Frontier Airlines will resume nonstop flights from Lambert-St. Louis International Airport to Cancun beginning in December.
The Denver-based carrier, which is in the process of being acquired by Republic Airways Holdings, announced the new roundtrip Saturday flight this week along with other flight additions. Flights to Cancun International Airport begin on Dec. 19. Frontier previously offered service between Lambert and Cancun through April 2008.
Frontier spokesman Steve Snyder said the acquisition by Republic will give the carrier an opportunity to look at growth get a free credit report.
"We are able to take a look at some routes that make sense," Snyder said. "We believe that the St. Louis-to-Cancun route does that right now."
St. Louis’ economy shrank faster than almost any other region in the country in the second quarter, according to a new report out today from the Brookings Institution.
Only beleaguered Detroit saw its economic output fall faster than St. Louis’ in the three months ending in June, a time when Chrysler’s Fenton truck plant limped into shutdown and U.S. Steel’s massive Granite City Works sat quiet.
Those sort of cuts contrasted with a relatively stable housing sector and a job market that’s less gruesome than some, keeping St. Louis mired in the middle of the pack among 100 large metropolitan areas that Brookings has been tracking through the recession. It’s better off than housing crisis hot spots like Las Vegas or factory towns like Dayton, Ohio, but worse off than energy hubs in Houston and Dallas, the same as it was three months ago.
With its broad base of industries, St. Louis’ $120 billion regional economy tends to track the nation as a whole. But this spring’s factory cuts took an outsized toll here because they eliminated jobs with better-than-average wages, said Jason Kunkel, an economist who tracks St. Louis for Moody’s Economy.com. That translated into a 1.5 percent decline in output, though that figure may be revised upward a bit. Since the recession began, output is off 6.1 percent.
"The manufacturing sector there has been hit very hard," he said. "That certainly has a big effect on why (output) in the first half of 2009 will be worse than average."
The good news, said Howard Wial, who co-authored the Brookings report, is that things appear to be getting a little better. The pace of job cuts is slowing. Auto sales have leveled off, a good sign for the car-making that remains here. The big plant in Granite City is pumping out steel again.
"You can see the light at the end of the tunnel," he said. "But you’re not there yet."
Air France-KLM is in talks with Japan Airlines to form an alliance by injecting a few hundred million dollars and taking a minority stake in the struggling carrier, a source familiar with the matter said.
Air France-KLM, Delta Air Lines and American Airlines are in separate “early stage” talks with Japan Airlines, said the source, who declined to be identified because the talks have not been made public.
The carriers are discussing an investment of $200 million to $300 million each, in exchange for a minority stake and a code-sharing relationship, but talks are fluid and the numbers could change every day, the source said.
The Japanese government prefers Delta Air Lines or Air France-KLM, which it views as financially healthier than American Airlines, the source said.
But JAL prefers American Airlines, with which it has an existing partnership through the Oneworld alliance, the source said. JAL and American have been code-sharing partners for a decade.
JAL, Asia’s largest airline by revenue, lost about $1 billion last quarter and is under growing pressure to raise money and slash costs after securing a 100 billion yen ($1.1 billion) government-backed credit line earlier this year.
Japan’s transport ministry regulates JAL and could play a key role in which airline is chosen as JAL’s partner.
(Reporting by Jui Chakravorty; Editing by Richard Chang)
The nation’s economy started to turn around after the passage of President Obama’s $787 billion stimulus package in February, his chief economic adviser said Thursday.
The American Recovery and Reinvestment Act created or saved slightly more than 1 million jobs through August, according to the president’s Council of Economic Advisers.
The stimulus plan also boosted the nation’s gross domestic product by 2.3 percentage points in the second quarter, the council said in its first quarterly stimulus report to Congress.
"We have absolutely seen a change in trajectory," said Christine Romer, the council’s chairwoman. "An economy that was in free fall with a tremendous amount of downward momentum has certainly seen something very different."
Not everyone, however, is buying that stimulus is helping improve the country’s fiscal picture.
"The White House can concoct whatever number they want, but the reality is 3 million American jobs have been lost since the start of the year and the unemployment number continues to rise," said Dave Camp, R-Mich., top Republican on the House Ways and Means Committee.
Stimulus on the streets
The federal government distributed $151.4 billion in stimulus funds or tax relief by the end of August. Another $128.2 billion was made available for recipients to claim. Much of the money spent went to individual tax cuts, state fiscal relief and aid to the most vulnerable.
Economists have differed over whether the stimulus package indeed improved economic activity in the second quarter, though most say it will have an impact in the current period. The GDP contracted at an annual rate of 1% in the second quarter, a significantly slower decline than in the previous two periods.
The latest Blue Chip consensus economic forecast for the third quarter is a 3% expansion, Romer said. Stimulus spending accounts for 2.7% of that bump.
