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Business and financeButtonwood's notebook

Britain: back to being the sick man of Europe?

IN THE 1970s, Britain was dubbed “the sick man of Europe”, a role previously played by the Ottoman empire in the late 19th century. A poor growth record since the second world war combined with terrible industrial relations (29m days lost to strikes in 1979) to make many ask the question “Is Britain governable?”.

The reason Britain joined what was then the EEC in 1973 (at the third attempt) was, in large part, a desperate attempt to find a way of forcing the country to become more competitive. Whether Europe was the key factor, or whether it was Margaret Thatcher’s reforms, by the mid-1990s, the trick seemed to have worked. In particular, London, which lost a quarter of its population between 1939 and the early 1990s, became a global, self-confident city, attracting expats from…Continue reading

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Business and financeGulliver

Restrictions are lifted on the last airline affected by America's laptop ban

JUST like that, America’s laptop ban is all but over. Four months ago the Trump administration announced that travellers from ten Middle Eastern countries would be barred from taking electronics larger than a mobile phone into plane cabins, citing security concerns. In the past few weeks, the government has been gradually freeing carriers, including Emirates, Etihad and Turkish Airlines, from the restrictions. On July 17th, it lifted the ban on the last remaining airline covered, Saudi Arabian Airlines.

That represents a shift by the Department of Homeland Security. John Kelly, the department’s chief, had at one stage suggested that the laptop would be extended across the world. But at the end of last month it was instead decided that America would demand a slate of tighter security measures at all airports with flights into the country. Mr Kelly said at the time that around 325,000 flyers each day, on 2,000 flights from 280 airports in 105 countries, would be subject to a more “extensive screening process”. That would include…Continue reading

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Business and financeGulliver

United Airlines is testing a novel way of bumping passengers

IT IS a classic traveller’s dilemma: you are waiting in the boarding area for your flight, and an airline employee asks over the loudspeaker if anyone is willing to be bumped in exchange for a voucher. You like the idea of sacrificing the unimportant meeting you were scheduled to attend in return for a few hundred dollars of travel credit. Then again you do not fancy explaining this to your colleagues, or sitting about in an airport for three hours waiting for the next flight.

Now imagine that instead of having to make this decision just before you board, you could do it do it several days in advance, in the comfort of your home. Changes the equation a bit, does it not?

United Airlines is contemplating a new scheme along these lines, called the Flex-Schedule Program. If a flight is overbooked, or looking like it might be, United will contact passengers who have signed up to the scheme up to five days ahead of departure. They will be given the option of switching to a less popular flight on the same day between the same…Continue reading

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Business and financeGulliver

Why the spectre of a hard Brexit has European airlines so worried

PILOTS are taught that a too-hard landing is better than a too-soft one. A plane can absorb more shocks than one might think, but a runway is only so long. But when it comes to Brexit Britain’s government seems to differ. And as the deadline for Britain’s secession from the European Union approaches, the spectre of a hard Brexit has some airlines scrambling. For carriers with big operations in Britain, the terms of Brexit cannot be cushioned enough.

Of most concern is that a hard Brexit will involve Britain leaving the European Common Aviation Area. Europe’s open skies fall under the jurisdiction of the European Court of Justice, whose yoke the country must be free from, insists Theresa May, Britain’s prime minister. That in turn would bring into question the right of British carriers to fly routes within the EU. The most pessimistic within the industry, including Michael O’Leary, the boss of Ryanair, say that unless a new bilateral agreement is agreed, there is a real prospect that flights between Britain and the continent…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

The Big Mac index

THIRTY-ONE years ago, The Economist created the Big Mac index as a way of gauging how different currencies stacked up against the dollar. The index is based on the theory of purchasing-power parity, the idea that in the long run, exchange rates should adjust so that the price of an identical basket of tradable goods is the same. Our basket contains one item, a Big Mac.

The latest version of the index shows, for example, that a Big Mac costs $5.30 in America, but just ¥380 ($3.36) in Japan. The Japanese yen is thus, by our meaty logic, 37% undervalued against the dollar.

