwan back into the fold. And Xi seemed to say, 'You guys should be ready for that. The United States better be ready for that and not be a problem or there was going to be a problem.' So, I don't know whether, doesn't it seem like things are, I don't know. I think both sides ought to just cool it for a while. And you know, if you got some big party Congress coming in 2028, you know, chill. It's, you know, this is important for AI that...
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Andrew Ross Sorkin8:06
There is a question though because there's some people who looked at some of the comments that the president's made and said that President Trump, this is...
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Joe Kernen8:13
That he's acquiescing.
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Andrew Ross Sorkin8:15
Or that he's effectively negotiating...
J
Joe Kernen8:17
He just said, yep, bargaining chip, this weapons deal to Taiwan. Well, we'll see whether we go through with it. Basically...
A
Andrew Ross Sorkin8:23
Which then speaks and says to everybody that it's...
J
Joe Kernen8:26
It's up in the air.
A
Andrew Ross Sorkin8:28
Well, it doesn't say it's up in the air. It says we're willing to give it away.
J
Joe Kernen8:31
No, it says the policy is up in the air whether we stick with what we've been saying.
A
Andrew Ross Sorkin8:35
And you don't think, you don't read it as we're willing to let it go if China's willing to give us economic...
J
Joe Kernen8:41
That's not what Rubio said. And when, you know, they were badgering Trump about it and he said, 'Would you defend Taiwan?' and he said, 'I'm the only one who knows the answer to that question.' I don't think he would, I don't think he would want that on his watch. No.
A
Andrew Ross Sorkin8:56
But if you look at what, I mean, by the way, the Taiwanese people, they saw that comment and they think that they're being sold away, too.
J
Joe Kernen9:04
What do you mean? They're assuming Trump's not, I don't think they're assuming the United States is out. We're involved in a huge weapon sale to Taiwan right now.
A
Andrew Ross Sorkin9:14
Right. But well, we're not. If China is willing to give us, if China's willing to give us a good deal...
J
Joe Kernen9:21
That's what the bargaining chip is, right? A good deal where...
A
Andrew Ross Sorkin9:26
On what?
J
Joe Kernen9:27
Well, that's the question.
A
Andrew Ross Sorkin9:28
Trade or something or...
J
Joe Kernen9:29
I mean I think that's what everybody thinks it's about.
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Andrew Ross Sorkin9:30
I don't think anyone knows right now. I don't think that Trump's even made up his mind on what he's...
J
Joe Kernen9:36
Okay. Do you think it's a good idea for him to acquiesce or you want to, you remember that, remember Biden when they asked him would you send troops to defend Taiwan? He said yes. Two days later the entire White House was like scrambling to do the damage control on that.
A
Andrew Ross Sorkin9:54
And now they're doing damage control on this. So...
J
Joe Kernen9:57
Where's their damage control on...
A
Andrew Ross Sorkin9:59
Trying to, on what?
J
Joe Kernen10:01
On the negotiate, on the bargaining chip piece.
A
Andrew Ross Sorkin10:03
Oh, saying it's a bargaining chip. Yes. Saying the weapons is a bargaining chip. Correct.
J
Joe Kernen10:07
I don't know if I haven't, who's doing damage control.
A
Andrew Ross Sorkin10:10
There was a whole skirmish over the weekend...
J
Joe Kernen10:16
Walking back whether we wouldn't... I don't know what, what is our policy? Would we...
A
Andrew Ross Sorkin10:24
That's, but I don't think any, there's a difference between selling weapons and actually getting involved in a hot conflict.
J
Joe Kernen10:35
Do you think that's where...
A
Andrew Ross Sorkin10:36
We're going to talk to David Perdue about all this.
J
Joe Kernen10:38
That's where, that's where the strategic ambiguity, maybe you think he's going to be doing damage control too.
A
Andrew Ross Sorkin10:43
I don't know.
