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February 23, 2005
Consumer Confidence Slips
A widely watched indicator of consumers’ confidence in the
economy slipped in February but remained well above its levels a year
ago, a private research group reported Tuesday, the Associated Press
reported. The Conference Board said its consumer confidence index dipped
to 104.0 this month, down from a revised 105.1 in January, as optimism
about business conditions over the next six months declined. The latest
figure was slightly above what analysts were expecting. Lynn Franco,
director of the Conference Board’s research division, called the
reading an indicator that consumers expect moderated but continued
growth in the economy. Despite the worsening in expectations about
business conditions, consumers’ views about labor conditions
improved slightly. Those saying that jobs were hard to get fell to 22.6
percent from 24.3 percent, while those saying jobs were plentiful was
essentially unchanged at 20.9 percent. On the whole, consumers’
assessment of current economic conditions continued to generally
improve. Those saying current business conditions were bad declined to
15.6 percent from 18.1 percent, while those saying conditions were good
slipped to 24.9 percent from 26.1 percent.
Consumer Prices Rise 0.1 Percent in January
Consumer prices inched up just 0.1 percent in January as energy
prices tumbled sharply for the second straight month, according to a
report on Wednesday that may help quell recent anxiety on inflation,
Reuters reported. Excluding volatile food and energy costs, the Consumer
Price Index (CPI), a widely used inflation gauge, rose 0.2 percent for a
fourth straight month in January, the Labor Department said. Wall Street
economists had expected a 0.2 percent rise in the CPI, both overall and
excluding food and energy, but traders had been bracing for the
possibility of larger gains after a report on Friday showed a big pickup
in core producer prices. The producer price report had fueled
speculation that the Federal Reserve could step-up its so-far
“measured” campaign of interest-rate rises to keep inflation
in check. The tame consumer price report could allay those concerns. The
consumer-price report showed energy costs dropped 1.1 percent, with fuel
oil prices off 5.2 percent, natural gas costs down 3.0 percent and
gasoline off 2.1 percent.
Judge OKs Class-action Suit by United Air Workers
A federal court judge ruled that employees of United Airlines may
proceed with a class-action lawsuit against the airline’s employee
stock ownership plan and its trustees, the workers’ attorneys said
on Tuesday, Reuters reported. U.S. District Court Judge Samuel
Der-Yeghiayan gave the lawsuit class action status on Thursday. No trial
date has been set. The suit, originally filed in 2003, alleges that the
employee stock ownership plan committee for UAL Corp. and the plan
trustee, State Street Bank, were aware that UAL’s stock was
unstable, said attorneys from Hagens Berman Sobol Shapiro, the law firm
representing an estimated 70,000 UAL employees. State Street Bank even
placed the stock on a watch list due to its volatility, attorneys from
Hagens Berman said. United Airlines, the No. 2 U.S. carrier, has been in
bankruptcy since December 2002 hammered by soaring fuel costs, weak
revenues and competition from low-cost airlines.
Hawaiian Airlines Bankruptcy Hearing Delayed as Contract Talks
Continue
A U.S. Bankruptcy Court hearing involving Hawaiian Airlines and its
pilots was postponed Tuesday, the Associated Press reported. Judge
Robert Faris rescheduled the hearing for today. The hearing involves
Hawaiian’s attempt to impose a new labor contract on the pilots.
The postponement was called as the airline and the Air Line Pilots
Association continued contract negotiations. Hawaiian has reached
contract agreements with unions representing other employees.
Hawaiian’s prospective new owner—R.C. Aviation
L.L.C.—says the carrier needs to have agreements in place with all
of its labor groups in order to emerge from bankruptcy. Hawaiian filed
for chapter 11 protection in 2003.
Independence Air Owner Saves to Avert Bankruptcy
FLYi Inc., owner of low-fare carrier Independence Air, said it saved
$94.5 million by ending 45 aircraft leases and deferred $70 million in
plane rental payments under a restructuring to avoid bankruptcy, the
Detroit Free Press reported. In exchange for the aircraft
financing changes, FLYi agreed to issue 8.3 million shares of stock and
$6.1 million in unsecured notes. Some of the shares would be issued
under convertible notes that don’t pay interest, the Dulles,
Va.–based company said in a statement Tuesday. Making the changes
“buys them time” to try to make the low-fare strategy work,
said Ray Neidl, a New York-based senior analyst at Calyon Securities USA
Inc. with a “neutral” rating on FLYi. “It’s
their last shot at it.” In a November filing, FLYi said it was
negotiating with leasing partners on $83 million due in January and
might consider chapter 11 protection if the talks failed.
Winn-Dixie Restructuring Could Include Store Closings
Winn-Dixie President and Chief Executive Officer Peter Lynch said
Monday that he expects to announce restructuring plans in 30 to 45 days
that could include store closings and other cutbacks, Knight-Ridder
reported. Winn-Dixie and 23 of its subsidiaries filed voluntary
petitions for chapter 11 reorganization Monday in the U.S. Bankruptcy
Court for the Southern District of New York. Winn-Dixie’s 920
supermarkets opened for business as usual Tuesday morning and will
continue to operate normally for the next few weeks. Lynch, who has a
reputation in the industry as a turnaround expert, said he is
“very optimistic” about
Winn-Dixie’s future. Burt Flickinger, managing director of retail
consulting firm Strategic Resource and a long-time observer of
Winn-Dixie and the supermarket industry, is more pessimistic.
“He’s never been through a bankruptcy,” Flickinger
said. “Peter’s a highly credentialed guy. But this has got a
high degree of difficulty.” Lynch was hired in December and
Flickinger said that may have been too late to turn the company around.
He said competition from Wal-Mart has intensified in the past year, and
that even if Winn-Dixie does improve the operations of its stores, it
may be too late to win customers back.
American, Continental Get Tentative Approval to Fly to China
United Airlines’s exclusive right to fly to Shanghai from
O’Hare Airport will end next year when American Airlines begins
serving the Chinese city, Knight-Ridder reported. The Department of
Transportation has granted tentative approval to Continental Airlines
and American Airlines to fly nonstop to China. The Tuesday decision ends
months of lobbying by the nation’s largest airlines for rights to
new China routes. Continental will serve Beijing from Newark, N.J.,
making it the first U.S. carrier to serve China from the New York area.
Federal regulators called the lack of a U.S. carrier serving China from
that region “the most serious service deficiency” it found.
Continental, which was granted seven weekly roundtrips to China, has
said it will announce when service will begin as soon as final approval
is granted. American will begin serving Shanghai from Chicago in 2006,
setting up head-to-head competition with United. It will also have seven
weekly roundtrips. United and Northwest Airlines are the only U.S.
carriers now allowed to fly to China. United flies 28 weekly roundtrips,
while Northwest flies 20. Three Chinese carriers combine for 25 weekly
roundtrips to the United States. The decision to give one of the China
slots to American will assure competition at O’Hare and put
pressure on United to keep fares prices down.