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In its second week of release, “Guardians of the Galaxy: Vol. 3” proved there’s still a big appetite for superheroes on the big screen.
The film had the lowest second week drop for a Marvel Cinematic Universe film since 2018’s “Black Panther.”
The success shows that writer-director James Gunn has his finger on the pulse, and has the potential to deliver similar results at DC Studios.

Still from Marvel Studio’s “Guardians of the Galaxy. Vol 3.”

Did someone say superhero fatigue? Not with James Gunn at the helm.
In its second week in theaters, the director’s “Guardians of the Galaxy: Vol. 3” proved that audiences are still willing to venture out to see costumed heroes on the big screen. Most blockbuster films’ ticket sales drop between 50% and 70% from the opening weekend to the second week. Gunn’s third tale about the Guardians of the Galaxy only dropped 47.6%, indicating that even casual fans think it’s a must-see movie.

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This is the smallest second week drop for a Marvel Cinematic Universe film since 2018’s “Black Panther,” which dropped just 44.7%, according to data from Comscore. It is the third-best second week fall of any MCU film since 2008, just behind “Thor,” which slipped 47.2% during its second week in 2011.
“Guardians of the Galaxy: Vol. 3” added $62 million in ticket sales domestically over Friday, Saturday and Sunday, bringing its total domestic haul to $214.7 million. Globally, the film has generated just under $530 million at the box office.
For comparison, the first “Guardians of the Galaxy” film tallied $773.3 million globally during its run in 2014 and “Guardians of the Galaxy: Vol. 2” scored $863.6 million during its run in 2017.
The strong box office for “Guardians of the Galaxy: Vol. 3” seems to quell fears about superhero fatigue at the box office, something even Disney CEO Bob Iger has worried about publicly. The executive has openly questioned whether Marvel should continue creating third and fourth films for established legacy characters, rather than exploring new heroes, antiheroes and villains.
His comments, which were delivered in March during the Morgan Stanley Technology, Media and Telecom Conference, came on the heels of the disappointing box-office performance of “Ant-Man and the Wasp in Quantumania” and “Thor: Love and Thunder.”

The third “Ant-Man” saw a 69.8% drop from its first week to its second, the largest fall of any MCU film. Meanwhile, the fourth “Thor” standalone saw a 67.6% drop, the third-highest of any film in the MCU, Comscore data show. 2021’s “Black Widow” holds the second-steepest drop with 67.8%, partially because the film was released in the middle of the pandemic and partially because it was delivered to theaters and Disney+ on the same day.
Second week numbers are sometimes more important than the opening weekend data. Showbiz analysts often look to this drop as an indicator of whether a film will have longevity at the box office or will fizzle quickly.
“It’s a win for Disney, Marvel, James Gunn, theaters and audiences across the board for such an important 2023 tentpole to showcase the power of quality blockbuster cinema and why opening weekends don’t always tell the full story,” said Shawn Robbins, chief analyst at BoxOffice.com.
Major tentpole features from Disney’s Marvel Cinematic Universe often see box-office ticket sales fall more than 50% after reaching sky-high opening weekend numbers. While those kinds of films can continue on toward billion-dollar or higher theatrical runs, this metric can indicate whether word-of-mouth is bringing new audiences to theaters or whether interest is waning.
“As a pure reflection of positive audience sentiment for a film, nothing says a movie is resonating strongly with audiences like a modest second weekend drop,” said Paul Dergarabedian, senior media analyst at Comscore.
The release of Marvel’s “Guardians of the Galaxy Vol. 3” also marks the symbolic end of Gunn’s time with one comic book studio and the start of his reign at another. Gunn, alongside producer Peter Safran, was named co-CEO of Warner Bros. Discovery’s DC Studios last year.
Because of this, the success of Marvel’s “Guardians of the Galaxy Vol. 3” actually bodes well for the future of DC. It shows that Gunn has his finger on the pulse, and has the potential to deliver similar results at his new studio.
Of course, Gunn has already dipped a toe into the DC universe with 2021’s “The Suicide Squad.” The movie generated less than $200 million globally, as it was released simultaneously on HBO Max and in theaters during the thick of the pandemic, but was well-received by both critics and audiences.
Gunn and Safran have developed a 10-year plan to reinvigorate its franchises across TV and film, including fresh spins on Superman and Batman. Gunn himself will write and direct “Superman: Legacy.” More

Kathy Lueders, the most recent top human spaceflight official at NASA, has joined Elon Musk’s SpaceX after retiring from the agency, CNBC has learned.
Lueders will work out of the company’s “Starbase” facility in Texas, people familiar with the matter told CNBC, and report directly to SpaceX president and COO Gwynne Shotwell as general manager.
She represents a key hire for SpaceX as it aims to make its massive Starship rocket safe to fly people in the coming years.

Kathy Lueders, formerly NASA associate administrator of the Space Operations Mission Directorate, before speaking to the media on May 30, 2020, following SpaceX’s launch of the Demo-2 mission.
Kim Shiflett / NASA

Kathy Lueders, the most recent top human spaceflight official at NASA, has joined Elon Musk’s SpaceX after retiring from the agency a couple of weeks ago, CNBC has learned.
Lueders’ role will be general manager, and she will work out of the company’s “Starbase” facility in Texas, reporting directly to SpaceX president and COO Gwynne Shotwell, people familiar with the matter told CNBC.

It’s a key hire for SpaceX as the company aims to make its massive Starship rocket safe to fly people in the coming years. Lueders, a respected expert in the sector, is already familiar with the company’s human spaceflight work to date.

