we'll see you soon you are our final guest here at davos. happy to have you here that does it for us from davos and the world economic forum we've been watching the futures and we'll show you a very quick look you'll see right now the dow futures are indicated down by about 83 points. you're also seeing some weakness, i believe, when is comes to the s&p at 7.5 and the nasdaq off by 10 we'll see you guys next week back in new york right now it's time for "squawk on the street. ♪ it's a beautiful day >> good thursday morning, welcome to "squawk on the street." coming off the first back-to-back losses for the dow in more than a month and futures suggest another drop as china has at least two cities on lockdown over the coronavirus. earnings pile in from the transports and more. oil is at its lowest since december 3rd

stocks pull back at the open on a big day for corporate results. p & g dragging the dow lower comcast and travelers with better than expected results. >> plus the ceos of both southwest and american airlines will join us to discuss this morning. and live from davos, sara is joined by the secretary general of the u.n. later on this hour first up, though, a ton of earnings to get to we'll start with p & g beating estimates by 5 cents a share sales did miss, hurt by a stronger dollar. don't see that too often comcast beating on both the top and bottom lines cable division, record quarterly net relationships. all-time high in the premarket here's what the chairman and ceo brian roberts said earlier on "squawk. >> we made a pivot to a broadband centric cable company that whether it's for streaming or gaming or any other app that you're interested on your

television, the best wi-fi, that's the number one product, that's what we go to market with we now have a mobile product and we have multiple video offerings. >> david, as you know, a lot of moving stories, management changes, ambitions in global news with sky and a lot more. >> i chose that bite, though, because that's the key to this company and that's what investors are most focused on. and they have succeeded i think and obviously it is our parent company, but they have succeeded in moving the focus from loss of video subs to the addition of what they call internet or broadband subs everybody connecting through comcast to get the broadband, which arguably is the most single important connection in your home. you had customer relationship net additions of 372,000 for the quarter. that was bolstered by the 442,000 new internet high-speed customers offsetting the loss of video subs, which we still pay attention to, jim, but which is just not as important for this

company because it is about ebitda and the growth there and it is fueled by people hooking up with the broadband. >> look, the stock is looking suddeny down doesn't make a lot of sense to me. >> we'd have to check the call and see what was said. it did look as though it was going to be up just moments ago. >> right we're at a disadvantage here it looks bad and then on the quarter they talk about how growth is coming back. look, proctor & gamble i liked the number but maybe they're saying something about baby that's not that good what matters with comcast is, i think, twofold one is internet. broadband is fantastic they make a ton of money but sky, nothing but upside to me. >> sky actually looked fairly. >> it looked good. >> yeah, looked fairly good in terms of the revenue growth, i think. to your point, they're going to get to a point at comcast where high-speed internet revenues actually meet -- are rising and meet the falling revenues from

video. right now 5.5 billion in video revenues versus 4.8 billion in internet but that's the two one is growing 8.8%, the other is declining 1.2%. wireless is interesting as an opportunity. 2 million subscribers now. remember the mnvo with verizon some questions and you have to wonder as 5g becomes something and reaching into the home with a broadband wireless product is a possibility. so we'll wait and see. we're still watching sprint and t-mobile because that could figure into so many people's strategy. >> they are talking about weak innocence sky's territory, which is not good. also talking about how nbc affiliate revenue growth is going to be tough to grow. i think those all should be known. i think soft across the board, sky is a little jarring because sky is the next leg.

i don't want to jump to the conclusion that this was su exposed to be robust, i think sky is working. >> ft has a great piece on what the sky maneuver means, if you're trying to break into global news. there's a lot of entrenched, good strong business models that you're trying to bust up. >> real quickly, from the call apparently they are talking aboutprice hikes in the cable product and the potential and continued sub losses so perhaps that is pressuring the shares. comcast had been up 5.5% so far this year. you can see it is losing ground there. >> you know something that is annoying to me, but there are many people out there in this country who own these stocks for dividends. there was a really big dividend, 10 cents rich people, big institutions, they're not focused on it. but i think it's a sign of health we've seen dividend boosts that are so much more positive versus

the commentary that it's all fed bubble you're not getting a dividend boost because of a fed bubble. a lot of the top down people are saying that this rally is fed bubble tell me how comcast's dividend boost has anything to do with the fed. if you're trying to do it, you're just playing mental parlor games. as for the airlines, obviously a lot of news. american beat by a penny, revenue in line, 10,000 flights cancelled due to the max southwest, q4 profit down 21 as the max added to cost. revenue came in slightly above we'll talk to both ceos of american and southwest the love story is going to be interesting as gary kelly -- there's a big item in there regarding boeing compensation. >> look, the ripples of this are so huge that you can't talk enough about it. now, there was a recommendation at morgan stanley. my biggest worry is this thing doesn't get solved, it doesn't

get solved we have a unique group of ceos who run the airlines they're outspoken. they're not afraid and they're not diplomatic gary kelly is not diplomatic about this. >> no. he's coming on and i'm looking forward to what he's going to tell us given his speaking about it in the past >> he should be having a huge year. >> you know, guys, i want to talk more about the airlines but i'd love to get to some breaking news this morning as well on hp and xerox. >> i'm nominating everybody. >> because they're nominating everybody. that's something we've told you in the past. hp is going to be nominating 11 directors -- excuse me, xerox is going to be nominating 11 directors for the hewlett-packard board. this, of course, yet another significant move as xerox continues to try to get hewlett-packard to the negotiating table essentially to discuss bringing the two companies together the current bid from xerox, as

our viewers likely know, $22, $17 of that in cash. the last significant step they took was lining up their financing, getting it committed, starting to pay for it but this is a real moment here, of course, in what is really the only hostile confrontation of significant companies that we have out there right now we can give you the names and the faces. there they are the full slate of board members that we're talking about betsy atkins, who comes on here frequently as well, formerly has been the chief executive officer at baja corporation. she's also a well-known director wynn resorts is one of hers. george bickerstaff, carolyn byrd, ken fennebresque i'm him coming on as a guest host for many yerz and on from there. fred hochberg another name some people may know.

this is not an icon-led slade, this is a xerox-picked slate we'll see how it matches up and how investors feel it matches up against the 11 directors they will be going up against this very well could go to the annual meeting so we are talking about the spring we don't have a specific date at this point as people know the nominating window for directors was going to close as of tomorrow, so this was not a surprise we've been telling everybody this would come. those 11 directors have now been nominated by xerox and the question will be put to hp now, you don't expect them all to get elected but there are some high-quality directors there, no doubt about that, i think, in reviewing this at least quickly. the expectation would be perhaps some, and if you get enough, jim, you certainly during the course of the election can try to get hp to the negotiating table, something they have refused to do thus far. >> david, how do you explain the

incredible level of confidence from the hp people that this is just nothing >> it's interesting, isn't it? >> when i say nothing, it's like hey, let's talk about the warriors versus portland this is nothing. >> i'm not sure what you could really do to explain it. >> level of confidence. >> i don't know what you hear from shareholders of either company. of course xerox has been maintaining that there's at least 2 billion in overall synergies in a union they believe, the ceo of xerox, would be best to run this combination, deliver on those synergies. it is still a bizarre situation to have a company with an $8 billion market value trying to take over a company with a $32 billion market value many who are of the belief these two companies belong together seem to think if you end up at the negotiating table, you'll end up where hp buys xerox they are moving firmly down the path where they say we're going to do it we're potentially going to raise the price. we expect that would be the

case price has been a key issue that hp, people close to the company have said stands in the way of any real dialogue here and they will go to an exchange/tender offer at some point as well. all of those things being sequences they move into and later into this year closer to the annual meeting but we're talking about a real fight here, no doubt they have done everything they said they would at xerox. >> i know, except for do really well. >> by the way, on that point they have got earnings >> they better blow out the numbers. >> and what about hp >> hp is going to be hindered by intel, intel problems. they can't get enough chips. it's a high-quality problem to some degree, they don't want to miss sales the hp people aren't -- they're not talking about this is the chiefs versus the niners, they're saying, hey, there's no game. >> no game and it is interesting to hear that >> it's highly unusual. >> chip berg not in davos.

he's the lead director, of course, leading this charge. he's back. i think enrique is there. >> chip probably wants to go to the super bowl game but he could fly back chip might be worried about levi's >> it's fascinating to talk to both sides and hear xerox say they really believe they are getting the support of shareholders from both companies. there is some overlap there as well hp saying take it to a vote. >> yeah, be my guest. >> yeah. >> they're doing a be my guest situation. it's kind of like trump in the senate versus the democrats. yeah, go ahead >> go ahead. >> senator mcconnell. >> they will but this fight will continue, as we thought it very well might for the some time. and there is no sign at this point that hp has decided to at least just enter into negotiations you can always try it and then say no that may be a stronger position you put yourself in with your shareholders when you say we did talk to them again and determined this is not in the

best interest -- >> is hp oblivious >> i have no idea. >> david, this is a big story. these are two storied names. this is not flippity-flop versus -- i don't know. >> floppity-flip. >> exactly when we come back we'll get cramer's mad dash. upgrades of ge, micron, western dig. we'll talk about mnuchin on tax cuts by the way, 10-year, 1.74 is a six-week low back in a minute (janine) i used to be a little cranky.

