23/02/2012

Air Asia hit by high fuel costs

Air Asia is one of Asia’s biggest low-cost airlines

Malaysian budget airline Air Asia has reported a 56% fall in fourth-quarter profit, hurt by higher fuel costs.

Net profit for the last three months of 2011 fell to 135.7m ringgit ($44.8m; £28.6m) from 311.1m ringgit in the same period a year earlier.

However, revenue for the quarter rose 9.3% to 1.27bn ringgit, thanks to more passengers and higher average fares.

Last month, Air Asia said it was ending its flights to Europe and India because of high fuel prices and weak demand.

For the full year, revenue rose 13% to 4.47bn ringgit, while net profit fell 46.8% to 564.1m ringgit.

Air Asia is run by chief executive Tony Fernandes, who took over English Premier League football club Queens Park Rangers earlier this year.

AirAsia Berhad (MYX: 5099) is a Malaysian-based low-cost airline. AirAsia is Asia’s largest low-fare, no-frills airline and a pioneer of low-cost travel in Asia.^[3] AirAsia group operates scheduled domestic and international flights to over 400 destinations spanning 25 countries. Its main hub is the Low-Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai AirAsia and Indonesia AirAsia have hubs in Suvarnabhumi Airport andSoekarno-Hatta International Airport respectively. AirAsia’s registered office is in Petaling Jaya,Selangor while its head office is at Kuala Lumpur International Airport.^[4][5] Air Asia plans to open ASEAN regional headquarters in Jakarta by August or September 2011.^[6] The airline itself will maintain its headquarters in Kuala Lumpur for the time being

            Driverless cars are sneaking up on you

NEW YORK (CNNMoney) — The “driverless cars” of science fiction fame are closer to reality than you think.

But they won’t arrive all at once in a single magnificent new machine. In fact, when the driverless car does come, it will happen gradually — one new technology at a time.

Sure, Google is testing cars that can drive set routes with minimal human interaction, but they’re not ready for Main Street yet. (Google (GOOG, Fortune 500) was not available for comment on this story.)

The first “autonomous driving” systems will only take full control in certain environments, such as interstate highways.

Self-driving cars aren’t just a matter of convenience; safety is the driving force. That’s why some people are pushing for a faster roll-out of the technology, said Bryant Walker Smith, a fellow at Stanford Law School who has written extensively about self-driving cars.

Over 30,000 people a year are killed in car crashes, the majority of which are caused by human error. Computers may not be perfect, but they’re almost certain to be far better than us.

“How long are we willing to wait and let people die before we move to the autonomous car?” said Smith.

Semi-autonomous driving has already started with “active safety” features. They take over only some of the driving, especially during emergency maneuvers or when drivers are tired.

“We and other automakers have been adding active safety features gradually,” said Nady Boules, director of electronics and controls for General Motors (GM, Fortune 500).

Boules headed the team that created “The Boss,” a self-driving Chevrolet Tahoe SUV that won a Defense Department-sponsored contest for self-driving cars in 2007.

Each of these new features not only makes cars safer but points out ways in which computers can be better at driving than we are:

Electronic stability control: This technology helps drivers keep cars from skidding during abrupt maneuvers.

Pre-collision warning systems: They detect an imminent crash and prepare the brakes.

Active cruise control: It uses radar to detect cars ahead and automatically slows the vehicle to maintain a safe following distance. Most of these systems work only at speeds above about 30 miles an hour. Some more advanced systems — including ones from Mercedes-Benz and Nissan’s Infiniti — work at any speed, even in stop-and-go traffic.

Pedestrian detection: Volvo has a system that scans ahead looking for pedestrians who seem to be moving into the path of the vehicle. The system can even apply the brakes if someone steps in front of the vehicle.

Autonomous steering: Some vehicles, particularly ones from Infiniti, have systems that recognize lane drift and gently nudge the steering wheel to help guide the car back into the center of the lane.

Several new Ford (F, Fortune 500) cars can now even parallel park themselves. The driver needs only to operate the gear selector, the gas and the brakes. All the steering wheel movements happen on their own, guided by a sensor that has already measured the size of the parking space.

Vehicle-to-vehicle communication: A major cause of crashes today is simple miscommunication. Drivers have limited options for letting others know what they’re about to do.