The SpaceX Starship lifts off from the launchpad during a flight test from Starbase in Boca Chica, Texas, on April 20, 2023.
Patrick T. Fallon | AFP | Getty Images

SpaceX did not immediately respond to CNBC’s request for comment on Lueders’ hiring.

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Lueders retired from NASA at the end of April, following a 31-year career with the agency. Before leading NASA’s human spaceflight program, she oversaw the culmination of its Commercial Crew program as manager, including the first SpaceX missions to carry NASA astronauts.
Earlier this year and shortly before she retired, SpaceX completed its sixth operational NASA crew launch — completing its initial contract for the agency. The company has received additional awards for eight more crewed missions.
Notably, Lueders follows in the footsteps of one of her recent NASA predecessors, William Gerstenmaier, who joined SpaceX in 2020 after more than a decade as the agency’s top human spaceflight official. Gerstenmaier is now SpaceX’s vice president of build and flight reliability.
Correction: The headlines and a photo caption on this story have been updated to correct the spelling of Kathy Lueders’ name. More

A glut of rentals in one of America’s richest beach communities has started to lead to price cuts.
At the start of the Covid pandemic, throngs of wealthy New Yorkers fled the city for the Hamptons and many bought homes. Now they want to find renters.
At the same time, Wall Streeters and tech workers are cutting their summer spending in the face of market volatility and layoffs.

Beach homes are seen on September 30, 2020 in Southampton, New York.
Kena Betancur | AFP | Getty Images

An oversupply of summer rentals in the Hamptons is spurring price cuts of 20% or more, as affluent Wall Streeters and tech workers cut back on their summer spending.
There are now about 5,700 seasonal rentals available for this summer on the South Fork peninsula in New York, which includes most of the Hamptons, according to Judi Desiderio, CEO of Town & Country Real Estate in East Hampton. That’s twice the number of homes that would typically be available for a summer before the Covid pandemic shifting vacationing habits, she said.

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“There’s just too much inventory, at every level,” she said.
The glut of rentals in one of America’s richest beach communities has started to lead to price cuts. Brokers say many homeowners have started trimming prices for their rentals by 10% to 20%, and prices are likely to drop further as homeowners race to fill their rentals before the start of Memorial Day.
“We’re choked with supply,” said Enzo Morabito, a Hamptons broker with Douglas Elliman. “And it’s throughout the Hamptons.”
Granted, “bargains” are all relative in the Hamptons, where a typical 3-bedroom house rents for between $60,000 and $100,000 for the summer, depending on the location. Homes on the ocean can rent for over $1 million for a month.
Yet the after-effects of the pandemic have led to a record number of available rentals, and brokers say it could take a few more summers for prices and demand to normalize. In the spring of 2020, throngs of wealthy New Yorkers fled the city for the Hamptons and many bought homes. That led to a sales boom where volume and prices soared. The median sales price jumped more than 40% to over $1.2 million.

Now, many of those new homeowners are trying to rent their homes, either because they want to travel for part of the summer or because they want the income to help pay home expenses. The surge in supply has upended a market that traditionally had a limited number of rentals and consistently high prices.
“We had a balanced market before Covid,” Desiderio said. “Demand wasn’t out of control and prices held for years.”
Many of the new homeowners also decided to rent because they expected the boom-time rental prices of 2020 and 2021, which are now unrealistic, brokers say.
“I get clients coming to me saying, ‘I want to rent my house for $250,000,'” said Gary DePersia of the Corcoran Group. “I tell them it’s not realistic anymore. The market has changed.”
DePersia is advising his rental clients to offer more flexible leases — perhaps for two weeks or a month rather than the whole summer — and to lower prices.
The other big problem is falling demand. Since the Hamptons is still highly dependent on the Manhattan economy — and specifically finance and tech — it’s starting to feel the chill of a falling stock market and shrinking IPO and capital markets. Wall Street bonuses fell 26% last and several of the large Wall Street firms and banks, including Morgan Stanley, Citigroup, Bank of America and Lazard, have announced job cuts.
“The Hamptons is tied to Wall Street with an umbilical cord,” Desiderio said. “When Wall Street is doing well, we do well. When they pull back, we pull back.”
The one bright spot in the rental market, at least for owners, is at the very high end, especially oceanfront. Brokers say one oceanfront home in the Hamptons has already rented for $2 million per month this summer, although the brokers declined to give details.
There are at least three other homes being offered for rent at $2 million or more for the summer, they say.
DePersia has a 12,000-square-foot oceanfront rental in Bridgehampton that’s being offered for $600,000 for two weeks. The newly built house, with 10 bedrooms, over a dozen bathrooms, multiple kitchens, a pool overlooking the ocean and a rooftop deck with a hot tub, has already attracted a number of potential renters.
“When you talk about oceanfront, new build, all the amenities for entertaining and families, there just aren’t that many,” he said. “And the kind of people who would rent a place like that aren’t as affected by the stock market or job cuts.” More

Media companies, including NBCUniversal, Disney and Warner Bros. Discovery, will make their annual pitches to advertisers during their Upfront presentations this week.
This year’s events come in the midst of a soft advertising market and the Hollywood writers’ strike, as well as accelerated cost-cutting by media companies.
Advertisers will likely increase spending on ad-supported and so-called FAST options this year as cord-cutting accelerates. Franchise-related content will continue to take a big role.