Berkshire Hathaway is getting, Berkshire Hathaway stock portfolio getting a new look during Greg Abel's first three months as CEO. Regulatory filing showing Berkshire took stakes in the following things: Delta Airlines and Macy's during the first quarter. Berkshire added to its positions in Alphabet and the New York Times Company. And there were lots of position cuts during Abel's first three months on the job. That includes eliminating stakes in Amazon, UnitedHealth, Visa, and DaVita. Now, Berkshire cut its stake in Chevron by 35% and sold nearly all of its stake in Constellation Brands.
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Joe Kernen11:23
And while Berkshire was buying Alphabet, Stanley Druckenmiller was selling. New filings show that the Duquesne family office sold its entire stake in Alphabet during the first quarter. It had more than tripled that stake in the prior quarter. The firm also cut its Amazon stake by 99%. The money went into Broadcom. Duquesne built a new position worth more than $83 million in Broadcom during the quarter. By the way, interestingly, I just seen because I saw a little debate going on on X about this. Bill Ackman, I think, had been in Google and he got out of Google as well, Alphabet. So, it's very interesting that. And then they move out of Chevron at a time when oil has moved the opposite way.
A
Andrew Ross Sorkin12:09
When do they move out?
J
Joe Kernen12:10
Well, that's the question.
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Andrew Ross Sorkin12:11
Yeah, I don't know.
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Joe Kernen12:13
Probably a good time to sell. Maybe now.
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Andrew Ross Sorkin12:15
Could be.
Swatch stores were forced to temporarily close in nine locations after giant crowds gathered looking for the new MoonSwatch Pocket Watch. I kind of want one of these, by the way. This is so cool. The pocket watch is a collaboration between Swatch and a luxury brand. It retails for about $400, but sells on secondary markets for about $3,000. PC, by the way, I believe is the, is the luxury collab. I mean, I think that's what's going on here. It's kind of an amazing, amazing thing.
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Joe Kernen12:47
What? Why do you want a pocket watch?
A
Andrew Ross Sorkin12:50
You don't. You want this watch. Go Google this watch. It looks, if you're into watches, it's a cool thing.
J
Joe Kernen12:56
Okay, I'm looking at them. I...
A
Andrew Ross Sorkin12:57
Oh, I'm sorry. It's not, it's, I was wrong. It's not, it's not PC, but it's pretty amazing what it is. And the lines are outrageous. Anyway, let's...
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Joe Kernen13:05
People are jonesing for a Swatch.
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Andrew Ross Sorkin13:07
This watch, go online and take a look.
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Joe Kernen13:11
Cheese will be next.
K
Katie Kramer13:13
Coming up on Squawk Pod, US Ambassador to China David Perdue. What he calls a highly productive meeting between President Trump and President Xi Jinping in Beijing. Iran, agriculture buys, and Taiwan.
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David Perdue13:27
He made it very clear to Xi Jinping in my presence that we're not changing the American policy on Taiwan. We fully support the Taiwan Relations Act, the three communiques, the six assurances. We don't support independence, but we also don't want to see coercion.
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Katie Kramer13:41
We'll be right back.
You're listening to Squawk Pod today with Andrew Ross Sorkin and Joe Kernen. Here's Joe.
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Joe Kernen13:58
US and China planning to set up boards of trade and investment. This follows President Trump's meeting last week with Chinese President Xi Jinping. US Ambassador to China, David Perdue, called that gathering a crucial and historic effort to correct decades of what he calls economic imbalance. Ambassador Perdue joins us this morning. It's been a while. Senator, ambassador, friend, David, how are you? It's good to see you, sir.
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David Perdue14:26
Joe, Andrew, I hope you guys are okay.
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Joe Kernen14:29
We're good. Hope you're good as well. You talk about 25, 30 years of malaise and I guess you don't need to, for us to describe what happened with, how many industries were hollowed out from some of the trade practices of China.