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all right, we're counting down to an opening bell here in 14 minutes time for our mad dash. you want to do a group of stocks. >> yes well, i find sometimes the cell side will do surveys behr said that facebook, twitter and snap increased user engagement obviously that means increased ad dollars this to me is a continual story

with this one, this one being the big surprise i think snap can go up even from here they are doing very well at advertising. twitter is a little bit more of a question mark. facebook, david, instagram on fire people look at facebook and they have moved a great deal. twitter, a great deal. but they're going to pick up packaged good ads that they haven't had. cpg is crucial i've got to get proctor's number, but clorox is more than 50%. also google and amazon. >> snap can live in a world in which instagram thrives as well. >> yes it is amazing. i thought it would die you know, my daughter sends me a picture of my face in a loaf of bread. dad, this is what people are doing. that's what they're doing? yeah and so snap never lost its audience but was poorly run.

evan and i really -- we didn't see eye to eye on a lot of things nothing, right down to clothes but i invite evan on to come on tomorrow because i think he's got the best story to tell. >> but he's not coming on. >> why not we're inviting him. >> you invited him >> i have to go to davos to interview him. no, i want him to come on. >> a completely unscientific survey in my own household, tiktok is getting a lot of screen time. >> tiktok is like kuzo, it's like a wii, it's underfoot constantly it's not good. it's not good for the country. could you tell el presidente that could you tell president trump that tiktok is a scrouge. >> i don't have a line you do >> he's over in davos. >> your two colleagues who do your show. >> did you put that hat on >> that was not in davos, the hat. >> i mean queens they're in davos, i'm in queens.

>> all right when we come back right here, we're going to have the ceo of southwest, gary kelly, we'll get his thoughts on the latest on boeing, of course, and the still grounded 737 max >> i've been very clear, we're not happy about our situation. you know, we put our future in the hands of boeing and the max and we're grounded built for you. so why isn't it all about you, when it comes to your money? so. what's on your mind? we are edward jones, a 97-year-old firm built for right now. with one financial advisor per office, we're all about knowing what's important to you the one who matters. edward jones. it's time for investing to feel individual.

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sell-off was hard in asia overnight. you had hong kong down 1.5, shenzhen shares down 3.5 it looks like a third drop for

the dow in a row you can always watch us live on the go on the cnbc app the opening bell is in eight minutes.

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you're watching cnbc "squawk on the street" live from the financial capital of the world busy thursday obviously with earnings mnuchin, david solomon in davos, we'll hear some of that sound in a moment but the weak action in asia really driven, jim, by more confirmed cases of the coronavirus. there's a case in singapore, saudi arabia, lockdowns on the cities of 11 million people. >> right right at the period where the new year and the travel celebration. just like the 11/11, this is something we may not be as familiar about this is like a great shopping pilgrimage again, all of the scientists that i've read, prc scientists, wuhan, the district just didn't

act right. they're slow, they didn't understand poa needs to be called in. it does seem a little chaotic. yesterday we didn't feel that way so that's why -- i don't know why we trusted it in the beginning. there were just -- you know, it's a big city and it was clear they weren't taking any of the measures that you need to take i mean it's not like you have 11 million people and it's hiding. >> yeah, it is sometimes worth mentioning a city of 11 million is far in excess of our largest city, which is where we are right here they have another city of 8 million which is equivalent to new york city size where they're similarly having travel restrictions on as well. 1.3 billion people, that's a lot of people in a country i have a keen sense for the obvious. >> watch luxury goods, watch airlines of course you're seeing a slate of movie premieres this week all delayed indefinitely because of the holiday. >> we went over them last night at "mad money.

you're talking about marriott, united, estee lauder these are not touchable right now. we looked at ebola. >> but ebola in terms of deadliness and sars, worse viru. >> yeah, but at the beginning everyone is really scared. we think this is going to be shorter duration now, just so you know, the comeback was so sharp that it actually paid to get in tomorrow the comeback was just -- there was so much shorting at the bottom that you had a reaction that was, boom so look at united. that is the one, i know we have gary kelly, but united is the one that i think could snap back the most other than marriott they were talking about hong kong being down. >> hong kong has its own set of problems the economy there has suffered. >> they're talking about basically a possible depression.

>> yeah. >> all that said, there's a slew of upgrades today, including morgan stanley on ge, ups to overweight price target goes to 14. speaking of aviation, jim, they do all aviation best in class. >> right this is one where i think they're getting in shape for the inevitable comeback of the max, or else you would wait -- i think this was a classic case of a big institutional upgrade. individuals at home, what they're saying is, look, you can go buy 100 million shares of this thing right now individuals at home, i would prefer to wait to see closer to the max because this next quarter could be a quarter where larry culp says, listen, we can't determine yet the impact larry culp is a straight guy but they did say long-term care is under control i thought that was very good the black hole that was powered, they say it's not a black hole anymore. >> i think that's the key in terms of stabilizing power nobody is talking about it being

the growth business of any kind of the just being able to stabilize power at ge is certainly significant. that is the expectation as we head into deeper this year. >> miracle worker? >> that is how you would determine mr. culp >> i was asking. miracle worker a question mark at the ending. not miracle worker, it was miracle worker >> i'll go question mark on that. >> it was pure chaos there. >> this is that bridge year for ge where they -- >> bridge over troubled water? >> bridge over the river quai? >> it does bring to mind that conference call from david calhoun at boeing yesterday where he said i do believe in this airplane, not considering scrapping the max. dividend would not be suspended or cut unless something dramatic happens and that they might resume production prior to reinstatement. that doesn't stop buckingham from cutting boeing to 308 they were at 365. >> i have to tell you, that was a very, very bullish conference

call it may have put a floor under the stock temporarily because what were we worried about we were worried about dividend, worried about whether there's an existential prices there calhoun handled himself very well seasoned, seasoned executive impressive david impressed me >> calhoun >> not calhoun from the great compromise, calhoun at boeing. >> understood. >> there's the opening bell and the s&p 500 at the big board it is tech nyc, a tech advocacy organization celebrating startups in new york city at the nasdaq swk holdings, a specialty finance company focused on health care. the action in semis remains very interesting. tech is pretty solid, signs of demand stabilization teradyne we mentioned the upgrate of micron and western dig and that's team micro.

