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Business News

Euro, EU areas post 0.2 percent GDP increase in Q2

BRUSSELS (BNO NEWS) – The European Union (EU) on Tuesday announced that both the euro area and the wider 27-nation EU region had a gross domestic product (GDP) increase of 0.2 percent during the year’s second quarter, compared to the previous quarter, which had previously posted growth rates of 0.8 percent.

The report was released by the EU’s statistical office, Eurostat, which its flash estimates also showed that the second quarter’s seasonally adjusted GDP had an increase of 1.7 percent in both zones, compared with the same quarter of the previous year. On a year-to-year basis, both zones also had positive marks during the first quarter, recording a 2.5 percent increase.

Comparatively, the U.S. had a GDP increase of 0.3 percent during the second quarter of the year, compared to the first quarter, which had marked a 0.1 percent increase as well. On a year-to-year basis, the GDP rose by 1.6 percent during the second quarter, following the first quarter’s increase of 2.2 percent.

Meanwhile, Japan, which has been facing its ongoing nuclear and post-earthquake crisis for the past months, recorded a GDP decrease by 0.3 percent in the second quarter, following a decrease of 0.9 percent in the first.

In a separate report, Eurostat revealed that the euro area’s global external trade surplus totaled to 900 million euros ($ 1.3 billion) in June, compared to the 700 million euros ($ 1 billion) in June 2010. In May, the euro area’s balance was 200 million euros ($ 287.5 million), compared with -4.9 billion (-$ 7 billion) in May 2010. On a month-to-month basis, June’s seasonally adjusted exports fell by 4.7 percent and imports by 4.1 percent.

The first estimate for the June extra-EU27 trade balance was a 12.2 billion euro ($ 17.5 billion) deficit, compared with -11.1 billion (-$ 15.9 billion) in June 2010. In May, the balance was -12.3 billion (-$ 17.7 billion) compared with -16 billion (-$ 23 billion) in May 2010. Also, its seasonally adjusted exports in June fell by 4.8 percent and imports by 3.8 percent, compared to the previous month.

Turkish pipeline explosion halts gas exports from Iran

TEHRAN (BNO NEWS) — Iranian gas flow to Turkey was halted on Friday after an explosion damaged a pipeline in eastern Turkey, Iranian state-run media reported.

Firefighters were dispatched to the scene and were ultimately able to put out the blaze, which had spread hundreds of meters (feet) wide with flames that leapt tens of meters (feet) into the air. There were no causalities as a result of the explosion and fire, according to the Fars News Agency.

Shortly after the explosion, a spokesman for the National Iranian Gas Company expressed its readiness to immediately fix the gas pipeline. “The blast in the gas pipeline in the Turkish territory has disrupted the exports and we have announced readiness for its immediate repair,” Majid Bujarzadeh said.

Bujarzadeh added that Iran is waiting for an answer from Turkey to resume the current 24 million cubic meters (847 million cubic feet) gas exports to the country.

It was not immediately clear what caused the explosion.

Last week, it took firefighters 10 hours to put out a fire on an oil pipeline in the oil-rich province of Khuzestan in southwestern Iran. The pipe is one of the country’s longest with the capacity to transfer up to 4,000 barrels per day.

Iran is the world’s fourth-largest oil producer and sits on the world’s second largest natural gas reserves.

U.S. goods and services deficit reaches $53.1 billion in June

WASHINGTON, D.C. (BNO NEWS) — The goods and services exports in the United States in the month of June reached $ 170.9 billion, recording a $ 53.1 billion deficit, according to a report released by the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) on Thursday.

Reports have shown that the exports of goods and services over the last year totaled $ 1.98 trillion, a 25.6 percent increase compared to that of 2009, marking an annualized growth rate of 16.4 percent compared to 2009.

However, with imports of $ 223.9 billion, the U.S. recorded a goods and services deficit of $ 53.1 billion, up from May’s revised deficit of $ 50.8 billion, the report showed. June exports were $ 4.1 billion less than May’s $ 175 billion, while its imports were $ 1.9 billion less than May imports of $ 225.8 billion.

Meanwhile, the Export-Import Bank of the United States said it had approved more than $ 24.5 billion in total authorizations in the current fiscal year through August 4, helping the U.S. export growth. The figure included 2,548 U.S. small-business transactions.