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David Perdue14:47
No, I spoke about it when I was in the US Senate. You and I have talked about it on air before. I mean, since 2004, basically the Chinese have taken advantage of us from the standpoint of we open our markets, but then we've allowed them to hollow out our key strategic industries with price dumping and consolidation into state-owned enterprises there. So now we're trying to rectify that. President Trump is desperately accelerating our ability to become independent again in these key strategic categories. But in that regard, I think this was a hugely successful trip. I think President Trump stood up for American workers and, you know, farmers and ranchers, businesses and he's really been over here selling and trying to get a level playing field. You know, the media is going to media and no matter what, it's going to be looked at in probably in a half empty way, but it's hard to point to other than I guess the Boeing deal, I guess, some engines, jet engines, things like that that haven't been announced officially yet.
J
Joe Kernen15:50
We don't know what the concrete results are of the meeting from last week. What do you...
D
David Perdue15:59
Let me, let me, yeah, let me give you a few tactical things. I mean, these are the close-end things. Obviously, there's a great Boeing deal. 200 planes and about 400 to 450 GE engines will also be included in that. Then we open up beef. I mean, President Trump has been fighting for a year to open beef up and they agreed in this meeting to recertify 400 facilities in the US, US beef facilities. They're going to open up poultry again. That's been, they've had a moratorium on that for a long time. Then, you know, there are other purchases, $17 billion of additional, this is in addition to the 25 million metric tons per year of beans, soybeans. So from an ag point of view it was highly successful but also from a relationship standpoint. President Trump and President Xi have a strong relationship. The conversations were really quite consequential. They were cordial but candid and I would say that, you know, they are developing a trust and more trusting relationship. Now we have a lot of work to do but President Xi Jinping committed to come to the US in September, September 24th is that date now and then they talked about supporting each other for APEC 2026 and also the G20. So I would say this was a highly productive meeting. President Trump is out here fighting for Americans and trying to create a level playing field that we have not had for the last 20 years.
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Joe Kernen17:22
Yeah, I want to talk to you about what the conditions are like on the ground over there in terms of the economy and real estate and all the things that you get to see firsthand, but the whole Taiwan issue is just front and center.
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Andrew Ross Sorkin17:38
And when we talk about it, Mr. Ambassador, it's like our whole policy is called strategic ambiguity. So like we're trying to talk about something and it's designed to be ambiguous. No one knows anything. But we need some clarity on what happened because that was something that probably led all the coverage was what the comments of President Xi which seemed a little bit bellicose. It almost seemed like he was tweaking the president about Taiwan. We don't know what the president's response was or whether there was one. He says only I know that. And then his comments about using the weapon sales to Taiwan as a bargaining chip. It almost sounds like he's ready to give up Taiwan or change our policy to get some type of trade deal done. Do you know exactly what's happening?
D
David Perdue18:37
I know exactly what's happening.
A
Andrew Ross Sorkin18:39
You do.
D
David Perdue18:39
President Trump made it very clear. He made it very clear. Now, you know, the gag on the back of the plane, the questions asked there were different, but he made it very clear to Xi Jinping in my presence that we're not changing the American policy on Taiwan. We fully support the Taiwan Relations Act, the three communiques, the six assurances. We don't support independence, but we also don't want to see coercion across the strait. We want a peaceful solution. We want the same thing China wants. They want peace and stability. This is a hot topic for the Chinese. President Trump held the line with regard to arm sales. What President Trump commented there, you said, was that, you know, it's for him to know, well, he's already sold 50% more military equipment to Taiwan in his first administration and this one than any other president since 1979. So, President Trump committed to the US policy that we've had for the last 40 years, 45 years or so.
A
Andrew Ross Sorkin19:34
Did you say we do not support the independence of Taiwan? Is that...
D
David Perdue19:40
Time back in the third communique says is that the US does not support independence.
