Germany appears to be too small to support two domestic airlines. Today, AirBerlin, the No. 2, will announce a six-year deal to lease half of its aircraft and crews to market leader Lufthansa, which intends to use the fallen rival to get its discount carrier, Eurowings, off the ground. Almost €1 billion in debt, AirBerlin became a costly burden to shareholders, including Abu Dhabi-based carrier Etihad, when it grossly over-expanded as the air travel market contracted. Aside from investors, German consumers will probably pay the price in costlier Lufthansa tickets.
Taking the train isn’t likely to get cheaper in Germany either. Deutsche Bahn is girding itself for another round of wage talks with its oh-so-unhappy workforce. While strikes like those that crippled rail travelers over the past two years are less likely this time, the wage increases being sought are just as big, in some cases up to 7 percent. The national railroad is bleeding travelers to a surging domestic bus market, which moves people around at a fraction of the price. Sometimes the quickest way between two points isn’t the smartest.
Deutsche Bank’s increasingly dire situation not only threatens shareholders and Germany’s banking system, but its chancellor, Angela Merkel. While her finance ministry loudly dismissed media reports of a government bailout yesterday, the vultures continue circling around Frankfurt and Germany’s largest bank. If the institution truly falls into an existential crisis – something its CEO, John Cryan, assures won’t happen – Merkel and the government may have to step in, and bail out another failed bank. That may not go over well with voters a year before she bids for a fourth term. Is it possible to hedge against unforeseen political risk?
The biggest cartel in the world is back. After lengthy negotiations, the oil-producing nations of OPEC agreed to decrease production for the first time in eight years to boost sagging crude prices. OPEC members will ratchet down daily output to 32.5 million barrels from 33.2 million, a 1 percent cut. The Iranian oil minister, who had opposed limits, announced the reductions. For the world economy, the new-found unity of the brothers-in-oil means rising prices and sinking economic growth. At least ECB President Mario Draghi can take heart: He may finally be able to reach his elusive inflation goals after all.
Less than four months before leaving office, Barack Obama learned yesterday in no uncertain terms that he is a lame duck. In a 97-to-1 vote in the Senate and 348-to-77 vote in the House, Congress overrode Obama’s veto of a bill that will give U.S. citizens the right to sue the government of Saudi Arabia for losses from the September 11, 2001, terror attacks. Fifteen of the 19 hijackers were Saudis, although their government has vehemently denied complicity. Maybe the new leverage will unearth the reason why members of Osama bin Laden’s family living in the States were allowed to violate a flight ban and leave the U.S. days after the attack.
Former French President Nicolas Sarkozy was known for having a soft spot for Libyan dictator Moammar Gadhafi. At least he let Gadhafi set up his desert tent in Paris during a state visit. But now his ostensible connections to the late despot may be coming back to haunt Sarkozy, who wants to be president again. According to reports in Paris, Gadhafi once secretly donated €6.5 million to Sarkozy’s election campaign. That allegation came to light in the reputed diary of a former Libyan prime minister and oil minister, who died in Vienna. As Voltaire once wrote: “To the living we owe respect, but to the dead we owe only the truth.’’
Here’s another obituary, this time to the golden age of the smartphone. The mobile internet handset boom may be coming to an end, according to our analysis, even though 1.4 billion of the sophisticated cellphones will be sold this year. But besides Apple and Samsung, none of the big smartphone makers are making real money any more, as the ubiquitous devices fall into tech’s commodity trap. When a new photo feature and wireless headphones are the most you can say about the latest iPhone, it’s time to look for the next best thing.
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