Port Klang Authority (PKA) is a statutory corporation under the purview of the Ministry of Transport (MOT) where its chairman and board members are appointed by MOT. PKA assumes the role of trade facilitator, regulator, landlord and free zone authority in Port Klang. The PKFZ project was initiated and endorsed by the government with the objective of elevating the status of Port Klang into a national load centre and regional transhipment hub.
MARC has removed its AAA and MARC-1/AAA ratings on Port Klang Free Zone (PKFZ)-related debt issuances from MARCWatch Negative where they were first placed on July 1, 2009. Concurrently, MARC has attached a negative outlook to the ratings. The rating actions affect the following issues:
1. Special Port Vehicle Berhad’s (SPVB) RM1,310 million Asset-Backed Serial Bonds;
2. Transshipment Megahub Berhad’s (TMB) RM1,095 million Fixed Rate Serial Bonds (FRSB) and up to RM360 million Commercial Papers/Medium Term Notes (CP/MTN);
3. Valid Ventures Berhad’s (VVB) RM510 million FRSB and up to RM85 million CP/MTN; and
4. Free Zone Capital Berhad’s (FZCB) RM410 million FRSB and up to RM70 million CP/MTN.
MARC’s rating actions follow Port Klang Authority’s (PKA) apparent lifting of its announced moratorium on payments due in the months of June and July 2009 to Kuala Dimensi Sdn Bhd (KDSB) for the purchase of land and development of PKFZ.
All corresponding payments due to SPVB, TMB, VVB and FZCB in the months of June and July have been received in full, enabling all four entities to meet their respective obligations under the rated issuances. SPVB, which had earlier failed to meet its scheduled funding payments into its Finance Service Reserve Account due on June 30, 2009, subsequently made full and timely payment of principal and interest due on July 30, 2009. The next scheduled principal and interest payments for TMB, VVB and FZCB are due in November 2009.
The negative ratings outlook increased event risk arising from a weakening in support from the Government of Malaysia in respect of the deferred obligations of PKA to KDSB and/or reduced willingness on the part of PKA to honour its obligations. MARC believes this could arise as a result of the ongoing politically charged debate over the legal implications of the letters of support issued by the Transport Ministry to facilitate the financing of the PKFZ and the contention surrounding the manner in which the development contract was awarded and the contract sums.
The outlook also incorporates uncertainty regarding the potential credit implications for the rated issuances arising from the eventual recommendations of the task force and committees that have been charged with the responsibility of finding a solution for PKFZ. MARC will reassess the currently high government support that is factored into the ratings of the four issuances after obtaining sufficient clarity on PKA’s intended course of action. If this results in a change in our rating assumption of the government’s intention to protect the position of existing bondholders notwithstanding the absence of an explicit guarantee for the rated issuances, MARC will likely lower the ratings.
Source : Malaysian Rating Agency report
Sunday, August 9, 2009
Unemployment in the US Falls as Recession Eases
Job losses
The pace of U.S. job losses slowed more than analyst forecasted last month and the unemployment rate dropped for the first time in more than a year, the clearest signs the worst slump since the Great Depression may be ending.
The overall payrolls fell by 247,000 (9.4%), down from 443,000 (9.5%) loss in June, the Labor Department said yesterday in Washington.
The positive report on payroll data has sent stock indexes soaring to their highs for the year and 10-year Treasuries to their worst week since 2003. The White House warned the jobless rate is still likely to reach the 10 percent rate as forecasted earlier, with companies such as Boeing Co., Verizon Communications Inc.and Emerson Electric still continuing in cut costs strategy, any rebound in hiring is expected to come in 2010.
President Barack Obama, speaking at the White House hours after the jobs report, said the unemployment numbers indicate “the worst may be behind us” for the recession.
The average losses of 331,000 in the past three months are less than half the pace of decline in the first quarter of this year given job losses peaked to 741,000 in January 2009, the most since post world war II.
According to survey by Bloomberg, the overall payroll rate may top 10 percent by early next year and an average at a rate 9.8 percent for 2010.
The manufacturing-factory payrolls fell 52,000, the fewest in a year compared to a decrease of 131,000 in the prior month. That drop came even as the automobile industry added 28,200 jobs as return of workers at General Motors Co. and Chrysler Group LLC, which have exited bankruptcy.
For the service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers, an improvement from a loss of 220,000 in June. Retail payrolls fell by 44,100.
Government payrolls rose by 7,000 after falling 48,000.
Consumer Spending
Even so, economists predict consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued Aug. 4.
