Tag: Business and finance

THE post-war system of global trade has been close to expiring, seemingly, for most of the post-war period. It tottered in the 1980s, when Ronald Reagan muscled trading partners into curbing their exports to America. It wobbled with the end of the fruitless Doha round of trade talks. The system now faces the antediluvian economics of President Donald Trump, who seems bent on its destruction.

Mr Trump’s mercantilism is gaining steam. Straight after saying he would slap hefty tariffs on aluminium and steel imports, he is setting his sights on China, a favourite stump-speech bogeyman. This week he blocked the takeover of an American chipmaker by a Singaporean rival, because of fears of Chinese technological leadership. He is poised to act against China over its theft of intellectual property and its trade surplus.

And yet global trade has proven itself to be remarkably resilient. An optimist could argue that, historically, it is big political realignments that overturn trade-policy…Continue reading

AS AMERICA’S oldest airline still aloft, Delta makes much of its southern roots. At its biggest hub, Atlanta airport, the company museum recounts how it became the world’s second-biggest carrier. The answer: by buying up domestic rivals. With few takeover targets left at home, Delta’s chief executive, Ed Bastian, is looking abroad. But his plans for more foreign joint ventures (JVs) face regulatory headwinds.

Last year Mr Bastian announced a flurry of JVs. In May Delta launched one with Aeromexico and in June another with Korean Air. In July Delta formed one of the world’s biggest JVs with Virgin Atlantic of Britain and Air France-KLM, a European group. In December it sealed one with WestJet, Canada’s biggest low-cost carrier. It wants closer relations with China Eastern and GOL of Brazil, two airlines in which it owns shares. And on March 12th it emerged that Delta and Air France-KLM plan to bid for Air India, an ailing flag carrier. If all these deals come off, one passenger in eight…Continue reading

GULLIVER recently wrote about a pet that suffered a grizzly end after it was not permitted to fly. Spirit Airlines refused to allow a hamster on board as an emotional-support animal and it ended up being flushed down an airport toilet. But sometimes it is more dangerous for an animal to be permitted to ascend to 35,000 feet. Particularly, it seems, if it is flying on United Airlines.

On March 12th, on a flight from Houston to New York, a United Airlines flight attendant knowingly stowed a French bulldog in the overhead compartment, where it died, the family that owned the dog alleges. United quickly apologised to the family for what it called “a tragic accident that should never have occurred, as pets should never be placed in the overhead bin.” The airline promised an investigation “to prevent this…Continue reading

WHEN the underpinnings of an industry change, the effects may seem slow and limited for a while, only to prove surprisingly speedy later on. Europe’s life-insurance industry provides a case study. The demerger announced on March 14th of Prudential is the latest in a flurry of activity prompted at least partly by shifts in European regulation over two years ago. Britain’s largest insurer (unrelated to the American insurer of the same name) is splitting off its British and European business into M&G Prudential, which will be largely focused on asset management. The remainder of Prudential will be left as an insurer in Asia, America and Africa.

Life insurers have been hurt by a prolonged period of low interest rates, prompting them to move towards investment-like products that leave more risk with policyholders, and away from products with guaranteed returns, such as annuities. More stringent capital requirements in the European Union for insurers from the beginning of 2016, under a set of rules called Solvency 2, mean that life insurers…Continue reading

THERE has been much chatter among frequent flyers in London this week about a front-page splash in the Financial Times claiming that British negotiations with America to replace the EU-US Open Skies Treaty are in trouble:

The US is offering Britain a worse “open skies” deal after Brexit than it had as an EU member, in a negotiating stance that would badly hit the transatlantic operating rights of British Airways and Virgin Atlantic. British and American negotiators met secretly in January for the first formal talks on a new air services deal, aiming to fill the gap created when Britain falls out of the EU-US open skies treaty after Brexit, say people familiar with talks.

The talks were cut short after US negotiators offered only a standard bilateral agreement. These typically require airlines to be majority owned and controlled by parties from their…Continue reading

Tipple from a teetotalitarian land

QUARTER-LITRE bottles of whisky whizz down a conveyor belt past Mukhtar Ali, a quality-control employee at Pakistan’s Murree Brewery, the only legal beer-and-spirit maker in this Islamic country. Nearby labourers pack Vat No.1, a cask-aged spirit, into boxes. An elderly man with a long beard tapes them up. Asked over the roar of imported German machinery if they have ever taken a sip of the amber liquid, each shakes his head. “It’s haram,” (meaning forbidden), says Mr Ali.

