South Korea on Monday delivered its largest ever interest rate cut and pledged more spending and tax cuts next year to help economic growth, already at a four-year low and likely to be hit further by the global financial storm.
But the 75 basis point rate cut to 4.25 percent failed to lift share prices after they dropped their most on record last week on growing fears that the economy, along with company profits, will buckle under the strain of the downturn across world markets.
“What investors really want isn’t just a rate cut but measures to cure a liquidity squeeze,” said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities. “It is the nervousness in the market that keeps credit tight.”
South Korea’s banks have looked particularly exposed to the global credit crunch, finding it difficult to roll over foreign currency loans, many of which are linked to forward covering of major export deals by local firms.
This lack of liquidity makes the banks in turn reluctant to lend at home, threatening domestic firms with their own credit crunch. This combination prompted the central bank’s rate cut.
The Monetary Policy Committee slashed the base rate by 75 basis points to 4.25 percent — its first emergency rate cut since the days after the September 11, 2001 attacks in the United States.
It was also the second cut this month. The central bank had cut rates by 25 basis points hours after a concerted rate cut among major central banks world wide aimed at boosting market confidence in the face of the deepest financial crisis in decades internet pay day loan.
Bank of Korea Governor Lee Seong-tae told reporters the central bank was also considering its first ever purchase of commercial bank bonds to put cash into the financial system.
“We have not decided how much liquidity we would inject with bond purchases, but we are considering 5-10 trillion won ($3.5-7.0 billion),” he told reporters.
Some analysts said the central bank may need to make more rate cuts.
“The rate cut could help lessen the burden of household debt and play a role as a stepping stone to boost the economy … Additional rate cuts are possible. A cut in rates might take place in December but more likely early next year,” said Cho Seong-joon, economist at Meritz Securities.
South Korean household debt totaled about 500 trillion won by the end of August. The ratio of debt to disposable income has risen sharply, especially debt to non-bank lenders, which charge higher rates than banks.
The central bank also cut its special interest rate for small- and medium-sized companies by 75 basis points. These companies are the country’s main employers, accounting for about 90 percent of the workforce.
BOOSTS SPENDING
President Lee Myung-bak is a budget speech to parliament said the government planned to further boost spending and cut taxes next year and stood ready to inject liquidity into the system until markets calm.
Stocks inched higher at the open Tuesday, following the previous day’s steep selloff, as a Senate hearing on the proposed $700 billion financial services bailout plan got underway.
The Dow Jones industrial average (INDU), the Standard & Poor’s 500 (SPX) index and the Nasdaq composite (COMP) all gained in the early going.
On Monday, all three major indexes slumped, with the Dow industrials sinking 373 points on worries about what details may emerge from the government’s plan to restore financial stability. It was the fourth day in a row that the Dow posted a move of 350 points in either direction, reflecting the extreme volatility present in markets right now.
In testimony prepared for a Senate Banking Committee hearing, both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke said that immediate action is needed to save the economy.
Paulson said the bailout is necessary "in order to avoid a continuing series of financial institution failures and frozen credit markets that threaten American families’ well-being, the viability of businesses both small and large, and the very health of our economy."
"Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy," Bernanke said.
The Congressional debate continues over the details of the plan to save Wall Street. The Democrats are seeking government ownership of certain assets, in exchange for putting up the money payday loan.
Art Hogan, chief market strategist for Jefferies, said that investors are still nervous about deteriorating earnings in the hard-hit finance sector, despite the call for a bailout.
Hogan said slow earnings growth in the finance sector is "going to give us ongoing pressure even if we get expedited approval of the bailout. I think that’s crept into investors’ psyche."
Oil: Oil prices recorded their biggest one-day jump in history on Monday, when the October contract surged $25 a barrel during late-day trading before closing up $16.37 to $120.92 a barrel. The late surge was partly due to the expiration of the October contract, which prompted traders to rush to fill obligations.
Early Tuesday, the November contract - now the front month - was trading down 87 cents to $108.50 a barrel.
Company news: Lennar (LEN, Fortune 500), a home-building company that provides financial services, announced third-quarter results before the opening bell. The company’s loss narrowed to 56 cents a share while revenue plummeted 53% to $1.1 billion. Both results came in slightly better than expected, but the results still indicate weakness in the housing sector.