Companies like Verizon and Boeing are still curtailing their expenses. New York-based telephone carrier Verizon last month said it may slash more than 8,000 jobs in the second half.
Chicago-based Boeing, which is planning to job cuts of about 10,000 workers, or 6 percent of its labor force, has agreed to allow some machinists to volunteer for a “layoff with benefits” to help mitigate job cuts, the International Association of Machinists and Aerospace Workers said July 28.
Emerson Electric Co., a maker of industrial equipment, will cut an additional 5,000 to 6,000 positions in the next few quarters, after it posted its third straight drop in quarterly earnings, the longest stretch since 2002. The company has already eliminated 20,000 jobs to date.
The unemployment rate may not peak until the second half of 2010, Treasury Secretary Timothy Geithner said on ABC last week, even as the economy shows signs of improvement.
The pace of U.S. job losses slowed more than analyst forecasted last month and the unemployment rate dropped for the first time in more than a year, the clearest signs the worst slump since the Great Depression may be ending.
The overall payrolls fell by 247,000 (9.4%), down from 443,000 (9.5%) loss in June, the Labor Department said yesterday in Washington.
The positive report on payroll data has sent stock indexes soaring to their highs for the year and 10-year Treasuries to their worst week since 2003. The White House warned the jobless rate is still likely to reach the 10 percent rate as forecasted earlier, with companies such as Boeing Co., Verizon Communications Inc.and Emerson Electric still continuing in cut costs strategy, any rebound in hiring is expected to come in 2010.
President Barack Obama, speaking at the White House hours after the jobs report, said the unemployment numbers indicate “the worst may be behind us” for the recession.
The average losses of 331,000 in the past three months are less than half the pace of decline in the first quarter of this year given job losses peaked to 741,000 in January 2009, the most since post world war II.
According to survey by Bloomberg, the overall payroll rate may top 10 percent by early next year and an average at a rate 9.8 percent for 2010.
The manufacturing-factory payrolls fell 52,000, the fewest in a year compared to a decrease of 131,000 in the prior month. That drop came even as the automobile industry added 28,200 jobs as return of workers at General Motors Co. and Chrysler Group LLC, which have exited bankruptcy.
For the service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers, an improvement from a loss of 220,000 in June. Retail payrolls fell by 44,100.
Government payrolls rose by 7,000 after falling 48,000.
Consumer Spending
Even so, economists predict consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued Aug. 4.
Companies like Verizon and Boeing are still curtailing their expenses. New York-based telephone carrier Verizon last month said it may slash more than 8,000 jobs in the second half.
Chicago-based Boeing, which is planning to job cuts of about 10,000 workers, or 6 percent of its labor force, has agreed to allow some machinists to volunteer for a “layoff with benefits” to help mitigate job cuts, the International Association of Machinists and Aerospace Workers said July 28.
Emerson Electric Co., a maker of industrial equipment, will cut an additional 5,000 to 6,000 positions in the next few quarters, after it posted its third straight drop in quarterly earnings, the longest stretch since 2002. The company has already eliminated 20,000 jobs to date.
The unemployment rate may not peak until the second half of 2010, Treasury Secretary Timothy Geithner said on ABC last week, even as the economy shows signs of improvement.
Thursday, August 6, 2009
Where is the airline Industry is heading ? Part Two
Lufthansa, one of Europe's largest aviation player has assessed a weak industry outlook coupled with its success in pushing through its acquisition of Austrian Airlines (AUA) has analysts split on whether to buy or sell the company's stock.
Lufthansa last week looked set to win approval from European Union for the AUA acquisition, the last in a string of recent purchases, including Britain's BMI and Brussels Airlines.
However, the company also gave a gloomy outlook for the rest of 2009, upon earlier assessment of the economic crisis and an exodus of premium seat passengers had all but wiped out first-half operating profit.
Lufthansa has launched a EUR1 billion euro (USD$1.4 billion) cost-cutting programme to counter the downturn, as well as rising fuel costs, aiming to post an operating profit for this year.
With the industry environment looking set to remain weak in the short term, is it time to dump Lufthansa's stock or should investors snap it up as long as the carrier remains the financially strongest among its peers?
According to analyst, based on its superior financial strength and its anti-cyclical approach to acquisitions, analyst expect Lufthansa to emerge as a long-term winner from the current global economic crisis.
Elsewhere from Europe, Britain is aiming to replace short-haul aviation with high-speed rail travel and plans for such a network are well advanced, Transport Secretary Andrew Adonis told the Guardian newspaper.