A
Andrew Ross Sorkin19:45
So that's already been the strategic ambiguity. We don't support independence but we don't want China to militarily or through coercion to change that independence. See why it's so ambiguous.
D
David Perdue20:01
Well, I don't see that as ambiguous. I know for decades they've called it strategic ambiguity, but to me it's very clear. We're not choosing sides. We want the people of Taiwan and the people of China to decide the future. And so we just don't want it to be coercive and we don't want it to end with a kinetic action. And I think President Trump this week made it very clear that his policy or the United States policy had not changed. And he accentuated the clarity around that. Now he also heard President Xi out and this I thought was very constructive. He allowed President Xi to talk to him at length about how they see the issue and I think that was very constructive because President Trump again established our position and our past practice with regard to Taiwan and arm sales for that matter.
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Joe Kernen20:48
Then it's never been the United States's policy to defend Taiwan militarily like Joe Biden said and like I don't know what that was in some type of brain fart or...
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David Perdue20:59
Go ahead. No, he made that statement three times on some trip over here, but no, it's never been our policy to defend Taiwan. That's not what the Taiwan Relations Act says. That's not what any of the communiques say. And it reserves the right that we will, you know, try to help maintain peace and stability on that issue.
A
Andrew Ross Sorkin21:20
Ambassador, though I think the question becomes if in fact there is quote unquote coercion and the question is is the coercion kinetic or something else, what role do you think the United States plays in that context?
D
David Perdue21:35
Well, we don't have a peace treaty and so the Taiwan Relations Act is the one that establishes a one China policy, not a principle. But that is to be determined by the president and the Congress at that time. I mean, I think at this point our desires have been made very clear and consistent over the last five decades.
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Andrew Ross Sorkin21:52
Do you think that as we try to gain some kind of what might describe as chip independence, this is now the United States, independence from Taiwan to some degree, that it makes Taiwan less strategically important over time if in fact that can be accomplished, meaning that we move more chip manufacturing to the US. Some people by the way say that's not even possible in terms of that kind of independence truly for something like 5 to 10 years at the pace that we're going.
D
David Perdue22:24
Well, we have some challenges. We have rare earth element independence and magnet independence. I mean, you know, we've allowed these key strategic industries to put us in a single source dependency that's not comfortable with anybody. I just met with all the diplomatic staff here in Beijing from all of our allies around the world and this is a number one topic with them. And so I believe that what President Trump has done is establish a priority to reestablish our independence. And this is something the Chinese are really struggling with. They've actually issued some edicts recently and some more constraints on our trade and so forth. We're not getting magnets the way we should have based on the Busan agreement. President Trump brought that up and President Xi Jinping agreed that we would address that. With regard to the defense of Taiwan, that is something that the American people through their elected officials and the administration at the time will have to make a decision at that time. What we're trying to do is encourage China to find a peaceful solution to this issue around Taiwan.
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Joe Kernen23:24
Tell me about that question I asked earlier in terms of bargaining. That's another thing that went back and forth. Oh, Xi's got the upper hand. Oh, no. President Trump has the upper hand. They still export a lot and that's good and bad for China. They want to be consumer-driven and, you know, the trade deficit with the US is way down because of, still large but no one would ever say 200 billion was small but much less. Senator, are they feeling the pinch from some of the policies that President Trump has put on there? I know real estate isn't great.
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David Perdue24:05
There's no question that over the last decade they've developed some headwinds. I mean, how smart was this, the one child policy and that demographic catastrophe is beginning to hit home here. Now, if you look at what we've done on trade, I mean, our trade deficit is down 30% over the last year. So, I believe the real estate debacle that they have here has not been rationalized the way ours was in 2008, 9, and 10. That is something that's hovering over them now. The one child policy and the demographic bubble, but plus unemployment among young workers, the college educated workers here is high. So yeah, they have headwinds, but I think right now there's no debate about who won this summit. It wasn't a contest. What we're trying to do is find a way to develop a future where China and the US can live productively together and have, watch both of us prosper. That's what Xi Jinping said in his opening remarks was he, they don't believe, he doesn't believe in the Thucydides trap. He thinks that there's a way forward for both to prosper and grow.
