US stocks in biggest loss in two months

A surprisingly bleak forecast for the world economy pushed stocks to their biggest loss in two months.

Major stock indexes tumbled by more than 2 percent Monday, sending the Dow Jones industrial average down 201 points, after the World Bank estimated the global economy will shrink 2.9 percent in 2009. It previously predicted a 1.7 percent contraction.

The grim assessment was the latest unwelcome surprise for the market since last month and further eroded hopes that the economy was starting to emerge from recession.

Investors began driving stocks sharply higher in early March, encouraged by modest improvements in housing, manufacturing and even unemployment.

The dampened economic outlook from the World Bank, a global lender based in Washington, also weighed on the prices of oil, metals, and other commodities.

Those price drops in turn sent energy and metal producers' shares falling.

Hugh Johnson, chief investment officer of Johnson Illington Advisors, said the downbeat economic prediction confirmed fears that have been building in the market for two weeks.

"The forecast by the World Bank just dramatized that the market may have overstated what's coming for the economy," he said.

The stock market is coming off its first weekly loss in more than a month after mixed economic readings last week.

Investors have gone from enjoying a string of better-than-expected economic data to trying to manage a list of worries about the economy.

Stocks have lost ground several times in the last month on fears that rising interest rates and inflation would upend an economic recovery.

Many analysts also say the relief that erupted in early March about the economy then led to outsize expectations for how quickly a recovery could occur.

Other economic news has hit stocks since May.

A disappointing government report last month on retail sales suggested the economy remained fragile, and the Federal Reserve reined in its expectations for how the economy will fare this year.

There were no major economic reports Monday, but traders will get data this week on new and existing home sales, durable goods orders, gross domestic product and personal incomes and spending.

The Federal Reserve also will be in the spotlight after its two-day meeting on monetary policy ends Wednesday.

The central bank is widely expected to hold its key funds rate steady near zero, but investors want to know whether policymakers will say the economy is recovering or still in need of aid.

The Dow fell 200.72, or 2.4 percent, to 8,339.01, its lowest finish since May 27.

It was the biggest drop for the blue chips since losing 290 points, or 3.6 percent, on April 20 as investors worried about the soundness of bank balance sheets.

The Dow has fallen for five of the last six days and remains down for June.

The Standard & Poor's 500 index fell 28.19, or 3.1 percent, to 893.04, also leaving the index with its biggest slide since April 20 and erasing its advance for the year.

The Nasdaq composite index fell 61.28, or 3.4 percent, to 1,766.19.

After Monday's drop and a 3 percent slide last week, the Dow is down 5 percent for the year.

The Nasdaq, however, remains up by 12 percent in 2009.

The market is selling off on the uncertainty of what lies ahead, said David Kotok, chairman and chief investment officer of Cumberland Advisors.

"The picture's not clear. You've got a market that's acting just that way," Kotok said.

Bond prices jumped Monday, pushing yields down, as the drop in stocks drove demand for the safety of government debt.

The yield on the benchmark 10-year Treasury note sank to 3.69 percent from 3.78 percent late Friday.

The Fed has been buying Treasurys and other kinds of debt with the hope of keeping borrowing rates low at the same time the government has been issuing record amounts of debt.

The Treasury Department is planning to auction another $104 billion in debt this week.

A gauge of stock market volatility known as Wall Street's "fear index" spiked. The VIX rose more than 11 percent Monday, its biggest one-day gain since April.

Benchmark crude for August delivery fell $2.52 to settle at $67.50 a barrel on the New York Mercantile Exchange. Gold prices also slid.

Shares of companies that produce commodities dropped.

Oil company Chevron Corp. fell $2.30, or 3.4 percent, to $65.76, while aluminum producer Alcoa Inc. fell 98 cents, or 8.9 percent, to $10.02.

Few areas were spared the selling Monday, but investors moved toward industries like consumer staples and utilities that are expected to offer shelter in a tough economy.

Procter & Gamble, the maker of Tide detergent and Crest toothpaste, slipped 8 cents to $50.56.

Duke Energy Corp. rose 24 cents, or 1.7 percent, to $14.65.

The dollar was mostly higher against other major currencies.

The Russell 2000 index of smaller companies fell 19.91, or 3.9 percent, to 492.81.

