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British Airways says it plans to cut a further 1 , 200 jobs after
reporting a first-half loss for the first time. The job loss
announcement means the airline will have shed a total of 4 ,900
positions by March 2010. The company suffered a loss before tax of
£292 m ($485 m) for the six months to the end of September, compared
with profits of £52 m a year earlier. The first half of BA's
financial year is usually stronger because it covers the summer
holiday season. BA said revenue over the six-month period was down
13.7 % to £4.1 bn, compared with £4.75 bn in 2008. "Aviation remains
in recession with revenue likely to be £1 bn lower this year," said
BA chief executive Willie Walsh. He told the BBC that this had been
the "most difficult year in the history of the aviation industry".
"All airlines are facing the same pressure. Operational changes at
British Airways are absolutely necessary to improve the performance
of the business," he said. BA has already achieved 1 ,900 global job
reductions by natural wastage, voluntary redundancies and reduced
overtime. Strike ballot BA is currently in a battle with unions over
changes to jobs and pay. It wants to cut the number of cabin crew
staff on its long-haul flights from 15 to 14 , with the change
coming into effect on 16 November. The company is also proposing a
two-year pay freeze. It says the changes are essential to its
survival. On Thursday, the Unite union said it would continue with a
strike ballot of British Airways cabin staff over the changes,
despite its legal challenge to the new working patterns being
delayed. Unite had sought a High Court injunction to have the changes
blocked, but the full trial will now not go ahead until 1 February.
Unite said staff would "unwillingly" work the new schedules from this
month but it would still ballot for a strike. The result of the
strike vote will be known on 14 December. Analysts said the latest
figures could be used as ammunition by the union. "These weak results
will underscore their fragility to unions opposed to wholesale
restructuring that is required if BA aims to survive this downturn,"
said Saj Ahmad from Gerson Lehrman Group. Shares in BA rose 6.2 % to
197.8 p as the market welcomed news of the extra job cuts and
measures to reduce costs. BA said its half-year operating costs were
down 8.7 %, despite the weakening of the pound, and fuel costs were
also lower by 17.8 % compared with the same period last year. Pension
scheme BA's half-year results revealed a growing problem with its two
final-salary pension schemes. Both are now closed to new joiners, but
although the older scheme (APS) now consists mainly of BA
pensioners, just under half of the 70 ,000 members in the newer
scheme (NAPS) are still working for the airline. In the past six
months, the surplus in the older APS scheme fell from £860 m to £27 m
while the deficit in the NAPS scheme ballooned from £1. 167 bn to
£2.66 bn. The value of the assets in both schemes rose, largely due
to this year's huge rebound in share prices. But this has been
outstripped by the rising cost of paying for the pensions once they
come into payment. The BA pension scheme trustees, in their interim
valuation, have assumed that the scheme's assets will earn a smaller
income in the future. The implication is that BA will have to increase
the already large deficit payments it makes to its final-salary
schemes, which it is obliged to do to ensure that they eventually
return to balance. A spokeswoman for the airline said it was
currently paying in £335 m per year into APS and NAPS, and that over
the past three years, the company has paid in £1.8 bn to cover its
current payments and the deficit.
US jobless rate rises to over 10 %
The unemployment rate in the US rose to 10.2 % in October, which was
its highest rate since April 1983 , according to figures from the US
Labor Department. It rose from September's figure of 9.8 %. The
economy lost 190 ,000 jobs in the month. The number of unemployed
people rose by 558 , 000 to 15.7 million. Since the recession began
in December 2007 , the number of unemployed has risen by 8.2
million, while the jobless rate has risen from 4.9 %. But there was
some better news with the revision of September's figure from a loss
of 263 ,000 jobs to a loss of 219 ,000 jobs. 'Disappointing' The
figures were particularly poor given Thursday's news of a fall in
initial weekly jobless claims and the data earlier in the week that
showed the US economy had grown by 3.5 % between July and September.