The unemployment rate, however, remains a weak point in the Obama administration’s portrayal of stimulus gains totally free credit score. The rate continues to increase, rising to 9.7% in August, though the pace of job loss has moderated. Congressional Republicans are pointing to the rising rate as evidence that the stimulus package is a failure.
"The Democrats’ bloated ’stimulus’ isn’t working, and we can’t afford another trillion-dollar mistake on the backs of our children and small businesses," said Rep. John Boehner, R-Ohio, after the latest job figures were released Friday.
The return to job growth depends on private industry, said Romer, adding the recovery act is still on track to save or create 3.5 million jobs.
"One of the big issues is, does the private sector come back?" Romer said.
So far, stimulus funding has helped boost employment in manufacturing, construction, retail trade and temporary employment services, the council said.
The administration has been on the defensive lately when it comes to the recovery act. Last week, Vice President Joe Biden gave a lengthy speech detailing how the stimulus package is meeting its goals to pull the country out of its economic doldrums.
"Two hundred days in, the recovery act is doing more, faster and more efficiently and more effectively than most people expected," Biden said.
Still, even some of the president’s supporters say more needs to be done to help Americans during the recession.
Sen. Joe Lieberman, I-Conn., called on the administration on Wednesday to speed up the pace of stimulus spending, particularly on construction jobs.
"We must do everything possible to put those and all stimulus dollars to work as quickly as possible to blunt the heavy toll the recession continues to take on far too many of our citizens," Lieberman said.
Private bus companies are seeing red over the introduction of green GO buses into the Niagara and Peterborough areas last week, only days after Greyhound said it could no longer justify running some of its remote Ontario and Manitoba routes.
Coach Canada and Greyhound say GO’s expansion will cost them business and potentially force them to cut jobs and routes.
Officials at both bus companies say they have approached GO about partnerships but, beyond sharing some maintenance facilities, the public agency isn’t interested.
According to GO, the growing population of the Golden Horseshoe means there is more demand for Toronto-area destinations that the private coach operators don’t serve.
Coach Canada, which runs 32 trips daily to St. Catharines, can’t compete with the lower subsidized fares offered by GO, says president Jim Devlin.
"If I lose 10 per cent (of the Niagara Region business) we’re carrying a lot of risk employing a lot of people with no return," he said.
If that happens, the company will have to consider laying off about 100 of its 1,000 employees.
GO is running 12 buses daily from Niagara to the Burlington GO station. A one-way adult fare from Niagara Falls to Toronto is $15.60, compared with $25.15 on Coach Canada.
Devlin believes the Niagara GO expansion has been fast-tracked because it serves Ontario Transportation Minister Jim Bradley’s St. Catharines riding, and that Peterborough got service because it feeds federal Finance Minister Jim Flaherty’s Oshawa constituency.
There are no publicly available feasibility studies on the new GO routes, according to the province, and GO says no environmental assessments were required because the bus service makes use of existing roads and infrastructure.
GO got $2.5 million in provincial and federal infrastructure funds to build four stations in Niagara. The transit agency anticipates the service will add $3.5 million in annual operating costs, of which $2 million will be covered by fares. GO Transit recovers 82 per cent of its operations from the fare box on average.
GO expects the new routes to attract about 500 daily riders from Niagara Falls, St. Catharines, Grimsby and Stoney Creek, and about 125 from Peterborough, managing director, Gary McNeil said.
"The motor coach industry primarily provides express bus services from Niagara Falls-St. Catharines into downtown Toronto, whereas our service is really from Niagara Falls, St. Catharines, Grimsby and Stoney Creek and feeds into our Burlington GO station, which then allows people to use our services to get to other locations such as Burlington, Oakville, Port Credit through the train system," McNeil said.
"Right now, someone from Niagara Region has no means of getting to those locations without going first of all into downtown Toronto and then reversing."
Private operators also make money on express package services, a market GO has no interest in, McNeil added.
When GO launched train service to Barrie, Greyhound Canada lost 30 per cent of its business in that market, said Stuart Kendrick, senior vice-president of Greyhound Canada, a division of a U.S.-based company.
"Before you go out and spend the type of money you spend on buses and infrastructure, why not look at the private sector that are passing these railhead locations such as Burlington and Oshawa?" Kendrick said.
Greyhound, he added, has Peterborough and Niagara routes, and would be willing to stop at GO stations.
"It’s not like that hasn’t been discussed before with GO," he said.
Robert Verrone, one of the most prolific commercial mortgage makers during the real estate boom, is finding himself in high demand again.
This time around, however, borrowers and lenders are tapping Verrone to help restructure loans at risk of default.
A severe lack of credit and falling revenue from office, retail and apartment buildings are upending fundamentals in the $700 billion market for commercial mortgage-backed securities, a major source of financing during the real estate boom. With few options in terms of refinancing, borrowers are increasingly seeking to extend existing loans to avoid defaults or forced property sales in a distressed market.
