Rolls-Royce in $2bn engine orders

UK engineering firm Rolls-Royce says it has won orders to make $2bn(£1.2bn) of aircraft engines to power Airbus planes for Air China and Ethiopian Airlines.

The orders were announced on the first day of the Dubai Airshow on Sunday.

The $1.5bn Air China order involves providing Trent 700 engines to power 20 A330 aircraft that will be delivered from 2011.

And the $480m Ethiopian order covers Trent XWB engines for 12 A350-900 XWB planes that will begin service in 2017.

It came after Ethiopian Airlines announced a $3bn aircraft order with Airbus.

The airline made an initial draft request for the dozen extra-wide bodied A350-900s in July and confirmed the deal at the air show, the biggest in the Middle East.

Best-selling engines

Airlines have been hit hard during the recession, so the order for engines is welcome news for Rolls-Royce, which has factories in Derby and Bristol making engines, and one in Sunderland making aero-engine components.

In addition, the Rolls-Royce Inchinnan factory, which opened in October 2004 close to Glasgow Airport, also manufactures aeroplane engine components.

The Ethiopian order means Rolls-Royce has sold more than 1,000 of its best-selling XWB engines.

The firm has said the XWB is the most fuel efficient and environmentally sensitive large engine design on the market, with fuel efficiency ratings 28% higher than pre-Trent generation engines.

In the summer the firm said it was on track to meet its full-year financial targets, but warned that delays on the Airbus A380 and Boeing 787 wide-body programmes had added an element of uncertainty.

However, the delays have created more demand for existing wide-body products, where it has a strong position.

Economy has improved: Prime Minister

By Shamim-ur-Rahman
Sunday, 15 Nov, 2009

KARACHI: Recognising the need for bringing down the cost of doing business in Pakistan Prime Minister Yousuf Raza Gilani said on Saturday that the only prescription to survive in the existing tough situation is to become more competitive, quality conscious and innovative.

Speaking at the 33rd FPCCI Export Trophy ceremony held at the Governor House he claimed that the economic health of the country had improved despite international and domestic adversities. He exhorted the business community to compete in the international market effectively, while keeping these principles in their mind.

Dr Ishrat-ul-Ebad Khan, Governor Sindh; Syed Qaim Ali Shah, Chief Minister; Makhdoom Amin Fahim, Minister for Commerce; Sultan Ahmad Chawla, President FPCCI; Syed Mohibullah Shah, CEO, TDAP were also present.Prime Minister Gilani said the country’s real GDP growth was likely to remain close to the target of 3.3 per cent during the fiscal year 2009-10 and took pride in the surge in foreign exchange reserves that have risen from $6 billion to $14.7 billion.

As a result of these positive signs, he said, Pakistan’s sovereign rating has improved and business sentiments are getting better. Remittances from overseas Pakistanis have hit a record mark of $800 million in October, 2009.

Mr Gilani was of the view that the issues like falling exports competitiveness, lack of sophistication, diversification of products and markets stem from structural weaknesses inherent in the economy and these have been addressed through a medium-term plan called, ‘Strategic Trade Policy Framework (STPF) 2009-12.’

The STPF provides assurance for continuation of trade policy for three years and the businesses can plan their production and export orders accordingly, he added.

The important policy initiatives under the strategy are certainty for capital cost, reliability of electricity supply at mutually agreed time by the electricity distribution companies and insurance cover for the visiting buyers.

The policy has been set in motion and the initiatives are at various stages of implementation, Gilani added pointing out that ministry of commerce as part of initiative has recently provided Rs27.3 million from Export Development Fund (EDF) for opening of FPCCI offices at China and Brussels for better export marketing.

Similarly, MoC has provided Rs9.380 million from EDF to FPCCI for installation of video conferencing facility at FPCCI offices at Karachi, Lahore, Islamabad, Quetta and Peshawar.