Other markets: European markets were down, but the Nikkei closed higher. The dollar fell versus the euro and the Japanese yen.
Central banks in Frankfurt, London and Zurich kept up their dollar auctions for a third day as part of coordinated action with the Federal Reserve to provide liquidity to financial markets.
The European Central Bank, the Bank of England and the Swiss National Bank allotted $76.2 billion out of $90 billion on offer in emergency overnight funds. The U.K. central bank distributed less than the $40 billion on offer, while the ECB and SNB said banks bid for more money than they auctioned. Today's funds replace $70.8 billion in overnight loans maturing today.
The central banks sought to soothe money markets after last week's collapse of Lehman Brothers Holdings Inc. and the U.S. government's takeover of American International Group Inc. threatened to derail financial markets. That led to the unveiling of the Bush administration's $700 billion dollar rescue plan to restore confidence.
“It would be wrong to say dollar markets are functioning normally but these are difficult times and central banks have injected a huge amount of liquidity,'' said Philip Shaw, chief economist at Investec Securities. “I think it is having an effect of some sort. Things do look considerably calmer than last week.''
The overnight rate for lending between banks in dollars fell to 2.97 percent today from 3.25 percent on Sept payday loans. 19, the British Bankers' Association reported in London.
Japan, U.A.E.
The United Arab Emirates central bank set up a 50 billion- dirham ($14 billion) fund for banks operating in the country to help ease liquidity constraints today. The Bank of Japan said it will auction dollars on Sept. 24, lending $30 billion for one month and plans to conduct four other dollar operations this year.
The Bank of England allowed bids of 20 percent of the total on offer today, twice the size permitted in previous auctions. The bank also disclosed that it received 5 billion pounds ($9.2 billion) in overnight funds on Sept. 19, the first use of its deposit facility in more than a year and the most since it revamped its money market operations in May 2006.
The ECB said the average rate for the overnight dollar loans, which were set up with a swap line with the Fed last week, was 3.25 percent. The average rate in the U.K. was 2.06 percent, and the minimum bid accepted was at 0.01 percent. The SNB loaned dollars at an average rate of 2.72 percent.
The Federal Reserve's Open Market Committee kept its target overnight lending rate at 2 percent on Sept. 16.
Blackstone Group LP and Kohlberg Kravis Roberts & Co are each looking to buy parts of Lehman’s real estate and asset management units, sources familiar with the situation said on Friday, sparking a broad rebound in financial stocks.
The real estate unit of Lehman Brothers Holdings Inc, which includes property and some asset-backed securities, could be worth about $5 billion, the sources said.
Lehman shares jumped 5.3 percent after the Reuters report. That helped lift the S&P financial index, which had slipped earlier on Friday, by 1.8 percent.
“Lehman has been so shredded in terms of confidence that anything like this is something that can ignite a upward movement at any point,” said Michael Holland, founder of money manager Holland & Co LLC.
Blackstone, KKR, and Lehman all declined to comment.
Lehman, the fourth-biggest U.S instant payday loan. investment bank, is under pressure to raise capital ahead of its earnings announcement this month. It has racked up crippling losses and still bears more than $60 billion of mortgage and commercial real estate exposure.
It has explored shedding assets, spinning off its money management arm and selling a significant stake to outside investors.
State-controlled Korea Development Bank (KDB) is in talks to acquire or invest in Lehman, but any deal was thrown into doubt amid financial market turmoil this week in South Korea. KDB has not given any details on the negotiations.
Japan's wholesale inflation rate accelerated to a 27-year high in July, squeezing corporate profits, increasing bankruptcies and threatening the economy's longest postwar expansion.
Producer prices, the costs companies pay for energy and raw materials, climbed 7.1 percent from a year earlier after a revised 5.7 percent increase in June, the Bank of Japan said in Tokyo today. The median estimate of 31 economists surveyed by Bloomberg News was for 5.7 percent.
More businesses failed because of rising fuel and raw- material costs in the first half of this year than for all of 2007, according to Teikoku Databank Ltd. Tokyo-based Galaxy Airlines Co. said last week that it will stop air cargo services, and Nippon Paper Group Inc. plans to increase prices for the second time this year.
“Even though oil prices have been coming down in recent weeks, companies will keep trying to raise prices because they've made up for only a fraction of the cost increases they've suffered,'' said Azusa Kato, an economist at BNP Paribas in Tokyo.