>> yes, i want to highlight steve weiss on the judge's show. he said teradyne you can make 10% watching scott wapner teradyne's quarter was just insane in terms of the numbers of orders. they do semi conductor testing now, the texas instruments call, i want to disagree with that call what you want to be -- marriott down 1.78. that's all sars -- not sars, corona this texas instruments call, it's more than 30% auto but these analysts are so eager to get in that everybody raised their price target tonight sky works solutions reports, if they don't blow the number away, liam griffin, are you listening to me? i think you'll be thinking why did i buy texas instruments and skyworks but the stock texas instruments is telling the truth the five price target bumps, did they listen to the call? did they point of order

did they listen to the call? have they no shame >> sound a little like john roberts last night in the impeachment hearings so ordered >> wow i've got to watch those. >> the western dig upgrade, morgan stanley says memory pricing strength surprises us. we didn't expect fundamentals to improve this quickly some wonder whether it's huawei stockpiling. >> huawei is 3%, 4%. what i will tell you is western digital is looking at flash. flash is back. why don't people just say this is about apple how much apple do you have if you've got a lot of apple, your stock is good and if you have not a lot of apple, texas instruments, your stock is not that good. >> not as good. >> why don't we just call it why do we have to be analysts speaking >> i don't know. >> i don't know either how wrong are they on texas instruments? we haven't mentioned tesla yet >> we haven't mentioned netflix.

netflix, we're good on that. >> on the record uvs does reinstate tesla's sell. they go to 410. >> from where? >> it's a reinstatement. i don't know what was prior coverage. >> how wrong can we be >> 160 >> i didn't like it at up with 60 now i don't like it at 410 no, it's not apple >> they say that the shares are discounting 1.6 million cars in 2025 we did 360,000 last year >> they're discounting the idea that he has a battery that goes 1,000 miles. >> they're not discounting the global automated taxi fleet that has unlimited mileage with batteries that go forever. >> look, batteries are -- batteries are the new windmill >> okay. i don't know what that means, but thank you. >> people think if you can solve the battery conundrum -- >> the conundrum being --

>> because they run out too fast >> storage. >> so who is going to come up with that other than the man who we have to protect, not unlike the wheel. the inventor of the wheel. >> or the wedge. >> don't forget the pulley president trump left out the guy who came up with the pulley. >> mnuchin had some interesting comments, jim, on the 20-year. he said it doesn't take the 50 or 100 off the table it did skew the curve a little bit. >> what he has to do, i've been telling these guys left and right, listen to me, do a 50-year infrastructure earmark it, don't make it like a regular bond gary cohn has come out quite oppositional to the administration, one of the biggest critics saying that the economy could have been much better without the tariffs but he did think the idea that you could sell a 50-year based that it's going to be earmarked, but he did talk about needing congressional approval i've noticed that the president does a lot of things that used

to require congressional approval that he has said don't, and no one seems to be challenging him. >> wow, 172 as we've lost that 1.80 range we were in. >> it's been pegged at 1.76 for a few days comcast, our parent company, we mentioned at the top of the show very strong earnings, which appeared to be leading towards the stock hitting new highs, but that turned around and rather dramatically it's called almost a 5% turn-around there based at least on what seemed to be the indicated price prior to the open of trading this morning it's the call. but jim, a few different things. i know you've got something. >> yes. >> they don't have the full transcript out and of course we're not able to listen to these calls while we're on air mike cavanaugh, the cfo, said, listen, there are going to be rate adjustments they're implementing in 2020 as well as ongoing changes in consumer behavior that leads them to expect higher video subscriber losses this

year as i discussed at the top of the show, video is not the key product here at comcast. >> right. >> but they do say it's still valuable for us to attach to our broadband centric customer relationships but only to the extent that it helps increase the lifetime value of those relationships. all that being said, jim, it has resulted in the stock turning around after, again, what was a strong quarter at comcast, not to forget a 10% increase to the dividend as well >> cable, ebitda expansion was supposed to be 100 basis points and it's only 50 basis points. tomorrow you'll hear seven analysts raise their price target and give you much better numbers. so before you assassinate the stock with sales, you will be buttressed by analysts who will wanting to tell the story. >> jim, you've had a busy morning with grubhub which airs tonight. >> wow wow. matt -- people love this stock it was a seamless interview.

>> got it. i'm on it. >> but matt maloney came out firing i mean he's got a newsystem for -- do we have a clip we do? >> we've got a little tease. >> man, we're good >> the crazy thing about this story is we're a public company. we have an obligation to review any valid offer and of course we would. we haven't had any offers. >> so doordash has not contacted you? >> we haven't had any offers and we're not seeking offers because we're interested in the products. >> but if uber would to come to you, it would be an unbelievable consolidation. you could make a fortune for your shareholders. this seems like a logical proposition. >> we would totally evaluate any offer. >> but it hasn't happened? >> but we haven't had one yet. >> where did that journal piece come from? >> he said ether, thin air. >> that was going to be my question to you and obviously you answered it. but the move in the stock is not something -- the move up and then the move down.

>> he says it smacked more of fiction than of fact he was adamant about it. look, it's true i only asked him about it eight times, i wanted to do it 12, but it got awkward at a certain point at a certain point i was like when did you stop beating your wife there was no doubt that that story had a bit of whole cloth going for it now, david has taught me that major publications are no longer the way they used to be too. right? they hear something -- >> there's stuff that ends up sometimes that is not completely correct. >> he was steamed. he was steamed >> yeah, i don't blame them. i'm looking forward to the rest of the interview tonight ot "mad." >> right now we should bring in gary kelly. >> let's do it. >> southwest, symbol love, out with its latest quarterly results. the airline continuing to face pressure not from their operations because they're the best operator in the business, but because the 737 max fleet. so joining us now exclusively, southwest chairman, ceo gary

kelly. gary, great to see you sorry about this thing just not making your year so far. you were angry last night. do you feel a little bit more amea ameliorated now? >> no, no. on that point there's nothing to be happy about i feel like there's been progress made but not enough yet, we need to get this thing done and get the max back up in the air. >> gary, i've got to tell you, i think i took about 20 flights in the last four weeks. all everybody wants to talk about is -- if this is the 737 max six months from now, i'm not flying it. gary, how do you reassure people when the longer this takes, the more worried the consumer is >> well, it's -- first of all, the airplane needs to be -- it needs to perform we need to be comfortable that

the airplane is safe we need to feel that our pilots are adequately trained so all that needs to be very, very carefully vetted at the right time that's number one. number two then, we need to be transparent, we need to communicate. boeing needs to step up and communicate and the faa has a role here. of course we'll rely heavily on our pilots as a part of that communication campaign but we need to get the airplane back in the air. we need to convince people by its performance that they can be confident in it. we are not going to operate the airplane unless we are confident. we've established a lot of trust with our customers over a mere 50 years and we're certainly not going to squander that now. >> yeah, it's important to point out that a pilot would not want to go into something that they were unsafe in, but this brings up another issue what we're hearing from boeing and they have been very cryptic, you almost have to read the tea leaves the way they used to be or the kremlin wall.

there was a story that dennis muilenburg felt this was the same plane as the old planes and didn't need to put pilots in the simulator. obviously your pilots have thousands of hours i'm sure they can handle anything but we do not have that across the board was he wrong to say, you know what, we don't need new training >> i don't think so, you know. but again, in fairness to your question, and it's a legitimate question, i just know southwest airlines i know our pilots. we hire very experienced pilots. on average they have 6,000 hours of experience before we even hire them. so they are expert on the 737. it is the only airplane that we fly. we're the gold standard when it comes to hiring our flight crews, our training, our procedures, all of that. so i'm very confident in that, as are our pilots. what other airlines do, as you all would understanding, iand, t

knowledgeable. others will have to make that assessment but as far as our company and our pilots, is there question, is there a need for additional simulator training our pilots tell me no. is additional training harmful absolutely not but it needs to be fact and data driven in terms of setting those requirements and not just doing things that make us all feel good you know, we're very comfortable with the airplane. we have almost 80,000 hours of flight experience in it. we have no problems with the airplane we're just looking forward, again, to getting it ungrounded and getting to work on getting it back in the air >> mr. kelly, you know, i'm curious, have you had a conversation with or heard from david calhoun since he took over as ceo if so, can you share at all what that conversation was like >> well, i know david well david is a friend. i've known him since his ge days

20 years ago and have kept up with him over the years and consider him an outstanding business leader. just a top-notch executive so absolutely we've had conversations. i had conversations with him when he was lead director at boeing and then of course when he was chair i would never want to share those conversations because, you know, they were private conversations. but, you know, certainly the things you hear from him publicly i agree with. i believe in him i believe in boeing. i've said that before. and they're an important company for our country. they'll get these things addressed. they made a lot of mistakes, they have got things they need to fix, but i think he's the right man at the right time. >> gary, last time you were with us, we talked about the prospect of maybe the board considering becoming a customer of a manufacturer other than boeing in the future, whether you would consider that one day.