The paper said in its Wednesday edition that the government plans to publish by the end of the year a route from London to Birmingham, which could be funded with a public-private partnership and which could be extended to Scotland.
There are also plans to run high-speed trains on the existing network, which could reduce journey times from London to Scotland to three and a half hours.
Cathay Pacific Airways warned of strong headwinds ahead, with concerns over high fuel prices dimming immediate prospects for a pick-up in demand.
The company has reported it had swung back to profit in the first half and said it had enough cash to fund aircraft purchases, but announced no interim dividend payment and did not rule out the possibility of tapping the equity markets further down the track.
Cathay Pacific continues to take delivery of new, more efficient aircraft, with two more Boeing 777-300 ER aircraft entering the fleet in the first half and the last of six Boeing 747-400 extended range freighters arriving in April.
LOW-END OF FORECAST
Cathay, Asia's No.4 carrier since being overtaken by Japan's All Nippon Airways, reported a net profit of HKD$812 million (USD$104.8 million) for January-June, compared with a loss of HKD$760 million a year earlier.
It booked fuel hedging gains of HKD$2.1 billion, while turnover fell 27 percent to HKD$30.9 billion.
The six-month result fell in the lower end of analysts' forecasts, which stretched from a low of HKD$400 million to a high of HKD$3 billion due to widely varied estimates for hedge gains.
Cathay's fuel hedging contracts in the first six months yielded mark-to-market gains of HKD$2.1 billion, compared with a loss of HKD$7.6 billion for full year 2008, the company said in the statement.
Rival Singapore Airlines, the world's second largest airline by market value, announced its first quarterly loss in six years, and warned that it could post an annual loss if adverse conditions continued.
Cathay Pacific is also assessing whether to adjust its structure if changes such as a further weakening in its premium travel business turn out to be cyclical or structural in nature.
Lufthansa last week looked set to win approval from European Union for the AUA acquisition, the last in a string of recent purchases, including Britain's BMI and Brussels Airlines.
However, the company also gave a gloomy outlook for the rest of 2009, upon earlier assessment of the economic crisis and an exodus of premium seat passengers had all but wiped out first-half operating profit.
Lufthansa has launched a EUR1 billion euro (USD$1.4 billion) cost-cutting programme to counter the downturn, as well as rising fuel costs, aiming to post an operating profit for this year.
With the industry environment looking set to remain weak in the short term, is it time to dump Lufthansa's stock or should investors snap it up as long as the carrier remains the financially strongest among its peers?
According to analyst, based on its superior financial strength and its anti-cyclical approach to acquisitions, analyst expect Lufthansa to emerge as a long-term winner from the current global economic crisis.
Elsewhere from Europe, Britain is aiming to replace short-haul aviation with high-speed rail travel and plans for such a network are well advanced, Transport Secretary Andrew Adonis told the Guardian newspaper.
The paper said in its Wednesday edition that the government plans to publish by the end of the year a route from London to Birmingham, which could be funded with a public-private partnership and which could be extended to Scotland.
There are also plans to run high-speed trains on the existing network, which could reduce journey times from London to Scotland to three and a half hours.
Cathay Pacific Airways warned of strong headwinds ahead, with concerns over high fuel prices dimming immediate prospects for a pick-up in demand.
The company has reported it had swung back to profit in the first half and said it had enough cash to fund aircraft purchases, but announced no interim dividend payment and did not rule out the possibility of tapping the equity markets further down the track.
Cathay Pacific continues to take delivery of new, more efficient aircraft, with two more Boeing 777-300 ER aircraft entering the fleet in the first half and the last of six Boeing 747-400 extended range freighters arriving in April.
LOW-END OF FORECAST
Cathay, Asia's No.4 carrier since being overtaken by Japan's All Nippon Airways, reported a net profit of HKD$812 million (USD$104.8 million) for January-June, compared with a loss of HKD$760 million a year earlier.
It booked fuel hedging gains of HKD$2.1 billion, while turnover fell 27 percent to HKD$30.9 billion.
The six-month result fell in the lower end of analysts' forecasts, which stretched from a low of HKD$400 million to a high of HKD$3 billion due to widely varied estimates for hedge gains.
Cathay's fuel hedging contracts in the first six months yielded mark-to-market gains of HKD$2.1 billion, compared with a loss of HKD$7.6 billion for full year 2008, the company said in the statement.
Rival Singapore Airlines, the world's second largest airline by market value, announced its first quarterly loss in six years, and warned that it could post an annual loss if adverse conditions continued.