J
Joe Kernen25:10
Did the, in terms of the strait that seemed good, it seemed, you know, China agreeing that we don't want Iran to ever have a nuclear weapon and the strait needs to be open but there's no concrete offer of assistance and couldn't they and don't they need that strait to be open? And how long can they go? Where are they getting their oil now? They got a lot of stockpiles, I guess.
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David Perdue25:32
Well, they get 48% of their oil through the strait, 15% from Iran, and 33% from the Gulf States. So, yeah, they have a high incentive to see this strait open, and they lobbied us for that in these meetings. President Trump encouraged them to get involved. He said, 'We don't need your help militarily, but we need Iran to negotiate in good faith.' Look, we've got agreement there. China and the US agree that there should be no nuclear weapon in the hands of the Iranians. And the second thing is no tolls in the strait and that the strait should be open. But you know, I think at this point it's all about the negotiations. And President Trump said very clearly he's prepared to go to the next step. He doesn't want to do that, but he's prepared to do that if the Iranians don't come back to the table and deal straight up on this issue.
J
Joe Kernen26:20
All right, last question. They don't have elections, but he does need, President Xi does need to have support obviously of the CCP and there's, I don't know, a lot of, we have the 250, if they've got some things coming up as well. Does he, President Xi, in your view, have the same concerns about doing what is best for his people or is it all about maintaining power for the CCP? And that, in other words, President Trump has to care about midterms. President Xi, you know that if the GDP, personal GDP of China is still $13,000 versus 90,000 here, that's not, you know, he doesn't necessarily have to answer to those types of concerns, does he?
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David Perdue27:10
No. And I think therein lies a difference in how America treats and our long-term strategy versus China. I mean, they have 2049, their 100-year anniversary clearly in sight. It's only 25 years from now. And so, President Trump is here for two and a half more years. He's in a hurry to get some things done. I believe Xi Jinping though has made the calculus that he can deal with President Trump. He does not know who's going to come after that. And there are some things that need to be dealt with on trade, Taiwan, the Middle East, all the Russia, energy. I mean, we think we have a huge opportunity to sell them LNG right now. And I think there's a door that's beginning to open in that regard. So, I think the accountability issue is one that we just don't know in China long term. You know, this person Xi Jinping is in charge. He's in control. Communist Party only has 6% of the population of China are members, but they certainly have control over the other 94. And look, right now this economy is not going to collapse, Joe, but it is certainly going to muddle through, not unlike maybe what we did after our '08, '09 issue. So, he is clearly in charge here. But I think this meeting went a long way to having President Trump and President Xi understand each other more clearly on some of these sticky issues.
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Joe Kernen28:28
6% not a big number unless you multiply it by 1.4 billion, right? And it becomes then it becomes a pretty big number. Anyway, Ambassador Perdue, great to see you. Best to Mrs. Perdue and hope to see you again soon.
K
Katie Kramer28:46
Still to come on SquawkPod, the jet fuel crunch in Europe with the continent's largest low-cost air carrier, Ryanair. CEO Michael O'Leary never holds back.
M
Michael O'Leary28:58
The risk in Europe though is they were worried in the last couple of months there'd be supply disruptions. So they get some of their oil from the Middle East. Most of that has switched to supplies coming from the Americas, Norway, West Africa. So the risk of fuel disruption has gone away. But much higher oil prices are going to be a real challenge through the remainder of this summer in Europe.
A
Andrew Ross Sorkin29:24
Welcome back. This is Squawk Pod.
J
Joe Kernen29:27
Up and Q.
A
Andrew Ross Sorkin29:29
You're watching Squawkbox on CNBC. I'm Andrew Ross Sorkin along with Joe Kernen.