Los Angeles, CA – May 02: WGA members take a selfie before heading to the picket line on the first day of their strike in front of Paramount Studios in Hollywood on May 2, 2023. The union were unable to reach a last minute-accord with the major studios on a new three-year contract to replace one that expired Monday night. (Genaro Molina / Los Angeles Times via Getty Images)
Genaro Molina | Los Angeles Times | Getty Images

Media companies making their pitches to advertisers this week will have to do their best to overcome a lot of noise in the industry.
The advertising market has been soft since last summer, and companies are also cutting costs as they look to make their streaming businesses profitable.

Meanwhile, the Hollywood writers’ strike is sure to play a role in the conversation, especially if picketers show up this week outside the annual advertising sales events known as Upfronts. Some of them already did at the so-called Newfronts, which are similar events focused only on streaming.
Kicking off the week will be Comcast’s NBCUniversal Upfront, which saw some last minute changes when global ad chief Linda Yaccarino resigned last week before Twitter hired her to replace owner Elon Musk as CEO.
Fox Corp., Disney, Warner Bros. Discovery and newcomer Netflix will also hold events this week. Paramount Global opted out of the Upfronts this year in favor of intimate dinners with advertisers.
Streaming remains a prime topic of discussion, especially as ad-supported tiers have taken on more importance in the face of slowing subscriber growth.
And franchise content is likely to be a big presence as media companies have leaned into series and films with track records for keeping viewers around.

Here’s a look at what’s in store for Upfronts.

Writers’ strike worries

Members of the Writers Guild of America stopped working and headed to the picket lines earlier this month, halting production on films and television shows.
Media executives say the strike will have no immediate effect on programming slates, but that could change depending on how long the strike lasts.
“There are certainly additional elements of fluidity this year, like the WGA strike, that are top of mind for advertisers and make flexibility even more critical in this year’s negotiations,” said Amy Leifer, chief advertising sales officer at DirecTV. “Even if there is a halt of scripted TV production due to the writer’s strike, we know that viewers are still going to consume TV content.”
That will likely mean more emphasis on live content, such as sports and news, if the strike drags on. Fox CEO Lachlan Murdoch said he doesn’t expect his company to be affected by the writers’ strike given its sports and news-heavy slate.
While this helps the traditional media companies like Fox, Warner Bros. Discovery and NBCUniversal, which all have robust sports and news offerings, it could weigh on the entertainment-only networks, as well as streaming services.

A scene from Netflix’ “Stranger Things” Season 4.
Courtesy: Netflix

Already, a number of productions have been paused, including Netflix’s “Stranger Things,” Disney and Marvel’s “Blade,” AppleTV+’s “Severance” and Paramount’s “Evil.”
The immediate concern for Upfronts, however, could be if picketers post up in front of the events. Many of Hollywood’s top talent, especially late-night talk show hosts who have already seen their shows halted, have shown support for the writers. Often, these comedians and talk show hosts take part in Upfronts.
During the Newfronts recently, picketers stood out front of the events. Netflix, which is having its inaugural Upfront this week since it recently instituted an ad-supported tier, has reportedly opted to make its presentation virtual-only.

Soft advertising market

Media executives across the board aren’t as bullish on the advertising market as they were a year ago.
“It feels like a party here,” then-NBCUniversal CEO Jeff Shell said at the Cannes Lions advertising conference last year, held a little more than a month after upfront presentations. “I don’t know if that’s because most of you are out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t feel like a down market.”
By November, the advertising market collapsed amid surging interest rates and recession fears.
“The advertising market is very weak,” Warner Bros. Discovery CEO David Zaslav in a November investor conference. “It’s weaker than it was during Covid.”
In recent months, executives have noted a limited recovery.
“The overall entertainment advertising marketplace has been challenging,” Disney Chief Financial Officer Christine McCarthy said last week during Disney’s second-quarter earnings conference call. “While the weakness has moderated somewhat, we anticipate that some softness may continue into the back half of the fiscal year.”
NBCUniversal, Paramount Global, Warner Bros. Discovery and Disney all reported dips of between 6% and 15% in TV advertising revenue in the first quarter.
Media executives’ messaging to advertisers could center around value this year, particularly as companies continue to offer more content on their streaming services. Warner Bros. Discovery will showcase Max, its new combined HBO Max-Discovery+ product that launches later this month. Disney announced last week it’s adding a feature to allow Hulu programming within Disney+, a change Chief Executive Bob Iger said “will provide greater opportunities for advertisers” when it rolls out later this year.

Cost cutting

While media executives will try to convince advertisers to maximize their spending, they’ll be pushing that narrative while making fewer shows. Disney said last week it plans to produce less content in the coming year. Warner Bros. Discovery has spent the past year eliminating content from Max to cut costs.
“It’s critical we rationalize the volume of content we’re creating and what we’re spending to produce our content,” Disney’s Iger said.
The cost-cutting efforts are driven by an urgent motivation to make streaming profitable. Paramount Global, NBCUniversal and Disney have all promised streaming will stop losing money by next year. Warner Bros. Discovery said earlier this month its U.S. streaming business will be profitable in 2023 — a year ahead of schedule.
“The key here is our U.S. streaming business is no longer a bleeder,” Zaslav said. “It’s hard to run a business when you have a big bleeder.”
Still, the upfronts are a time to showcase content. If the investor messaging is centered around cutting the fat, the ad buyer message will around showcasing the quality of existing franchises.