That is where Verrone, 41, comes in.
Verrone’s Ironhound Management Co. has ramped up its restructuring business since February, juggling negotiations on more than 30 loans at a time.
Some loans he helps restructure are the same ones he made while a 14-year rainmaker at Wachovia Corp.
When working on deals that he helped engineer, some parties in restructuring negotiations have been critical, Verrone said. But he won’t be singled out as a player in a market where fiercely competitive lenders were all loosening standards to boost volume and finance leveraged buyouts.
“I definitely hear it,” Verrone said during a rare interview in his Madison Avenue office this week. “We all made loans that we thought would work. People bought loans they thought would work.”
Signaling he’s moved on, he’s downsizing his nickname of “Large Loan” Verrone, earned for his penchant for the biggest deals free instant credit report. “Call me ‘No-Loan’ Verrone,” he quipped.
Ironhound — which is affiliated with hedge fund Scoggin Capital Management — and a similar restructuring firm led by former Lehman Brothers CMBS chief Kenneth Cohen have advantages because of their personal connections and intimate knowledge of dealmaking, he said. Some boutique investment banks are also in on the action, as well as junior CMBS players, he added.
Verrone on Friday oversaw the restructuring of a $230 million loan for the Setai building, a swank condominium, spa and restaurant complex in the financial district of New York. As with many loans, more equity was needed to get it extended, and to cover cost overruns, he said. He started that workout process in January.
Such work has rounded out Verrone’s experience, after dealmaking at Bear Stearns and Wachovia, he said.
Wachovia, which was purchased by Wells Fargo & Co in December 2008 several months after Verrone’s departure, contributed $24.2 billion in loans to U.S. commercial mortgage-backed deals in 2007. It exceeded the No. 2 Bank of America Corp. and No. 3 Lehman Brothers by more than 35 percent, according to Commercial Mortgage Alert.
Volume plunged in 2008, and remains virtually nil.
“There are things that I am learning now that I should have known as a lender, and anyone that would tell you otherwise” about themselves isn’t truthful, he said.
After bungling five probes that should have uncovered Bernard Madoff’s $65 billion fraud, regulators must learn to aggressively investigate tips and complaints to catch wrongdoers, the U.S. Securities and Exchange Commission’s internal watchdog said on Thursday.
A scathing report issued last week by SEC Inspector General David Kotz found that the agency missed numerous red flags, did not properly follow up on leads and dismissed tips and complaints that might have uncovered Madoff’s investment sham.
At a congressional hearing to examine the SEC’s shortcomings, Kotz outlined dozens of recommendations to improve SEC procedures for handling tips and examining individuals and companies.
He urged the SEC to make sure that complaints were properly vetted, saying tips and complaints had to be reviewed by staff who had related experience.
Kotz’s report detailed, for example, how three staffers discounted a detailed 2005 complaint about Madoff by Harry Markopolos because he was a competitor rather than a Madoff employee or investor.
The three staffers — two of which were relatively senior employees — had never investigated a Ponzi scheme, where initial investors are paid with money from newer investors.
SEC Chairman Mary Schapiro has already asked Congress to give the agency authority to compensate whistleblowers.
Schapiro and her new director of enforcement, Robert Khuzami, have instituted changes to speed up the pace of enforcement, such as making it easier for staff attorneys to negotiate penalties and use subpoenas. Khuzami has also cut the number of managers at the SEC and plans to create specialized teams to investigate cases.
Some lawmakers are seeking more money for the SEC, which is understaffed and underfunded when compared to banking regulators.
New York Senator Charles Schumer, a senior member of the Banking Committee, supports a bigger budget for the agency and says the SEC should keep all the feeds it collects.
Madoff pleaded guilty in March to orchestrating a Ponzi scheme and is now serving a 150-year prison term.
(Reporting by Rachelle Younglai; Editing by Neil Stempleman)
The head of U.S. bank Goldman Sachs said on Wednesday that anger over bankers’ pay was “understandable and appropriate,” and that greater scrutiny of trade in complex instruments was needed to keep banks in check.
But with the banking sector bouncing back from the financial crisis, regulatory overkill could choke off economic growth, Lloyd Blankfein told an industry conference in Germany’s financial hub.
“I think several months ago took the worst case off the table, and I think the financial markets are in recovery now. So I believe that the worst of this crisis is off the table,” he said.
He took a hard line on bankers’ compensation, arguing there was scant justification for paying outsized bonuses when a bank had lost money for the year.
Anger over compensation was in many respects “understandable and appropriate,” he said, adding that Goldman had a clawback tool which let the firm recover some of the bonuses paid if reputational or financial damage ensued.