“U.S. exports play a key role in boosting our economy and encouraging job creation and growth,” said Fred P. Hochberg, chairman and president of the Export-Import Bank.

Nonetheless, the BEA report showed that while exports and imports of services remained virtually unchanged in June at $ 49.6 billion and $ 35.1 billion respectively, goods deficit increased $ 2.1 billion from May to $ 67.6 billion, and the services surplus decreased $ 0.1 billion to $ 14.5 billion.

In addition, June’s goods and services deficit increased $ 6.2 billion compared to the previous year. Exports were up $ 19.5 billion, which represents a 12.9 percent increase, and imports had a 13 percent growth, reaching $ 25.7 billion.

American Eagle Airlines fined $155,000 for safety violations

WASHINGTON, D.C. (BNO NEWS) — The U.S. Federal Aviation Administration (FAA) has fined American Eagle Airlines more than $ 150,000 due to several safety violations last year, the FAA said on Wednesday. It is the airline’s second fine in two months.

The FAA said its inspectors observed 12 American Eagle flights arriving at Dallas/Fort Worth International Airport on December 28 and December 29 last year. In eight instances, loading documents for checked luggage did not match observations made by the inspector.

The FAA said American Eagle’s approved weight and balance program calls for the use of an automated Electronic Weight and Balance System (EWBS) to make sure aircraft are operated with correct weight and balance information. However, accurate data must be entered for the EWBS to function properly.

Operators may not exceed an aircraft’s weight limit when loading the plane and the weight must be distributed so that the aircraft remains in balance during the flight. There have been accidents involving overweight aircraft in the past, most notable Air Midwest flight 5481.

Flight 5481 crashed into a U.S. Airways hangar at Charlotte/Douglas International Airport in Charlotte, North Carolina on January 8, 2003, killing 21 people. A subsequent investigation revealed the aircraft was overweight and this was ruled a contributing factor, in addition to improper maintenance.

The FAA alleges American Eagle entered inaccurate data in the EWBS and then operated the aircraft with incorrect weight and balance information. As a result, the agency has proposed a civil penalty of $ 80,000.

In addition to the fine of $ 80,000, the FAA has also proposed a civil penalty of $ 75,000 due to American Eagle’s alleged use of improper procedures to repair an engine on one of its Embraer 135 regional jets. According to the FAA, a mechanic signed off as ‘complete’ on work he had not performed. As a result, American Eagle operated the aircraft on 34 flights between September 11 and September 17, 2010, when it was not in compliance with regulations.

American Eagle Airlines, a regional affiliate of American Airlines, was also fined $ 77,500 last month after the airline’s line maintenance contractor in Virginia was found to use uncalibrated tools to test the anti-freeze used for de-icing aircraft. American Eagle Airlines was fined more than $ 5.7 million last year by the FAA.

Capitol One to acquire HSBC’s domestic credit card business for $2.6 billion

MCLEAN, VIRGINIA (BNO NEWS) — Capital One Financial Corporation on Wednesday announced that it has agreed to acquire HSBC’s domestic credit card business, including its approximately $ 30 billion credit card portfolio, for $ 2.59 billion.

The definitive agreement was signed for an 8.75 percent premium to par value of all receivables. As of June 30, the premium would have totaled $ 2.59 billion.

The acquisition includes ongoing private label and co-branded partnerships as well as infrastructure and capabilities that are expected to enhance Capital One’s partnership platform for future growth. The transaction is also expected to improve Capital One’s earnings and long-term capital generation trajectory.

“The acquisition of HSBC’s domestic credit card business is an attractive strategic and financial opportunity in a business we know well,” said Richard Fairbank, Chairman and Chief Executive Officer of Capital One. “Adding the HSBC card business to our own will enhance our credit card franchise and accelerate our achievement of a leadership position in retail card partnerships.”

Despite the expected addition of approximately $ 30 billion of HSBC credit card loans, the company does not expect a significant increase in total assets. The company expects to fund HSBC credit card loans primarily with cash and the proceeds from the balance sheet repositioning related to the pending ING Direct acquisition.

Capitol One, which is headquartered in McLean, Virginia, expects to complete the acquisition in the second quarter of 2012, and expects its Tier 1 common ratio to be in the mid-9 percent range at the end of the second quarter.