Franchise frenzy

If one thing is for certain, the media networks and their streaming counterparts will showcase slates with a heavy emphasis on franchises.
It’s been a theme at Upfronts in recent years. During last year’s NBCUniversal Upfront, late-night host and “Saturday Night Live” alum Seth Meyers made jabs about the schedule of spinoffs and reboots being presented.
“I don’t need to tell you that the last two years have been transformative not just for the TV business but across all industries. We needed to be inventive, agile, forward-facing, and yet and this is still how we are doing upfronts,” Meyers said last year. “That’s not to say that NBC is not embracing the future — this next year promises exciting new shows and ideas like ‘Law & Order,’ ‘The Fresh Prince of Bel-Air,’ ‘Night Court’ and ‘Quantum Leap.'”
Franchises attract a large swath of audience demand for both Hollywood films – which are an important part of the programming slate for streamers like Disney+, Paramount+ and Peacock – as well as TV franchises, according to data from Parrot Analytics.
“Hollywood has been recycling in the last 12 to 13 years as other content has failed to break out,” said Brandon Katz, an entertainment industry strategist at Parrot.

The logo of the streaming service Paramount+ on a logo wall at the Paramount+ launch event. (recrop) The streaming service Paramount+ is now available in Germany.
Jörg Carstensen | Picture Alliance | Getty Images

Paramount, in particular, has seen a big reliance on franchises, especially for its Paramount+ streaming service. Star Trek series content accounted for 32.4% of Paramount+’s U.S. audience demand in 2022, while Yellowstone spinoffs made up 11.4%, according to Parrot.
Last week, Paramount’s CBS broadcast network announced three new series for next season – one being “Matlock,” a reboot of the late 1980s-90s series that will star Academy Award-winning actress Kathy Bates, and the other, “Elisabeth,” which is based on a character from “The Good Wife” and “The Good Fight” franchise.
Disney+ has heavily relied on series stemming from its Marvel and Star Wars libraries. However, Parrot Analytics found there was a downtick in U.S. demand for Marvel content in late 2022, likely due to the mixed reception its recent series have received.

The shift to streaming

Ad-supported streaming will be an even bigger part of the conversation this year.
With cord-cutting accelerating – overall pay-TV subscribers were down 3% this past quarter, “universally worsening,” according to Wells Fargo analyst Steven Cahall – digital advertising is likely to take a bigger piece of the pie.
“It’s a pretty unmistakable trend where linear TV continues to fall and digital video and connected TVs are rising to fill the gap,” said Paul Verna, a principal analyst at Insider Intelligence. Advertisers are expected to spend $12.48 billion on digital media during the Upfronts and Newfronts this year, a 28% increase over last year, Verna added.
U.S. TV ad spending during the Upfronts is expected to drop by 3.6% to $18.64 billion for the 2023-24 season, according to Insider Intelligence, evidence the market has stopped growing on the traditional TV side while more dollars shift toward digital.
Netflix and Disney+ launched ad-supported tiers for their services late last year. With subscriber growth stagnating for streaming, and companies pushing toward streaming profitability, executives hope the cheaper options will retain or bring in customers.
Disney recently said it was relying on its ad-supported option to help make a profit with its streaming offerings. The company will be adding Hulu content to Disney+, which Iger said was “a logical progression of our DTC offerings that will provide greater opportunities for advertisers.”
Price increases for ad-free options, to boost revenue for these businesses, could also push customers to cheaper options with ads.
Paramount+ and NBCUniversal’s Peacock have offered ad-supported tiers since each launched. While Peacock held a Newfront presentation to showcase its content, the streaming service will be a key part of NBCUniversal’s Upfront on Monday.
“Just a year ago, if you looked at the composition of Paramount’s ad revenue, about 25% went to digital,” said David Lawenda, Paramount’s chief digital advertising officer. “Now it’s about 40%. That’s 40 cents of every dollar going to digital.”
Free, ad-supported platforms like Paramount’s Pluto and Fox’s Tubi will also see more advertising dollars come their way.
“We’re looking forward to Tubi being a central part of our upfront negotiations,” Murdoch said recently during Fox earnings. “It’s clearly not only a strategic driver for us. It’s been an important driver going forward.”
These free, ad-supported streaming television, or FAST, services have seen explosive growth. They also experienced an increase in viewership during the height of the pandemic, when productions were halted and there was a lack of new content. If the writers’ strike continues, that could be the case once again.
Disclosure: NBCUniversal is the parent company of CNBC.
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Fanatics agreed to buy the U.S. operations of sports betting company PointsBet.
The deal values the assets at about $150 million.
The agreement marks a big leap into sports gambling for Fanatics.

Fanatics logo is seen on the dugout wall before the game between the Pittsburgh Pirates and the Milwaukee Brewers at PNC Park on July 3, 2022 in Pittsburgh, Pennsylvania. (Photo by Justin Berl/Getty Images)
Justin Berl | Getty Images

Fanatics has agreed to acquire the U.S. operations of PointsBet, marking the sports giant’s first major leap into U.S. sports betting.
The deal is worth about $150 million in cash. The companies announced the deal Sunday night soon after CNBC reported an agreement was reached.

“Fanatics and PointsBet are excited to enter into an agreement for Fanatics Betting and Gaming to acquire PointsBet’s U.S. business,” the companies said in a joint statement. “While there are still several steps in the process to complete the acquisition, both parties are confident in the outcome. Fanatics Betting and Gaming and PointsBet will provide further details of the proposed deal and timely updates in the coming weeks.”
Fanatics will gain access to at least 15 states with the deal, according to people familiar with the deal who declined to be named because discussions were private. Fanatics expects to have access to the majority of states where PointsBet operates by the start of the NFL season, according to one of the people.
PointsBet, whose shares are traded in Australia, is expected to hold a shareholder vote on the deal in late June. Only PointsBet’s U.S. assets are part of the deal. Fanatics will plan to fund some of the remaining cash flow burn from PointsBet, which has had to spend heavily on marketing to compete with larger rivals DraftKings and FanDuel.
PointsBet forecast a loss of between $77 million and $82 million for the second half of the year. Citing “very challenging” market conditions, the company said Sunday that it would need to raise additional capital at a “significant discount to recent market prices” in the near term if the deal with Fanatics somehow fell apart.
NBCUniversal will get proceeds from its previous deal with PointsBet and will no longer have an equity stake. NBC acquired a 4.9% equity stake in PointsBet in 2020.