The yen traded at 110.15 per dollar as of 11:10 a.m. in Tokyo from 110.14 before the report was published. Japan's currency has fallen 2 percent this month. Government bonds dropped for the first time in five days, causing the yield on 10-year debt to rise 1 basis point to 1.46 percent.
Interest Rates
Faster inflation is unlikely to prompt the Bank of Japan to raise interest rates as the economy teeters on the verge of its first recession since 2001. Governor Masaaki Shirakawa and his colleagues will keep the benchmark overnight lending rate at 0.5 percent for the rest of the year at least, according to 31 of 33 economists surveyed by Bloomberg last month.
The central bank last month raised its inflation forecast and cut its growth estimate, saying higher costs are squeezing companies and households. The world's second-largest economy probably shrank at an annual 2.3 percent pace last quarter, the first contraction in a year, economists estimate a report will show tomorrow.
Nippon Paper, Japan's second-largest paper maker, said last month it will raise prices by 10 percent in September. Fuel and raw materials are “rising so rapidly that it's too difficult to recover profits with cost-cutting efforts alone,'' the company said on July 30.
Iranian Revolution
The increase in producer prices was the steepest since January 1981 cash advance loans. From a month earlier, prices climbed 2 percent, the fastest pace since April 1980, when oil surged in the wake of the 1979 Iranian Revolution.
Higher commodity costs are also feeding into retail inflation. Consumer prices excluding fresh food, fish and vegetables climbed 1.9 percent in June from a year earlier, the most in a decade.
Some 235 companies went bust in the six months ended June because of rising costs, exceeding the 229 bankruptcies recorded for the same reason in all of 2007, Teikoku Databank reported last month. Transport, food and metal companies led the failures.
Galaxy Airlines, an air cargo operator whose shareholders include SG Holdings Co., the holding company of Sagawa Express Co., last week said it will stop operations in October because of rising fuel and maintenance costs. The company was founded three years ago.
“Small and medium-size companies are really suffering under this cost environment,'' Stefan Worrall, vice president of Japan equity sales at Credit Suisse Group in Tokyo, said on Bloomberg Television.
Oil Eases
Producer-price gains will probably ease in coming months as oil falls and a global slowdown reduces demand for raw materials.
Crude oil has dropped 21 percent since reaching a record $147.27 a barrel on July 11. Retail gasoline prices climbed to a record 185.1 yen a liter ($6.39 a gallon) this month.
Wholesale inflation “will probably stay around 5 percent through the end of this year and then gradually head in the opposite direction next year,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo.
Even so, producer costs will keep fueling consumer prices for a while, economists said. Ajinomoto Co., the country's biggest foodmaker, last week announced plans to raise prices, and McDonald's Holdings Co. Japan said a Big Mac may soon cost Japanese consumers 30 yen more.
“We expect core prices will rise 2.2 percent in July and 2.3 percent in September,'' said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Even though crude oil prices are being adjusted now, the ongoing cost-push inflation won't weaken easily.''
Exports from Germany, Europe's largest economy, declined the most in almost four years in May, as a cooling global economy and a stronger euro curbed demand.
Sales abroad, adjusted for working days and seasonal changes, decreased 3.2 percent from April, the Federal Statistics Office in Wiesbaden said today. That's the biggest drop since June 2004. Economists expected a gain of 0.5 percent, the median of 11 forecasts in a Bloomberg News survey showed.
Exporters are grappling with the euro's 15 percent appreciation against the dollar and an 18 percent gain against sterling in the past year. That's eroding competitiveness just as a U.S.-led global slowdown and record oil prices cool the world economy. In China, export growth probably slowed in June.
“We can't expect much support from the export side,'' said Matthias Rubisch, an economist at Commerzbank AG in Frankfurt. “We will only see slight gains in the coming months. Over the past few weeks, the economic outlook has considerably worsened.''
From a year earlier, exports rose 2.5 percent, today's report showed. The trade surplus narrowed to 14.4 billion euros ($23 billion) from 18.8 billion euros in April. Economists forecast a surplus of 17.3 billion euros. The surplus in the current account, the measure of all exports including services, narrowed to 7.5 billion euros from 15.5 billion euros in April.
Production Drops
Manufacturing orders in Germany unexpectedly fell for the sixth month in succession and industrial production declined for a third, reports showed over the past week.