“The ways I communicate with other cars are my horn, my lights and my middle finger,” said Smith.

In the age of wireless networks, we can do better. It would be fairly easy for every car to electronically broadcast its speed, braking and steering inputs to cars around it so that all the cars in a given area would know what every other car was doing. Cars could then react to each other automatically.

V2V communications, as it’s called for short, is actively being pursued by a consortium of major automakers, and experimental cars are already in use. The National Highway Traffic Safety Administration is expected to rule next year on how to move forward with this technology.

On Tuesday, Consumer Reports magazine announced its strong supportfor the technology, which could save thousands of lives even in human-driven cars.

So what happens now? Once these systems learn to handle the easy stuff such as highways, the next step will be complex city and suburban roads with intersections and pedestrian traffic.

At first, automated driving will be entirely voluntary and used only depending on the situation and your comfort level.

“For the near term, there will always be a driver in the seat and, always, the driver will be responsible,” said Boules.

As these systems get better, though, you will begin to phase yourself out more and more, until, finally, you give up control for good. 

         Oil price hits eight-month high

price	change	%
119.89	+ +0.31	+ +0.26

The price of oil has reached its highest level since June last year due to rising tensions over Iran’s nuclear programme.

Benchmark US light crude rose 1.7% to $105.01 a barrel and brent crude futures rose $1.14 to $120.72 a barrel.

On Sunday, the country’s oil ministry said it had halted oil sales to British and French companies.

The cost of fuel has also risen. In the UK the price of diesel has hit a new high, at 143.16 pence a litre.

The figures, from Experian Catalyst, also show the price of a litre of unleaded petrol has reached 135.39 pence.

Iran is the world’s fifth-largest oil exporter.

The country insists its nuclear programme is peaceful, but the UN’s International Atomic Energy Agency says it has information suggesting Iran has carried out tests “relevant to the development of a nuclear explosive device”.

TransitionThe rise in the oil price also pushed UK oil giant BP’s shares above 500 pence for the first time since last January.

Analysts say the price of oil has risen as EU countries seek to find new oil suppliers and Iran hunts new buyers for its oil.

“The increase in price is a direct result of European importers of Iranian oil looking round to find alternative sources,” said Professor Paul Stevens from Chatham House.

Oil prices have also been driven up by an improvement in the performance of the US and Chinese economies.

The US is the world’s largest consumer of oil.

“It’s been a combination of a couple of factors, obviously geo-political tensions are rising, especially Iran,” said Amrita Sen, an oil analyst at Barclays capital.

Stronger demand”But the price support has also come through, because fundamentals have tightened up.”

Factors include stronger demand because of Asian growth and the European cold spell. At the same time, supply from South Sudan and Syria to Europe has also been cut.

If there is no further tension in Iran, the oil price may fall back. However, few analysts think this is likely.

“That assumes that Iran doesn’t do anything else, but that is a doubtful assumption,” added Prof Stevens.

“If there was a military attack on Iran, then all bets are off.”

           Thailand’s economy shrinks 9% after flood disruptions

Honda and other manufacturers saw their products damaged by the floods, hurting exports

Thailand’s economy contracted sharply in the last three months of 2011 after some of the worst flooding on record disrupted manufacturing.

Gross domestic product declined by 9% in the three months to December compared to a year earlier, the National Economic and Social Development Board (NESDB) said.

Compared to the previous three months, the economy contracted by 10.7%.

The floods killed more than 700 people and covered two-thirds of the country.

Brighter outlook?

Analysts said despite the poor numbers, the future outlook was not as bleak.

“The fourth-quarter figures reflected a worse-than-expected impact from the floods. The overall picture going forward will pick up,” said Pimonwan Mahujchariyawong from Kasikorn Research Centre.

The NESDB raised its forecast for 2012, saying it expects a rise in both public and private spending.

Thailand’s Prime Minister Yingluck Shinawatra has said the country will spend 350 billion baht ($11bn; £7bn) on infrastructure after the floods.

The NESDB said it expects the economy to expand by between 5.5 and 6.5% this year, rather than the 4.5 to 5.5% it had forecast in November.

The Bank of Thailand cut its benchmark interest rate for the second time in January.