a lot of people were skeptical given the cost that would involve and others suggested maybe gary is just posturing for better prices. how serious were you how serious are you? >> well, we're -- obviously it has those posturing benefits, but that's not who we are and that's not what we're doing. no, we're serious. and i think if you were to turn the question around and we hadn't shared that that was our view, you would say why aren't you, southwest, looking at some alternatives now i think it's our duty to do that and it's a serious endeavor. we need to give it a good look now is not the time to be focused on exploring that question right now we need to be laser focused on running a great operation, taking great care of our customers and getting the max back into service. so at the right time i want to take a good look at that but yeah, any competitor to boeing has a real challenge. they're going to have to come with some solutions.

a timeline that makes sense for us, a product that meets our needs and the price has to be right and factor in that there's an extra cost involved with operating multiple fleets. the other thing to remember is that we cherish our low-cost position we cherish our low fare brand. and so all of that has to fit and it just remains to be seen whether that problem can be solved >> you don't have a lot of international exposure, but airlines as a sector are under pressure on this coronavirus >> yeah. >> we've been through scenarios like this before i wonder how you see this one playing out, at least given the information we have right now? >> well, and your point is a good one, which is this is not new. we've been here before going back to the sars epidemic, gosh, 15, 20 years ago so we know what to do, we have the right protocol you're correct, we don't have exposure to asia, but that doesn't mean that we don't have

exposure here. so we're working with the cdc, all of our operationis folks ar poised to step up our protocols if we need to. at this point we haven't made any changes in terms of our operations. >> all right, gary this is a great time for this country in terms of growth, in terms of business. i've got to ask you, how much could you have made if it weren't for this >> well, jim, i'm glad you asked. you know, going back a year ago i shared at the time that we were so excited about 2019 it was really positioned to be our best year ever we had some cost pressures as you all know from our release, we came in under budget if you take into account the effect of the max, our costs were only up 2.7% and that was with a lot of different inflationary pressures, so that was good but straight answer, you know,

if you just look at the effect on our earnings that the max penalty imposed, the estimate that we shared, that means our earnings would have been 28% greater. you know, that's many billions of dollars in terms of shareholder value and just using the multiple that we have. so we had a near record fourth quarter as it was, but even with that penalty, we had record earnings per share on a non-gaap basis. earnings would have been up a third compared to a year ago it would have easily been an all-time record. so yeah, that is frustrating what is concerning to me, though, is we weren't able to grow we're losing share had we maintained our normal pace, we would have earned another six or seven million

customers in 2019. so yeah, we don't want this to go on indefinitely it won't we'll get the max back we'll get it back into service and we'll get back on our growth track. the nice thing is the economy is solid. we have wonderful opportunities to grow. we're anxious to get at it >> talk about buying opportunity the closer we get. gary, one last thing esg, we have to ask, it's just right to the ask, what can an airline do to cut down its emissions? >> well, first of all, jim, it's a very important topic it's something that the industry -- the airline industry needs to do more over the next -- certainly the next 10 to 20 years you can reduce your consumption per trip, which is helpful, and the industry has done that consumption over the last three decades has been cut in half

so a very significant improvement there. the max is important in that regard because there's a 15% reduction in fuel burn and carbon emissions, so that's important. but ultimately i think the most tangible thing that the industry needs to do and we need to work with the energy industry is alternative fuels. alternative fuels is the answer for air transportation, and they need to be commercially available in adequate supplies, commercially available in terms of the right pricing, and there just needs to be more focus and more effort on that. carbon offsets are fine, but in the ending, you know, there's only so many offsets available in the world so that's not going to solve the problem we need to get at fossil fuel replacements and the technologies there we have some alternative fuels that we use, but right now it's

a hobby. again, as a country we need to get serious on that and get going. >> mr. kelly, before we let you go, if we can come back to the max one final time here. i was struck by those numbers you shared with us a 28% increan earnings that would have been available to you you got a product that is not working that was sold to you or you bought to what extent do you go back to boeing and say, you owe us a lot more money in terms of what we've lost and the opportunity we've lost here? >> well, those discussions will absolutely happen and we shared that in the press release. again, to be clear, our earnings -- we estimated our earnings would have been say 28% higher and we settled with boeing on that i don't think investors have paid enough attention because at least from the balance sheet, from the cash perspective, i'm

not going to disclose exactly what our settlement was, but, you know, we have the financial resources as if we had the max in operation for 2019. now you fast forward to 2020 and we'll absolutely be talking to boeing about that because it is a setback and we are going to have to work hard to catch up. we'll need boeing's assistance to do that >> gary, thank you so much for coming on. you are always a straight shooter and it is much appreciated. >> thank you all for having us appreciate all that you all do have a great show. >> okay. thank you so much. gary kelly, southwest air. dow down 152 seeing some challenges in commodities, copper, cyclicals let's get to the world economic forum in davos, switzerland where sara eisen is live with us sitting down with a special guest. sara >> reporter: good morning, carl,

jim, and david joining me here from davos is the united nations secretary general. thank you so much, mr. secretary general. >> a pleasure. >> reporter: you've just arrived in davos how would you explain or characterize the state of global political tensions right now >> i think we are having the highest geopolitical tension i remember since i started we were on the verge of a war in the gulf and can't imagine the dramatic consequences the war in the gulf would have for the region and even the global economy. we have a dysfunctional relationship between the greatest powers which makes it more difficult in relation to the crisis be it libya, syria, africa, afghanistan, to create conditions for a quick solution to put a stop. we see nonproliferation as a risk again the nuclear risk is there. we live in a difficult period

where geopolitical tensions are also having an impact on the economy because they generate as you know trade tensions. technology tensions, even bigger in my opinion than trade tensions and i think that these slow down growth and contribute to the difficulties the global economy is facing. >> let's talk about a few of them one the market has been paying very close attention to the u.s. and iranian conflict where do you think this is heading? >> i think it was very important that things have not escalated we had the incidents we had but afterwards both sides stopped and this was extremely important. and now what i think also essential is to create conditions for a platform allowing a discussion about the future because this tension cannot remain forever because if this tension remains forever we are at the mercy of an incident that then can trigger an escalation that will become extremely dangerous. >> is it your expectation that the european countries are going

to bring a formal complaint to the u.n. security council that iran has violated its 2015 agreement? >> it's up to them to decide but they have announced it >> which would trigger sanctions. >> i think it is credible this might -- it is a process that takes a lot of time. i think their intention is to create conditions for a discussion to start. that is my belief. >> iran? or europeans >> no, the europeans but that doesn't mean that of course the iranian reaction might create a situation which becomes even more difficult. >> reporter: you mentioned trade tensions of course another hot topic here the u.s./china phase one trade deal how much in your mind does that alleviate some of the tension between the world's two biggest economies? >> it has helped it has helped the global markets as we know we saw the positive impact global economies apparently giving signs of trying to start recovering but the problem is not solved.