Mr Gilani also reminded the industrialists that a comprehensive Textile Policy 2009-14 has also been announced to revive the textile sector through Textile Investment Support Fund of Rs40 billion.

The textile policy envisages developing international and domestic demand driven capabilities, infrastructure improvement, skill development, standards for international compliance, increasing productivity, improving quality and ensuring optimum utilisation of resources.

The policy aims at achieving textile exports to reach a target of $25 billion in five years and would increase employment by 100 per cent.

The policy focuses on investment of $8 billion by the private sector towards increased capacities while government would invest in infrastructure, skill development, and marketing and information technology.

Acknowledging the support extended by the business community at the time of national disasters Mr Gilani commended its fund raising movement for displaced persons and said that with the industry’s efforts ‘we would be better positioned to address the core issues of poverty alleviation and job creation in the near future.’

Underscoring the importance of improved law and order situation he said the government was taking all measures to bring normality to the situation so that the business community has more confidence. Lots of investment is coming into Pakistan and it reposes confidence in the business-friendly policies of Pakistan, he added.

He also claimed that Friends of Democratic Pakistan had accepted proposals for reconstruction of Swat and Malakand and also for projects to boost energy production in the country.

BA merger ‘good for passengers’

British Airways (BA) boss Willie Walsh has said the planned merger with Iberia is "great news for British Airways, our customers and our shareholders".

He also said there was "no question" of the airline’s standards of service being cut after its merger.

His comments came a day after the two carriers said they had reached a preliminary merger agreement.

BA’s main union, Unite, warned it would not back the deal without a commitment to avoid compulsory redundancies.

Third largest

In an interview with the BBC, Mr Walsh reiterated that both firms would retain their separate brand names.

The merger, which is expected to get regulatory backing and be concluded by the end of next year, is set to create the world’s third largest airline.

Under the terms of the deal, BA will hold a a 55% stake in the new company with Iberia holding 45%.

The combined firm would have 419 aircraft flying to 205 destinations, and BA and Iberia said it would save them a total of 400m euros ($594m; £358m) in costs a year.

However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.

Cabin service

"This is all about the future, about creating a strong European airline at which BA will be at the heart," said Mr Walsh.

"The headquarters will be based here [in London], it will be listed in the UK, I will be chief executive."

He denied speculation that, following the merger, BA’s level of cabin service would be reduced to Iberia’s level.

"There is no question about British Airways’ standards. We are working to improve them, and think we are doing a tremendous job," he said.

Responding to the question of whether the planned merger would result in significant job cuts, he said: "I don’t think staff will be worried, consolidation is part of our industry."

Unite’s national office for civil aviation, Steve Turner, said the union was seeking urgent talks with BA.

"It is imperative that both companies sit down as soon as possible with the unions here and in Spain to discuss how jobs and standards can be safeguarded," he said.

Unite is already balloting its members among BA’s cabin crew on whether to take action over the company’s existing cost-cutting plans, while Iberia staff have already gone on strike over pay and plan more disruptions in the run-up to Christmas.

Analysts say that post-merger job cuts are expected among administrative staff, but that with the headquarters of the new firm being established in London, redundancy fears are strongest in Spain.

BA ‘dominant’

Aviation expert Douglas McNeil of Astaire Securities said BA would be "relieved" to have finally got the merger deal in place.

"I think BA will be pleased with the deal they have got – the headquarters in London, led by Willie Walsh, and BA will be majority shareholder," he said.

However, Virgin Atlantic, one of BA’s big competitors in the UK, raised concerns over the new company’s market share.

Both BA and Iberia have been losing money during the downturn as businesses and individuals cut back on flying.

Mr Walsh has previously said a merger would help both firms cope with the recession.

The firms have considered a tie-up for a number of years and held talks on the issue in July 2008.

BA already owns 13.5% of Iberia and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other’s services.

Financial woes

The agreement comes a week after BA said it would cut a further 1,200 jobs and reported a loss in the first half of its financial year for the first time in its history.