"It's pretty disappointing overall," said Richard Franulovich, senior
currency strategist at Westpac in New York. "Job losses are not
moderating as quickly as I had hoped despite those earlier indicators
on jobs." The dollar fell against both the euro and the yen following
the release of the figures. Long-term unemployed The sectors
contributing the largest numbers of job losses in October were
construction, manufacturing and retail. It was the 22 nd month in a
row that the US economy had shed jobs, which is the longest run
since records began 70 years ago. There is concern that rising
unemployment could scupper the recovery by restricting consumer
spending, which accounts for 70 % of the economy. The number of
people who had been out of work for at least six months rose to a
record 5.6 million, accounting for 35.6 % of the jobless total.
its highest rate since April 1983 , according to figures from the US
Labor Department. It rose from September's figure of 9.8 %. The
economy lost 190 ,000 jobs in the month. The number of unemployed
people rose by 558 , 000 to 15.7 million. Since the recession began
in December 2007 , the number of unemployed has risen by 8.2
million, while the jobless rate has risen from 4.9 %. But there was
some better news with the revision of September's figure from a loss
of 263 ,000 jobs to a loss of 219 ,000 jobs. 'Disappointing' The
figures were particularly poor given Thursday's news of a fall in
initial weekly jobless claims and the data earlier in the week that
showed the US economy had grown by 3.5 % between July and September.
"It's pretty disappointing overall," said Richard Franulovich, senior
currency strategist at Westpac in New York. "Job losses are not
moderating as quickly as I had hoped despite those earlier indicators
on jobs." The dollar fell against both the euro and the yen following
the release of the figures. Long-term unemployed The sectors
contributing the largest numbers of job losses in October were
construction, manufacturing and retail. It was the 22 nd month in a
row that the US economy had shed jobs, which is the longest run
since records began 70 years ago. There is concern that rising
unemployment could scupper the recovery by restricting consumer
spending, which accounts for 70 % of the economy. The number of
people who had been out of work for at least six months rose to a
record 5.6 million, accounting for 35.6 % of the jobless total.
RBS bank reports losses of £2.2 bn
Royal Bank of Scotland Group, which is majority- owned by taxpayers,
has reported a pre-tax loss of £2.2 bn for the July to September
period. It compares with a profit of £1.9 bn in the same period last
year. RBS has written off another £3.3 bn in bad debts and other bad
investments, which is down from the £4.7 bn it wrote off in the
previous three months. The bank said although conditions had improved
in the past three months they "remain fragile". It predicted that the
number of companies failing, and the number of people out of work,
would not peak until next year. RBS chief executive Stephen Hester
told the BBC that the bank's recovery "would be a marathon not a
sprint" and that he expected losses until well into next year. By
mid-morning, shares were up more than 7 %. Higher lending On the
subject of bonuses, Mr Hester said everyone at the bank was treading
a "very delicate tightrope". ANALYSIS Hugh Pym, BBC chief economics
correspondent The picture on business lending is patchy. RBS says it
has increased lending to small businesses during the third quarter of
this year compared with the previous quarter. But if you look at
total business lending over the full year to date it has actually
fallen a bit. This might add weight to the criticism that tax payer
owned banks are still not doing enough to help businesses raise
funding to take them out of the recession. But, RBS says there is a
trend for companies and households in the UK and the US to opt for
debt repayment rather than new borrowing. It says it has £27 bn of
credit lines on offer to companies which have not been taken up. The
debate over whether people and companies don't want to borrow or
whether banks don't want to lend is still unresolved. He said the
bank was leading the way on pay within the government constraints,
but he added it was necessary that RBS kept the best people in order
to return the bank to profitability. RBS said it had increased lending
to small businesses in the past three months and also extended £27
bn of credit lines to small and medium businesses, which had not been
taken up. It added its core banking activities had made an operating
profit of £1.2 bn. Uncertain future Tower Group's banking analyst,
Ralph Silva, says that RBS's loan book seems to be suffering more
than its competitors. "While they are still showing solid numbers for
retail banking, they are struggling with their investment and
corporate banking operations," he said. "It appears that businesses
that have to buy banking products are not happy with the uncertainty
around the banks future. " Earlier in the week, it was announced that
RBS is to be forced by the European Commission to sell parts of its
business It will sell RBS branches - originally under the Williams &
Glyn's brand - in England and Wales, as well as the NatWest brand in
Scotland, RBS Insurance, and its card payment business, Global
Merchant Services. It also plans to put £282 bn of its assets into the
government's insurance scheme for toxic assets, which will take the
government's stake in RBS to 84 %. It is already 70 % owned by the
taxpayer.