In…Continue reading

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ApprovedBusinessBusiness and finance

Millions of things will soon have digital twins

THE factory of the future will be a building stuffed full of robots making robots. A factory in Amberg, a small town in Bavaria, is not quite that, but it gets close. The plant is run by Siemens, a German engineering giant, and it makes industrial computer-control systems, which are essential bits of kit used in a variety of automated systems, including the factory’s own production lines.

The Amberg plant is bright, airy and squeaky clean. It produces 15m units a year—a tenfold increase since opening in 1989, and without the building being expanded or any great increase in the 1,200 workers employed in three shifts. (Production is about 75% automated, as Siemens reckons some tasks are still best done by humans.) The defect rate is close to zero, as 99.9988% of units require no adjustment, a remarkable feat considering they come in more than 1,000 different varieties.

Such achievements are largely down to the factory’s “digital twin”. For there is another factory, a…Continue reading

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ApprovedBusinessBusiness and finance

An illustrious Hong Kong container firm sells to China

Terminal value

STONECUTTERS ISLAND in Hong Kong used to be a favoured habitat for poisonous snakes and eye-catching birds such as the white-bellied sea eagle. Thanks to Hong Kong’s rapid development, it is no longer so hospitable. Its sky is full of gantry cranes, stacking 20-foot-long shipping containers in multicoloured tessellations, like giant Lego bricks. A cluster of decorative containers, daubed in graffiti, line the perimeter of container terminal eight, which is partly operated by COSCO, a state-owned Chinese shipping giant. In bright yellow lettering, one slogan instructs passers-by to “Respect Past, Embrace Future”.

Few Hong Kong companies have as much to tell about the past as Orient Overseas Container Line (OOCL), the world’s seventh-biggest container shipping line. Its founder, Tung Chao-yung, owned the first Chinese-crewed steamship to travel from Shanghai to France in 1947, and went on to build a shipping empire of over 150 vessels. His…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Africa is Islamic banking’s new frontier

IN 2008 Ethiopia’s conservative central bank experimented: it authorised interest-free banking. Interest is prohibited under sharia law, so the move was lauded as a step towards expanding financial services for the country’s large and often poor Muslim minority. But momentum soon stalled. An attempt to launch a fully-fledged Islamic bank foundered. Today most of Ethiopia’s big commercial banks offer a narrow range of Islamic financial products, but to few customers. Islamic finance in Ethiopia was stillborn.

Outside Africa, Islamic finance is in much healthier condition. Between 2007 and 2014, the sector tripled in size (although growth has slowed lately). Total assets are around $1.9trn. Sub-Saharan Africa accounts for less than 2% of this, yet it should be especially fertile territory. The continent’s Muslim population is 250m and growing. And according to the World Bank, as many as 350m Africans do not have a bank account.

Several countries are vying to become…Continue reading

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ApprovedBusinessBusiness and finance

Norwegian might still transform long-haul flying

Freddie Laker saw it coming

A DECADES-old dream of many low-cost carriers (LCCs), to break into the market for long-haul flights, has also been a long-standing nightmare for executives at full-service airlines, who earn their corn chiefly on such routes. So a series of setbacks for Norwegian, the latest LCC to try its hand at long-haul flights, has set off a round of Schadenfreude at established airlines across Europe. On July 13th, Norwegian revealed a disappointing set of results for the three months to June. A week earlier its chief financial officer of 15 years, Frode Foss, resigned with immediate effect, sending the share price down by 8%. Over the past year the shares have lost a third in value, as investors grow nervous.

The worries go back to Norwegian’s decision to begin long-haul flights. Founded in 1993 by Bjørn Kjos, still its CEO and biggest shareholder, it took over some domestic routes in Norway from a bankrupt charter…Continue reading

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The fashion industry pays attention to plus-size women

Hot to trot

A GOOD fit is everything, stylists often counsel, but in assessing its market America’s fashion business appears to have mislaid the measuring tape. A frequently-cited study done a few years ago by Plunkett Research, a market-research firm, found that 67% of American women were “plus-size”, meaning size 14 or larger. That figure will not have changed much, but in 2016, only 18% of clothing sold was plus-size, according to NPD Group, another research firm.