Fanatics has been in talks with a number of different sports betting companies over the past year as it has plotted its path forward in mobile gambling.
“This is a 10-year journey,” Matt King, the CEO of Fanatics Betting, said at the SBC Conference earlier this month. “We’re going to move very methodically through that 10-year journey. And by doing that and taking that approach, it allows you to be a bit more considered in your decisions. You can kind of move slower, slightly slower today, in order to move fast later.”
Fanatics is a sports platform company with a private valuation of $31 billion. The company has forecast 2023 revenue of $8 billion.
Fanatics owns commerce assets, a sports trading card business, and is building out a sports betting division. The company acquired legendary trading card company Topps for $500 million last year.
Disclosure: NBCUniversal is the parent company of NBC Sports and CNBC. More

FLYING IS A dirty business. Airliners account for more than 2% of the annual global emissions from the burning of fossil fuels, many times commercial aviation’s contribution to world GDP. Two forces look poised to push this figure up in the years to come. First, people love to fly. IATA, the airline industry’s trade body, predicts that 4bn passengers will take to the skies next year, as many as did in 2019, before covid-19 temporarily grounded the sector. Airlines could be hauling around 10bn passengers by mid-century (see chart 1). Boeing, an American planemaker, estimates that this will require the global fleet to roughly double from around 26,000 in 2019 to 47,000 by 2040. After a pandemic blip, investors are more bullish again about the sector’s prospects (see chart 2). Showing its confidence, on May 9th Ryanair, a giant of low-cost air travel, placed an order worth $40bn for 300 new Boeings.Second, as other carbon-belching industries, from electricity generation and road transport to steel- and cement-making, go green, air travel is proving harder to decarbonise. If the aviation business is to reach the industry’s goal of net-zero emissions by 2050, tomorrow’s fleet would need to be much cleaner than today’s. Mission Possible, an industry consortium, reckons this could only be done by doubling historical fuel-efficiency gains, putting aircraft powered by novel technologies in the air by the mid-2030s and rapidly rolling out sustainable fuels (plus carbon-capture technology to offset residual emissions, see chart 3).A recent report by SEO Amsterdam Economics and the Royal Netherlands Aerospace Centre, two think-tanks, puts the necessary investment between now and 2050 in Europe alone at some €820bn ($900bn) at current prices, on top of the €1.1trn required for business as usual. Alas, the aviation industry’s current state-of-the-art technology and its economics make Mission Possible sound anything but.When it comes to cutting emissions, aviation has a “wonderful history” compared with other sectors, says Steven Gillard, a director of sustainability at Boeing. He is not wrong. Carbon emissions per kilometre travelled by the average passenger fell by more than 80% over the past 50 years. Each new generation of aircraft generally consumes 15-20% less fuel than the previous one, largely thanks to improved engines. Boeing’s chief executive, Dave Calhoun, told investors last year he wants his next model to be “at least 20%, 25%, maybe 30% better” than aeroplanes it replaces. The trouble is that the technology that might help Mr Calhoun meet this goal is barely perceptible on the horizon. As the jet age nears its centenary, even the historic pace of improvement is becoming tougher to sustain. “Every leap in tech makes the next one harder,” says Andrew Charlton of Aviation Advocacy, a consultancy. And not just for Boeing and its European arch-rival, Airbus.Take engines. CFM, a joint venture between GE and Safran, two engine-makers, has nearly 1,000 engineers working on Rise, an open rotor-engine that does away with the cowling the covers the fan blades. Rolls-Royce and Pratt & Whitney, two other big engine-makers, are also beavering away on their own ideas. But neither engine is likely to provide the efficiency gains that Boeing is after. Tweaking the airframes, such as the potential upgrade to Airbus’s A320 short-haul jets with composite wings that can carry larger, more efficient engines, may help—but only a bit. Work on more radical airframe redesigns, like using a narrower, lighter wing held in place with a strut extending for the bottom of the fuselage as in small propeller planes, under development by Boeing and NASA, America’s space agency, is preliminary at best. If Mission Possible’s efficiency targets look distant, the prospects for all-new types of planes or fuel seem remote. A few startups, such as Electra.Airflow and Heart Aerospace, are working on battery-powered prototypes. Heart