About eight stocks fell for every stock that rose on the New York Stock Exchange, where consolidated volume came to 5.1 billion shares, down from 5.5 billion Friday.

Trading was heavy Friday because of expiration of options and futures contracts.

Overseas, Japan's Nikkei stock average rose 0.4 percent.

Britain's FTSE 100 fell 2.6 percent, Germany's DAX index fell 3 percent, and France's CAC-40 fell 3 percent.

Source : STAR
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Fury as Lloyds closes Cheltenham & Gloucester branches and cuts 1,660 jobs

• All 164 branches of the 160-year-old building society to close
• Cuts come on day taxpayer's stake increases to more than 45%

Lloyd Banking Group provoked a furious reaction from unions and MPs tonight over its plans to shut all 164 Cheltenham & Gloucester branches and cut a further 1,660 jobs.

The decision, which came on the day the taxpayer's stake in the bailed out bank rose temporarily to 45.74%, takes the total job cull at the UK's largest high street bank to more than 4,000 since it was created in January by Lloyds TSB's rescue of HBOS. Further job cuts, as many as 25,000, are expected from the combined 140,000 workforce during the three-year integration.

The entire C&G network is to close by November after more than 150 years and more than 15 years after the Gloucester-based building society was taken over by Lloyds TSB.

The sudden move prompted speculation that Lloyds was trying to head off a move by the EU, which the bank had already warned could demand drastic sell-offs of parts of its operations to counter concerns about anti-competitiveness.

The Unite union attacked the decision as "nothing short of disgraceful". Its general secretary, Derek Simpson, warned that closing the C&G network would "rip the heart out of hundreds of local communities up and down the country". Unite also said today 500 staff at RBS have been told that they are at risk of redundancy as part of an existing job cut programme.

John McFall, chairman of the Treasury select committee, told MPs Lloyds had betrayed "the dignity of the workforce". He urged Treasury secretary Kitty Ussher to "join me in writing to Cheltenham & Gloucester to ensure that people are treated properly when it comes to being unemployed".

McFall was particularly furious the job cuts had been leaked, leaving the bank scrambling this morning to inform staff of the plan drawn up by Helen Weir, who is responsible for retail banking.

About 1,000 employees will lose their jobs as a result of the C&G closures, while the bank is cutting 265 positions across its personal loans division, which will lead to job losses in Chester and Cardiff, with other jobs also going across its retail, personal finance and mortgage sales operations.

Intelligent Finance, a brand launched to much fanfare by HBOS at the height of the dotcom boom, is to be closed to new mortgage business.

Lloyds said compulsory redundancies would be "a last resort". Weir said: "We will work through these changes carefully and sensitively and continue to consult closely with our unions throughout."

She stressed C&G would continue to be used as a mortgage brand through brokers, alongside Birmingham Midshires, Halifax and Scottish Widows. For the first time, Bank of Scotland will start to sell its own-brand mortgages in its branches, rather than those of the Halifax, the country's biggest mortgage lender.

The enlarged bank is operating a multi-brand strategy, although it is dropping the Clerical Medical name, which was part of HBOS. This is unlike the Spanish bank Santander, which recently announced plans to unite Abbey, Alliance & Leicester and Bradford & Bingley under its red flame logo.

The taxpayer stake in Lloyds yesterday rose to more 45% after the Treasury pumped in a further £1.7bn to enable the bank to exchange preference shares for ordinary shares, although the stake will slide back to 43% once the "rump" shares from the placing are sold. In the process some £2.3bn was repaid to the taxpayer.

Simpsonsaid: "UK taxpayers have not poured billions of pounds into this organisation just to see it sack thousands of hard-working people. This is truly a dark day for the financial services sector in this country."

Alex Potter, banking analyst at City broker Collins Stewart, said the closures could be a "sop" to the regulators, even though Gordon Brown allowed UK competition rules to be broken when HBOS was rescued.

The EU has yet to pronounce on the deal. "There are still antitrust concerns about the Lloyds-HBOS merger at commission level," Potter told BBC Radio 4's Today programme.



Source : Guardian
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

UK aerospace 'facing 10,000 job cuts'

The UK aerospace sector is set to cut 10% of jobs, about 10,000 posts, in the next year, an industry body has said.