Export push

Major companies that manufacture in Thailand saw exports hit when industrial estates flooded, including Honda, Sony and Western Digital.

The manufacturing index fell for the fourth month in a row and exports fell for a second month in December.

Honda, Toshiba and Fujitsu have all cut their profit forecasts because of disruption to production lines.

Thailand’s Ministry of Commerce said it was targeting a 15% increase in exports this year, compared to 17.2% rise in 2011.

However, analysts said slackening global demand would also weigh on exports.

         Bank of England injects another £50bn into UK economy

The BBC’s Stephanie Flanders explains how quantitative easing works

The Bank of England has agreed to extend its quantitative easing (QE) programme by £50bn to give a further boost to the UK economy.

When completed, it will bring the total amount of QE stimulus to £325bn.

The Bank started its QE programme, through which it buys mainly government-issued bonds, freeing up cash for lending, in 2009.

The Bank’s Monetary Policy Committee (MPC) also said it would keep interest rates at their record low of 0.5%.

UK interest rates have been held at that level since March 2009.

The BBC’s economics editor, Stephanie Flanders, said the £275bn of QE undertaken so far was an amount equivalent to nearly 20% of the country’s gross domestic product.

Inititally, experts were predicting an extra of £75bn of QE, but this figure was reduced to £50bn when economic surveys released last week indicated that the manufacturing and service sectors had performed better than expected in January.

However, concerns remain over weak consumer spending and the eurozone crisis.

Inflation undershoot?

The Bank said in a statement: “The underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter.

Continue reading the main story

Analysis

Simon GompertzPersonal finance correspondent, BBC News

 

It seems mind-boggling to most people that a tactic designed to get banks lending more would have the side-effect of knocking pensioners’ incomes.

QE makes annuities shrink. You get 25% less now than you did three years ago.

The downward effect of QE on pensions happens because the annuity income you are promised tracks the interest rate the government pays on its debts. These interest rates are already low and QE pushes them even lower.

By pressing the QE button, it could mean thousands have to make do with a whole retirement on less money.

“Some recent business surveys have painted a more positive picture and asset prices have risen. But the pace of expansion in the United Kingdom’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.”

It added that without another stimulus from QE, inflation was likely to fall from its current 4.2% to below its 2% target, as rising unemployment and falling import and energy prices fell away, and as the VAT increase from 17.5% to 20% last January also dropped from the annual comparison.

Official economic data also released on Thursday showed import prices fell by 1.3% between November and December.

Other figures showed that industrial production, which accounts for about 15% of the economy, grew by 0.5% on the month, against forecasts for a 0.2% rise.

“Despite overall signs that activity picked up in January after GDP contracted 0.2% in the fourth quarter of 2011, the economy is far from out of the economic woods and it continues to face major obstacles to developing sustainable, decent growth,” said Howard Archer, chief UK economist at IHS Global Insight.

Damaged pensions

The new QE was greeted with dismay by the pensions industry.

Dr Ros Altman: “I don’t see how making pensioners poorer is going to stimulate the economy”

Joanne Segars, the chief executive of the National Association of Pension Funds, said while she could understand the need to boost the economy, QE was damaging the value of pensions: “Retirees who get locked into a weak annuity will find that the Bank’s money printing leaves them out of pocket for the rest of their lives.

“For the companies that run final salary pensions, QE is a headache which pushes their pension funds further into the red. This means businesses have to put more money into their pension schemes, instead of spending it on jobs and investment. Our fear is that firms struggling with a weak economy will simply choose to close their pension schemes.”

She called for help for pension funds from the Pensions Regulator.

          Greece bailout: Coalition fails to agree cuts

The party leaders only received the text of the draft proposals on Wednesday morning

Greek PM Lucas Papademos has failed to secure the support of his coalition for a raft of new austerity measures, after more than seven hours of talks.

He met officials from three parties to try to secure a deal leading to a fresh bailout package.

The main stumbling block was proposed pension cuts, reports said.

Greek Finance Minister Evangelos Venizelos is travelling to Brussels where Eurozone finance ministers meet on Thursday afternoon.

Observers say there is huge pressure for Greek political leaders to strike a deal prior to that meeting.

“I leave for Brussels with hope that the Eurogroup will take a positive decision concerning the new aid plan,” Mr Venizelos said prior to his departure from Athens.