Cathay Pacific is also assessing whether to adjust its structure if changes such as a further weakening in its premium travel business turn out to be cyclical or structural in nature.
Maxis Seeking IPO in FTSE KL
Maxis Communications has chosen Goldman Sachs, Credit Suisse and CIMB to advise it on a planned US$2 billion listing on the Bursa Malaysia.
The listing is said to be one of the biggest in Southeast Asia over the last few years, the public offering of raising is said to be possibly more than USD 2billion shares and is likely to take place by the end of this year.
IPOs has spring back to life in major Asian markets due to booming markets, led by the Shanghai Exchange Market , China.
Maxis' move comes after Prime Minister Datuk Seri Najib Razak had seek the re-listing of Maxis on Bursa Malaysia to boost liquidity and draw in investors to Southeast Asia's most laggard stock market so far this year.
The relisting of Maxis in the local stock exchange is expected to create some sort of excitement as Maxis stocks has been the preferred stocks for both local and foreign investors.
Goldman Sachs, Credit Suisse and CIMB declined to comment on the share sale plans. as the sources declined to be identified because details of the deal are not public.
The listing is said to be one of the biggest in Southeast Asia over the last few years, the public offering of raising is said to be possibly more than USD 2billion shares and is likely to take place by the end of this year.
IPOs has spring back to life in major Asian markets due to booming markets, led by the Shanghai Exchange Market , China.
Maxis' move comes after Prime Minister Datuk Seri Najib Razak had seek the re-listing of Maxis on Bursa Malaysia to boost liquidity and draw in investors to Southeast Asia's most laggard stock market so far this year.
The relisting of Maxis in the local stock exchange is expected to create some sort of excitement as Maxis stocks has been the preferred stocks for both local and foreign investors.
Goldman Sachs, Credit Suisse and CIMB declined to comment on the share sale plans. as the sources declined to be identified because details of the deal are not public.
Global Economical Indicators
There was some positived news from the American Housing Market for sales of new single-family homes, which has increased by 11% in June to an annual rate of 384,000. However, this was still 21.3% lower than in June 2008, despite the prices of houses in the 20 largest cities rose by 0.5% in May, as according to the S&P/Case-Shiller index. Other than that the index of American consumer confidence fell to 46%for July from 49.3% in June.
New orders for durable goods in America declined by 2.5% in June to $158.6 billion, after rising for both months of April and May while the biggest declines were in orders for transport equipment. Orders for other durable goods increased by 1.1%.
Asian powerhouse, Japan reported its industrial output went up by 2.4% in June. Although this was the fourth monthly rise in a row, output was 23.4% down on a year earlier.
From accross the globe, Britain reported its GDP fell by 0.8% for the three months to June 2009, having declined by 2.4% in the first quarter to March 2009. The economy shrank by 5.6% in the year for the second quarter, the largest contraction since the comparable records began in 1955.
The annual rate of consumer-price inflation in South Africa fell to in June to 6.9% from 8% in May.
New orders for durable goods in America declined by 2.5% in June to $158.6 billion, after rising for both months of April and May while the biggest declines were in orders for transport equipment. Orders for other durable goods increased by 1.1%.
Asian powerhouse, Japan reported its industrial output went up by 2.4% in June. Although this was the fourth monthly rise in a row, output was 23.4% down on a year earlier.
From accross the globe, Britain reported its GDP fell by 0.8% for the three months to June 2009, having declined by 2.4% in the first quarter to March 2009. The economy shrank by 5.6% in the year for the second quarter, the largest contraction since the comparable records began in 1955.
The annual rate of consumer-price inflation in South Africa fell to in June to 6.9% from 8% in May.
How did Japan restore its Financial System
Regulatory authorities around the world are currently discussing ways to prevent another financial crisis. One idea is to mandate higher levels of capital reserves. Japan’s banking reform shows that a comprehensive solution would work better.
After our bubble economy collapsed in the 1990s, it took policy makers many years to address the real issue: the health of our financial system. When they did, they injected public funds into large Japanese banks across the board, enhanced deposit insurance safety nets, and accelerated the disposal of nonperforming assets based on strict risk assessments. The market selected which banks could survive under a system of multiple regulatory requirements, not just a capital requirement. Many banks were absorbed into larger entities.
Japan also avoided moral hazard by studiously avoiding the classification of any bank as “too big to fail.” Regulators instead put more emphasis on improving banks’ risk controls and did not require them to have excess capital. The financial system soon regained its health and the economy enjoyed seven consecutive years of uninterrupted growth, starting in 2001.