on the other hand, i think that especially the technology divide is creating the risk and the risk is that at a certain moment the two biggest economies tend to polarize around them, dividing the global economy into two with two internets, two artificial intelligence strategies, and then two military and geostrategic strategies >> you're talking about a full scale technology -- >> and this is kind of dividing the world into two it would be very dangerous i think we need to avoid the confrontation and create conditions to have a global market, international law, a global market with multi level mechanisms of governors. >> reporter: the trend is going away from that president trump came here and said the message to governments is, take care of your own people i mean, it is more of an inward looking policy which is really

spreading around the world if you look at brexit or the united states how do you convince at the u.n. -- >> i think everybody needs to take care of their own people because i mean i was prime minister my first responsibility was to take care of may own people the point is that to take care of anyone's people we need to solve global challenges. and those global challenges can only be solved if we have a multi lateral approach at least an approach based on solid international cooperation. you won't solve climate change without international cooperation. you won't solve the problem of new technologies, cyber security problems without international cooperation. you won't solve the problem of artificial intelligence potential threats if you don't have international cooperation i think the more complex the world is becoming the more technology is evolving, the biggest challenges of a small world with a growing economy and a physical limitation that climate change demonstrates the more this happens the more a multi lateral approach there needs to be reform, more

inclusive of a single society, community, that needs to be in a network between imf, world bank, omc, wto, the other different regional organizations we all need to work together because the problems we face are problems that are very difficult. look at terrorism. there is no way you can address the terrorism if you do not have engagement of the u.n. and the organizations that support the european union and also a development of support to those countries that requires the world bank to get fully onboard. so we need more and more a multi lateralism that is a network and that is inclusive to allow the business community, the youth, the local powers, the cities >> reporter: it just feels like we're going the other way. you mentioned cyber as one of the challenges cover of "the wall street journal" today, bezos phone hack connected to saudi leader. u.n. signals why is the u.n. involved in this >> it's -- we have several

independent entities within the u.n. that do investigations into those things so it is not the u.n. official that has done it >> reporter: u.n. experts. >> u.n. experts. obviously this is a serious question that deserves to be properly addressed >> reporter: are they investigating this >> as i said not the u.n. as such we don't have powers of investigation in these situations as such >> reporter: what about the cyber threat >> there are experts, independent experts that pronounce themselves on different issues of different natures. >> reporter: what about the cyber threat this sort of feeds into your worry about a broader technology war, artificial intelligence, 5g, cyber warfare. how much worse is it getting >> i think it is very worrying because there is not an effective international -- there is a kind of chaos in the cyber space. it's like the wild west of the past and we need to -- i don't think we can have forms of regulation based on international conventions like in the past what we need is platforms where

states, companies, reserve centers, come together and find forms of cooperation, define some red lines create some protocols and norms that are flexible, adjustable, but that guarantee that in essence the cyber space is a force for good and limit the capacity of terrorists, white supremacists, those that spread their speech and gangsters of all sorts to use it against the community in general >> reporter: thank you so much secretary general of the united nations. pleasure speaking with you today. >> it was a pleasure to be here. >> reporter: just a snapshot of some of the bigger concerns going on here from geopolitical to cyber to of course this odd story about jeff bezos going out on the sidelines of the world economic forum here in davos we'll send it back to you. >> all right so many global cross currents,

sara thanks to you. our sara eisen good thursday morning everybody. welcome back to "squawk on the street." as you can see sara is live at the world economic forum in davos, switzerland big show coming up this hour including the ceos of american airlines and union pacific both with their earnings out this morning. in the meantime markets getting a little bit of a challenge here dow is on pace for the biggest weekly decline since august. s&p and nasdaq since september as we're back to 3310 and we have some data crossing the tape let's get to rick santelli >> reporter: yes our december read on leading economic indicators lei expected to be down 0.2 is down 0.3 so down more than expected. no change last month was unchanged. but before it was unchanged last month we had three minus 0.2 in a row. it has not been a good year for this particular indicator especially considering how rare it is to have negative numbers we don't see huge response

but the response is already in the market all the corona stories truly having an effect whether it's lower interest rates and of course paying attention to christine le gard and the ecb but all things considered we see treasury yields like all global sovereigns pushing the envelope to some of the lowest yields of 2020 carl, back to you. >> all right thank you very much, rick santelli as we said, some big earnings movers today we'll start with p & g beating estimates by 5 cents a share raising full-year earnings outlook. sales did miss though. not very common for p & g. hurt by the stronger dollar. our parent company comcast beats on both of the bottom lines. cable vision saw record quarterly net for customer relationships and a 10% div hike a couple airlines under pressure southwest and american both down after reporting today. we talked to gary kelly of southwest in the last hour about the 737 max. >> i think it's three months on

and we're still talking about the same thing on that point there is nothing to be happy about. i feel like there's been progress made but not enough and yet we need to get this thing done and get the maximum back up in the air >> also a reminder the ceo of american airlines doug parker will join us later on this hour. hard to draw big, broad brush strokes on earnings season so far but you could build a case that maybe the commentary, the outlook is better than the actual prints we've gotten so far. >> it's kind of amazing. the names that have beat and some cases raised, names like our parent company comcast, travelers, texas instruments after the bell last night all trading lower. the two names in terms of earnings that missed in some sort of capacity, kinder morgan and union pacific are the two names trading the highest. for what that's worth. >> hum yeah comcast as we've sort of told people in the last hour of course looked as though it was going to be up rather sharply but has reversed course after the conference call though off the lows of the trading session. this after as we said reported a

very strong quarter in terms of broadband additions, 442,000, losing video subs, but on the call indicating as well not going to continue to chase video subs raising prices and expects those sub losses to actually increase in the current year. that perhaps pressuring the stock as well as at least some guidance in terms of ebitda margins having an impact also. but it is an interesting time in this business and i think it sort of points the commentary on the call and everything we've seen, the introduction of the peacock streaming service that we'll get later this year but was introduced last year, the bundle, the cable customer is going away we talked about it for years there are still 80 million of them but that is down from about 100 million. and we all know it is going to continue to erode. >> as for p & g, sara, i know you are watching from afar most of the categories at least

in line and they do see sales of four to five for the year prior three to five. but that dollar dynamic hard to escape >> reporter: sure. but this is another example where the gut reaction to sell the stock has actually turned around because this was a pretty strong quarter out of p & g. a slight miss on the top line but this is the company that is still showing 5% organic growth and that is very strong. if you look at the entire consumer package good industry not quite as strong as the 7% growth we saw before so maybe investors getting a little spoiled. it is also a stock up 30% in the last year and trading near an all-time high but if you look, guys, at the fundamentals of this business, 9 out of 10 categories grow. diapers not so much. despite the fact that my stimulus i guess didn't help so much over the last three months and there's two stories here a return to brands remember, we've been saying for months, now, that millennials don't want brands and brands are out of vogue guess what some of the strongest performers

were not new brands. they were olay in the beauty, personal care business they were vix which makes the vapor rub and nyquil and dayquil. seasonal but strong bands and a return to them being driven by reinvestment in the brands, driven by higher marketing of course as p & g tries to strike a cord with the younger audience across digital the other thing is innovation and you've seen that in a return to growth in gillette now, in the razor shaving business which used to be weak for p & g but now has shown a few quarters of growth including this one. they've got new innovations that people are paying up for the premium brands so besides the better consumer environment those are two examples of how p & g is executing the return to brands and innovation and perhaps why the market is giving it benefit of the doubt it also raised the forecast so continue to expect these strong numbers going forward. >> another name i'm keeping an eye on as well as intel we get

earnings from them after the bell as i mentioned texas instruments last night better than expected top and bottom lines company also forecast better than expected quarter, current quarter revenue as demand for micro chips stabilizes obviously we've seen that big run in semistocks already. and it's kind of incredible because revenue numbers have continued to come down for many of these names and yet the stocks have continued to move higher today maybe not with standing given the breather you're seeing in texas instruments which is down 2% right now. it really just speaks to the fact that investors are betting on this idea of a bottoming within semis not even necessarily recovery yet but just a bottoming, which i think is also part of what has propelled some of the other hard hit names for example like some of the freight carriers, names like union pacific, which didn't have the strongest report today but is still trading higher. i think there's this bet on this idea of a bottoming and subsequent recovery within the broader economy in 2020. >> as i said on twitter, unpc's

traffic for the year slightly positive over all. but year to date, rail traffic is down almost 8%. so we're going to have to see something of an improvement. >> energy shipments down 20% last quarter a big drop >> we'll be talking to the ceo later in the program turning now to the coronavirus, with two cities in china now on lockdown, we'll go to beijing for the latest on the story. eunice yoon. >> reporter: the chinese government has locked down more chinese cities because of the mysterious coronavirus the cities are nearby wuhan the epicenter of the outbreak with an additional 10.5 million people at least although a seventh city was just added in the past couple minutes. all of these people are restricted from traveling. in wuhan itself the authorities have suspended all public transportation, buses, ferries, and the subway no outbound trains or flights. today the transport ministry added some other measures.