already has orders from Air Canada and United Airlines for 30-seaters that could fly 200km on batteries alone, or double that with hybrid power using sustainable fuel. If all goes well, these could be in the air by 2028. Anders Forslund, Heart’s boss, reckons that by 2050 all routes up to 1,500km could be served by electric planes. But such trips account for only 20% of today’s airliner emissions. Another option is liquid hydrogen. In 2020 Airbus said it would start work on this technology, with the aim of having a short-haul commercial jet in the air by 2035. This seems unlikely. Hydrogen must be stored below -235°C and takes up more space than kerosene per unit of energy. Using it would thus require a thorough redesign of the aircraft, with heavy cooling systems and bigger fuel tanks that leave less room for passengers, and of airports, which are not equipped to deal with the gas. If hydrogen can be made to work, it would, like battery-powered flight, probably be limited to short-haul flying. Reducing the carbon footprint of long-haul flight requires something else. The most promising something on offer is sustainable fuel, which though not fully carbon-free does emit 80% less greenhouse gas than kerosene. Such fuels are currently produced from old cooking fat, and occasionally blended in small quantities with the conventional stuff. Boeing has promised that all of its planes will be capable of running on 100% sustainable fuels by 2030. Many airlines and energy firms have announced joint schemes to boost production and bring down the cost, which currently stands at roughly twice that of kerosene. Output reached 300m litres in 2022, according to IATA, a three-fold increase on the year before.That is still a drop in the bucket. For sustainable fuels to get the industry 65% of the way to net zero by 2050 would require 450bn litres a year by 2050, according to iata. And obstacles to achieving the required scale remain formidable. A big one is availability of feedstocks. Second-hand cooking oil is not mass produced in sufficient quantities. Nor are household waste and by-products of forestry, two other potential feedstocks. Converting food crops to fuel use would get you further but is politically controversial at a time when food prices are already rising fast. The EU recently barred fuel producers from using food-crop-based feedstocks to meet new mandates for sustainable fuels. Synthetic alternatives, made from carbon captured from industrial sources or directly from the air, are so far the preserve of a few pilot projects.Overcoming these technological hurdles is made more difficult by the competitive dynamics of the planemaking duopoly. The covid crisis and the grounding of the 737 MAX, Boeing’s short-haul workhorse, for 20 months after fatal crashes in 2018 and 2019 have left the American firm with long-term debts of $47bn. It is already busy launching a bigger version of the MAX and certifying the 777X, a variant of its popular long-haul jet. If it does not launch an all-new plane until late this decade, that will be a gap of 25 years from its last big debut, of the 787 in 2005. Its engineers’ skills may atrophy. A new plane programme that might cost up to $30bn and take ten years from launch to commercialisation would not sit well with Boeing’s aim: to resume returning money to shareholders by 2026. Airbus’s finances are healthier. But it, too, has little incentive to place a giant bet on an untested new technology with its American nemesis in no position to exert competitive pressure. As it is, the European company’s orders are already around 7,000 planes, roughly 50% bigger than Boeing’s. All this means that flying is unlikely to become radically climate-friendlier soon. Scott Deuschle of Credit Suisse, a bank, calls the industry’s net-zero target “low probability”. The only other option is for governments to get serious about the problem. There are signs of this happening. The EU is phasing in a mandate for sustainable fuels, whose share in European airlines’ tanks will need to rise from 2% in 2025 to 70% by 2050. In 2026 the bloc will start phasing out free emissions allowances for carriers under its emissions-trading scheme. Some countries are going further. As part of its bail-out of Air France during the pandemic, the French government forbade the carrier from competing with trains on routes of less than two and a half hours. In the Netherlands, meanwhile, the authorities mandated a reduction by late 2023 in the number of flights at the state-owned Schiphol airport, the country’s biggest, by 8%, to 460,000 a year, to cut both carbon-dioxide and noise pollution. The French ploy might work, though just how much good it will do does is debatable. The Dutch one was foiled in April by a court, with the backing of several airlines. The aviation industry wants climate virtue—but not yet. ■ More