Designers and retailers have long thought of the plus-size segment as high-risk. Predicting what these customers will buy can be difficult, as they tend to be more cautious about styles. Making larger clothes is more expensive; higher costs for fabric cannot always be passed on to consumers. In turn, plus-size women shopped less because the industry was not serving them well. “We have money but nowhere to spend it,” says Kristine Thompson, who runs a blog called Trendy Curvy and has nearly…Continue reading

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ApprovedBusinessBusiness and finance

The United States of debt

POLITICS in America may be an arena of mutual incomprehension with few settled facts, but the debate about the health of American firms’ balance-sheets is, if anything, even more bewildering. Ranged on one side are those who complain that America Inc is hoarding $2trn of idle cash and that this acts as a powerful drag on the economy. On the other are those, including the IMF, who yell that firms are bingeing on debt, with borrowing hitting an all-time high of $8.4trn last year. As a result firms are simultaneously accused of being timid wimps and reckless idiots.

In fact, the numbers show that they are by and large a sensible bunch (especially compared with the country’s bankers and politicians). What is more, the debate over debt, as framed, misses the most intriguing thing about their balance-sheets. These have been radically reshaped to adapt to three national economic sicknesses—a financial system that companies still mistrust after the crisis; a broken tax code; and monopoly…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Climate change and inequality

ON JULY 12, the Larsen C ice shelf in Antarctica disgorged a chunk of ice the size of Delaware, a small state on America’s east coast. America’s government seems unfazed by the possibility that such shifts might one day threaten Delaware itself. Its climate defiance grows not only from the power of its fossil-fuel industry and the scepticism of the Republican party, but also from a sense of insulation from the costs of global warming. This confidence is misplaced. New research indicates not only that climate change will impose heavy costs on the American economy, but also that it will exacerbate inequality.

Calculating the economic effects of climate change is no simple matter. It means working out how a given increase in global temperature affects local weather conditions; how local weather affects things like mortality and crop yields; how those changes add to or subtract from regional GDP; and how thousands of local-level changes in GDP add up nationally or globally. No…Continue reading

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Can the world thrive on 100% renewable energy?

A WIDELY read cover story on the impact of global warming in this week’s New York magazine starts ominously: “It is, I promise, worse than you think.” It goes on to predict temperatures in New York hotter than present-day Bahrain, unprecedented droughts wherever today’s food is produced, the release of diseases like bubonic plague hitherto trapped under Siberian ice, and permanent economic collapse. In the face of such apocalyptic predictions, can the world take solace from those who argue that it can move, relatively quickly and painlessly, to 100% renewable energy?

At first glance, the answer to that question looks depressingly obvious. Despite falling costs, wind and solar still produce only 5.5% of the world’s electricity. Hydropower is a much more significant source of renewable energy, but its costs are rising, and investment is falling. Looking more broadly at energy demand, including that for domestic heating, transport and industry, the share of…Continue reading

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A new approach to financial regulation

An inspector Quarles

DONALD TRUMP promised to unshackle America’s financial firms from mounds of stultifying regulation and the grip of bureaucrats with little practical experience of capitalism. One way to put that pledge into practice is to appoint officials with business backgrounds and deregulatory agendas. This element of the Trump strategy was on show this week, with a presidential nomination for a critical job at the Federal Reserve and the first public address by the new head of the Securities and Exchange Commission (SEC), another financial regulator.

Buried in the voluminous pages of the Dodd-Frank act, an Obama-era law passed in response to the financial crisis, was the creation of a new supervisory job at the Fed. Thus far, this powerful post has been informally delegated to an existing Fed board member, first Daniel Tarullo and, since his departure, Jerome Powell. That is set to change. Randal Quarles was formally nominated for the…Continue reading

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Business and financeGulliver

Donald Trump’s effect on tourism has not been as bad as feared

A FEW months into Donald Trump’s presidency, the headlines about travel to America were dire. “US Travel Industry Fears a ‘Lost Decade’ Under Trump,” Bloomberg warned. “Trump Slump Could Take a $1.3 Billion Toll on US Travel Spending,” the travel-news site Skift stated. “US Travel Industry Fears Trump Slump,” reported The Hill, which quoted the executive director of the Global Business Travel Association saying that the president’s early policy agenda “is unlike anything…Continue reading

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China may match or beat America in AI

AT THE start of this year, two straws in the wind caught the attention of those who follow the development of artificial intelligence (AI) globally. First, Qi Lu, one of the bosses of Microsoft, said in January that he would not return to the world’s largest software firm after recovering from a cycling accident, but instead would become chief operating officer at Baidu, China’s leading search engine. Later that month, the Association for the Advancement of Artificial Intelligence postponed its annual meeting. The planned date for the event in January conflicted with the Chinese new year.

