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Thursday October 25th 2001

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Business this week
October 25th 2001
From The Economist print edition 




Staying aloft

	
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Switzerland's federal government, some cantons and some of the country's biggest companies-including Nestl?, Novartis, UBS and Credit Suisse-decided that a national airline was required irrespective of cost. Although most national airlines look in a sorry state, government and business stumped up SFr4.24 billion ($2.6 billion) to recapitalise Crossair, a Swiss regional airline that will take over two-thirds of bankrupt Swissair's aircraft and routes.

See article: Europe's airlines and subsidies <http://TheEconomist.s.maildart.net/link_31713_6557115_2_80065724_60423391_1_46>  E+ <http://www.economist.com/images/dingbats/e5.gif>

Britain and America resumed talks aimed at an "open skies" agreement that would allow more airlines to ply their trade between the two countries, and would persuade America's antitrust authorities to allow an alliance between BA and American Airlines. The French government confirmed a similar deal to enable an alliance between Air France and Delta. BA also began alliance talks with KLM Royal Dutch; other European airlines are likely to seek allies.


America's bad results

America's biggest companies had a tough week. AMR, parent company of American Airlines, the world's biggest, reported a loss of $525m in the latest quarter, including losses related to September 11th, compared with a profit of $322m last year. 

Viacom, an American media giant that owns CBS, MTV and Paramount Pictures among others, announced a net loss of $190m in the third quarter, partly as a result of lost advertising revenue after September 11th.

See article: Media and the economic downturn <http://TheEconomist.s.maildart.net/link_31712_6557115_2_80065724_60423391_1_45> 

Lucent Technologies, an American telecoms-equipment maker, reported losses in the latest quarter of $8.8 billion compared with $484m in the same period last year. Much of the loss is accounted for by restructuring costs that will see its workforce reduced by almost half, to as few as 57,000 by March next year.

Honeywell lost $308m in the third quarter after restructuring costs of $1 billion. It also said 4,100 jobs would go next year in addition to 15,800 announced in September.

Xerox announced a fifth consecutive quarterly loss, of $211m, slightly more than a year ago. The copier company has spent some years in the doldrums and claimed that a restructuring plan had been put back by the aftermath of September 11th.

Profits at ExxonMobil, the world's biggest publicly-traded oil company, fell by 23% in the third quarter, to $3.3 billion, compared with the same period the year before when the company made the highest profits ever recorded by an American company. Falling oil prices are largely to blame.

Enron's share price suffered a second blow a week after its third-quarter results showed a one-off charge of $1 billion related to investments that had gone awry. Investors took further fright after the energy-trading giant admitted that one of the deals, involving its chief financial officer, Andrew Fastow, had caught the eye of America's Securities and Exchange Commission, which then started an informal investigation of Enron. Mr Fastow is being replaced. 

America's International Trade Commission agreed with the country's steel companies that foreign competition was adversely affecting domestic producers. This opens the way for the government to introduce tariffs and quotas on foreign steel. The European Union threatened action through the WTO if restrictions were introduced.


Sent packing?

It was reported that the European Commission would block a euro1.7 billion ($1.5 billion) purchase by France's Tetra Laval of a rival Swedish packaging company, Sidel. The Commission fears for competition in the drinks-packaging market.

America's Federal Trade Commission voted to block the $8.2 billion sale of Seagram's drink businesses to Diageo, a British drink company, fearing that it would create a rum duopoly with Bacardi. Diageo said it would give up the Malibu rum brand to prevent the deal from being beached. 

	
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Germany's Ifo business-climate index plummeted to its lowest level since 1993 and its biggest monthly fall since 1973-worrying signs that Europe's largest economy is leading the way toward recession.

See article: Germany's troubled economy <http://TheEconomist.s.maildart.net/link_31714_6557115_2_80065724_60423391_1_47>  E+ <http://www.economist.com/images/dingbats/e5.gif>


Japan's losses

Fujitsu announced losses of ?175 billion ($1.4 billion) in the six months to September. The Japanese electronics giant suffered from the falling demand for chips and telecoms equipment. The company added a further 4,500 job losses to the 16,400 announced in August.

Sony, another Japanese electronics giant, reported a second quarterly loss, of ?13.2 billion ($111m), in the three months to September. Weaker consumer demand has hit sales in America. However, the company's game division moved back into profit, thanks to rising sales of PlayStation2.

Japan's economics minister, Heizo Takenaka, said that redenominating the yen was again under consideration as part of wider economic restructuring; removing two noughts would bring it into line with the dollar and euro. The measure is more usually associated with countries that are suffering hyperinflation to restore confidence; deflation-stricken Japan would perhaps be better advised to add some zeroes.


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