Today’s regulatory dialogue in the United States and Europe has implicitly assumed that large financial institutions are “too big to fail.” This assumption may encourage banks to take excessive risks, resulting in potentially more bank bailouts. It has also skewed the regulatory debate toward a focus on requiring banks to hold higher levels of “going concern capital,” such as common equity.
This is a dangerous path to follow. If regulators mandate higher capital requirements for banks, there is no guarantee that banks will be able to raise that capital in equity markets. They may have to shrink their balance sheets to meet the requirements, potentially curtailing their capacity to lend and support economic growth. A narrowly defined approach to capital regulation would also reduce banks’ options for raising other types of capital when they need it. This could result in systemic risk when another financial crisis hits.
A better regulatory framework must combine capital regulations with other tools, including a resolution mechanism for financial institutions that fail, a retail deposit insurance system, and a prompt corrective action system that allows regulators to force a bank to take action before it fails. As long as the regulators can effectively control systemic risk by taking such a multifaceted approach, banks should also be allowed to absorb losses, raising capital other than common equity. It should be acceptable to allow banks to fail, and there should be no need for excessive capital requirements.
A new regulatory framework should be able to distinguish the differences between banks whose main business is deposit taking and lending the vast majority to other banks world wide, and banks that trade for their own account.
The recent financial crisis in the US, demonstrats that balance sheet structure matters. Trusted banks with a large retail deposit base continued to provide funds to customers even in the depths of the crisis, whereas many banks that relied heavily on market funding or largely trading for their own account effectively failed.
Investment banks with higher risk businesses by nature should be charged a higher
level of capital requirement—otherwise, sound banking will not be rewarded.
Policy makers instead should learn from Japan’s experience by improving the range of regulatory rules available and setting reasonable capital rules for banks based on their actual business models. That’s the best way to ensure banks perform their essential role at the lowest long-term cost to taxpayers, customers and shareholders.
After our bubble economy collapsed in the 1990s, it took policy makers many years to address the real issue: the health of our financial system. When they did, they injected public funds into large Japanese banks across the board, enhanced deposit insurance safety nets, and accelerated the disposal of nonperforming assets based on strict risk assessments. The market selected which banks could survive under a system of multiple regulatory requirements, not just a capital requirement. Many banks were absorbed into larger entities.
Japan also avoided moral hazard by studiously avoiding the classification of any bank as “too big to fail.” Regulators instead put more emphasis on improving banks’ risk controls and did not require them to have excess capital. The financial system soon regained its health and the economy enjoyed seven consecutive years of uninterrupted growth, starting in 2001.
Today’s regulatory dialogue in the United States and Europe has implicitly assumed that large financial institutions are “too big to fail.” This assumption may encourage banks to take excessive risks, resulting in potentially more bank bailouts. It has also skewed the regulatory debate toward a focus on requiring banks to hold higher levels of “going concern capital,” such as common equity.
This is a dangerous path to follow. If regulators mandate higher capital requirements for banks, there is no guarantee that banks will be able to raise that capital in equity markets. They may have to shrink their balance sheets to meet the requirements, potentially curtailing their capacity to lend and support economic growth. A narrowly defined approach to capital regulation would also reduce banks’ options for raising other types of capital when they need it. This could result in systemic risk when another financial crisis hits.
A better regulatory framework must combine capital regulations with other tools, including a resolution mechanism for financial institutions that fail, a retail deposit insurance system, and a prompt corrective action system that allows regulators to force a bank to take action before it fails. As long as the regulators can effectively control systemic risk by taking such a multifaceted approach, banks should also be allowed to absorb losses, raising capital other than common equity. It should be acceptable to allow banks to fail, and there should be no need for excessive capital requirements.
A new regulatory framework should be able to distinguish the differences between banks whose main business is deposit taking and lending the vast majority to other banks world wide, and banks that trade for their own account.
The recent financial crisis in the US, demonstrats that balance sheet structure matters. Trusted banks with a large retail deposit base continued to provide funds to customers even in the depths of the crisis, whereas many banks that relied heavily on market funding or largely trading for their own account effectively failed.
Investment banks with higher risk businesses by nature should be charged a higher
level of capital requirement—otherwise, sound banking will not be rewarded.
Policy makers instead should learn from Japan’s experience by improving the range of regulatory rules available and setting reasonable capital rules for banks based on their actual business models. That’s the best way to ensure banks perform their essential role at the lowest long-term cost to taxpayers, customers and shareholders.