The Society of British Aerospace Companies said falling passenger levels were hitting aircraft orders as well as spending on research and development.

Demand for military planes was up by about 3% on the same time a year ago, it said, but this was partly thanks to orders placed several years ago.

The sector is worth about £20bn a year and employs about 100,000 people.

But the society's general director, Ian Godden, told the BBC this headcount was likely to be reduced by 10% in 2009.

There are fewer orders for planes and so fewer people are required to make them," said the society's chief executive, Ian Godden.

The report was released on the day that BAA - which operate seven UK airports -reported passenger numbers had fallen by 7.3% in May from a year ago after the recession hit North Atlantic traffic and airlines cut capacity at Stansted.

Unclear future

The Society of British Aerospace Companies said that sales volumes had been flat in 2008, but there had been a slight rise in turnover.

Falls were experienced in employment, orders and R&D spending, but exports, productivity and skills levels rose, it said.

"The civil sector appears to be hit harder than the defence sector but the export market and order backlogs offer some cause for optimism," Mr Godden said.

"There has been a slowdown in the sector but compared to the rest of the economy, aerospace has held up well thus far.

"Our industry is in for a difficult period in the immediate future but the degree of that difficulty is yet to become clear."

Large employers in the sector include Airbus, BAE and Rolls-Royce.

Mr Godden told the BBC that Rolls-Royce was an "exceptional case" because it not only made aircraft engines, but also carried out repairs on its engines and so was relatively well-protected during tougher times.

Source : BBC
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

British Airways looks to 2,000 job cuts to stay airborne

BRITISH Airways boss Willie Walsh has refused to rule out compulsory redundancies among the airline's 40,000 staff after setting a three-week deadline for an agreement on pay cuts and job reductions.

BA is offering voluntary redundancy to its 14,000-strong cabin crew in an effort to cut 2000 jobs.

Speaking at the annual meeting of the International Air Transport Association in Kuala Lumpur, the BA chief executive said he had set a June 30 target for reaching an agreement on pay deals because the industry was in a "fight for survival". Talks with the various unions will begin today.

Asked if BA was considering compulsory redundancies, Mr Walsh said: "I would not rule that out. We will take whatever steps are necessary to see the business through this crisis. We are working together and, I would say, generally constructively so far. But we have significant challenges that must be addressed."

Mr Walsh was confident there would be a good response to the voluntary redundancy program. "We know there is huge pent-up demand among the cabin crew group," he said.

But negotiations with cabin crew have been fraught in recent years.

A dispute with flight attendants cost the airline £80 million two years ago when they called off a threatened strike at the last minute. BA was able to run a full service but was left with multimillion-pound losses and empty terminals at Heathrow Airport after passengers avoided the airline or sought compensation for their bookings.

Mr Walsh denied that BA passengers faced a summer of strike action that could further damage a business that lost £401 million ($A816 million) last year and would disrupt the holiday plans of hundreds of thousands of passengers.

Asked if holidaymakers faced strike-led disruption, Mr Walsh said: "I don't see it. We have got very intelligent people working for us at BA. They can see what is happening in the industry. Everyone in the business can see that this is not a temporary blip and it's a massive challenge facing all airlines."

Mr Walsh said the airline would struggle to survive if it did not tackle costs, as the industry gathered in Malaysia to debate how to reduce a forecast combined loss of £5.7 billion ($A11.6 billion) this year.

IATA economist Brian Pearce warned this week that airlines could shed 100,000 jobs this year.

"I have talked about this industry being in a fight for survival and BA, as part of the industry, is in a fight for survival," Mr Walsh said.

Trade unions have called for short-term pay changes but are so far baulking at permanent alterations to their contracts.

Mr Walsh was adamant airlines faced a long downturn and any economic recovery would not be fast or strong enough to save them.

Source : TheAge
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Arcandor files for bankruptcy

German retailer Arcandor AG filed for bankruptcy protection Tuesday in an effort to salvage its department stores and its mail-order arm, a day after the government rejected its bid for state-backed emergency credit.

Arcandor said in a statement it filed with the district court in Essen, where it is based.

"Through filing for protection, our aim is to continue restructuring the company and its subsidiaries in an effort to ensure their survival," the company said.

Arcandor units including the Karstadt Warenhaus GmbH department stores and the Quelle GmbH mail-order company were involved in the filing.