J
Joe Kernen29:33
Europe's largest airline group Ryanair. Earnings out this morning. Joining us now to talk the company's results, fuel costs, Boeing, and more is Ryanair Group CEO Michael. The Dublin-based budget airline group is Boeing's biggest customer outside of the US. Good morning.
M
Michael O'Leary29:50
Good morning, Joe. I don't feel qualified to fill Becky's seat here, but I'll do my best.
J
Joe Kernen29:55
You do just do your best.
M
Michael O'Leary29:56
Considerably older and a lot less attractive.
J
Joe Kernen29:58
Certainly not as, well, actually, we can't say things like that anymore. You look great. You look great. I find you very attractive. How bad is this and likely to get in terms of jet fuel?
M
Michael O'Leary30:11
I don't think it's bad at all. I mean, you know, we've just announced record full year results. So, we carried 28 million passengers. We reported a profit of 2.26 billion. Oil prices have spiked hugely. But we're very well hedged. We're 80% hedged out to March '27 at $67 a barrel. The spot price today on jet is about $150 a barrel. So, we're in great shape.
J
Joe Kernen30:32
Let's have a good CEO. Whose idea was that? The CEO or the CFO probably.
M
Michael O'Leary30:37
You've been hedging all along.
J
Joe Kernen30:38
Yeah, we hedge all along. Generally speaking, it's the advantage of having a strong balance sheet. So, we're in pretty good shape. Our competitors are in real trouble. Most are only hedged till the end of September. The risk in Europe though is they were worried in the last couple of months there'd be supply disruptions. So, they get some of their oil from the Middle East. Most of that has switched to supplies coming from the Americas, Norway, West Africa. So, the risk of fuel disruption has gone away. But much higher oil prices are going to be a real challenge through the remainder of this summer in Europe. But thankfully, Ryanair, because of our hedging, we should be in pretty good shape.
A
Andrew Ross Sorkin31:08
Is your sense that the other airlines that you worry about could get in trouble, that they do want, do they either go bankrupt or are you worried that they just start canceling flights left and right because it's too expensive to even be in the air or what?
M
Michael O'Leary31:20
Andrew, well, they're already canceling flights and we've seen a lot of competitors take five, six percent of capacity out in April, May, June. I mean I think if oil prices remain up at these levels, if the Strait of Hormuz remains closed until say September, October, there's going to be airline bankruptcies in Europe like you had Spirit over here in the states. We have airlines over there that are in the same kind of poor shape. They have low fares but high costs and therefore can't make money. I mean I don't think anybody really believes this is going to continue on to the end of the summer. You have Memorial Day coming up here at the end of May, the midterms are kicking off. I think the administration is going to have to declare a win and get the hell out.
J
Joe Kernen31:55
Policy mistakes just across the European Union with energy. I mentioned that to you. Is it glaring to you at this point? Is it Germany?
M
Michael O'Leary32:03
No. No. No. It's pan-European, Joe. I mean, we have spent the last 20 years taxing the hell out of European air travel. You know, we have an environmental tax about €7 a ticket now on all, only on intra-European flights for carbon dioxide. Oh, yeah. You're saving the planet and the hedgehogs and whatever else it was. But we exempt all the long-haul flights. So the Americans, the Chinese, the Gulf carriers are all exempt. We're just taxing the hell out of the poor dumb Europeans going on their two weeks holidays to Spain, Portugal, Italy, and Greece. The airlines across Europe are calling for abolition of that ETS. It is the dumbest taxation known in humankind. Ursula von der Leyen, who's the, I call her useless. She's the president of the European Commission.
J
Joe Kernen32:44
Useless von der Leyen.
M
Michael O'Leary32:45
Useless von der Leyen. She's been talking about making Europe more competitive for about the last two years. Of course, she hasn't had an idea, no initiative. She should start by abolishing environmental taxes on air travel. The Swedes now get it. The home of Greta Thunberg, flight shaming. They've abolished the aviation tax and we're growing very strongly in Sweden. Europe needs to do likewise.