These were the latest signals that China could be a close second to America—and perhaps even ahead of it—in some areas of AI, widely considered vital to everything from digital assistants to self-driving cars. China is simply the place to be, explains Mr Lu, and Baidu the country’s most important player. “We have an opportunity to lead in the future of AI,” he says.

Other…Continue reading

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Business and financeGulliver

Who is writing politicians’ letters complaining about the Gulf carriers?

CONGRESS is sick and tired of unfair competition to America’s airlines from the three big Gulf carriers, Emirates, Etihad and Qatar Airways. So on June 28th, 17 representatives from the state of Illinois wrote a letter to the secretaries of State, Transportation and Commerce complaining about the subsidies these airlines receive from the United Arab Emirates and Qatar. Illinois is home to one of the America’s biggest hubs, O’Hare International in Chicago. Nearly 25,000 people in the state are employed by American Airlines, United and Delta.

The letter followed similar ones from congressional…Continue reading

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ApprovedBusiness and financeFinance and economics

How to kill a corporate zombie

WHAT is the best way to kill a zombie? Fans of Daryl Dixon, a character in “The Walking Dead”, a television series, will know the answer: a crossbow bolt to the brain. Getting rid of corporate zombies, however, is a much more complicated process.

Ageing populations mean that the workforces in developed economies are likely to stagnate, or even shrink, in coming decades. That means almost all the burden of economic growth is likely to fall on productivity improvements. There has been a lot of focus on labour-market flexibility as the key to solving this problem, but the flexibility of the corporate sector may be just as important. Indeed, there is a growing belief that the persistence of zombie firms—companies that keep operating despite a poor financial performance—may explain the weak productivity performance of developed economies in recent years.

An inability to kill off failing companies seems to have two main effects. First, the existence of the…Continue reading

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Business and financeGulliver

The boss of Qatar Airways ridicules American carriers for their aged flight attendants

GULLIVER is rarely fazed by what happens below the line of his posts. Receiving the occasional shoeing from readers—sometimes insightful, sometimes not—goes with the job. And he has certainly found his views swayed by well-reasoned arguments he finds there.

But he was truly gobsmacked at the discussion that ensued from a piece last year about the sexualisation of flight attendants. The post noted a few of the seedier airline hiring practices, such as asking potential recruits, some just 15, to take part in a bikini competition, or carriers refusing to employ married women. It then concluded with what seemed to be an an uncontroversial suggestion: female cabin crew should be chosen for their abilities, not for their allure.

It turns out that such woolly liberal thinking is merely the product of the bubble he lives in, according to some readers. “A mixture of silly puritanism and pseudo-egalitarianism,” said one. “Boo hoo why do pretty…Continue reading

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Business and financeButtonwood's notebook

The psychic Brexit ballot paper

DR WHO, the long-running British science-fiction hero, has a long-standing device to get him out of tricky situations; a piece of “psychic paper” that lulls the viewer into accepting the doctor’s credentials. Apparently blank, the paper says whatever the Doctor wants it to say.

The British government under Theresa May apparently thinks the 2016 EU referendum ballot paper had psychic qualities. The question merely asked “Should the UK remain a member of the EU or leave the EU?”. But on BBC Radio 4 this morning, Damian Green, who is (in effect) deputy prime minister, said Britain had to leave bodies like Euratom because the people voted for it. 

The argument seems to be that Britain must rid itself of all traces of the EU like someone leaving an area of intense radiation needs a complete detox. So no EU means no single market, no customs union, no free movement and no regulation by the European Court of Justice. It is the ECJ’s role that dooms Euratom, apparently.