German consumer, business and investor confidence fell last month. Plant and machinery orders fell the most in three years in May, the VDMA machine makers association said last week cash advance.
“The stronger euro is starting to hurt,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “Foreign orders have seriously dropped in recent months and with weak domestic demand not offsetting the shortfall, economic growth in the second quarter may contract.''
Growth is slowing globally after the U.S. subprime mortgage market collapsed, making banks reluctant to lend and driving up the cost of credit. The International Monetary Fund in April forecast world growth would slow to 3.7 percent this year from 4.9 percent in 2007.
Australia, Dubai
Oil prices above $135 a barrel are fanning inflation and eroding demand. About 50 countries now have inflation of more than 10 percent, a Morgan Stanley study showed last month.
Some companies are trying to offset falling European and U.S. orders by expanding in oil-exporting countries. Lanxess AG, Germany's biggest publicly traded specialty-chemicals maker, is sticking to its full-year profit targets on demand from Asia.
Hochtief AG, Germany's biggest construction company, won three orders valued at more than 340 million euros ($540 million) to maintain roads and build apartment towers in New Zealand, Australia and Dubai.
Shipments to countries outside the European Union rose 4.2 percent from a year earlier. Exports to EU member states increased 1.5 percent, while imports gained 5.7 percent.
Still, after the fastest economic expansion in 12 years in the first quarter, Europe's largest economy may shrink in the second quarter, Germany's Deputy Economy Minister Walther Otremba said June 24.
The head of Mexican beer company Grupo Modelo is stepping down from the board of Anheuser-Busch as the remaining directors of the iconic American brewer of Budweiser consider a $46 billion takeover offer from Belgian brewer InBev.
The resignation of Carlos Fernandez, president and chief executive of Grupo Modelo SAB, was announced Friday - the same day the Anheuser-Busch Cos. (BUD, Fortune 500) board met in St. Louis to consider InBev’s $65-per-share offer for the largest U.S. brewer.
Anheuser-Busch said in a statement its board did not respond to InBev’s proposal after Friday’s meeting, but would "continue to review and consider the proposal." InBev declined comment.
Anheuser-Busch shares slipped 38 cents to $60.67 Friday. The stock price has risen sharply since rumors of InBev’s interest began earlier this spring.
St. Louis-based Anheuser-Busch did not say why Fernandez resigned. His departure leaves the board with 13 members.
"Carlos has always provided great value as a member of our board, with insights into the business," Anheuser-Busch President and CEO August A. Busch IV said in a statement. "He remains a respected colleague."
Grupo Modelo said in a statement that Fernandez resigned from the Anheuser-Busch board "to avoid the appearance of any conflicts." Company officials did not elaborate.
Anheuser-Busch owns an approximate 50% non-controlling stake in Grupo Modelo, which distributes Budweiser, Bud Light and other Anheuser-Busch products in Mexico. There have been reports that Anheuser-Busch is considering a greater stake in Grupo Modelo. Still, analysts say the relationship has long been strained.
Juli Niemann of Smith Moore & Co. in St. Louis said Fernandez’s departure may be a signal that the Anheuser-Busch board is opposed to the InBev deal.
"What Grupo Modelo wants is a semi-silent partner, and that’s not Anheuser-Busch," Niemann said. "The trend may possibly be going in the direction Fernandez doesn’t like.
"I view the board meeting as buying time to throw up more defenses - a scorched-earth policy or poison pill." A poison pill unleashes more shares if there is an unwanted suitor who tries to take over a company, driving up the purchase price.
Dave Kolpak of Victory Capital Management in Cleveland also believes the majority of board members may be expressing opposition to the InBev takeover.
"My expectation is the Anheuser-Busch board will resist the offer," Kolpak said http://paydayloans-on.com. "I think it will be a difficult task because I think it’s a pretty generous offer. I think the board today is getting together to think about ways to resist."
A deal between Anheuser-Busch and Grupo Modelo could make the St. Louis brewer too big for InBev to purchase. Last week, in a letter to Busch, InBev CEO Carlos Brito warned against pursuing a larger piece of Grupo Modelo. Brito said his company’s $65-per-share offer was based on Anheuser-Busch’s current assets, business and capital structure.
Several Missouri politicians have expressed opposition to the Inbev offer, citing Anheuser-Busch’s 150-year heritage in St. Louis and its strong commitment to civic and charitable endeavors.