Wednesday, August 5, 2009
Where is the Airlines Industry is heading? Part One
Yet again another losing quarter for the global airline industry, despite undertaking painful cutbacks in operating and capital expenditure. The solution for moving forward for this hard hit industry is a consolidation.
How many more seats can the airlines operators pull from the sky? Apparently not enough to turn the industry around for a sustained period.
The nine largest U.S. airlines which accounts to about 88% of all domestic traffic lost a collective $1.5 billion during the recently completed second quarter.
Based on recent survey by the airline analyst, revenue for the third quarter is expected to decline at a rate 20% or so for most big carriers from the same quarter in 2008, as business and leisure travelers continue to cut back. The July load factors that airlines are expected were close to 90% full.
Now poses a few questions that needs to be answered - The problem? Are they too many planes in the Sky?.
With the economy in the process of recovering from a setback of curtailing demand for air travelling, cutting the supply of seats only goes so far when they're spread among nine major carriers, plus regional competition.
The industry is essentially engaged in an ongoing fare war among airline operators, a tough way to price seats high enough to cover costs. An improving economy, inevitable at some point, figures to push oil prices as much as customer demand. Will carriers ever be able to set prices optimally to increase profitability?
A plan of spreading out 88% of the domestic flying public among six airlines would work a lot better than spreading them among nine. Until then, it's a dim future for as far as we can see in the coming years.
The majors operators are advised adopt a policy of cost cuts and increase revenue by at least 15% in order improve marginal profits and upgrading their aging fleets. The problem arises, is that most carriers have been through big restructurings either in or outside of bankruptcy, leaving little room for further cost cuts in costly infrastructure which includes equipment, terminal rentals and expensive labor.
According to recent studies, it is expected most major carriers, including Delta, JetBlue and Air Tran, to post operating profits in 2009, but thin margins offers little cushion against any possible one-time costs that might occur that would eventually consume available operating profits.
The biggest problems, though, are at U.S. Airways and United, both of which could easily land in bankruptcy in less than a year,due to low market caps and a lack of unencumbered assets to borrow against makes raising cash a problem.
How many more seats can the airlines operators pull from the sky? Apparently not enough to turn the industry around for a sustained period.
The nine largest U.S. airlines which accounts to about 88% of all domestic traffic lost a collective $1.5 billion during the recently completed second quarter.
Based on recent survey by the airline analyst, revenue for the third quarter is expected to decline at a rate 20% or so for most big carriers from the same quarter in 2008, as business and leisure travelers continue to cut back. The July load factors that airlines are expected were close to 90% full.
Now poses a few questions that needs to be answered - The problem? Are they too many planes in the Sky?.
With the economy in the process of recovering from a setback of curtailing demand for air travelling, cutting the supply of seats only goes so far when they're spread among nine major carriers, plus regional competition.
The industry is essentially engaged in an ongoing fare war among airline operators, a tough way to price seats high enough to cover costs. An improving economy, inevitable at some point, figures to push oil prices as much as customer demand. Will carriers ever be able to set prices optimally to increase profitability?
A plan of spreading out 88% of the domestic flying public among six airlines would work a lot better than spreading them among nine. Until then, it's a dim future for as far as we can see in the coming years.
The majors operators are advised adopt a policy of cost cuts and increase revenue by at least 15% in order improve marginal profits and upgrading their aging fleets. The problem arises, is that most carriers have been through big restructurings either in or outside of bankruptcy, leaving little room for further cost cuts in costly infrastructure which includes equipment, terminal rentals and expensive labor.
According to recent studies, it is expected most major carriers, including Delta, JetBlue and Air Tran, to post operating profits in 2009, but thin margins offers little cushion against any possible one-time costs that might occur that would eventually consume available operating profits.
The biggest problems, though, are at U.S. Airways and United, both of which could easily land in bankruptcy in less than a year,due to low market caps and a lack of unencumbered assets to borrow against makes raising cash a problem.
SSangyong to file Bankruptcy?
Some creditors of Ssangyong Motor Co, a leading auto manufacturer in South Korea has plan to file a petition with a Seoul court Wednesday to have the debt-ridden car maker liquidated.
Ssangyong has been in court-approved bankruptcy protection since February this year. Its troubles have deepened in the past two months resulted from the adverse global economic crises with hundreds of dismissed workers occupying the company's Pyeongtaek factory, which houses its sole assembly line.
Dissatisfied workers are seen striking at the compound of the Ssangyong plant in Pyeongtaek, some 70 kms south of Seoul, on Tuesday.