people can no longer take privately run coaches or ferries in or out of wuhan nor can they charter a vehicle or a boat. the only way out is by private car but if you go on to the highway, you have to go through health checks. the authorities are imploring people not to leave the city the government has been under a lot of criticism both at home and overseas for not reacting fast enough to this virus. it looks as though beijing is moving into overdrive, going in the opposite direction, a massive mobilization effort where the authorities in the past couple hours said they are tapping into strategic reserves for rice, cooking oil, pork, calling on companies to continue to deliver to wuhan. they're coordinating their increased efforts of production for masks and according to the industry and information ministry they said that they boosted that number to 8 million

masks a day. honeywell also said that they are working night and day in order to try to meet the demand. the ministry has also said it is directing efforts to deliver protective suits, gloves, gear from medical reserves as well and this outbreak just continues to dampen, though, the overall festivities and feelings around lunar new year this is supposed to be the happiest time of the year for the chinese but even here in beijing a lot of cities have been canceling those festivities and beijing has done so as well which is, guys, like the equivalent of the u.s. deciding it is going to cancel christmas. >> eunice, is this unprecedented to see quarantines of cities this size and this early in an outbreak has this ever happened before? if it hasn't, what has it meant in terms of some of the mobilization efforts and the ability of the government to react quickly? >> reporter: this is unprecedented. it has been an effort that we haven't seen before. like i said, it is a mass mobilization effort.

and it's really not only to try to get control of the virus but also to try to help the people who are in these beleaguered areas to really get through this crisis there are several provinces that are leaning on each other. you're seeing that the government authorities are all trying to coordinate the efforts but at the same time there's still a lot of distrust and confusion about the government efforts and so because of that people are still concerned and panicked about what's going to happen next for them >> eunice, thank you for bringing us the latest we send it back to sara in davos now where she spoke to a special guest. sara >> reporter: hi, morgan. yes, actually about this very topic earlier i spoke with ceo of novartis regarding the spread of this coronavirus. we also talked about trade and price hikes for pharma listen >> first, it's great to see the

response from governments around the world. the chinese government has been very transparent, telling updates to the global community on an ongoing basis. certainly the human-to-human transmission is something everyone is going to be watching carefully. i think all the right things are happening. you've seen some of the actions the chinese government has taken. i know critical disease control agencies around the world are getting really active. we all have to wait and see. there is a lot we don't know until we have all of the facts it is really difficult to judge. i had the opportunity to work on the h 1 n 1 pandemic back in 2009 developing vaccines and the one thing i learned is you have to get all of the facts together, be thoughtful before you take action. >> how quickly can a drug maker come up with some sort of vaccine or medicine to fight this kind of thing before it becomes a pandemic >> well, i think there is an opportunity to look at existing antiviral drugs to see if there is any activity. that can be done in the course of months. developing a new vaccine of course takes much longer i mean, that would be more on the course of a year plus to even have a candidate vaccine. we saw that with ebola

we've seen that with other situations so that would take more time i know there are already efforts ongoing to start looking at existing antiviral drugs >> wanted to ask you about drug pricing because new pricing for 2020 has come out. you raised prices 7% along with the industry why is the industry raising prices right now and there is so much pressure to do the opposite >> the critical thing to look at in our industry and the u.s. given the rebate structures we have is net pricing. so our net pricing in 2020 will be down 1% to 2% when you think about it in those terms what we do on a few key products, we have to raise list prices to offset some of the rebates we have. our net pricing is actually coming down. when you look across the industry actually price increases have mitigated quite a bit. and net pricing in our industry i believe if you look across the major players is negative for most of the major players. it's actually become a much more stable environment >> how has that been happening >> i think a lot of companies are becoming much more thoughtful about this. a lot of internal commitments to

limit list price increases when you limit list price increases to medical inflation then of course you have net price increases that start to fall so a lot of what congress has been contemplating is happening through the industry's own self-regulation. >> you also get caught up in the trade deals. i know, the usmca for example took away -- which other trade deals should we be watching as it relates to pharma >> we were disappointed in the usmca there wasn't the protection we hoped would be built into it. i think having a solid ip framework around the world is absolutely critical for innovation based industries not just the pharmaceutical industry when i look ahead, you know, of course we've had the u.s./china agreement, and important developments there in stabilizing that relationship. that is really important to us china is one of our highest growth markets we want to double our chinese business over the next five years. we have some of the highest levels of new drug approvals and new drug reimbursements in china. so having a stable relationship

there is important >> reporter: the ceo of novartis, guys and coming up we'll have an interview with the founder and coceo of sales force mark benioff, a very popular man here in davos and already making headlines saying capitalism as we know it is dead so that is coming up next. i'll see you in just a few >> okay. there is mr. benioff i hear he has a good party, too. thank you. did want to update a story we brought to you at the top of the 9:00 hour. xerox has upped the ante in its continuing efforts to acquire hp, inc. you can see there the performance of the two stocks. hp is up this morning. 11 board members have been nominated by xerox to replace the entire board at hp, all of which is up, and which will be voted on of course at the company's annual meeting later this year. typically takes place in roughly the april timeframe. don't have a specific date

the nominating window for those who wanted to nominate directors was going to close tomorrow, so not a surprise we've told you in the past that xerox was following a path here in terms of trying to get hp to the negotiating table that would include nominating a slate to replace the entire board, putting it up to shareholders if you will those people you're looking at right there include the former senior executives from aetna, coca-cola, hilton, united airlines, walt disney. they also sit on boards such as american airlines, and others, and we do have a response from hp it's a rather terse one of course hp has not engaged in any conversations with xerox about a potential deal at this point they had done so previous to xerox's coming forward with its unsolicited bid of $22 a share, 17 of which is in cash and which is now fully financed.

hp says, quote, these nominations are a self-serving tactic by xerox to advance its proposal, which significantly undervalues hp and creates meaningful risk to the detriment of the hp shareholders they have focused of course on price. there is an expectation if they were to get to the negotiating table, morgan, they would be willing at the xerox side to try to increase price. the question is how much and then it sort of becomes like hp just leveraging up its own balance sheet to be bought by xerox, which then leads many to believe if they ever do get into a real negotiation perhaps it makes more sense for the $32 billion market cap company hp to buy the far smaller xerox. >> this is just one of those dramas that continues to evolve. i'm curious though a very diverse slate of nominees from xerox that you just listed off. not a lot that are very tech centric. >> no. not a great deal of technology centric names, though a few. but when you look at the hp board you could potentially make

the same argument. >> all right after the break do not miss an exclusive with the ceo of american airlines reporting earnings this morning. before we talk about tax-smart investing, what's new? -well, audrey's expecting... -twins! grandparents! we want to put money aside for them, so...change in plans. alright, let's see what we can adjust. ♪ we'd be closer to the twins. change in plans. okay. mom, are you painting again? you could sell these. lemme guess, change in plans? at fidelity, a change in plans is always part of the plan.

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the street." american airlines one of the big movers this morning. phil lebeau joins us now with the ceo doug parker. >> reporter: let's bring in doug parker from american airlines headquarters, dry headquarters down in ft. worth, texas doug, only for you would i stand out in the rain. tell me about the fourth quarter. you beat by a penny. revenue roughly in line with expectations you guys had a number of challenges relative to what, you know, you went into the year expecting in 2019, right >> we did. we certainly were dealing with the 737 max problem. we had our own operational issues in the summer of this year but the fourth quarter we had really great results, eps up some 19% year over year and the operating performance the best in our company history we're really pleased with the results and entered 2020 with great momentum and we're excited about what lies ahead. >> reporter: we'll talk about your 2020 outlook in just a bit. you brought up the max give me your reaction to the

latest announcement from boeing earlier this week that they are going to be not expecting to have the max back until at least the middle of the year >> again, we're obviously disappointed to see the return to service date likely moving back we had it in our schedule for june 5th we'll need to reassess and clearly move that back so that's never good news. but what does feel better is it does feel as though, you know, we're getting more clarity on what the actual date is and more realistic assessments. so in that sense it makes it a lot easier to plan as far as we're concerned, you know, that aircraft is going to return when the faa decides it is ready when they do, we will be ready and they're looking forward to that date. in the meantime, that is not going to be driving our strategy we're intent upon continuing to run a great operation, growing into profitable markets with whatever aircraft we have to grow with and producing free