In a video interview posted Friday on InBev’s Web site, Brito tried to calm fears about what will happen in St. Louis if the takeover is approved.
"We don’t have a headquarters in the U.S. So why would we move the headquarters out of St. Louis when we understand that St. Louis is such an integral part of what the brand is all about - the roots, the Clydesdales, the museum, the Pestalozzi Street brewery, the 1 Busch Place - all the things are key parts of the brand?" Brito said. "So why change? We don’t have a place to go."
In another deal, Anheuser-Busch said Friday it will purchase the remaining 50% ownership of the Crown Beers India Ltd. joint venture from its partner, Crown International. The deal also gives Anheuser-Busch ownership of the venture’s brewery in Hyderabad, India.
A state judge upheld the fraud verdict that Alabama won against AstraZeneca Pharmaceuticals LP in a Medicaid drug pricing suit, but ruled Thursday the punitive damages were too high, trimming the total judgment to $160 million.
The jury had ordered the company, the U.S. subsidiary of Britain’s AstraZeneca PLC (AZN), to pay $40 million in compensatory damages and $175 million in punitive damages. But Circuit Judge Charles Price ruled that state law limits punitive damages to three times compensatory damages and cut the amount down to $120 million.
A spokeswoman for AstraZeneca said the company would appeal to the Alabama Supreme Court.
The verdict in February came in the first trial of lawsuits filed by the state against more than 70 drug companies. The lawsuits claim the state was overcharged for prescription drugs for Medicaid recipients.
Two other drug companies, Novartis Pharmaceuticals and SmithKline Beecham Corp., are currently on trial in the litigation in Montgomery.
One of the state’s lawyers, Montgomery attorney Jere Beasley, said it was important that the judge found punitive damages were supported by the evidence. He said the court also "correctly found there was sufficient evidence that the defendants committed fraud" in pricing drugs for the poor and elderly in the state’s Medicaid program.
"We believe this is a most significant finding by the trial judge who heard the evidence and found that the defendants committed intentional fraud," he said.
AstraZeneca spokeswoman Laura Woodin said the company was pleased that the judge "reduced the amount of punitive damages as required by Alabama law."
"However, we are disappointed that Judge Price did not set aside the jury’s verdict in its entirety," Woodin said payday loan online. "AstraZeneca has fully complied with the law, government guidelines and contracts that govern Medicaid pricing."
Drugs manufactured by AstraZeneca include Nexium, which is used to treat heartburn and acid reflux, and Crestor, which is prescribed to lower cholesterol.
Judge: Pharma firm’s actions ‘reprehensible’
In his eight-page ruling, Price said the evidence during the trial showed that AstraZeneca’s actions in overcharging Alabama’s Medicaid program were "reprehensible."
"The state introduced evidence to establish that the defendants fraudulently diverted Medicaid funds intended to benefit the state’s poor, elderly and infirm citizens," Price wrote. "The state established that defendants’ wrongful conduct deprived the state of limited funds available for the state’s Medicaid recipients."
At a hearing last week, attorneys for AstraZeneca had asked Price to throw out or reduce the $215 million jury verdict. AstraZeneca contended that, if not thrown out, the total judgment should be no more than $86 million.
Alabama Attorney General Troy King filed the lawsuits against the drug companies in 2005. Since the lawsuits were filed, the state has settled its claims against two drug manufacturers, Takeda Pharmaceuticals North America Inc. and Day LP.
Similar lawsuits against pharmaceutical companies are pending in other states, including Mississippi, South Carolina, Utah, Hawaii and Alaska.
Treasury Secretary Henry Paulson says the administration intends to keep pursuing a policy of "robust engagement" with China that will include filing unfair trade cases as needed and pressuring the Chinese to move more quickly to revalue their currency.
Paulson, delivering a speech outlining the goals of a high-level meeting the two countries will hold next week, said it was important for both nations to resist calls for erecting protectionist barriers.
"It is clear that our strategy for robust engagement with China — intensive dialogue but with resort to WTO dispute settlement and WTO-sanctioned trade remedies if needed — is more productive than protectionist policies or legislation," Paulson said in his prepared remarks.
Get ready for higher airfares and get used to those crowded planes as rising oil prices force airlines to face the grim prospects of finding ways to deal with multi-billion dollar fuel bills.