The creditors who mainly made up of auto parts suppliers collectively agreed that it is better to liquidate assets of Ssangyong before the company's asset value falls further tio repay their debts.The creditors plan to submit the liquidation plan to the Seoul Central District Court on Wednesday afternoon.
Ssangyong owes a combined 300 billion won ($247 million) to the parts manufacturers, and further 240 billion won to state-owned Korea Development Bank.
Ssangyong on Sunday said it had no choice but to consider liquidation, as it has failed to agree with workers union on a restructuring plan that would include cutting 37% of the company's staff and the sale of assets.
Negotiations with the worker's union last week to end the occupation failed, with management threatening to take steps toward bankruptcy unless the union accepted a compromise offer on layoffs.
Auto manufacter - Maruti expects to export 100,000 units this year
Maruti Suzuki India Ltd, India's largest car maker by sales is expected to export more than 100,000 vehicles in the fiscal year ending March 31, 2010.
Chairman R. C. Bhargava said in the company's annual report for 2008-09 released on Tuesday.
The small cars market will be the major export market segment,thus major elements of future growth strategy of the company.
The local unit of Suzuki Motor Corp. exported 70,023 vehicles in the previous fiscal year. Exports made up slightly less than a tenth of the company's total sales, which grew 1.5% to 722,144 units in 2008-09.
In the period of April-July 2009, the company's exports market more than doubled from its preceeding year to 39,860 units, resulting in a a jump of 21 %.
The company exports cars to more than 100 countries, with Europe being its key market.
Maruti's major export model is the A-Star small car, which contributes more than two-thirds to the company's overseas sales.
Besides exporting the model on its own, the car is also bought by Suzuki Motor's Japanese peer Nissan Motor Co. under a contract manufacturing agreement. Nissan sells the small car in Europe as Pixo.
According to Mr. Bhargava, Maruti Suzuki is financially sound and practically debt free and have a healthy cash balance.
Maruti Suzuki Chief Executive and Managing Director Shinzo Nakanishi said in the annual report that falling raw material costs and better foreign exchange management will help the company improve its profit margin in the short term.
In anticipation of rising fuel prices of gasoline and diesel, the company is working toward developing more vehicles that use cheaper alternative fuels such as compressed natural gas.
The company is working with the government and other companies on projects to develop hybrid vehicles.
Chairman R. C. Bhargava said in the company's annual report for 2008-09 released on Tuesday.
The small cars market will be the major export market segment,thus major elements of future growth strategy of the company.
The local unit of Suzuki Motor Corp. exported 70,023 vehicles in the previous fiscal year. Exports made up slightly less than a tenth of the company's total sales, which grew 1.5% to 722,144 units in 2008-09.
In the period of April-July 2009, the company's exports market more than doubled from its preceeding year to 39,860 units, resulting in a a jump of 21 %.
The company exports cars to more than 100 countries, with Europe being its key market.
Maruti's major export model is the A-Star small car, which contributes more than two-thirds to the company's overseas sales.
Besides exporting the model on its own, the car is also bought by Suzuki Motor's Japanese peer Nissan Motor Co. under a contract manufacturing agreement. Nissan sells the small car in Europe as Pixo.
According to Mr. Bhargava, Maruti Suzuki is financially sound and practically debt free and have a healthy cash balance.
Maruti Suzuki Chief Executive and Managing Director Shinzo Nakanishi said in the annual report that falling raw material costs and better foreign exchange management will help the company improve its profit margin in the short term.
In anticipation of rising fuel prices of gasoline and diesel, the company is working toward developing more vehicles that use cheaper alternative fuels such as compressed natural gas.
The company is working with the government and other companies on projects to develop hybrid vehicles.
Tuesday, August 4, 2009
Govt to announce for Budget 2010
Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah clarified on Tuesday the issues pertaining to the announcement of Budget 2010 at the National Tax Conference.
1) A group of 18 focus groups are task to reviewe 68 memorandums.
2) The exercise is expected to be completed by end of August 2009.
3) Consideration of reducing prefential taxes
Prime Minister Datuk Seri Najib Tun Razak is expected to table the Budget 2010 in Parliament on October 23.
1) A group of 18 focus groups are task to reviewe 68 memorandums.
2) The exercise is expected to be completed by end of August 2009.
3) Consideration of reducing prefential taxes
Prime Minister Datuk Seri Najib Tun Razak is expected to table the Budget 2010 in Parliament on October 23.
FBM KLCI closes Higher at 7.16 points
The 30-stock FBM KLCI reached an intra day high of 10.55 points and settling at 8.57 points to 1,179.88 with turnover stood at 1,048 million shares valued at RM1,658 million.