“Multi-year guaranteed employment contracts should be banned entirely. The use of these contracts unfortunately is a common practice in our industry,” he said.
HOT TOPIC
Bankers’ pay has been a hot topic at the two-day Banks in Transition annual conference, especially as some finance ministers from the Group of 20 countries want to explore ways to rein in bonuses.
Martin Blessing, the head of Commerzbank, said it was time to end guaranteed bonuses for investment bankers, fuelling debate on what role payoffs play in destabilizing the financial system free credit report.
“I have a feeling that in New York and London guaranteed bonuses are being paid again if people are changing jobs,” said Blessing, who last year was the lowest-paid chief executive for a German blue-chip company.
“And therefore I agree with (HSBC Chairman) Stephen Green, who said yesterday that bonus payments there should be abolished. I think this is correct,” said Blessing, who faces a lawsuit from dozens of London bankers who say they did not get promised bonuses after Commerzbank bought Dresdner Kleinwort last year.
REGULATION
Banks are feeling the heat as regulators, central banks and national governments try to ensure free-wheeling banks do not again pose systemic risks to the financial system.
Central bankers on Sunday proposed a new regulatory framework that would force banks to set aside more profits as a cushion against hard times.
While Goldman’s Blankfein acknowledged the financial system needed repair as policymakers tried to restore trust, he said they should not try to shelter the sector from the storm of the century and should focus on making trade in derivatives more open to scrutiny.
Standard & Poor’s said on Tuesday U.S. credit card losses declined in July, but forecast bad loans would soon resume their upward trend as thousands of Americans lose their jobs.
The ratings agency’s credit card quality index, which measures credit card loans that banks do not expect to be repaid, fell to 9.8 percent in July from a record high of 10.4 percent in June, helped by more cautious consumer spending.
Analysts have also said loan losses eased as consumers used more tax refunds to pay down debts.
But S&P estimated credit card losses would pick up again as the economy continues to shed thousands of jobs every month in the worst recession since the Great Depression.
Credit card losses usually follow unemployment, which rose to a 26-year high of 9.7 percent in August.
S&P said that, considering its own estimates that unemployment would rise to between 10 payday loans.4 percent and 12.7 percent, credit card losses rates could go up to between 10.5 percent and 13 percent and “remain in this range for the next 12 to 24 months.”
S&P said losses could also be boosted by company moves to increase fees and interest rates before limits on those charges come into effect in February 2010.
In aggregate, S&P’s credit card quality index tracks the performance of more than $491.1 billion of receivables held in trusts of rated U.S. credit card-backed securities.
American Express Co, Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc, Capital One Financial Corp and Discover Financial Services make up around 80 percent of the credit card industry.
(Reporting by Juan Lagorio; editing by Andre Grenon)
Chinese airlines are negotiating with Boeing Co to further delay taking delivery of 787 Dreamliner orders, a senior Boeing executive said on Monday, as they continue cost-cutting initiatives amid weak international air travel demand.
A sharp global economic downturn had pushed China’s top three airlines — Air China() and China Eastern Airlines — into a combined loss of more than $4 billion in 2008, forcing them to slash their capital expenditures.
Meanwhile, Boeing, the No. 2 plane maker behind EADS unit Airbus, has also been struggling with a range of supply, manufacturing and design problems, made worse by a two-month strike at its Seattle-area plants last year.
“All of them have already delayed. It’s a mutual decision, it’s not one-sided,” David Wang, president of Boeing’s China operations, told Reuters on the sidelines of a business event.
“Based on our delay, we could have aircraft for them by the end of next year, but it’s too early for them. Actually they are supposed to get some of the early positions, but they would rather have some of the later positions now.”
Chinese carriers, including China Southern Airlines, have ordered nearly 60 Boeing 787 jets, Wang said, adding the Dreamliner is expected to make its first flight by the end of this year with initial delivery expected in the fourth quarter of 2010.
Global orders for the Dreamliner totaled 852 units as of the end of 2008, according to Reuters calculations.
ORDER CANCELLATION?
The Chinese government has handed out cash aid to its ailing airlines and encouraged them to scrap or delay aircraft orders after the country’s air travel growth fell into single digits in 2008 for the first time in five years.
China Eastern executives said previously that the carrier would cut the number of plane deliveries this year by nearly half to 13 from 29 and may consider scrapping its previous order for 9 Boeing 787 jets.
Wang did not respond to questions about whether any Chinese carriers had scrapped orders for Boeing’s Dreamliner.
But Airbus’ China president told reporters in March that the European aircraft maker has had no order cancellations from China.
A few Chinese airlines have asked for delays in taking delivery of previous orders but none has canceled, Laurence Barron told Reuters at the time.
Airbus runs a joint assembly venture in the northern Chinese city of Tianjin, which makes aircraft in the A320 family.
(Editing by Ken Wills)
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