Following the coalition talks, Mr Papademos was reported to have gone directly into a meeting with EU and IMF officials.

They represent the so-called “troika” of bailout creditors – the European Union, the European Central Bank and the International Monetary Fund – who had earlier agreed the draft proposals with the prime minister.

They are thought to include a 20% minimum wage reduction, pension cuts and the sacking of 15,000 public sector workers – and have prompted further mass protests.

Officials from Pasok, New Democracy and the far-right Laos party only received the 50-page text on Wednesday morning, reports said, after Mr Papademos agreed the deal with the troika on Tuesday night.

Continue reading the main story

Greek deadlines

• This week: Eurozone finance ministers to hold a meeting or conference call to approve the latest bailout, as soon as Greek politicians agree to conditions
• 15 February: The latest a deal can be finalised in order to allow enough time for the Greek debt exchange, according to the Commission
• 20 March: Greece must have received its next tranche of bailout cash to meet a 14bn euro debt payment
• April: Greek elections expected

• Gavin Hewitt: Europe waits on Athens

Pressure

According to Laos leader George Karatzaferis, the bulk of Wednesday’s meeting was spent discussing the issue of supplementary pensions, which had reportedly been in line for a 15% cut.

Mr Papademos’s office said Mr Karatzaferis had expressed “serious reservations” during the meeting.

As he left, Mr Karatzaferis told reporters: “I made my positions clear from the beginning… I wanted to support Mr Samaras (New Democracy leader) on that issue (pensions).”

Antonis Samaras said he had felt obliged to bargain hard.

“We want to ease the people’s suffering,” he said.

However, the BBC’s Mark Lowen, in Athens, says the package of cuts and reforms would go down very badly with an austerity weary Greek nation.

According to unconfirmed reports in the Greek media, the measures were aimed at trimming 3.2bn euros (£2.7bn; $4.2bn):

• Minimum wage to be cut by 22% from 751 euros per month to 600 euros.
• Supplementary pensions to be reduced by 15% but basic pensions also likely to be cut
• 15,000 public sector jobs to go by end of 2012
• But holiday bonuses, known as 13th and 14th month salaries, expected to be saved

On Tuesday night, a spokesman for the International Institute of Finance (IIF) which is negotiating on behalf of the private creditors said the talks had been constructive and its three officials were returning to Paris for further consultations.

As part of Greece’s new 130bn euro ($170bn; £110bn) bailout deal – Greece’s second international bailout – Mr Papademos and Finance Minister Evangelos Venizelos have also been engaged in a separate strand of negotiations with private creditors over a write-off of up to 70% of the value of the money owed by the Greek government.

ALBA countries to pool funds in joint bank

• Venezuela’s President Hugo Chavez holds a map of the Americas during a session of …
• Cuba’s President Raul Castro speaks during a session of the Bolivarian Alternative …

CARACAS, Venezuela (AP) — An eight-nation bloc of Latin American and Caribbean countries agreed on Sunday to deposit 1 percent of their international reserves into a jointly administered development bank as they seek to deepen economic cooperation.

Officials announced the decision as Venezuelan President Hugo Chavez hosted leaders of the Bolivarian Alliance bloc, or ALBA, at a meeting in Caracas.

The countries that have agreed to deposit 1 percent of their international reserves in the ALBA Bank include members Cuba, Ecuador, Bolivia, Nicaragua, Dominica, Antigua and Barbuda and St. Vincent and the Grenadines.

The new bank is to provide financing for economic development projects. It’s unclear how much in all the countries plan to deposit in the bank, or how the funds will be administered.

Chavez has recently withdrawn much of Venezuela’s international reserves in gold deposited in European and U.S. banks, transferring the gold to Venezuela’s Central Bank.

He has also urged Latin American countries to promote regional development banks as alternatives to the World Bank and International Monetary Fund.

Chavez has touted the left-leaning ALBA bloc among his allies as an alternative to free trade agreements that the U.S. government has advocated.

Leaders also announced at the meeting that the group will soon expand with Suriname and St. Lucia as new members.

Bolivian President Evo Morales proposed that the group form a defense council for their militaries to work more closely together.