It made a pre-tax loss of £292m in the six months to the end of September.

The half-year results also revealed a growing problem with its two final-salary pension schemes.

In the past six months, the surplus in one scheme fell from £860m to £27m, while the deficit in the other scheme ballooned from £1.2bn to £2.7bn.

Iberia revealed on Friday that it had made a net loss of 182m euros in the nine months to the end of September, compared with a profit of 51.1m euros a year ago.

HSBC sells its group headquarters

HSBC is selling its group headquarters in London’s Canary Wharf for £772.5m ($1.3bn) in cash, but will remain in the building in a leaseback deal.

Lord Foster was architect on the building project

It is being bought by the South Korean National Pension Fund – one of Asia’s largest sovereign investors.

The bank said they were "delighted" with their new landlords.

HSBC, which will remain in the building of the last 17 years of the lease, said a gain of £350m would appear on its income statement the deal’s completion.

Ken Harvey, HSBC’s chief technology and services officer, said: "We actively manage our global real estate portfolio in accordance with the needs of our businesses and in the interests of our shareholders, and we are delighted the National Pension Service of Korea, one of Asia’s largest sovereign investors, will be our new landlord."

Ifad to grant $18m for farm project

International Fund for Agricultural Development has funded 23 projects and programmes in Pakistan for a total investment of about $460 million. – Photo by Reuters.

ISLAMABAD: The International Fund for Agricultural Development (Ifad) will provide a loan of $18.33 million to Pakistan to support an innovative project to help small-holder farmers maximise yields by addressing a lack of financial resources and inputs and by supporting gender and poverty mainstream in the country’s national crop productivity project.

The Crop Maximisation Support project aims to increase crop production in 10 districts in all the four provinces. The new project was initiated as a response to last year’s volatile food price situation. It is a direct support to the government’s second phase of nationwide Crop Maximisation Project.

The loan agreement for the project was signed in Rome on Friday by Pakistan Ambassador to Italy Tasnim Aslam and Ifad President Kanayo F. Nwanze, according to a press release issued by Ifad.

A key innovative feature of the project is the introduction of gender mainstreaming and poverty targeting into the second phase of the project. The Ifad project will support the formation of special interest groups of women and the landless, promote their involvement in community development, and enhance their access to financial resources.

At least 25,000 poor rural households are expected to benefit, particularly resource-poor rural inhabitants such as small landowners, tenant farmers, the landless and women.

To date, Ifad has funded 23 projects and programmes in Pakistan for a total investment of about $460 million.

Eurozone emerges from recession

 

Germany, the world’s biggest exporter, has seen a pick-up in exports

The eurozone economy has emerged from recession after growing between July and September, figures have shown.

The 16 nations that use the euro collectively grew 0.4%, after shrinking by 0.2% between April and June.

The French and German economies both grew for a second consecutive quarter, confirming the eurozone’s two largest economies are out of recession.

However, both France and Germany grew by less than expected, a sign of how tentative signs of recovery remain.

The European Union as a whole – which includes non-eurozone countries such as the UK and Sweden – also emerged from recession, growing 0.2% in the third quarter.

Germany’s economy grew by 0.7% in the quarter, while France grew by 0.3%. Both economies and Japan ended year-long contractions in the second quarter of the year, while the US has since joined them after its economy grew in the third quarter.

However, the UK remains in recession, having contracted by 0.4% between July and September.

The UK, Europe’s second largest economy, has now contracted for six consecutive quarters, the first time this has happened since quarterly figures were first recorded in 1955.

Faster recovery

Economists had expected Germany to grow by 0.8% in the third quarter, and France’s growth was only half what had been predicted.

Germany’s Desatis statistics office also revised upwards its estimate for growth in the second quarter, to 0.4% from 0.3%.

Though the data on Friday was weaker than expected, few analysts had even predicted at the start of the year Germany and France would start to recover so soon.

"The German economy has emerged from the deep recession earlier and faster than many had thought," ING economist Carsten Brzeski said.