J
Joe Kernen33:04
Do Europeans ever look at Germany and wonder about the leadership there with what's happening with...
M
Michael O'Leary33:10
I don't think much is the leadership. I mean it's just the whole...
J
Joe Kernen33:12
Should they be helping with Iran or with the strait?
M
Michael O'Leary33:16
Yahoo political issues. You know, look, we all want an early solution to the strait. You know, it would have helped, I think, if the administration here had consulted more with the Europeans before they went in, right? You know, but it is in everybody's interest to get the straits reopened. Europe's jet fuel doesn't come from the Middle East. So, we're in that sense. But high oil prices is not good for the US economy. It's not good for the European economy. We need to get this thing fixed. I mean, I disagree with Trump on tariffs. I fundamentally disagree with, you know, Trump on a few things, but one of the things he's right on is Europe has been weak on defense spending. NATO needs to significantly up its game on defense spending. The only way Europe can fund that is by getting to a much more competitive economy and taxing things like low-fare air travel is not the way you get to a competitive...
J
Joe Kernen34:06
You're just taxing ourselves.
M
Michael O'Leary34:07
So you're hedged, but the country of Europe is not hedged on. Could there be some recessions in some of the countries that are less...
J
Joe Kernen34:15
Again, as you know, it depends on how long this goes on. I mean, if oil stays at $150 a barrel, you know, through to September, through to the end of this calendar year, we're all going into recession. The US, Europe, everybody. I would be more optimistic. I think it will, you know, there will be an end brought to the, or the straits will reopen. Oil prices will trend back downwards again. I think by the time we get to the end of the summer, but what the hell do I know? I'm only some dumb schmuck working for an airline.
A
Andrew Ross Sorkin34:42
You didn't see any results, any pressure yet from demand destruction from this or...
M
Michael O'Leary34:49
Well, funny enough because we're coming into the peak travel season in Europe, you know, we're seeing there's a little bit of nervousness out there into June, July, and August. We're having to price a little bit down to keep bookings going but close in is very strong.
A
Andrew Ross Sorkin35:00
Do you see the distinction? So one of the things that's fascinating to watch in the US is that these US airlines are killing it in the front of the plane, killing it. Back of the plane is a more complicated story. Is that the same story in Europe or is that a completely different story?
M
Michael O'Leary35:16
Yeah, I mean it is a similar story. I mean one of the things, one of the fundamental difference between Europe and the US is we have much lower cost carriers across the board. Across the board, like we wipe the floor with Southwest over here. I mean our cost per seat is about $40. Southwest cost per seat is about $120. So we're much lower cost.
A
Andrew Ross Sorkin35:34
Is that a labor story? What is that?
M
Michael O'Leary35:36
It's an efficiency, bigger aircraft gauge type. We just generally, we don't distribute to travel agents. We're just much more ruthless about being lower cost. But there is a similar story with the legacy carriers in Europe because the Gulf guys are all grounded. The legacy guys are taking all the connecting traffic going to Asia, going to the US. I mean the Gulf carriers are in real trouble. I mean essentially they're grounded. The Lufthansas, the BA, the Air Frances are taking all that big long-haul connecting and that is pricing up. So they're doing very well on the long-haul stuff. But on the short-haul piece, Ryanair is wiping the floor with everybody because we have such a cost advantage. We're so well hedged. We will pay down the last of our bond. I have a 1.2 billion bond. We pay down next week. I'm completely debt-free now with a fleet of 650 aircraft. So, we're still growing very strongly in Europe. But there's lots of flaky low-fare but not so low-cost carriers like the Spirits. There's a few of those in Europe. I think...