Units not involved include travel operator Thomas Cook Plc, in which Arcandor holds a majority stake, and its home-shopping channel HSE 24, the statement said.

The government on Monday rejected a bid from Arcandor for euro437 million ($610 million) in state-backed credit.

"Following that, there was no sustainable financial perspective," the company said. "As of June 12, when short-term loans of euro710 million will be due, we will be insolvent."

Arcandor said that some 43,000 employees in Germany would be affected by the proceedings. They will receive their paychecks through August and then will be eligible to file for special state benefits.

"As part of the bankruptcy protection proceedings we will fight to maintain as many jobs and stores as possible," said Karl-Gerhard Eick, chairman of Arcandor's management board.

Chancellor Angela Merkel, who had repeatedly voiced skepticism about a government bailout of Arcandor, described the filing as "an unavoidable step whose opportunities should now be used."

"The pledges by the owners and creditors were absolutely not enough for us," Merkel told reporters. "We have to take care of tax money."

Merkel said Economy Minister Karl-Theodor zu Guttenberg would soon speak with Arcandor employee representatives "because the government has a great interest in being helpful."

"We have always said that an insolvency filing can offer the possibility to put the company on new feet and open up prospects for it," Merkel told reporters.

She said she saw opportunities for jobs in joining up with other companies, such as Metro AG, the owner of rival department store chain Kaufhof.

Metro spokesman Ruediger Stahlschmidt said after Tuesday's filing for bankruptcy protection that his company was still interested in taking over some 60 of the 90 Karstadt department stores and their employees.

Metro has proposed a merger that would produce one large retail company, though negotiations so far have made little headway.

"We hope ... that we will be able to return to talks next week," Stahlschmidt said.

Earlier in the day, the Economy Minister Karl-Theodor zu Guttenberg had spelled out the requirements for any government backing, including "significant contributions" from its owners and a debt moratorium from creditor banks.

Arcandor shares fell 48 percent to close at euro0.55 on Tuesday.

Source : AP
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

The St. Regis Monarch Beach schedule for a Foreclosure Auction!

The St. Regis Monarch Beach, infamous as the hotel where American International Group sponsored a luxury retreat just days after accepting a federal bailout, has been scheduled for a foreclosure auction.

The companies that own the resort are in default on a $70-million loan from Citigroup Global Markets Realty Group, people knowledgeable about the debt said Tuesday.

Negotiations continue in an effort to avoid an auction, according to those sources. But unless something is worked out, the St. Regis will go on the block July 7, to be sold to the highest bidder, according to a "terms of public sale" document obtained by The Times.

The resort's troubles come as the recession and credit crunch have hammered the hotel industry, depressing room rates and occupancy levels and making loans all but impossible for hotel owners to get.

Resorts like the St. Regis, which cater to wealthy travelers and the high-end corporate retreat business, have seen some of the steepest declines in revenue.

Business is so bad -- and funding so expensive -- that hardly any hotels are being sold these days, and most are now worth 50% to 80% less than at the peak, said hotel broker Alan X. Reay of Atlas Hospitality Group in Costa Mesa.

Just this week, Sunstone Hotel Investors Inc. said it would turn the trendy W Hotel in downtown San Diego over to its lenders, part of a growing trend that Reay said was a "bloodbath."

The St. Regis -- which has several restaurants, a golf course and a private beach club -- has been hit by a steep drop in bookings, according to the people with knowledge of the situation.

Built by the Makarechian development family of Newport Beach, the property is current, for now, on two other mortgages totaling $230 million on the 400-room hotel and golf course, these people said, speaking on condition of anonymity because of the sensitivity of the situation.

When the Makarechians and their partners, including San Francisco's Farralon Capital hedge fund, refinanced the property and incurred $300 million in debt in 2007, credit markets had not yet seized up and the hotel's revenues were high enough to support the payments.

But that's no longer the case, these people said. Neither Citigroup nor representatives of the St. Regis would comment on the record.

The St. Regis always aimed to satisfy the smallest whims of wealthy people and high-end corporate travelers.

Before the hotel opened in 2001, Paul Makarechian, the 27-year-old scion overseeing non-residential projects for the family, took The Times on a tour, pointing out sweeping tapestries, elaborately stitched duvet covers matching fabric-draped headboards -- even motion sensors so employees would know without knocking if guests were present.