cash flow for our investors. >> doug, one more question regarding boeing you know larry kellner former continental ceo. >> sure. >> reporter: you know dave calhoun well from his years in the industry >> i do. yes. >> reporter: give us a sense in the change of tenor and tone coming from boeing to their customers since this change in leadership >> those individuals would be the first to tell you they have a lot of issues to address they're both i think exceptional leaders who are certainly up to the task but it's not one or two people that make this happen and they'd be the first to tell you that but look, like i say, both great executives as far as we're concerned, again, the aircraft, it's up to the faa and boeing it's up to boeing to meet the faa's needs and they'll do that

at some point we're certain and when they do we'll be ready. the other thing that is important to us is the cost isn't borne by the american shareholders but by boeing boeing stepped up dan that for 2019 as this was pushed back i made certain i talked to dave and made sure they were recommitted to that as this continues to push that as we have additional damages in 2020 they're still committed to that. he assured me they are i know they are. this is unfortunate certainly for our customers and our team but as it relates to our investors while we will have a financial impact on a reported basis boeing is doing the right thing and making sure they are compensating american and therefore our shareholders for the damages we incur i expect them to do that in the future >> reporter: doug, i know you don't have a big exposure to china and asia pacific but the coronavirus, the potential impact for the travel industry

overall, is one that people are looking at right now does this feel more like sars to you or do you look at this and say it's too early to know and it could be maybe closer to the zika virus in terms of a short-term impact? >> absolutely no way to know, phil what i do know is in each of these issues we as an industry, i know, handle this exceptionally well, with great care for our customers and team members. we do that by staying in touch with the cdc, cvp, our own medical staff working with those agencies to ensure that our customers and team members are safe and that's what we'll continue to do here. but no way certainly for me to assess at this point what the impact may be over time. what i know for certain is we'll manage through this as we have the others in the past and we'll do so in a way that enassures the safety of our

customers. >> reporter: doug, let's talk about your outlook for 2020. the last couple of years as american at least in terms of how investors have looked at it has been out performed by the rest of the industry you've lagged your competitors but you also had a lot of head winds there. first and foremost being the number of new aircraft that you guys were buying and paying for. you've got some of that turning into tail winds. operationally do you feel as you look at 2020 that you're starting to turn that corner >> absolutely. it's already begun we certainly need to continue to execute and prove it but, yeah. like i said, we just completed a very solid fourth quarter, best out performing performance in our history. we need to continue within our team and as we do so what we know is we will continue to improve our performance going forward and as it relates to, you know, what you referenced in terms of purchasing new aircraft, since the merger while

we've been producing record earnings we haven't been producing much cash flow for our investors because weaver' been taking those earnings and putting them into new aircraft integration expenses we are beyond that now that is an exciting point for us and certainly our shareholders as we are able to generate real cash flow returns and return that both to reduce debt and to our shareholders we announced today that our target cash, free cash flow for the next two years is $6 billion and based on our market kap that's a serious free cash flow return we feel really good about where we are today and the future and what it means for investors in american airlines. >> reporter: quickly, doug, one last question. as you look out into the summer travel season you won't have the max. your competitors and the rest in the industry likely won't have the max as well. how much does that impact pricing this summer? >> i don't know the exact answer to that question, phil i know it means we won't be able to meet the full demand needs of the customers of american airlines there is a lot of pent up demand

for traveling on american. we're not going to be able to meet it all. it is unfortunately going to some of our competitors. i don't know how that may or may not affect pricing it is unfortunate, like i say. for the customers that want to be on american airlines that are going to be needing to be flying someone else in the great scheme of things, 2%, 3% of our capacity by the time we'd be flying over wise we'll still serve the vast majority but we'd like to be serving more that indeed is too bad the last thing we like to see is people that want to be on american having to go fly somewhere else but this will pass like i say, we'll be compensated from a financial standpoint and we're looking forward to being able to grow aggressively once this happens >> doug parker chairman and ceo of american airlines joining us from the company headquarters in ft. worth, texas carl, we'll send it back to you. just a reminder. american, beat on the bottom

line by a penny with revenue in line with expectations back to you. >> phil, thanks to you and doug many thanks. take a look at the markets here as we go to break - at southern new hampshire university, we believe in education built for all people. - [woman] snhu was the best experience of my life. - [man] without snhu, i wouldn't be the leader i am today.

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it is time now for our etf spotlight. taking a look at the semiconductor ticker smh is now trading up just 0.25% hovering near all-time highs though and looking to close for its fifth positive day in a row helping boost the group western digital. also micron which are both trading up, western digital almost 3%. micron 1%. morgan stanley uptgrading to overweight on the earnings front texas instruments reported adjusted quarterly profits above estimates as well but that company's revenue and guidance also coming in better than expected as microchip demand stabilizes even so those shares remain under pressure down more than 1% >> time for a news update.

sue herera has that for us back at headquarters. >> thank you very much good morning, everyone here is what's happening at this hour china has closed off a city of more than 11 million people today in an unprecedented effort to try and contain a deadly virus. wuhan shut down all forms of transportation in and out of that city. several other cities were also locked down. 17 people have died from the virus and 571 people have been sickened by the coronavirus. vice president pence arriving in israel to attend the largest ever gathering focusing on commemorating the holocaust he is among some 40 dignitaries at the forum, which coincides with the 75th anniversary of the liberation of the auschwitz death camp three americans died when a c-130 hercules ariel water tanker crashed while battling wild fires in australia's southern state of new south wales. the state's fire commissioner confirming the deaths.

>> our hearts are with all of those that are suffering what is the loss of three remarkable, well respected crew that have invested so many decades of their lives into firefighting and fire management. >> you are up to date. that's the news update this hour i will send it back downtown to you, david >> okay. thank you, sue still to come, climate change and socially responsible investing certainly been a big theme in davos and throughout the markets this year. but is big tech doing enough our next guest says not even e d llushyafr te the break. ♪ ♪

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talking about recent initiatives by microsoft and goldman sachs >> i respect both of them in running of their businesses. i would say they have different policy views than we do. we don't believe there should be carbon taxes we want to cut taxes we think industry can deal with this issue on its own, is dealing with this. this is a worldwide issue much bigger outside the u.s. than inside the u.s >> but is big tech doing enough? our next guest doesn't think so, the columbia senior scholar at its global energy center joins us this morning. good to have you with us, doctor good morning >> delighted to be here. thank you. >> we can talk about what tech still needs to do in a moment but it sounds like you think microsoft at least has thrown down a gauntlet of sorts >> absolutely. microsoft is unquestionably in pole position now. they've made a set of big announcement last week, the biggest one is that in addition to being carbon neutral by 2030, which is an incredibly

aggressive goal, they have said they're going to undo all of their legacy emissions by 25050. that is hundreds of millions of tons of co2. it us an audacious, very hard, and it won't be free but they've put a billion dollars into an innovation fund and are finalizing developing their plans on how to proceed. >> yeah. talked to jim cramer about the motivation behind this last week wouldn't you expect big tech to follow suit and of the other big players at least in the megacap space who would move the needle the most if they did follow suit >> well, thanks for asking they certainly have the balance sheet to do this work and they have the ethos that is important. now they need to activate. out of all the companies that can take the lead forward, amazon is the best positioned to do it because of the nature of their business and because of their supply chains they have made very, very small commitments compared to, say, what microsoft is making today

in fact, some of the small companies like stripe or shopify have made more concrete commitments than a company like amazon google, similarly, and alphabet, their parent company, x, all of that cluster they have an incredible capability. they have staff and engineers and teams and stuff like that. but at this point they're still sort of toying around with corporate procurement. they have yet to make the big investments. they have yet to make the major commitments and change of business model they need to hit those kinds of targets >> you mentioned, julio, how hard it is to get to carbon neutral. i want to look at what it means when a company says they are looking to get neutral it is not necessarily just a matter of completely getting off of fossil fuels. you also have offsets and credits and basically a complex situation of how that comes out to be neutral. >> i'll come back to offsets in