Ecuadorean President Rafael Correa suggested that the group boycott an upcoming Americas summit in Colombia in April if Cuba is excluded from the meeting.

Chavez and his allies also used the ALBA meeting to make a statement condemning violence in Syria, which they said had been fomented by foreign powers including the U.S.

The group also backed Argentina on Saturday in its long-running dispute with Britain over the Falkland Islands.

The dispute heated up recently when Prince William, a Royal Air Force helicopter pilot, was assigned to the islands on an upcoming military tour along with a warship in the run-up to the 30th anniversary of Argentina’s April 1982 invasion, which sparked a 10-week war.

Argentina, which claims Britain stole the archipelago from it 180 years ago, calls them the Malvinas Islands and has protested the British deployment.

Chavez and other leader condemned Britain’s stance.

                China ‘bans’ airlines from joining EU carbon scheme

China has voiced concerns over the impact of the scheme on its airlines

China has “banned” all airlines in the country from joining the European Union’s Emissions Trading Scheme (ETS) aimed at cutting carbon emissions.

The authorities have also barred the airlines from increasing their fares or adding new charges for the scheme.

The ban comes just weeks after the China Air Transport Association said its members did not support the ETS.

The scheme, implemented from 1 January, levies a charge on flights in EU airspace based on carbon emissions.

‘Severe challenges’

Continue reading the main story

“Start Quote

They would be able to stop the Chinese airlines from flying to the EU, but that could see retaliatory action by China”

Siva GovindasamyFlightglobal

The scheme has come in for severe criticism not just from China but also from other countries such as the US and Canada.

China has claimed that the plan could cost Chinese airlines 95m euros ($124m, £79m) in extra annual costs.

Analysts said that given the global economic conditions and an uncertain outlook for the travel industry, airlines were wary of the scheme hurting their profits.

“The sector is already facing quite severe challenges,” Chris De Lavigne of Frost & Sullivan told the BBC.

“The airline industry as a whole has already been hit by high fuel costs in the past couple of years and no one wants additional cost factors coming in.”

According to EU estimates, the scheme will see the cost of air fares rise by between 2 and 12 euros per passenger.

‘Very tricky’

The move by the Chinese authorities is likely to complicate the issue as the EU will have to decide on what measures it will take from here on.

“It is going to be very tricky. You have to wait and see how the EU will react,” Siva Govindasamy of Flightglobal told the BBC.

“They would be able to stop the Chinese airlines from flying to the EU, but that could see retaliatory action by China which will not be good for either side,” he added.

Analysts said that given the differences between the various parties involved, the matter may have to be resolved by an international body.

“It could potentially end up on the desk of the World Trade Organization as the countries who are against it have said it is an unfair trade practice,” said Frost & Sullivan’s Mr Lavigne.

“Both sides have claimed that this is either fair or unfair, so it is very difficult to see how this is going to shape up.”

         UK economy to enter recession soon, says report

The UK economy could rebound in 2013 if the eurozone crisis is resolved, Niesr said

The UK economy will enter recession in the first half of the year as households continue to cut back, an influential think tank has warned.

The National Institute of Economic and Social Research (Niesr) said the government should temporarily ease its spending cuts to promote growth.

It expects the economy to shrink 0.1% in 2012, but to grow 2.3% in 2013 if the eurozone debt crisis is resolved.

Niesr said, however, that deficit cuts had bolstered market confidence.

The UK is already close to another recession – defined as two consecutive quarters of economic contraction – after official figures in January showed that the economy shrank by 0.2% in the final three months of 2011.

In its UK and World Economy Forecast Niesr said: “We forecast a return to technical recession in the first half of this year, as households continue to retrench, credit conditions remain tight, and businesses are reluctant to invest given uncertainty about both domestic and foreign demand.”

Niesr said economic conditions will not improve in the short term, as both the private the public sectors are still focused on paying off debts. “Over the near term we do not expect economic conditions to improve,” the report said.

The think tank predicted that inflation would fall sharply, with the consumer price index down to 2.2% this year and 1.4% in 2013.

But there were grim forecasts on unemployment, which Niesr expects will rise to about 9% this year, from 8.4% in the three months to November, and will remain above 7% in 2014.

“Unemployment at this elevated level for such a long period is likely to do permanent damage to the supply side of the economy, with large long-run economic costs,” the report said.