has reported a pre-tax loss of £2.2 bn for the July to September
period. It compares with a profit of £1.9 bn in the same period last
year. RBS has written off another £3.3 bn in bad debts and other bad
investments, which is down from the £4.7 bn it wrote off in the
previous three months. The bank said although conditions had improved
in the past three months they "remain fragile". It predicted that the
number of companies failing, and the number of people out of work,
would not peak until next year. RBS chief executive Stephen Hester
told the BBC that the bank's recovery "would be a marathon not a
sprint" and that he expected losses until well into next year. By
mid-morning, shares were up more than 7 %. Higher lending On the
subject of bonuses, Mr Hester said everyone at the bank was treading
a "very delicate tightrope". ANALYSIS Hugh Pym, BBC chief economics
correspondent The picture on business lending is patchy. RBS says it
has increased lending to small businesses during the third quarter of
this year compared with the previous quarter. But if you look at
total business lending over the full year to date it has actually
fallen a bit. This might add weight to the criticism that tax payer
owned banks are still not doing enough to help businesses raise
funding to take them out of the recession. But, RBS says there is a
trend for companies and households in the UK and the US to opt for
debt repayment rather than new borrowing. It says it has £27 bn of
credit lines on offer to companies which have not been taken up. The
debate over whether people and companies don't want to borrow or
whether banks don't want to lend is still unresolved. He said the
bank was leading the way on pay within the government constraints,
but he added it was necessary that RBS kept the best people in order
to return the bank to profitability. RBS said it had increased lending
to small businesses in the past three months and also extended £27
bn of credit lines to small and medium businesses, which had not been
taken up. It added its core banking activities had made an operating
profit of £1.2 bn. Uncertain future Tower Group's banking analyst,
Ralph Silva, says that RBS's loan book seems to be suffering more
than its competitors. "While they are still showing solid numbers for
retail banking, they are struggling with their investment and
corporate banking operations," he said. "It appears that businesses
that have to buy banking products are not happy with the uncertainty
around the banks future. " Earlier in the week, it was announced that
RBS is to be forced by the European Commission to sell parts of its
business It will sell RBS branches - originally under the Williams &
Glyn's brand - in England and Wales, as well as the NatWest brand in
Scotland, RBS Insurance, and its card payment business, Global
Merchant Services. It also plans to put £282 bn of its assets into the
government's insurance scheme for toxic assets, which will take the
government's stake in RBS to 84 %. It is already 70 % owned by the
taxpayer.
G20 ministers meet in St Andrews
The world's most powerful finance ministers are gathering in St Andrews for a summit aimed at pulling the world's economy out of recession. The G20 event will be held at Fairmont St Andrews Hotel, a golf resort just outside the ancient university town. Co-ordinating fiscal policy will be on the agenda, as well as how to police global financial and banking systems. Protests are planned on Friday and Saturday to call for more action to tackle unemployment and climate change. A low key rally has been held by around 20 environmental protesters who gathered with a handful of placards. The demonstrations will also include a "People's Summit" at St Andrews University students' association. The two-day G20 event, which is being chaired by UK Chancellor Alistair Darling, will be attended by Timothy Geithner, the US Treasury Secretary, as well as the finance ministers of Europe's largest economies and those of China, Japan, India, and Russia. " It is vital that we ... recognise that our economies are highly inter-dependent " Alistair Darling Officials have drawn up an agenda that includes a proposal to cut down on the high level of reserves held by governments with the biggest economies. The idea of a central reserve held instead by the International Monetary Fund is being resisted by those with emerging economies, including Brazil. The co-ordination of fiscal and monetary policy will attempt to avoid the creation of new imbalances between different countries, similar to the ones that led to the economic crisis last year. That involves, for instance, pressure on the US to increase savings and on China to increase consumption. Curb bonuses Developing countries are also raising concerns that capital flows into their economies are resulting from relatively low interest rates in the most developed economies, leading to over- valued currencies. The previous finance ministers meeting - which took place in London in September, followed by heads of government in Pittsburgh - set out plans to curb excessive banker bonuses, which were seen as creating incentives for reckless risk-taking. There is pressure at the St Andrews meeting, particularly from the French government, to ensure others are implementing that agreement on common standards. And on Saturday morning, there is to be discussion of the transfers of funds from richer, more developed countries that will be necessary to help developing nations adapt to their climate change requirements. In a letter to fellow summiteers ahead of their gathering, Mr Darling set out his agenda: "As the process of recovery continues, it is vital that we co-operate more effectively in managing the world economy, recognising that our economies are highly inter-dependent."
South Korea approves India deal
South Korea has ratified a free trade deal with India that will give the two Asian countries much greater access to each other's markets. The pact, known as the Comprehensive Economic Partnership Agreement, was initially signed in August. Under the terms of the deal, import duties between the two parties will be reduced or eliminated. India, where parliamentary approval is not needed for trade agreements, had already signed off the deal. It is due to be implemented in January. Last month, South Korea signed a trade pact with the EU to remove trade tariffs.
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