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November 8, 2004
Fed Expected to Stay the Course for Now
Fed officials have left no doubt that they will raise short-term
rates on Wednesday by a quarter point, to 2 percent, but they are still
keeping their options open for December and next year, the New
York Times reported. Even if the central bank announces another
rate increase on Wednesday, as most analysts expect, “real”
short-term rates will still be slightly below zero after subtracting the
effect of inflation.
Northwest Pilots Ratify $265 Million Concession Deal
Pilots at Northwest Airlines Corp. have ratified a $265 million
concession package that includes 15 percent pay cuts, the pilots union
said on Friday, Reuters reported. The deal, which runs through Dec. 31,
2006, was approved by an 89.1 percent margin, according to the Air Line
Pilots Association. Management and non-contract employees will
contribute an additional $35 million in pay cuts and benefit changes,
for a total of $300 million in annual savings for the airline.
Airlines Keep Fighting for Viability
Despite three years of shrinking and cutting costs, most big U.S.
airlines haven’t returned to profitability, the Wall Street
Journal reported. Conditions have worsened recently in the face
of high fuel prices, airfares at 12-year lows, overcapacity and rapid
expansion of discount carriers. Airlines have been forced again to
embark on a frantic campaign to cut expenses. If unsuccessful, some
airlines face bankruptcy, and a few may even stop operating in the
months ahead. But to get the cuts, they face increased tension with
their heavily unionized work forces, the online newspaper reported.
Heating Oil Prices Cause N.Y. Retailer Bankruptcy
High heating oil prices far outpacing revenues generated by
fixed-priced retail contracts forced Smithtown, N.Y.–based heating
oil retailer Suburban Fuel Inc. to file for chapter 7 bankruptcy
protection, the company’s attorney said on Friday, Reuters
reported. Privately held Suburban Fuel filed the voluntary petition for
bankruptcy on Wednesday in the U.S. Bankruptcy Court, Eastern District
of New York. The bankruptcy comes after Star Gas Partners LP warned
investors last month that it might seek bankruptcy protection if it
could not find financing for its Petro heating oil unit, one of the
largest U.S. distributors.
United Needs $2 Billion More in Cost Cuts
United Airlines, trying to revamp its business after nearly two years
in bankruptcy, has told its unions it must terminate and replace their
pensions as part of its drive to cut costs by an additional $2 billion a
year, Reuters reported. Glenn Tilton, CEO of United parent UAL Corp.
told employees on Thursday that one-third of the savings would come from
labor, one-third from replacing pensions with cheaper plans, and
one-third from non-labor cost cuts. United has said it needs the savings
to secure critical financing to help it exit bankruptcy, the newswire
reported.
Delta Details Job Cuts Plan
Delta Air Lines Inc. said on Sunday it will cut 2,000
aircraft-maintenance jobs, up to 3,100 customer-service jobs, and
between 1,600 and 1,800 supervisory and administrative personnel as part
of a previously announced plan to cut total staffing by 7,000, Reuters
reported. A company spokeswoman said the actual number of cuts will be
about 100 below its initial forecast. Delta has more than 60,000
employees, according to its Web site.
Nextwave Plans Wirless Network After Bankruptcy
NextWave Telecommunications Inc. said on Friday it planned to build
and operate wireless networks after it reorganizes and sells many of its
wireless airwaves licenses, Reuters reported. NextWave, which has been
in bankruptcy protection since 1998, revealed its plans a day after it
agreed to sell its licenses for mobile airwaves to Verizon Wireless for
$3 billion. NextWave said it planned to form a new company that would
deliver phone and Internet services to computers and advanced mobile
phones over high-speed wireless networks, the newswire reported.
UK Consumer Insolvencies Hit Record High in Third Quarter
The number of people in England and Wales unable to pay their debts
in the third quarter hit a record high, official figures showed on
Friday, suggesting rising interest rates are hitting over-extended
households, Reuters reported. The number of individual insolvencies rose
to a seasonally adjusted 11,967 in the third quarter, up 6.2 percent on
the quarter and 31.1 percent on a year earlier, according to the
Department of Trade and Industry. With overall consumer debt already
topping one trillion pounds, the latest figures highlighted the risk
posed to the economy from the rise in interest rates, the newswire
reported.
Carlyle Increases Its Interest in Debt Deals
Carlyle Group, among the biggest buyers of private companies, is
busily expanding its corporate loan operation, the Washington
Post reported. The Washington firm built its reputation as a
buyer in leveraged deals, investing some of its own money and borrowing
the rest. Now Carlyle is making a bid to become a major player in the
debt side of the buyout world as well, with some new funds to invest in
and originate corporate, high-yield debt, including loans to finance
buyouts.
Judge OKs Citigroup Settlement
A federal judge on Friday approved Citigroup Inc.’s $2.6
billion settlement with WorldCom Inc. investors who lost billions when
an accounting scandal plunged the telecommunications company into
bankruptcy protection, Reuters reported. With the settlement approved,
Citigroup has resolved one of the biggest class action lawsuits
resulting from a string of corporate scandals over recent years. The
settlement initially called for Citigroup to pay $2.65 billion to
WorldCom stockholders and bondholders, but the amount was later cut to
$2.575 billion, or equal to just less than half of Citigroup’s
profit in third quarter.