Euratom governs the Continue reading

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Business and financeGulliver

Why British Airways customers might enjoy a strike by flight attendants

HOW do you best judge the success of an airline? One obvious way is to ask whether lots of people fly with it, and if it makes pots of money for shareholders. Judged on these metrics, few can quibble with the direction that British Airways is heading. Last year 42.1m people flew with the airline, nearly 10m more than in 2011. In 2012, IAG, the airline’s parent firm, posted a loss of €716m ($816m). In 2016 it made a profit of €1.9bn.  

Shareholders, then, have little to grumble about. One of the ways that the airline has prospered is by focusing on its costs. When Willie Walsh, himself an avowed cost-cutter, moved from the hot seat at BA to running IAG in 2011, he appointed Alex Cruz from Vueling to carry on his work. As befits the former head of a budget carrier, Mr Cruz has continued to strip many of the frills from the once full-service airline.

Passengers and staff are not so happy with the changes. The airline has suffered four computer failures over the past year. The last one, in May, knocked out many…Continue reading

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ApprovedBusinessBusiness and finance

Craft beer in America goes flat

Over a barrel

JULY 4th is a day to celebrate American independence, first and foremost, but also to grill meat and swill beer. For American beer lovers in particular, the pint-glass runneth over in terms of choice. They had 5,000 breweries to pick from this year; 35 years ago there were under 100. Drinkers can enjoy time-honoured traditions, guzzling Budweiser to wash down all that sizzling beef, and newer ones such as sipping ale “finished with fennel, liquorice and anise” at Tørst, a Brooklyn bar.

For the producers of beer, the mood is darker. Though the number of brands has proliferated, the number of drinkers has not. Sales have been flat for a few years and 2017 has been especially slow so far. The volumes of beer sold at stores for the three months to June 17th were 1% lower than in the same period last year, according to Nielsen, a market-research firm. Brewers are now waiting with some anxiety for data about sales during the July 4th…Continue reading

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ApprovedBusinessBusiness and finance

Food-delivery firms like Delivery Hero are thriving

Bringing home the bacon

NIKLAS OSTBERG spent much of his youth as a competitive cross-country skier in Sweden. Then he ditched his skis for a less healthy cause. A decade ago he founded a firm that matched online pizza orders to restaurants. It grew into Delivery Hero, a Berlin-based service that last year dispatched nearly 200m takeaway dinners to customers around the world. It is in over 40 countries and claims to be the local leader in 35, including Germany.

The recipe has delivered in financial terms. The company’s initial public offering (IPO) on June 30th proved popular with investors and its share price has climbed since. Delivery Hero is now valued above $5bn, a handy premium over a valuation of $3.1bn in May, when Naspers, a South African online giant, invested in it.

It is not alone; shares in similar businesses have performed well after going public in recent years. Shares in Just Eat, a British company with a market value of £4.5bn…Continue reading

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ApprovedBusinessBusiness and finance

Why Brexit could entail a hard landing for low-cost carriers

THE European Commission celebrated 25 years of the EU’s internal aviation market in June. The liberalisation of European aviation, which allowed EU carriers to fly between any airport within the bloc, opened the skies to the masses. Greater choice of airlines has cut fares—by as much as 96% between Paris and Milan since 1992, for example, in large part because of low-cost carriers (LCCs). Cheap fares have pushed passenger volumes to record levels, from 360m in 1993 to 920m this year.

Yet the bosses of Europe’s two biggest LCCs, Ireland’s Ryanair and Britain’s easyJet, are in no mood to cheer. The problem is the possibility of a hard Brexit. In the 1990s Britain was the country driving forward airline liberalisation in Europe, against the instincts of France and Italy, which preferred to protect their own flag carriers. The British government’s plan to leave the EU by March 2019 means that the country will probably exit the European Common Aviation Area (as an expanded version of that…Continue reading

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Hollywood studios dip their toes in virtual reality

For your eyes only

OUTSIDE a squat grey building in Santa Monica, the California sun melts the tar. Inside, in a dark room roughly the size of a small shipping container, two men are exploring the world by means of virtual reality (VR). They squash spiders in an abandoned temple, hit a home run at Yankee Stadium and float through a Blade Runner-esque landscape, all in the span of eight minutes. It feels much longer than that, and also shorter—time is hard to grasp in VR.