A
Andrew Ross Sorkin36:28
You speak to this and it's really because we have a US audience that's going to understand this. Do you think that in Europe there's so much more competition than there is in the US? Do you believe, I mean we were just having a big debate a couple years ago whether Spirit before it went bankrupt should have been, should have been acquired by JetBlue, wasn't allowed to happen. But there's all sorts of debates even today about whether American for example should merge with United. I don't think that's in the offing. But how do you see competition from your vantage point in Europe where there seems to be a lot of it compared to here?
M
Michael O'Leary37:00
There's not that much anymore in Europe, Andrew. I mean, Europe is inexorably migrating towards four large carriers. You have over here United, Delta, American, and then you have Southwest, the big low-cost carrier. Europe is going the same way. So, you'll have the three big legacy carriers, the BA family, the Air France, KLM, and Lufthansa. And then Ryanair is going to be the kind of big dominant low-cost carrier. And the other guys who are stuck in the Middle East, yes, the Wizz, the Baltic airs are either going to get taken out or, which I think, well they'll be M&A or they'll fail.
J
Joe Kernen37:34
Okay.
M
Michael O'Leary37:34
And that's inevitable. So Europe runs about 10 years behind the US. The US had the first, the kind of, the were the first to deregulate.
J
Joe Kernen37:43
Okay. One of the few economic policy Carter was successful with.
M
Michael O'Leary37:47
The first, Europe copied that US success. But we're coming to the end of that now and therefore we're going to fundamentally be the only low-cost carrier in Europe. But the good news is we've ordered 300 aircraft from Boeing, the Max 10s which we hope to take first delivery of in the spring of '27. That gives us growth to go from 200 million to 300 million passengers a year over the next 8 years by keeping airfares low in Europe. And the great advantage in Europe is the rest of them are dumb and high-fare. So all we got to be is not so dumb and much lower price and we'll win.
J
Joe Kernen38:15
Wow. Thank you, Michael.
A
Andrew Ross Sorkin38:16
While Rory McIlroy wins the British Open.
J
Joe Kernen38:18
Yeah. You thought Rory, he couldn't find, couldn't find the guy win the PGA. That guy doesn't, it first Harrington or McIlroy were going to nick it again.
M
Michael O'Leary38:27
Harrington, he can play the senior tour, can he?
J
Joe Kernen38:31
He is on the senior tour.
M
Michael O'Leary38:32
That's what I mean. And he was one under, I saw him chip in an eagle and another...
J
Joe Kernen38:37
He's one of those rare Irish guys, you know, wasn't an alcoholic. He's kept himself fit. He's kept himself kind of...
M
Michael O'Leary38:43
Rare.
J
Joe Kernen38:43
Yeah. Yeah. Kept himself fit and active. You have Fontaines D.C. We do.
M
Michael O'Leary38:48
Hey, you're very good on the old rock bands.
J
Joe Kernen38:50
You know what D.C. stands for?
M
Michael O'Leary38:52
District of Columbia, I presume.
J
Joe Kernen38:54
Dublin City.
M
Michael O'Leary38:55
No way.
J
Joe Kernen38:56
Yes.
M
Michael O'Leary38:56
What?
J
Joe Kernen38:57
Yes.
M
Michael O'Leary38:57
I thought it was some kind of, you two are going to conquer America.
J
Joe Kernen39:00
Fontaines is named after the Godfather character Fontaine.
M
Michael O'Leary39:04
There should be Fontaine's District of Columbia.
J
Joe Kernen39:06
No. Oh my god.
M
Michael O'Leary39:07
Okay.
J
Joe Kernen39:07
You two are making a new album. They're on the way back.
K
Katie Kramer39:12
And that is Squawk Pod for today. Thanks for listening. Thanks for starting your week with us here. Squawkbox is hosted by Joe Kernen, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. To get the smartest takes and analysis from our TV show right into your ears, please follow SquawkPod wherever you get your podcasts. Have a great Monday. We'll meet you right back here tomorrow.
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Joe Kernen39:39
We are clear. Thanks, guys.