In the latest move from the battered airline industry, United Airlines said Wednesday it will reduce its fleet by 100 planes by 2009 and will cut 1,400 to 1,600 jobs to stave off losses related to fuel costs.
This means that passengers will pay even more to fly as airlines scramble to curb their losses from escalating fuel prices, analysts said. To add insult to injury, the planes will also get more crowded as airlines reduce capacity.
Raymond Neidl, airline analyst for Calyon Securities, said the airlines would have to raise ticket prices by at least 30% to match fuel costs, though he said it’s unlikely they could get away with an increase that steep.
Michael Derchin, airline analyst for FTN Midwest Securities, said passengers should expect fares to go up another 5% through 2009, on top of the 7% increase that’s already happened this year.
"The marginal traveler will be priced out of the market, as it should be in this environment," said Neidl. "The consumer’s not paying his [share] with these oil prices. They’ve got to start pricing the product to reflect the cost of producing the product."
Since airlines are trying to save money by reducing capacity, Derchin said that passengers should expect more crowded planes.
"With this level of capacity reduction, you’re talking about load factors in the 90% range, which effectively means full airplanes wherever you go," said Derchin. "The choice for consumers will be reduced, meaning fewer flights and fewer destinations."
Derchin said United’s capacity reductions would have the most impact on its hubs in Denver, Chicago, San Francisco and Los Angeles.
United, owned by UAL Corp., (UAUA, Fortune 500) said it was culling six B747s and its entire fleet of 94 B737s. The airline described the B737s as its "oldest and least fuel-efficient" planes. The company’s stock rose more than 11% on the news.
The money-losing airline industry is fighting for survival under the weight of escalating oil prices. United said it is making the cuts to help deal with an additional $3 billion in fuel costs this year. On Monday, the International Air Transport Association, representing 240 carriers, projected that soaring fuel prices would cause the industry to lose $2.3 billion this year.
United is the latest to announce cuts to jobs and planes, but it won’t be the last, said Neidl of Calyon.
American Airlines said on May 21 that it would reduce capacity by 11% to 12% in the fourth quarter. The Associated Press quoted Chief Executive Gerard Arpey as saying he might lay off thousands of staffers http://abc-cashadvance.com. American, owned by AMR Corp., (AMR, Fortune 500) is the leading U.S.-based carrier.
Neidl said that Delta Air Lines (DAL, Fortune 500), the third-largest airline in terms of annual sales, will probably be the next among the major carriers to slash jobs and ground aircraft.
Bob McAdoo, airline analyst for Avondale Partners, noted that Delta made a similar and successful cut to capacity after filing for bankruptcy in 2005. "That was a major step in changing the economics of their business and actually enabled them to make some money, even during bankruptcy," he said.
McAdoo described United’s cuts as "substantial" and "enough to make a difference."
United said it was trimming its domestic capacity in the fourth quarter by 14% year-over-year. This means that during the 2008-2009 period, capacity would be reduced by 17% or 18%, the airline said.
The job cuts include 500 previously announced reductions, which will happen by year’s end, United said. The reductions will include salaried employees, managers and contractors, according to the airline. United currently employs 55,000 workers.
The culling of the fleet includes the previously announced elimination of 30 B737s. United said it would phase out 80 planes by the end of 2008, and idle another 20 planes in the following year.
"This environment demands that we and the industry act decisively and responsibly," said United’s Chief Executive Glenn Tilton, in a press release. "At United, we continue to do the right work to reduce costs and increase revenue to respond to record fuel costs and the challenging economic environment."
The airlines have also been focusing on mergers as a means of survival. On May 30, United and US Airways (LCC, Fortune 500) backed out of a potential deal that would have created the world’s largest airline, according to the AP. Meanwhile, Delta (DAL, Fortune 500) and Northwest Airlines (NWA, Fortune 500) are working on a potential merger.
Some airlines have also been adding fees to once-free benefits, such as snacks and checked baggage. Despite this cost cutting, airlines are finding it harder to survive as they get squeezed by soaring fuel costs.
The British airline Silverjet, which serviced Newark-Liberty Airport in New Jersey, became the industry’s latest casualty on May 30 when it suspended operations. The next casualty could be Mesa Air (MESA), which may file for Chapter 11 in July if a contract with Delta falls through, according to the AP.
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