The creator of the experience is Walter Parkes, a former boss of DreamWorks Pictures, a film studio, who last year co-founded Dreamscape Immersive. The startup plans a chain of VR multiplex cinemas offering ten-minute interactive experiences for around $15 each. The first will open at a shopping mall near Beverly Hills at the end of the year; another 14 are planned for 2018. Mr Parkes says it costs about $2m to make a ten-minute VR experience, compared with around $200m for a big-budget…Continue reading

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ApprovedBusinessBusiness and finance

Russian oligarch Vladimir Yevtushenkov falls from grace, again

HE WAS back in favour, or so it appeared. After spending several months under house arrest in late 2014, Vladimir Yevtushenkov, a Russian oligarch, relinquished control of Bashneft, a midsized oil firm, to the state. “If you like another company tomorrow and want to take it, you are welcome,” he told Vladimir Putin at the time, he later recalled. The president publicly gave his approval to Sistema, Mr Yevtushenkov’s conglomerate, shares in which had plunged. Mr Yevtushenkov subsequently appeared at annual Kremlin receptions and late last year joined a presidential delegation to Crimea.

Now he is under pressure again, facing a lawsuit from Rosneft, a state-run oil giant, which is demanding 171bn roubles ($2.8bn) in damages. Rosneft’s boss is Igor Sechin, a Putin confidant, who many in Moscow reckon orchestrated the initial 2014 case against Mr Yevtushenkov as well. (Rosneft and Mr Sechin have denied any involvement in it.) Late last year, Rosneft purchased Bashneft from the state…Continue reading

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Who would buy Air India?

A FAMOUS brand in the world’s fastest-growing aviation market, sitting on valuable slots at international airports and able to borrow cheaply thanks to being state-owned: Air India ought to be hugely profitable. But under state ownership it has guzzled public funds as hungrily as its jets consume kerosene. Last week the authorities threw in the towelette and announced an “in principle” cabinet agreement to privatise it. The chances of that going ahead rose on June 30th when IndiGo, a well-run private low-cost carrier, said it wanted to bid.

Whoever seizes the controls can expect a hard task. Air India has struggled since private rivals were first allowed in 1994 to fly in India’s skies. Together with Indian Airlines, another state-owned carrier with which it merged in 2007, it has a domestic market share of just 13% and is shedding one percentage point or so every six months. A bail-out of 300bn rupees ($4.7bn) agreed in 2012 was meant to stop losses, but has…Continue reading

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A reality check for virtual headsets

JUSTIN WILLIAMS takes off a virtual-reality (VR) headset and wobbles away from a demo area at E3, the world’s largest gaming convention, in Los Angeles. The bottoms of his feet and calves are “on fire,” he says. Mr Williams, a 32-year-old former marine, was playing “Sprint Vector”, a VR running game: players swing hand-held controllers to simulate motion. Though he has been standing in one place, his brain believes he has just run for several miles.

This sensation of complete immersion is called “presence”. Boosters of VR say it is what will drive the technology’s mass adoption, in time. When Facebook bought Oculus, a VR startup, for $2bn in 2014, and sent interest in the technology rocketing, it was this feeling of being present that Mark Zuckerberg, the social network’s boss, described as “incredible”.

Yet despite many pronouncements that 2016 was the year of VR, a more apt word for virtual reality might be absence. Of the 6.3m headsets that were…Continue reading

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Markets worry about central banks

IN JANE AUSTEN’S novel, “Sense and Sensibility”, Henry Dashwood’s death plunges his wife and two daughters, Elinor and Marianne, into financial distress, because his heir grants them only a meagre allowance. Bond-market investors have started to worry that something similar is about to happen to them.

Since 2009 central banks have been incredibly supportive of the financial markets—keeping short-term interest rates at historic lows and buying trillions of dollars worth of bonds. But in recent weeks, several of them have been hinting at reducing their largesse.