FLYING IS A dirty business. Airliners account for more than 2% of the annual global emissions from the burning of fossil fuels, many times commercial aviation’s contribution to world GDP. Two forces will push this figure up in the years to come. First, people love to fly. IATA, the airline industry’s trade body, predicts that 4bn passengers will take to the skies next year, as many as did in 2019, before covid-19 temporarily grounded the sector. Airlines could be hauling around 10bn passengers by mid-century (see chart 1). Boeing, an American planemaker, estimates that this will require the global fleet to roughly double from around 26,000 in 2019 to 47,000 by 2040. After a pandemic blip, investors are more bullish again about the sector’s prospects (see chart 2). Showing its confidence, on May 9th Ryanair, a giant of low-cost air travel, placed an order worth $40bn for 300 new Boeings.Second, as other carbon-belching industries, from electricity generation and road transport to steel- and cement-making, go green, air travel is proving harder to decarbonise. If the aviation business is to reach the industry’s goal of net-zero emissions by 2050, tomorrow’s fleet will need to be much cleaner than today’s. Mission Possible, an industry consortium, reckons this could only be done by doubling historical fuel-efficiency gains, putting aircraft powered by novel technologies in the air by the mid-2030s and rapidly rolling out sustainable fuels (plus carbon-capture technology to offset residual emissions, see chart 3).A recent report by SEO Amsterdam Economics and the Royal Netherlands Aerospace Centre, two think-tanks, puts the necessary investment between now and 2050 in Europe alone at some €820bn ($900bn) at 2018 prices, on top of the €1.1trn required for business as usual. Alas, the aviation industry’s current state-of-the-art technology and its economics make Mission Possible sound anything but.When it comes to cutting emissions, aviation has a “wonderful history” compared with other sectors, says Steven Gillard, a director of sustainability at Boeing. He is not wrong. Carbon emissions per kilometre travelled by the average passenger fell by more than 80% over the past 50 years. Each new generation of aircraft generally consumes 15-20% less fuel than the previous one, largely thanks to improved engines. Boeing’s boss, Dave Calhoun, told investors last year he wants his next model to be “at least 20%, 25%, maybe 30% better” than aeroplanes it replaces. The trouble is that the technology that might help Mr Calhoun meet this goal is barely perceptible on the horizon. As the jet age nears its centenary, even the historic pace of improvement is becoming tougher to sustain. “Every leap in tech makes the next one harder,” says Andrew Charlton of Aviation Advocacy, a consultancy. And not just for Boeing and its European arch-rival, Airbus. Take engines. CFM, a joint venture between GE and Safran, two engine-makers, has over 1,000 engineers working on Rise, an open rotor-engine that does away with the cowling that covers the fan blades. Rolls-Royce and Pratt & Whitney, two other big engine-makers, are also beavering away on their own ideas. But neither engine is likely to provide the efficiency gains that Boeing is after. Tweaking the airframes, such as the potential upgrade to Airbus’s A320 short-haul jets with composite wings that can carry larger, more efficient engines, may help—but only a bit. Work on more radical airframe redesigns is preliminary at best. Boeing and NASA, America’s space agency, are developing a narrower, lighter wing held in place with a strut extending from the bottom of the fuselage as in small propeller planes. If Mission Possible’s efficiency targets look distant, the prospects for new types of planes or fuel seem remote. A few startups, such as Electra.Aero and Heart Aerospace, are working on battery-powered prototypes. Heart already has orders from Air Canada and United Airlines for 30-seaters that could fly 200km on batteries alone, or double that with hybrid power using sustainable fuel. If all goes well, these could be in the air by 2028. Anders Forslund, Heart’s boss, reckons that by 2050 all routes up to 1,500km could be served by electric planes. But such trips account for only 20% of today’s airliner emissions. Another option is liquid hydrogen. In 2020 Airbus said it would start work on this technology, with the aim of having a short-haul commercial jet in the air by 2035. This seems unlikely. Hydrogen must be stored below -235°C and takes up more space than kerosene per unit of energy. Using it would thus require a thorough redesign of the aircraft—with heavy cooling systems and bigger fuel tanks that leave less room for passengers—and of airports, which are not equipped to deal with the gas. If hydrogen can be made to work, it would, like battery-powered flight, probably be limited to short-haul flying. Reducing the carbon footprint of long-haul flight requires something else. The most promising something on offer is sustainable fuel, which though not fully carbon-free emits 80% less greenhouse gas than kerosene. Such fuels are currently produced from old cooking fat, and occasionally blended in small quantities with the conventional stuff. Boeing has promised that all of its planes will be capable of running on 100% sustainable fuels by 2030. Many airlines and energy firms have announced joint schemes to boost production and bring down the cost, which currently stands at roughly twice that of kerosene. Output reached 300m litres in 2022, according to IATA, a three-fold increase on the year before.That is still a drop in the bucket. For sustainable fuels to get the industry 65% of the way to net zero by 2050 would require 450bn litres a year by then, iata reckons. Obstacles to achieving such scale remain formidable. A big one is availability of feedstocks. Second-hand cooking oil is not mass-produced in sufficient quantities. Nor are household waste and by-products of forestry, two other potential sources. Converting food crops to fuel use would get you further. But this is politically thorny at a time when food prices are already rising fast. To avoid controversy, international sustainable-fuel standards currently prohibit using food crops as a feedstock altogether. Synthetic alternatives, made from carbon captured from industrial sources or directly from the air, are so far the preserve of a few pilot projects.Overcoming the technological hurdles is made harder by the competitive dynamics of the planemaking duopoly. The covid crisis and the grounding of the 737 MAX, Boeing’s short-haul workhorse, for 20 months after fatal crashes in 2018 and 2019 have left the American firm with long-term debts of $47bn. It is already busy launching a bigger version of the MAX and certifying the 777X, a variant of its popular long-haul jet. If it does not launch an all-new plane until late this decade, that will be a gap of 25 years from its last big debut, of the 787 in 2005. Its engineers’ skills may atrophy. A new plane programme that might cost up to $30bn and take ten years from launch to commercialisation would not sit well with Boeing’s other aim: to resume returning money to shareholders by 2026. Airbus’s finances are healthier. But it, too, has little incentive to place a giant bet on an untested new technology with its American nemesis in no position to exert competitive pressure. As it is, the European company’s orders are already around 7,000 planes, roughly 50% more than Boeing’s. Flying is, then, unlikely to become radically climate-friendlier soon. Scott Deuschle of Credit Suisse, a bank, calls the industry’s net-zero target “low probability”. The only other option is for governments to get serious about the matter. Some are. The EU is phasing in a mandate for sustainable fuels, whose share in European airlines’ tanks will need to rise from 2% in 2025 to 70% by 2050. In 2026 the bloc will start phasing out free emissions allowances for carriers under its emissions-trading scheme. As part of its covid bail-out of Air France, the French government forbade the carrier from competing with trains on routes of less than two and a half hours. The Dutch authorities ordered a reduction by late 2023 in the number of flights at the state-owned Schiphol airport, the Netherlands’ biggest, by 8%, to 460,000 a year, mainly to cut noise pollution though carbon emissions were also a concern. The French ploy may work, though just how much good it will do is debatable. The Dutch one was foiled in April by a court, with the backing of several airlines. The aviation business wants climate virtue—but not yet. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Many U.S. companies said China’s recovery helped their quarterly sales, but demand hasn’t snapped back as quickly as expected for some.
Starbucks, Disney, MGM Resorts and Procter & Gamble are among the companies that reported a boost to their China sales.
But companies are still waiting to see the same recovery in travel retail.