"If you're going to build a five-star luxury resort hotel that will outdo every other deluxe hotel on the planet, you don't scrimp on sheets," he said. "You don't scrimp on anything."

But in these times, perhaps a bit more austerity is in order.

Although the St. Regis is not directly on the waterfront, the Pacific Ocean is visible from its six restaurants and it boasts a five-star Mobil Travel Guide rating, compared with four stars for the nearby Ritz-Carlton and Montage resorts.

Guests can take a shuttle across the golf course to a private ocean-front club at Monarch Beach, the northernmost stretch of Dana Point, where they can sip cocktails after taking surfing lessons.

The St. Regis became something of an emblem of corporate excess and greed last October, as the global financial system was threatening to melt down.

The taint arrived by association with AIG, the giant New York insurer that, because of massive wrong-way bets on the mortgage markets, became the largest recipient of bailout money from the federal government.

Just weeks after receiving its first $85 billion in federal funds, AIG shelled out more than $440,000 at the St. Regis for rooms, wining and dining, spa treatments and rounds of golf to reward 100 top salespeople.

The Presidential Suite, which normally goes for $3,200, was booked for five nights, The Times reported.

The event was widely vilified and lampooned, and bookings at the St. Regis dropped by 20% in the months following it, St. Regis marketing director Michael Mustafa told Hotels Magazine.

By Mustafa's estimate, about a third of the drop-off was attributable to what the magazine termed the "AIG curse."

"My phone started ringing off the hook," Mustafa recalled. "That was the worst week of my life."

At the St. Regis, managers couldn't be reached for comment Tuesday. But it appeared the debt problem would not directly affect resort visitors. The Citigroup real estate arm is pursuing what is known as a non-judicial foreclosure, meaning no sheriff's deputies nailing notices to the hotel walls or sales on the courthouse steps.

Instead, the auction is to be held at First American Title Co. in Santa Ana.

Bidders would be vying for the hotel and golf course, but not the surrounding residential areas, including a yet-to-be-developed parcel on the hotel's south flank, which is owned separately by the Makarechian-Farralon partnership.

Citigroup itself is allowed to bid, according to the "terms of public sale" document. The Makarechians and partners also are likely to enter bids.

The package to be sold includes the obligation to pay the $230 million in senior mortgages on the property.

Source : HotelsMag
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

FACTBOX-Banks, funds, insurers cut 382,880 jobs in crisis

Banks, insurers and asset managers worldwide have
announced 382,880 job cuts since August 2007 when the credit crisis began to
intensify. Following is a list of the deepest job cuts at major companies:

 Company                     Jobs       Headcount       Latest

                             cut        before Aug 07*  headcount**

----------------------------------------------------------------------------

 American Express (AXP.N)    11,000     Unavailable     Unavailable

 Bank of America (BAC.N)     45,500     195,675         284,802 (March 31)

   (Includes 30,000-35,000 jobs to be slashed over three years after the

   purchase of Merrill Lynch and 7,500 jobs to be cut over the next two years

   after the acquisition of Countrywide Financial Corp)

 Barclays (BARC.L)           9,050      127,700         156,300 (Dec. 31)

   (Includes 3,000 cuts after the acquisition of Lehman Brothers businesses)

 Citigroup (C.N)             75,000     361,000         309,000 (March 31)

 Commerzbank (CBKG.DE)       9,500      35,384          64,707 (March 31)

   (All layoffs announced after the acquisition of Dresdner Bank)

 Credit Suisse (CSGN.VX)     7,320      45,600          46,700 (March 31)

 Deutsche Bank (DBKGn.DE)    1,380      75,140          80,277 (March 31)

 Fidelity Investments        4,000      Unavailable     40,000 (April 15)

 Fidelity National

 Financial Inc (FNF.N)       4,100      Unavailable     13,680 (March 31)

   (Includes 1,500 cuts after purchase of three title insurers in December)

 First American (FAF.N)      5,460      38,000          32,700 (Dec. 31)***

 Goldman Sachs (GS.N)        4,800      29,905          27,898 (March 27)

 HSBC (HSBA.L)               16,350     312,577         312,866 (Dec. 31)