French Finance Minister Christine Lagarde told Europe 1 radio that while the country’s economy would have contracted during 2009 overall, it would enter next year "with elan".

France and Germany may have been less hard hit than the UK by the global economic slowdown because their financial sectors, which were at the heart of the crisis, account for a smaller proportion of their economies.

Stronger exports and consumer spending, as well as government stimulus packages, have contributed to the growth in the eurozone’s largest economies.

The data released on Friday showed that Italy, Austria and Slovakia had also emerged from recession in the third quarter.

However, Spain’s troubled economy contracted further in the quarter.

Rising inflation threat seen in South Asia

WASHINGTON: Rising inflation is posing a threat to South Asia, with the situation most worrying in the Maldives where a foreign currency black market has emerged, a senior World Bank economist has warned.

Pakistan was set to have the highest rate in the region at at 20.7 per cent, followed by Nepal at 13.2 per cent and Bangladesh at 5.2 per cent this year, the International Monetary Fund said. Above: People try to get subsidized sacks of flour provided by the government in Rawalpindi during Ramadan —Photo by AP

Noting that the median inflation rate in South Asia was more than twice that of Latin America and the Caribbean, economist Eliana Cardoso asked whether policymakers in the region should be concerned ‘and wonder whether they are doing something wrong.’

In the third quarter of 2009, inflation in South Asia, which aside from the Maldives comprises India, Pakistan, Nepal, Bangladesh, Afghanistan, Sri Lanka and Bhutan, hit an average 10.9 per cent, the World Bank said.

It compares with just 2.9 per cent in Latin America and the Caribbean.

‘From the price stability perspective the most worrying situation is that of the Maldives,’ Cardoso, the bank’s chief economist for the South Asian region, wrote on the ‘World Bank’s End Poverty in South Asia’ blog.

She said that the budget deficit in Maldives, the region’s most exotic tourist destination, was projected to reach 33 per cent by the end of the year and ‘a black market for foreign currency has emerged.’

Cardoso noted that the Maldives government had promised fiscal adjustment.

President Mohamed Nasheed has said that his atoll nation was facing its worst economic crisis ever because of a sharp fall in tourist numbers and chronic government overspending.

While Afghanistan, despite raging violent conflicts, has been able to keep its macroeconomic policy under control, fiscal slippage in Nepal could undermine macroeconomic stability, Cordoso said.

She proposed tightening of monetary policy in the Himalayan nation since real interest rates were negative at present.

In India, the South Asian giant, widening budget deficits are the most visible obstacle to stable and sustainable growth, Cardoso said.

New Delhi has forecast that inflation could hit 6.5 per cent by the end of the financial year to March 2010 amid speculation the central bank could be forced to raise benchmark borrowing rates early in the new year in an attempt to check rising prices.

But the Indian government is keen for the bank to hold off on rate rises for as long as possible in order to sustain India’s fragile economic recovery.

The International Monetary Fund expects the inflation rate in India to be 8.6 per cent in 2009.

Pakistan was set to have the highest rate at 20.7 per cent, followed by Nepal at 13.2 per cent and Bangladesh at 5.2 per cent this year, the fund said.

Cardoso said that in general, the recipe for hyperinflation was the monetization of budget deficits in countries afflicted by political instability or conflict.

Monetization usually refers to the printing of money by central banks.

‘Even if the threat of mega inflation is far removed from the South Asia scenarios, the combination of big budget deficits and loose monetary policy seems to be present in some countries of the region,’ Cardoso said.

She pointed out that it was possible that the higher inflation in South Asia was ‘just a passing cloud blown by the spike in food prices.’

The Brazilian economist recalled the days when Latin America was the land of inflation with hyperinflation in Bolivia, Brazil and Argentina hogging the news in the 1980s and early 1990s.

