Dixon spinning as Qantas boosts fares. There was Qantas CEO Geoff Dixon in The Australian this morning spinning the line that things are tough but the airline is still doing well: “Qantas chief executive Geoff Dixon expects more airlines to fold in the current industry shake-up but believes the flying kangaroo will come through the uncertainties ahead of the game.” Some of the information Dixon gave to The Oz in his “wide-ranging interview” should have been disclosed to the market, so Qantas also released a statement this morning but, as usual, the real news was buried at the bottom:
Mr Dixon said the company was taking immediate steps to minimise the impact of the fuel cost rise, including an increase in domestic and international airfares sold in Australia from 9 May 2008.
The fare increase will apply to all Qantas and QantasLink routes across all fare classes:
Domestic fares will increase by approximately 3.5 per cent.
International fares will increase by approximately 3 per cent.
Jetstar is reviewing its fare levels and increases to Qantas fares sold outside Australia are also under consideration.
Strange that Dixon didn’t inform The Oz of this plan to lift fares. No wonder the Reserve Bank is worried about inflation. Qantas can do this to “protect its profitability,” but we consumers can’t do anything to protect ours! — Glenn Dyer
Oil close to US120 a barrel on Scottish strike. World oil prices went within 7 cents of hitting the $US120 a barrel mark in Asian trading this morning after BP shutdown a vital supply pipeline in Scotland due to a refinery strike. The price hit $US119.93 in Singapore trading on that news and media reports of panic buying of petrol in Scotland and parts of northern England. BP closed the Forties Pipeline System, carrying 40% of Britain’s oil output, after a strike at the Grangemouth refinery cut power supplies to the network and terminal that delivers 700,000 barrels of oil a day. Refinery production will resume tomorrow night, our time, and the pipeline should resume pumping oil soon after. There was also an attack on a police station in Bonny Island, the site of one of Nigeria’s largest oil and gas export terminals. June crude oil futures jumped by $US1.41 to $US119.93 a barrel in after-hours electronic trading on the New York Mercantile Exchange. That was the highest intra-day price since the futures began trading in 1983. It was at $US119.32 at noon today in Singapore. — Glenn Dyer
BMW starting to feel the pinch. Now the luxury goods market is feeling the pain of America’s sliding economy. Last week, Gucci revealed that first quarter sales growth fell 3% (but were up 2.4% on a same store basis) and Italian brand Bulgari warned investors that March sales were soft, while another top luxury good group, LVMH, says it’s still doing well. But a surprise announcement from BMW late last week sent a bit of shudder through the sector. The world’s biggest luxury car maker announced a €236m ($US369m) charge because of falling prices and rising bad debt in the US. It saw increased volatility in the leasing market in the US with prices of used or leased cars dropping sharply in March. But the car maker reaffirmed its full-year profit target of a slight increase over last year’s pre-tax level. The news follows a warning from its great rival, Daimler (Mercedes) that US car sales would fall this year, but would be offset by growth in emerging markets such as China. It’s an interesting indicator and one that will be repeated in coming months as the slowing US car industry and falling car values punches holes in the value of lease deals. — Glenn Dyer
MFS fiasco rolls on. The MFS fiasco continued last week, as the embattled Gold Coast fund manager continues in its attempts to finalise its December financials. Another two executives jumped off the sinking ship, with communications head (and former AFR scribe) John Hurst and property boss Bill Grounds announcing their resignations. Hurst was simply in the wrong place at the wrong time, while Grounds was property chief while MFS made the disastrous purchase of Gersh Investment Partners last year. MFS is expected to write $100 million off its Gersh investment (which it held for around 6 months). Meanwhile, the AFR reported that liquidators have been appointed to a company owned by MFS’ 32-year-old CEO, Craig White. White (whose managerial experience consists of being the understudy of disgraced ex-MFS boss, Michael King) is in the unusual position of being CEO of a company while he staves off a bankruptcy caused by an investment in the company which he heads. Hopefully for White’s sake, he didn’t provide personal guarantees to Citigroup for loans made to C&P White Investments. — Adam Schwab
Another US airline goes bust. Eos Airlines, which offers business class flights between New York and London, has filed for Chapter 11 bankruptcy protection, becoming the latest carrier to fail in the face of record fuel prices and a sliding economy. Eos said it would stop operations entirely on April 27, sacking most of its work force. Eos joins a number of airlines to shut down in recent weeks, including Aloha Airlines, Champion Air, ATA and Skybus Airlines. Frontier Airlines is also in Chapter 11, trying to restructure. Hong Kong-based Oasisi Airlines, which offered budget flights between Hong Kong and London, has also failed. — Glenn Dyer
Bank exception fees clear one court hurdle. There’s mixed news for banks in a court ruling on Thursday relating to the legality of exception fees charged on bank accounts. Justice Andrew Smith in the High Court in London ruled that overdraft fees are subject to laws regulating unfair terms in consumer contracts, allowing the Office of Fair Trading to continue a legal challenge to the policy, Bloomberg reports. British banks charge as much as £30 to customers who overdraw their accounts. The court ruled that exception fees on bank accounts in Britain are not unenforceable penalties but are assessable for fairness under the Unfair Terms in Consumer Contracts Regulations. In the judgement the court found that, of contracts of high street banks whose terms it reviewed, terms and conditions were clear. The court found that customer contracts were not clear, in certain respects, for four banks: Abbey, Barclays, Clydesdale and HBOS. The Office of Fair Trading in Britain has campaigned for several years (and with the backing of consumer lobbies) to reduce and even set aside exception fees on bank accounts. The court did not make any ruling on the fairness of fees, which are subject to later hearings. The ruling, apart from the fact that it covers a NAB subsidiary, is of interest given the parallel argument in Australia over the merits and levels of bank penalty fees. — The Sheet