The Federal Reserve has been slowly pushing up interest rates and has talked about reducing the size of its balance-sheet, by not reinvesting the proceeds of bonds when they mature. There have been suggestions that the Bank of Canada might push up rates when it meets on July 12th. Both Mark Carney, the governor of the Bank of England and Andrew Haldane, its chief economist, have hinted that a rate rise may be on…Continue reading

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An American payments firm goes online and buys British

Purchasing power

A BIDDING war was briefly but eagerly anticipated. In the end, not a shot was fired. On July 4th the share price of Worldpay, a British payments processor, leapt by 28% after the company said it had received preliminary approaches from JPMorgan Chase, America’s biggest bank, and Vantiv, an American payments firm. The next day Worldpay said it had accepted a cash-and-shares bid from Vantiv, worth £7.7bn ($10bn), giving its shareholders 41% of the combined group. JPMorgan Chase, sniffily explaining that it had considered a bid after an “invitation” from Worldpay, which is a client, declined to proceed. Under Britain’s takeover code that refusal rules out a counter bid for six months. The shares slipped back by nearly 9%.

Vantiv and Worldpay are “merchant acquirers”: companies that have contracts with sellers of goods and services, and licences from credit- and debit-card companies, to accept and process card payments. They also provide…Continue reading

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Detroit’s car firms try to match Silicon Valley

IT IS fashionable to say that the city of Detroit is on the up after decades of decline. Amid the derelict buildings there are signs of revival; art shops and trendy food trucks abound. But for a truer augury of the city’s possible future, consider the rock-bottom stockmarket valuations of Ford and General Motors (GM), Motor City’s two big domestic car firms. (A third, Chrysler, is owned by Fiat Chrysler Automobiles, whose chairman is a director of The Economist’s parent company.) If you put the members of the S&P 500 index in order of their price-earnings ratios, Ford and GM are at the bottom, among the walking dead.

For their investors, creditors and 426,000 staff, about 18% of whom are in Detroit, it is a terrifying signal. A low price-earnings ratio is the stockmarket’s way of telling you that business as you know it is over. GM and Ford together made $18bn of underlying profit last year but have a market value of $98bn. That ratio implies that their…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

A new trade deal between the EU and Japan

FREE-TRADE agreements have seemed out of fashion as President Donald Trump has set about scotching some of America’s. But on July 5th Cecilia Malmström, the EU trade commissioner, and Fumio Kishida, the Japanese foreign minister, announced they had achieved consensus on a Japan-EU Economic Partnership Agreement (JEEPA). In front of the cameras, they swapped Japanese Daruma dolls, talismans of perseverance and good luck, and, they hope, of a win-win agreement.

The timing of JEEPA was just as carefully co-ordinated. When negotiations started in 2013, it was neither side’s main priority. But now both want to show that they can fill the vacuum left by America’s withdrawal under Mr Trump from its role as the world’s trade leader. To highlight its political importance, they note that this is the first trade agreement to mention the Paris climate accord, another deal Mr Trump has spurned. Haste is handy: the EU wanted success before Brexit negotiations and…Continue reading

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Business and financeGulliver

Screeners at Minneapolis airport are reported to have a 94% failure rate

TWO more airports have joined Abu Dhabi in having a laptop ban lifted. On July 5th passengers flying from Dubai or Istanbul to America were told that they will once more be allowed to take large electronic devices into plane cabins, rather than having to stow them in the hold, which they have been required to do since March. That will come as a relief to passengers of Emirates, Turkish Airlines and Etihad who have been forced to fly without their laptops and tablets. It follows a change of heart by John Kelly, America’s homeland security secretary. On July 28th, Mr Kelly’s department decided again to trust foreign airports with screening laptops for hidden explosives, so long as they upgraded security. Other airports affected by the ban are expected to pass muster in the coming days and weeks.

That is good news. But America would do well to get its own house in order as well. Fox 9 Continue reading

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Business and financeFree exchange

Podcast: Vorsprung durch Angst

Germany is admired for a stable economy and holding on to blue-collar jobs but derided for its persistent trade surpluses. Our economics editor John O’Sullivan examines what Chancellor Merkel’s government might do next. Also, how “total immersion” could drive the masses to virtual reality. And why banks are de-risking to avoid penalties. Hosted by Simon Long.

 

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