‘At that time, Asia was seen as immune to the Latin disease. Since then, much water has gone under the bridge.’ —Reuters

IMF sees recovery for Pakistan, with risks

By Amin Ahmed
Friday, 13 Nov, 2009

ISLAMABAD: The International Monetary Fund announced on Thursday that while risks to Pakistan’s economy remained, the early signs of recovery in some sectors were encouraging.

A statement issued at the end of the IMF mission’s talks with a Pakistani delegation in Dubai said the fund welcomed the efforts being made by the authorities to stabilise the economy, to advance structural reform and lay the foundations for high and sustainable growth.

The statement said: ‘Discussions between the authorities and the IMF staff on the third review of the economic programme supported by the SBA are scheduled to be completed shortly.

‘The IMF mission held constructive discussions with government and State Bank officials, focussing on Pakistan’s recent economic performance, the outlook for the rest of the fiscal year 2009-10, and policies needed to consolidate macroeconomic stability and reduce poverty.

‘The discussions took place against the background of changing security conditions and delays in donor disbursement of financial aid.

‘The IMF staff mission led by Adnan Mazaeri met the Pakistan economic team led by Finance Minister Shaukat Tarin to initiate discussions on the third review under Pakistan’s Stand-by Arrangement (SBA).

‘The SBA of SDR 5.169 billion (about $7.6 billion) was approved by the Executive Board of the IMF on November 24, 2008. The SBA was augmented to SDR 7,235.9 million (about $11,327 million) and extended through end-2010.

‘A first disbursement of SDR 2.067 billion (about $3.1 billion) was made on November 26, 2008 and a second one of SDR 568.5 million (about $847 million) on April 1, 2009, after completion of the  first programme review.

‘The third disbursement of SDR 766.7 million (about $ 1,200 million) was made on August 7, 2009, after completion of the second programme review. Total disbursements thus far amount to SDR 3,402.6 million (about $5,327 million).’

Air India posts 1.2 billion dollar loss

MUMBAI: National carrier Air India on Wednesday announced a net loss of 55.48 billion rupees (1.19 billion dollars) for the fiscal year ended March, hit by the global recession and low air traffic.

Revenues for the year to March 2009 fell nearly 12 per cent to 134.79 billion rupees, the airline said in a press release after its board meeting on Wednesday to approve the accounts.

The debt-ridden state-run airline is seeking a financial bailout from the government.

Last month, Civil Aviation Minister Praful Patel said the government may give the ailing flag carrier a one-billion-dollar bailout on condition that it cuts costs.

The government is planning to inject 50 billion rupees (one billion dollars) in phases, Patel said in October, but the handout would be conditional on measures to cut costs and increase revenues.

The minister said Air India had targeted 30 billion rupees in cost cuts and was aiming to increase revenues by 20 billion rupees ‘over the next two years.’ Air India operates 435 flights to 117 destinations in India and overseas daily, with a fleet of 147 aircraft.

The airline has in the past year tried to lower costs by cutting loss-making routes, rationalising wages and phasing out old aircraft.

‘Cost-cutting measures and a pick-up in demand in domestic and international traffic are likely to result in improvement in the operating performance for the year 2009-10,’ Air India said in its press statement, subject to fuel prices remaining stable.

Air India is not listed.

India’s airline industry has been hit by overcapacity and a sharp drop in passenger numbers as a result of the global economic slowdown.— AFP

Bank Muscat may write down stake

DUBAI, Nov 11: Bank Muscat, Oman’s largest lender by market value, said on Wednesday it might have to write down a significant part of its 23.4 million rial ($61 million) investment in Pakistan’s Silkbank in the fourth quarter.

Bank Muscat has a 35-per cent stake in Silkbank, which is planning a rights issue. But the Omani bank said it will not participate, “as regulatory approvals in Oman have not been forthcoming.”

Bank Muscat expects its Silkbank stake to be diluted and as a result, “it is likely that the bank could write down a significant part of this investment of RO23.4 million during the last quarter of 2009,” it said in a statement.—Reuters