Pedestrians walk past Yum! Brands Inc. Pizza Hut and KFC restaurants in Shanghai, China.
Qilai Shen | Bloomberg | Getty Images

China is leaving behind pandemic lockdowns, and U.S. companies like Procter & Gamble, Starbucks and MGM Resorts International say the country’s recovery is boosting their overall sales as consumers in their home markets watch their wallets.
With its large population and swelling middle class, China is a desirable market for many multinational companies that have seen their U.S. businesses mature. But its zero-Covid policy, which imposed harsh restrictions to stop the spread of the virus, hurt the country’s economy — and revenue for the many U.S. companies that sell their goods or services there.

After rolling back the policy in December, China’s economy grew 4.5% in the first quarter. U.S. companies are reporting that demand in China is returning, boosting their sales at a time when many U.S. consumers are pulling back their spending.
However, the recovery hasn’t been as swift or dramatic as many investors hoped. Most companies are still waiting to surpass pre-pandemic sales in China. The travel retail segment is taking even longer to bounce back. And Apple’s sales fell in its China region, which includes the mainland, Hong Kong and the nearby self-governing island of Taiwan.
Morgan Stanley analyst Kelly Kim wrote in a research note that the firm’s China consumer team expects that recovery will come in three stages: a spring break in February through April, summer “revenge spending” in May through July, and a stable recovery starting in August.

Restaurants rebound

U.S.-based restaurants were among the companies that saw demand return in China. But sales haven’t snapped back to 2019 levels just yet.
Starbucks reported that its same-store sales in China rose 3% in its latest quarter, reversing their declines. Some Wall Street analysts were still anticipating shrinking same-store sales for the company’s second-largest market.

A year earlier, the coffee giant suspended its outlook for the year, citing lockdowns in China as one of the reasons for the decision. That quarter, Starbucks’ same-store sales in China sank 23%.
Yum China, Yum Brands’ master franchisee in China, also said its same-store sales grew 8% in the first quarter. China is KFC’s largest market and Pizza Hut’s second largest.
“We benefited from increasing mobility and saw a 40%-plus growth at transportation and tourist levels. However, same-store sales at these locations in the first quarter were still 20% to 30% below 2019 levels,” Yum China CEO Joey Wat told analysts on the company’s conference call.

Travel boosts parks and casinos

Tourists pose for a photo at the Shanghai Disney Resort as the resort kicked off a month of festivities from January 13 to February 10 to celebrate the upcoming Chinese New Year.
China News Service | China News Service | Getty Images

Chinese consumers also appear to be traveling again as restrictions lift, visiting theme parks and casinos. The increase in travel and leisure spending helped a range of U.S. companies at the start of the year.
Disney touted “improved financial results” at its Shanghai and Hong Kong resorts.
“We’ve been really gratified to see the bounce-back from the pandemic closures that we had,” Disney CFO Christine McCarthy told analysts Wednesday on the company’s conference call.
Macao, the world’s biggest gambling hub, has seen a resurgence of tourists after testing requirements for inbound travelers from the mainland, Hong Kong and Taiwan were dropped. Tourism peaked over the Lunar New Year holiday in late January.
MGM Resorts International operates MGM Cotai and MGM Macau venues in the region. Earlier this month, the casino giant reported a swift return to profitability as foot traffic at its Chinese casinos reaches pre-pandemic levels. In the first quarter, its properties in China generated adjusted earnings of $169 million, or 88% of the division’s adjusted earnings four years earlier.
Airbnb said for its latest quarter its Asia-Pacific division saw its biggest year-over-year growth for nights and experiences booked. The company closed its domestic China business in 2022, shutting down all mainland listings to focus on helping Chinese consumers find lodging abroad instead.
“We are encouraged by China’s recent lifting of its travel restrictions even though we anticipate the outbound recovery to be gradual due to challenges with limited flight capacities,” the company wrote in its quarterly letter to shareholders.
While many U.S.-based businesses are benefiting from China’s rebound, companies are still waiting to see the same recovery in travel retail.
SK-II, a luxury skin-care brand owned by Procter & Gamble, has seen its sales bounce back in China, with the notable exception of its travel retail segment. Overall, Procter & Gamble’s organic sales rose 2% in China. As consumer mobility rises, the consumer packaged goods giant expects revenue to rebound even more.
Scott Roe, chief financial officer of Tapestry, the parent of Coach, Kate Spade and Stuart Weitzman, said Thursday that the company has begun to see an uptick in domestic Chinese travel, including in Hong Kong and Macao. Yet, he added that global Chinese tourism is below pre-pandemic levels — and said that the potential for more travel could bring opportunity ahead.
In its greater China unit, Tapestry expects a mid-single-digit gain in revenue for the fiscal year, including an expected increase of about 50% in the next quarter. The company’s sales momentum in China is helping offset weakness in the U.S., as North American consumers become more cautious.
Though many businesses have struggled with travel retail in China, at least one company is already seeing its sales at duty free shops and tourist destinations bounce back.
Beauty giant Coty said it’s seen consumer traffic return to retailers, and pointed to more flights to the tropical island and shopping district Hainan, where it has dozens of stores. The French-American company owns Covergirl, Kylie Jenner’s beauty lines, and a slew of designer perfume and cosmetics brands. Coty’s travel retail sales climbed more than 30% in the quarter.
A glut of inventory weighed on Coty’s China sales in its latest quarter, but April’s sales were still higher than both the year-ago period and two years prior.
Piper Sandler analyst Korinne Wolfmeyer called the company one of her favorite beauty stocks in a note to clients following Coty’s quarterly earnings report. She in part cited its China performance.
“We are remaining cautiously optimistic on China for the beauty market in the near term, but for COTY specifically, we view the company’s strategic investments in the region and key product launches as a driver of market outperformance,” she wrote.
— CNBC’s Melissa Repko and Stefan Sykes contributed reporting for this story. More