Capital One, at its sole discretion, also has the option of issuing $ 750 million of the approximately $ 1.25 billion to HSBC at $ 39.23 per share (the average of the closing prices of Capital One shares on Monday and Tuesday).

In connection with the transaction, Capital One expects to realize cost synergies of approximately $ 350 million and incur restructuring costs of approximately $ 420 million.

Japan: Tepco registers $7.4 billion Q1 losses

TOKYO (BNO NEWS) — The Tokyo Electric Power Co., Inc.(TEPCO) on Tuesday announced losses of ¥571.7 billion ($ 7.4 billion) during the fiscal year’s first quarter.

The company’s operating revenues for the first quarter (from April 1 to June 30) represents a decrease of 7.2 percent compared to the previous year.

Losses are mostly due to restoration and compensation costs, as tens of thousands of Japanese nationals have been affected by the country’s nuclear crisis after Tepco’s Fukushima Daiichi nuclear power plant suffered meltdowns in at least three of its reactors since the March 11 earthquake and tsunami.

Ordinary losses were ¥62.7 billion ($ 811.33 million), while restoration costs totaled to losses of ¥105.5 billion ($ 1.3 billion). In addition, estimated extraordinary losses of ¥397.7 billion ($ 5.1 billion) were due to compensation payments.

Meanwhile, the company’s electricity sales during the period decreased 12.1 percent on a year-to-year basis, as electricity usage has suffered a general decrease.

On the revenues side, electricity industry sales revenues decreased 8.1 percent, as nationwide residents have cut down electricity consumption as requested by the government. Since the disaster, electricity shortages have been recurrent since several nuclear plants have been shut down, while others go through periodic checks.

In May, Tepco announced the resignation of its president Masataka Shimizu after the company registered a historic loss of ¥1.25 trillion ($ 15.3 billion) in the 2010 fiscal year, which is the biggest loss in history by a non-financial Japanese company.

Japan’s nuclear crisis began since the Fukushima Daiichi nuclear power plant was severely damaged on March 11 when a 9.0-magnitude earthquake and a subsequent tsunami devastated the country. The disaster disabled the cooling systems of the plant, and radioactive elements leaked into the sea and were later found in water, air and food products in some parts of Japan. Subsequent power shortages throughout the country have further complicated recovery efforts.

At least 23,482 people were killed, while 8,069 people remain missing. There are still more than 88,000 people who are staying in shelters in 21 prefectures around Japan.

German air traffic controllers to strike Tuesday

FRANKFURT, GERMANY (BNO NEWS) – The German Trade Union of Air Traffic Control (GDF) has called on its 5,500 members to participate in a six-hour strike on Tuesday morning, the union said on Monday, risking major disruption.

The union is currently locked in a pay dispute with the controllers’ employer, the German Air Navigation Services (DFS), which is a company owned by the government and is responsible for air traffic control in Germany.

“Dear members of the GDF, the state of the labor dispute with Deutschen Flugsicherung (DFS) is unchanged,” a letter from GDF to its members said. “The invitation of the DFS last week to re-negotiate contained no new offers, so unfortunately that has been no basis for new negotiations.”

It added: “Therefore the following call goes out to all of you: The union of air traffic control requires ALL of the German wage employees working on air traffic at all locations on Tuesday, 09 August, 2011, between 6 a.m. and 12 p.m., to lay down their work for 6 hours.”

The letter said several locations were excluded from the strike so air traffic control will still be able to handle emergency situations, but massive delays and flight cancellations are anticipated, should the strike proceed.

A Frankfurt labor court approved the industrial action on Monday afternoon, but German airlines and tourism industries have been highly critical of the timing of the strike which comes in the middle of the holiday season. The GDF has asked for air travelers’ understanding that it saw no other course in the stalled pay dispute other than to strike, according to The Local.de.

The dispute revolves around pay and conditions for the union’s 5,500 members. The GDF is demanding a 6.5 percent wage increase in a 12-month pay deal while the DFS is reportedly offering a longer-term agreement, consisting of a 3.2 percent rise from August 1, followed by a 2 percent rise or at least a rise keeping pace with inflation from November 1, 2012.

At the moment, the salary of controllers starts at €90,000 ($ 128,000) per year.

The Trade Union of Air Traffic Controllers (GDF) was forced to cancel a strike last Wednesday after it was banned by a labor court in Frankfurt, saying some of the union’s demands were unacceptable, The Local reported.