Continue reading the main story

“Start Quote

As Niesr have said, the government’s commitment to deficit reduction has helped maintain market confidence. ”

Treasury spokesman

Niesr suggests relaxing the government’s austerity programme. “The UK economy currently suffers from deficient demand; the current stance of fiscal policy is contributing to this deficiency. A temporary easing of fiscal policy in the near term would boost the economy,” the group said.

Little scope

More investment would not derail the chancellor’s long term fiscal goals, Niesr said.

On Monday, the Institute of Fiscal Studies said the government could safely cut taxes temporarily, without worrying that the Bank of England would raise rates in response.

But the IFS that there was little scope for big or long-term tax cuts, which risked undermining investor confidence.

“The chancellor faces his third budget with the economy and public finances in considerably weaker shape than he had hoped a year ago,” said Paul Johnson, director of the IFS.

Last month, Chancellor of the Exchequer George Osborne said he would continue with the coalition government’s efforts to reduce the deficit, despite criticism that it is choking off recovery.

A Treasury spokesman said: “As Niesr have said, the government’s commitment to deficit reduction has helped maintain market confidence.

“They expect the government to meet its fiscal mandate and for the UK economy to grow more strongly than the euro area this year and next.”

Meanwhile, Niesr forecast global growth of 3.5% for 2012, led by China and India, and 4% in 2013. It forecast US economic growth of 2% this year.An independent Scotland could be more constrained on economic policy than at present, a study has suggested.

Scottish independence

The report also considered the monetary and fiscal policy choices facing Scotland if it leaves the union.

Niesr concluded that retaining sterling would be “sensible” for Scotland, but warned that currency union could restrict fiscal policy.

The Scottish government said the report “validates” its aim to retain sterling and insisted Scotland would be in a “healthier” financial position.

The report said that it is “doubtful” whether the Bank of England would extend lender-of-last-resort facilities to Scottish institutions, something First Minister Alex Salmond has argued for.

Niesr adds: “With a pro rata transfer of existing UK public debt, Scotland would enter independence heavily indebted with no insurance from fiscal risk sharing or fiscal transfer mechanism with the rest of the UK.

“Even with a favourable settlement on future oil revenues, its fiscal balances are likely to be volatile with large deficits in some years as a result of its dependence on oil revenues,” the report said.

            American Airlines announces 13,000 job cuts

American Airlines will cut maintenance staff, flight attendants, pilots and management

The parent company of American Airlines (AA) says it will shed 13,000 jobs – around 15% of its workforce.

AA’s parent, AMR, wants to cut staff costs by 20% in a bid to reduce spending by $2bn (£1.26, 1.52bn euros) and raise revenue by $1bn a year.

AMR, which filed for bankruptcy protection in November, also wants to make changes to its staff pensions.

The 88,000 strong workforce is mostly represented by three main unions, which are opposed to the changes.

AMR said it plans to begin negotiations with the three unions shortly.

AMR lost $884m in the first nine months of 2011, and on Tuesday disclosed a $904m loss for December alone.

The company has lost more than $11bn since 2001.

AMR’s chief executive, Thomas W Horton said in a letter to employees: “We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalise fully on the solid foundation we’ve put in place.”

‘Dismay and outrage’

Mr Horton said in December that the company would emerge from bankruptcy with fewer workers.

“I expect dismay and outrage from our membership as details of the proposal are made public,” said Laura Glading, president of the flight attendants’ union.

Mr Horton said the planned cost-cutting moves will include restructuring debt and aircraft leases, grounding older planes, and changing workforce contracts, some management jobs will also go as part of the plans.

The biggest cuts – about 4,600 – are expected to be among maintenance workers. Baggage handlers could be cut by 4,200, while some 2,300 flight attendants, 1,400 management employees and 400 pilots would also lose their jobs.

The company also wants union approval to drop its traditional pension plans, which pay a defined amount of pension and covers 130,000 employees and retirees, and replace them with a “retirement account”.

AMR’s company pension funds are underfunded by billions of dollars and the company said on its website on Wednesday that it could no longer afford them.

AMR is the latest of several large US airlines to go through Chapter 11 bankruptcy protection in an effort to reduce costs and debt.