The market was in line with the gains of other regional markets(refer - Far East Asian Bourses ended Higher on trading).
Advances stocks beat decliners 403 to 299 while 215 stocks were unchanged.
Consumer stocks Nestle (M) Bhd and British American Tobacco Bhd ,and department store operator Parkson were among the major gainers of the day on expectations that retail sales will recover gradually towards the year-end, boosted by the festive season and the mega sales campaign.
A soft quarter for the remaining 2009 is expected with anticipated given the wealth effect from the rally in the equity market and the more positive overseas economic data in June.
The recovery in retail sales will be more apparent in 2010 driven by an anticipated stronger GDP in 2010 with lower unemployment rate due as a result of improve business sentiment and a rebound of the equity market and positive news flow from overseas.
Profit takings saw counter such as Tanjong shedding by 40 sen to RM15.58, Petronas Dagangan fell 11 sen to RM8.55 while AirAsia gave up nine sen to RM1.45 after announcing details of its proposed share placement at an illustrative RM1.25 per share.
The market was in line with the gains of other regional markets(refer - Far East Asian Bourses ended Higher on trading).
Advances stocks beat decliners 403 to 299 while 215 stocks were unchanged.
Consumer stocks Nestle (M) Bhd and British American Tobacco Bhd ,and department store operator Parkson were among the major gainers of the day on expectations that retail sales will recover gradually towards the year-end, boosted by the festive season and the mega sales campaign.
A soft quarter for the remaining 2009 is expected with anticipated given the wealth effect from the rally in the equity market and the more positive overseas economic data in June.
The recovery in retail sales will be more apparent in 2010 driven by an anticipated stronger GDP in 2010 with lower unemployment rate due as a result of improve business sentiment and a rebound of the equity market and positive news flow from overseas.
Profit takings saw counter such as Tanjong shedding by 40 sen to RM15.58, Petronas Dagangan fell 11 sen to RM8.55 while AirAsia gave up nine sen to RM1.45 after announcing details of its proposed share placement at an illustrative RM1.25 per share.
Far East Asian Bourses ended Higher on trading
Asian share markets closed higher on Tuesday mainly driven by rise in commodity-related stocks for base metals and crude oil prices and HSBC climbing in Hong Kong after its results beat forecasts.
Major bourses across Asia closed marginally higher particularly Japan's Nikkei (1.1%), Australia's S&P/ASX 200 (1.5%), South Korea's Kospi Composite (0.6%) and New Zealand's NZX-50 (1.3%) higher
However the Dow Jones Industrial Average (“DJIA”) futures were down 16 points in screen trade.
According to Shinichiro Matsushita, Daiwa Securities analyst "There still is concern that the market is heading towards overheated, but the mood is positive, supported mainly by better-than-expected U.S. manufacturing data, suggesting growth in the July-September quarter.
The Dow Jones Industrial Average rose 1.3% while S&P 500 gained 1.5% to the good, in New York on Monday. Both were powered to their highest closes since Nov. 4, 2008, boosted by data indicating a rise in manufacturing activity across the globe, while many financial stocks advanced upon strong profit reporting from U.K. banking heavyweights of HSBC and Barclays.
Hong Kong's Hang Seng Index rose by 0.5%, with HSBC's 6.4% rise powering most of the gains after the bank posted decline of 57% in year to date first-half net profit, but still above analysts' expectations
Major bourses across Asia closed marginally higher particularly Japan's Nikkei (1.1%), Australia's S&P/ASX 200 (1.5%), South Korea's Kospi Composite (0.6%) and New Zealand's NZX-50 (1.3%) higher
However the Dow Jones Industrial Average (“DJIA”) futures were down 16 points in screen trade.
According to Shinichiro Matsushita, Daiwa Securities analyst "There still is concern that the market is heading towards overheated, but the mood is positive, supported mainly by better-than-expected U.S. manufacturing data, suggesting growth in the July-September quarter.
The Dow Jones Industrial Average rose 1.3% while S&P 500 gained 1.5% to the good, in New York on Monday. Both were powered to their highest closes since Nov. 4, 2008, boosted by data indicating a rise in manufacturing activity across the globe, while many financial stocks advanced upon strong profit reporting from U.K. banking heavyweights of HSBC and Barclays.
Hong Kong's Hang Seng Index rose by 0.5%, with HSBC's 6.4% rise powering most of the gains after the bank posted decline of 57% in year to date first-half net profit, but still above analysts' expectations
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