a moment but the easiest way to think about it is today a company like microsoft has 16 million tons a year for all of their scope 1, 2, and 3 emissions. all of those together they can maybe get rid of i don't know, 12 or 14 million tons of that through efficiency and conservation and renewable buying and improving their supply chains. there's a bunch of stuff they can do but there's always legacy emissions. there is going to be a couple million tons at a minimum maybe as much as 4 or 5 million tons that are just really hard to get. that is a big number you need some kind of platform or service that can deliver that kind of volume to the market today. people are trying to pull that together but they can't. we have discovered over the past few years that offsets don't quite do that. and buying offsets doesn't actually remove the co2 from the air and oceans that we need. so they made the right starting position we'll figure this out as we go we'll put the money in place but, man, getting to zero requires undoing the hard to

abate stuff like shipping or planes and this sort of thing and it requires ultimately cleaning up your mess at the end of the day that is a big, big order and we need more options and technologies than we have today to do the job well >> their desire to actually remove all of the carbon they put into the atmosphere as a public company or as a company over the next 30 years, is that going to require the development of technologies that don't currently exist, or are there technologies that actually are there but perhaps aren't getting the necessary investment that can pull carbon out? >> yeah, you hit it right on the head there's actually enough to start with now we need to scale it up and microsoft identified four of them in their press release. they want to do more with trees, planting forests they want to put carbon back into soil using advanced agricultural practice. they want to combine carbon capturing storage with

bioenergy, something called bex and they also want to suck co2 out of the air using direct air capture and storing it permanently in rocks and all of those exist they exist with companies that will give you offerings. they exist with, you know, guarantees and wrappers around the performance of this stuff. we need to scale them up at the same time, we also want to bring down the cost, increase the performance, widen the option set, and that is going to require a whole new level of investment and enterprise than we have today. >> well certainly we'll talk again about this hopefully to some that this past week has been a bit of a sea change given the big names that have lept into this effort dr. friedman, thank you for your time >> my pleasure thank you so much. let's go back to davos and sara with a look at what's coming up later in the program sara >> reporter: you guys were just talking about the urgency of

fighting, dealing with climate change guess what marc benioff is coming up next founder and coceo of sales force and he is here talking about planting a trillion trees and investing in that effort it is actually something president trump spoke about here as well. we'll talk to him about that and a whole lot more his thoughts on broader technology and why he says capitalism as we know it is dead and then later on "closing bell" we're going to talk about media in the age of trump with the "new york times" ceo and also on his partnership with facebook. why he chooses facebook and not apple when it comes to releasing news a lot more interviews coming up from davos for you but for now, morgan, i'll send it back to you >> we look forward to it, sara thank you. when we come back shares of union pacific surging this morning. johnson & johnson is a baby company. but we're also a company that controls hiv, fights cancer, repairs shattered bones,

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they see what others don't, from an angle others won't take. they learn that embracing those challenges is what sets them apart. i am justin rose, and we are morgan stanley. one of the hottest s&p 500

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welcome back union pacific getting a boost this morning as cost cuts help offset a drop in revenue shares of the big aet rail stock higher today now up about 3% coming off an all-time high earlier this month union pacific chairman and ceo lance fritz joins us now first on cnbc. great to have you on thanks for joining us. >> thank you, morgan i'm happy to be here >> i want to get your take and outlook on 2020 but first one of the reasons we've seen union pacific trade higher in recent months in really the overall rail group has been precision scheduled rrg a scheduled railroading and the ability to take the costs out. certainly for union pacific we've seen operating ratio come down, freight car capacity up, dwell time up, locomotive productivity up. how much more is there to implement in terms of this type

of precision railroading and what does that mean in terms of longer term the operating ratio for the company? >> thank you for that question i have to say i'm just so proud of the women and men of union pacific and the work that they've done to generate the service product that's generating these kinds of productivity numbers that you just shared. there's plenty left in the tank. when we talked this morning on our call we talked about train length being an important part of productivity, about efficiently switching car and doing less switching we talked about efficient use of assets like our locomotives and freight cars and maintaining the railroad in an efficient manner. we've got projects in all of those areas to advance all of them i think the end game that we've discussed with our share holders is trying ultimately to get to a 55 operating ratio and what we said this morning is this year we're committing to 59ish

number we'll do as much as we can so that is another solid year of improvement. and as we get a little bit more clarity we'll start talking a little bit more about what -- how do we get to that end game and what is the time frame >> okay. we've seen volumes declining as we head into 2020 and given the fact that the up does handle so many different types of goods from so many different parts of the country and beyond, what is your assessment of the u.s. economy right now and how do you expect that to evolve this year? >> the u.s. economy feels to me like it's having some of the head winds that we were facing in 2019 turn into tail winds or at least calm. for a railroad, a big freight railroad like union pacific what we need are consumers buying things that's driven a lot by housing. we need the industrial economy to be perculating and healthy and that's a lot about industry

investment as well as risk taking and we need healthy trade. and if you start on trade, the passage of uscma through congress, signing of the phase one china deal, those are all positives that turn what were head winds into probably tail winds. if you think about industrial economy, that certainty is helping our industrial customers to start thinking a little bit more about risk taking and getting out of the de-stocking mode when it comes to consumers they still look pretty healthy. job markets are pretty good. wages are pretty good. it feels like there is a little life being brought into the housing market so i look at 2020 and think the way the markets are set up there's a couple unique head winds for us there is a loose truck market. that's a primary competitor for us >> yes >> that makes their pricing very aggressive but -- and coal is facing very low natural gas prices -- but

over time i expect the other tail winds to start showing up in 2020 for us >> lance, you know, a lot of the macro watchers are listening to what you're saying obviously industrial production has been down for four straight months. so which quarter quarter would story begin to make itself evident? when is the inflection, first half, second half, and which freight categories would lead? >> yeah, sooner is better for us, of course. the first thing i need to see and hear from our customer base is they're thinking about risk in a different way, whether it's investing in supply chains that look like they can be a little more normalized and stable or their own working capital and capital investments domestically i think we'll see it piece by piece. housing and construction are an important part of that we're blessed being a low-cost

producer of plastics in the petro chemistry, so will be helpful. we'd like to see it bleed into old-line industries like steel and basic goods. bottom line is it's too early for me to be able to call when i can just see green shoots showing up to where i expect it to start moving in that direction. >> in terms of the impact from these two trade deals you mentioned, the phase one with china and usmca, are they enough to get the company back to positive volumes this year let's just leave it there. >> yeah, so we are guiding to getting positive volume this year, and that's two parts one is the markets that we participate in have to get healthier, and we talked a little bit about truck competition in a loose truck market we see that through truck bankruptcies starting to firm up a bit. and we need to see some of our other markets starting to move

positively but then part of it is us controlling our own destiny and taking this fantastic service product that the unified plan 2020 has created and generating business from it our commercial team is all over that right now so, yeah, i think we are set as we stand right now three weeks into the year, to think we're going to achieve a positive growth in 2020 >> all right lance fritz, thanks for joining us today shares of union pacific up 3%. >> thank you new development on the coronavirus front in the past few moments. sue herera has more on that. >> the state department has increased its level to a level 3 traveled a advisory saying reconsider travel to china, and they are citing the centers for disease control and prevention which issued a watch level 2 basically what they are saying is in an effort as we told you just a few minutes ago to

contain the coronavirus, the city of wuhan has basically stopped all travel in and out of that city and the state department as a result of the coronavirus and the increasing fatalities is now recommending that american citizens reconsider travel to that particular part of china and also the cdc basically echoing that we'll keep you posted on any further developments carl, back to you. >> sue, thank you vsm fery muchr that a tiny leg down, dow down 122, still above the session low of 219. "squawk on the street" is back in a minute. to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.

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all right. for our "sector sort," a leading story this morning was the earnings from comcast, our parent company you can see the stock's performance at the bottom. the earnings were strong but on the conference call they continued to say that the video business is going to see in fact increased losses of subscribers this year. it's no longer an emphasized service at comcast it's all about broadband connections. a relationship only to the extent it helps increase the lifetime value of that

relationship a lot of companies still rely on good old cable for their money, being fully distributed. it continues to decline and warnings of further declines coming, we're seeing the impact on viacom, discovery, disney, fox is another name as well under pressure this morning. viacom shares are down 11% already this year, carl. >> media and materials not enjoying a good day on the session. when ke cowe come back, marc bef live in davos. hey, saved you a seat.

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