 ING (ING.AS)           over 7,000      119,097         114,035 (March 31)

 J.P.Morgan (JPM.N)          23,700     179,664         219,569 (March 31)+

   (Includes 7,600 cuts announced after the purchase of Bear Stearns and up

   to 14,000 layoffs announced in 2009)

 Lehman Brothers             12,570     N/A             N/A

   (Number made up of about 6,000 job cuts made before the bank collapsed in

    September and an estimated 10,500 left jobless after the bank collapsed

    -- about 8,000 others were transferred to Nomura and 10,000 to Barclays)

 Lloyds (LLOY.L)             3,595      66,000          58,756

   (Includes nearly 3,000 cuts since takeover of HBOS in early 2009)

 Merrill Lynch               3,300      61,900          N/A

   (Layoffs before takeover by Bank of America closed on Jan. 1)

 Morgan Stanley (MS.N)       8,680      45,845          44,616 (March 31)

 National City Corp          7,400      32,445          N/A

   (Layoffs before National City Corp merged with PNC on Dec. 31)

 Nomura (8604.T)             1,530      16,854          25,626 (March 31)

   (Includes 1,000 jobs cut after the acquisition of Lehman Brothers units)

 PNC Financial

 Services (PNC.N)            5,800      28,054          59,000 (April 23)

   (Job cuts at the combined group are due to be completed by 2011)

 RBS (RBS.L)                 15,250     135,400         174,000 (Dec. 31)++

 Santander (SAN.MC)          2,600      135,922         181,166 (March 31)

 State Street (STT.N)        1,800      24,500          27,500 (March 31)

 UBS (UBSN.VX)               19,700     81,557          76,200 (March 31)

 UniCredit (CRDI.MI)         9,000      135,880         170,732 (March 31)+++

 * Estimate based on earnings reports and management statements

 ** Headcount effective on the date in brackets

 *** Estimate

 + Includes 38,211 staff from the acquisition of Washington Mutual

 ++ Includes employees from ABN AMRO acquired in October 2007

 +++ Includes staff from Ukrsotsbank acquired in January

Source : Reuters
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

Airlines 'to lose $9bn' as they fight to survive recession

Airlines will lose $9bn (£5.7bn) this year, nearly double previous forecasts, as carriers fight to stay afloat in the "most difficult" trading conditions they have ever faced, the industry's leading body has warned.

Buffeted by a collapse in business traffic, falling fares and the threat of resurgent fuel costs, the industry is expected to come close to matching last year's losses of $10.4bn, said the International Air Transport Association (Iata). Revenues are expected to fall by 15% this year, a decline of $80bn, as passenger numbers fall and airlines slash fares to entice a dwindling amount of potential customers. As a result, the forecast industry loss this year has nearly doubled from $4.7bn to $9bn.

Giovanni Bisignani, Iata chief executive, said the industry's future depended on a "drastic" reshaping by governments, through lower taxation and fewer ownership guidelines, and by mergers between airlines.

"There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced," said Bisignani.

The Iata boss is renowned within the industry for his apocalyptic outlooks, prompting a gentle rebuke from the chief operating officer of Airbus, John Leahy, who said the long-term outlook for aircraft manufacturers remained strong.

However, Bisignani's comments were backed by leading airline executives this morning at the Iata annual general meeting in Kuala Lumpur. Willie Walsh, British Airways chief executive, said "every" airline was in a fight for survival.

"Everyone is fighting for survival, if you look at their financial performances," said the BA boss, whose airline lost a record £401m last year. Asked if he agreed with the assessment of arch-rival and Virgin Atlantic co-owner Sir Richard Branson, who said two major carriers could go bust this year, Walsh joked that he was unlikely to reach an accord with the tycoon on anything. "If he said two I am going to disagree with him." He added: "It is quite possible that you could see a number of airlines fail, with oil prices rising and no sign of the economic environment improving. There are a lot of airlines that could fail."

Pointing to Ryanair's first full-year loss in 20 years, announced last week, Walsh said "all airlines" were encountering difficulties. Last year more than 30 airlines collapsed, including Silverjet and XL Airways in the UK, following a spike in fuel costs that saw the price of oil nearly breach $150 a barrel.