The 155-year-old institution causes some spluttering nonetheless. Founded for British troops of the Raj, it can sell only to the 3% of the 207m-strong population that is comprised of foreigners and non-Muslims. But many of its products end up in Muslim hands, as illustrated by the predilections of the former prime minister, Zulfiqar Ali Bhutto, who ordered a nationwide ban on alcohol in 1977. “He was the biggest consumer of Murree in…Continue reading

“SUCCESS is toxic”, says Risto Siilasmaa, Nokia’s chairman, as snowflakes swirl in the wind outside. Asked what lesson to draw from his firm’s collapse, which started a decade ago, he underlines the dangers of doing too well. In its heyday, Nokia was a monster; its market capitalisation surpassed $290bn in mid-2000 and by 2007 it accounted for 40% of global handset sales. Yet its dominance in hardware, which encouraged a relaxed attitude towards software, bred failure. It is now worth $33bn.

No executive at Ericsson, Nokia’s big European rival based some 400km to the west near Stockholm, would put it quite that way. But the experience of the Swedish firm has been strikingly similar. Early this decade Ericsson provided 40% of the world’s mobile infrastructure and its market capitalisation hovered above $40bn. Now both numbers are about half that.

The two firms are also direct competitors once again, which invites assessment of who is ahead. Another question is whether European…Continue reading

IN THE run-up to the presidential election of 2016, investors were nervous about Donald Trump. They liked his tax-cutting, anti-regulation promises, but fretted about his foreign and trade policies. Some dubbed the two agendas “Trump lite” and “Donnie Darko”.

Almost as soon as it became clear that Mr Trump would become president, the markets decided to believe in the optimistic version. His tweeting and decision-making may have been erratic, but investors seemed to forgive the president his peccadilloes as a wife might her errant husband: “He may not be faithful but he’s a good provider.”

Fears about trade conflict almost disappeared. In last month’s survey of global fund managers by Bank of America Merrill Lynch, just 5% regarded a trade war between America and China as the biggest risk facing the markets, compared with 45% who worried about a return of inflation or a crash in the bond markets.

The announcement of tariffs on steel and aluminium on March 1st thus…Continue reading

AS COMPUTING power has grown, it has become easier to uncover information hidden inside datasets that seem totally unconnected. Some recent studies have used this approach to reveal business-related information flows. One linked the movements of 18th-century share prices with the arrival of ships bringing news. Another looked at the relationship between business activity and the movements of corporate jets. A third mined White House visitor logs for the names of executives and examined their companies’ subsequent stockmarket returns.

A paper in this vein published on March 5th pores over a dataset released by New York City’s government covering more than 1bn cab rides between 2009 and 2014. David Finer, a graduate student at University of Chicago’s Booth School of Business, analysed trips connecting the headquarters of big banks and the Federal Reserve Bank of New York. He extracted trips starting at commercial banks and at the New York Fed that converged on the same destination around…Continue reading

WHEN British soapmakers merged with Dutch margarine merchants to form Unilever in 1929, the logic was clear. Both firms shared a key ingredient, animal fat, and were starting to step on each other’s toes as they diversified. Unilever is one of the world’s largest consumer-goods firms. A dual-nationality company, it has headquarters in both Britain and the Netherlands and is regarded as a national treasure in both places.

Before the month is out, however, it is expected to plump for Rotterdam as its sole headquarters (Britain’s quandary over Brexit is doubtless a factor). It is not alone in rethinking its arcane arrangement. According to FTI Consulting, a business-advisory firm, of the 15 companies that have used a “dual structure” at one time or other over the past 25 years, only six remain. Some, such as Royal Dutch Shell, an oil giant, unified their structures in the mid-2000s. RELX, an Anglo-Dutch publishing firm, did so last month. BHP, an Anglo-Australian mining firm, faces investor pressure to do the same.

“Siamese…Continue reading