The DFS could still attempt to halt Tuesday’s strike with a last minute legal appeal or by agreeing to arbitration talks late on Monday or early Tuesday, but no agreement was reached by late Monday evening.

U.S. private sector adds 114,000 jobs in July

WASHINGTON, D.C. (BNO NEWS) — The U.S. private sector added 114,000 jobs in July from the previous month, according to a report released on Wednesday by Automatic Data Processing, Inc. (ADP).

The ADP National Employment Report showed that total employment increased by 114,000 in the private sector as small businesses added 58,000 jobs, medium businesses 47,000, and large businesses 9,000.

According to the ADP report, employment in the service-providing sector rose by 121,000 last month, marking 19 consecutive months of employment gains. Meanwhile, the goods-producing sector decreased by 7,000 jobs during the same period, the second decline in three months. The manufacturing sector, which has seen growth in seven of the past nine months, lost 1,000 jobs in July.

“Today’s report shows modest job creation for the month of July at a rate of half what is needed for meaningful employment and economic recovery,” said Gary C. Butler, Chief Executive Officer of ADP. “Construction lost 11,000 jobs this month, and manufacturing and financial services were nearly flat with losses of 1,000 each.”

Butler noted that the professional business services, education and healthcare sectors had good growth with small businesses’ continued positive job growth averaging 69,000 new jobs a month for the past year.

However, the report also revealed that employment is decelerating. Since February, the three-month percent change has declined every month, from 0.6 percent to 0.27 percent in July. The estimated advance in employment from May to June was also revised down, from an initial 157,000 to 145,000.

The report is derived from actual payroll data and measures the change in total nonfarm private employment each month.

Aeromexico carries out first transcontinental biofuel flight

MEXICO CITY (BNO NEWS) – Mexican flagship carrier Aeromexico on Monday evening made its first transcontinental flight using biofuel, the company said on Tuesday.

The company said the flight from Mexico City to Madrid, which is a distance of 9,073 kilometers (5,637 miles), will prove the use of biofuel for long-distance flights. The Boeing 777-200ER, with capacity for more than 250 passengers, flew with a General Electric motor, which produces 12 percent less carbon dioxide per seat than its closest competitor.

The engine ran with a blend of 70 percent of traditional fuel and 30 percent biofuel, which was provided by Boeing and supplied by the Mexican Airports and Auxiliary Services (ASA). Details of the flight were announced in a joint press release from Aeromexico, the Mexican government, and Boeing.

The aviation biofuel which was used for the flight is composed of a mixture of petroleum-derived jet fuel and oil obtained from the Jatropha Curcas plant, which is being produced for the aviation sector in the Mexican states of Chiapas, Puebla, Veracruz, Yucatan and Michoacan.

But the biofuel made at Jatropha is not financially viable yet due to its high production cost. However, if and when the demand increases in the aviation sector, the production costs are expected to diminish, ASA general director stated.

In April, Mexican low-cost carrier Interjet successfully carried out the first biofuel powered flight in the American continent from Mexico City to the southern city of Tuxtla Gutierrez.

Korean Air orders two Boeing 737-900ERs in deal valued at $171.6 million

SEATTLE (BNO NEWS) — Korean Air on Tuesday morning announced a new order for two additional Boeing 737-900ER jetliners in a deal which is valued at $ 171.6 million at Boeing list prices.

The order follows another order in March when the airline ordered two Boeing 747-8 Freighters in a deal which was valued at approximately $ 639 million at the time. Korean Air is the flag carrier and largest airline of South Korea.

Korean Air currently operates two Boeing 737-900ERs as well as a combination of Next-Generation 737-800s and -900s in its single-aisle fleet. The airline’s fleet consists of 82 Boeing jets and more than 30 Airbus aircraft.

“The Next-Generation 737-900ER complements Korean Air’s fleet of more than 80 Boeing airplanes,” said Marlin Dailey, vice president of Sales and Marketing at Boeing Commercial Airplanes. “The new Boeing Sky Interior will enable Korean Air to further enhance the premium flying experience it provides to its passengers.”

Korea’s flag carrier is in the process of revamping its fleet with technologically advanced airplanes – having completed a cabin refurbishment project for its mid- to long-haul flights earlier this year. The addition of Boeing’s Next-Generation 737-900ER is intended to further improve Korean Air’s premium service strategy, according to Boeing.