Virgin Atlantic, one of BA's biggest rivals on the transatlantic route, said summer bookings would be lower than in recent years. Steve Ridgway, Virgin Atlantic chief executive, said the carrier's premium economy cabin - a halfway house between economy and business class - was proving to be a "recession buster". However, he said bookings for the upper class cabins were being hit.

"We have maintained load factors [the proportion of seats sold per flight] in premium economy and economy. But upper class load factors are down," he said. Ridgway added that he did not expect a large number of airline bankruptcies this year following the demise of more than 30 carriers in 2008.

"I think it's a fight for survival but the airlines that were most vulnerable have gone."

Tony Tyler, chief executive of Hong Kong-based Cathay Pacific, said the industry was facing "the most difficult trading conditions any of us can remember."

The biggest blow to long-haul carriers is the slump in profitable first and business class bookings, which have fallen by around 20% since the start of the year and pitched many carriers into loss-making territory. BA, for instance, relies on business passengers for more than 50% of its revenues. "Demand for first and business class has reduced significantly," said Tyler.

Bisignani said businesses were slashing travel budgets in response to the downturn: "Our customers don't have confidence. They need to reduce debt and that means less cash to spend. Business habits are changing and corporate travel budgets have been slashed. Video conferencing is now a stronger competitor."

Alan Joyce, the chief executive of Australian carrier Qantas, took a more optimistic view, saying that business and first class bookings would stage a recovery. "These businesses go through cycles. We have seen some premium markets in the past go through decline. But it does come back." Cautioning against the gloomiest predictions for the industry, he added: "If you put 10 economists in the room you would have 10 different opinions about what is going to happen." Asked if Qantas was still considering a merger with BA, after talks were aborted last year, Joyce said the airline was not mulling a deal: "We are focused on our core business." Walsh also ruled out re-starting talks.

In his annual address to the industry, Bisignani also accused the British government of using air passenger duty to pay off MPs' expenses, in the latest indication that the scandal has acquired global fame. "It is unacceptable that money collected from our responsible industry in the name of the environment is being used by an irresponsible government to pay inflated MP expense claims or bail out banks."

Source : Guardian
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]

General Motors to File for Bankruptcy

GM - the biggest car manufacturer in the world until last year - will file for bankruptcy in the US courts as it seeks to restructure its stricken operations.

The US government is said to be planning to take a 60% stake in the Detroit company under a deal to provide an additional £19 billion in aid to help GM emerge from bankruptcy.

President Barack Obama is preparing to make a White House address in which it is understood he will reassure that a revived GM will come out of the restructuring process.

It is also thought that he will stress the government's commitment to staying out of the carmaker's business decisions, in spite of its majority ownership stake.

The Canadian government is also reportedly taking a 12.5% stake in GM and a United Auto Workers trust for health care expenses would get 17.5%.

Holders of GM corporate bonds are expected to receive a 10% stake, with the possibility of increasing their share to 25%.

GM, maker of Chevrolet, Buick and Cadillac cars and trucks, is expected to file for bankruptcy protection at 8am in the US (1pm BST). The move will not affect Magna International's rescue deal to buy GM Europe and the Vauxhall and Opel brands.

The bankruptcy - the fourth-largest of its kind in the world - is set to trigger an intensive two to three-month restructuring that will see thousands of US workers axed, with many dealerships and factories also closed.

GM plans to name veteran turnaround specialist Al Koch to serve as its chief restructuring officer to help the company through bankruptcy protection.

He will lead the separation of the carmaker's assets into a "new GM" and the remaining parts of the company that will form "old GM".

The "old GM" company is then set to be wound down once the company emerges from bankruptcy.

GM was founded in 1908 by William Durant, who brought several car companies under one roof and developed the strategy of "a car for every purse and purpose" in the 1920s that was designed to appeal to consumers of all ages and financial status.

The group commanded more than half the US car market in the 1950s and employed more than 600,000 workers in the late 1970s, making it the largest private employer in the country.

It is still one of America's largest employers today, but will come out of its Chapter 11 process a far leaner firm, focusing only on its four core brands - Chevrolet, Cadillac, Buick and GMC.

Source : Independent
[tags : recession bankrupt collapse retrenchment financial news collapse stagnation economic slowdown financial collapse world recession global recession layoff job cut]