Posts in category Business and finance


Business and financeGulliver

The days of the A380 look numbered

ASK frequent flyers which is their favourite aircraft and most come up with the same answer: the A380 superjumbo made by Airbus, a giant European planemaker. Able to carry 525 passengers in a typical three-class layout, on two full-length decks, the aircraft still feels spacious, with wide aisles and plenty of headroom. Frequent flyers also admire the freshness of the cabin air, the lighting systems that are designed to reduce jet lag and the quietness of the cabin. “You can hardly hear it take off,” one fan recently told Gulliver. “And I can actually go to sleep on the plane unlike any other I’ve been on before.”

But less than a decade after it carried its first paying passengers, the age of the superjumbo looks like coming to an end. When Airbus announced its plans to build the plane in 2000, it hoped to sell up to 1,200 of them over two decades. Eighteen years later it has sold just a quarter of that figure, and has…Continue reading

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Business and financeGulliver

Turkish Airlines bounces back to growth

A LITTLE over a year ago, Gulliver gave a downbeat assessment of the prospects for Turkey’s aviation sector. Having enjoyed a decade of uninterrupted growth of more than 10% a year, Turkish Airlines, the country’s flag-carrier, was grounding aircraft and closing routes amid growing unrest at home and violence across its border with Syria. Concerns about regional security were also making life difficult in the United Arab Emirates (UAE) and Qatar, two other countries that have built aviation empires by connecting far-flung parts of the globe through their hub airports. Yet whereas the Gulf carriers remain in the doldrums, Turkish is gaining altitude again.

There had been just cause for concern about Turkey at the end of 2016. The year unleashed a failed military coup, a resultant purge of dissenters, and a wave of attacks mounted by Islamic State terrorists. When Istanbul’s Atatürk Airport was struck by bombers in June, even transit passengers started to…Continue reading

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ApprovedBusinessBusiness and finance

Spotify opts for an unusual way of going public

FOR seasoned bankers and starry-eyed entrepreneurs alike, doing an IPO, or initial public offering, is synonymous with the very idea of taking a firm public. No wonder, then, that the decision by Spotify, a music-streaming service, to opt for an unconventional alternative called a “direct listing” has prompted debate. Instead of paying investment banks hefty fees to arrange an IPO, Spotify plans to have existing shares simply switch one day to being tradable on the New York Stock Exchange (NYSE).

IPOs themselves have become rarer, as startups such as Uber and Airbnb have chosen to raise money through private markets instead. Although there was an uptick in the number of IPOs in America in 2017—108, compared with 74 in 2016—the average number of IPOs has remained at around 100 annually since 2000, compared with over 300 in the course of the two previous decades. But until now no big company had contemplated direct listing as an alternative. The structure has been seldom used: in…Continue reading

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ApprovedBusinessBusiness and finance

Taiwanese bosses are the Chinese-speaking world’s oldest

DESPITE her father’s pleas, Cherry Liu refused to work for the family business, a small electronic-components company founded in 1979 on the outskirts of Taipei. A 34-year-old diamond dealer based in Sydney, Ms Liu says she is simply not passionate about gadgets such as circuit-breakers. Nor are her siblings. Her 64-year-old father cannot find a successor, but he will not even consider recruiting someone outside the family, she says. He fears that a newcomer might leave and take the family’s precious list of customers and suppliers with him.  

Taiwan’s economic boom was fuelled by people like Ms Liu’s father, entrepreneurs who started from nothing to build successful family-run companies, many of which are now huge. These firms still dominate Taiwan’s export-reliant economy, which specialises in high tech. Of all listed firms, 70% are family-run, compared with 33% for Chinese firms and 40% for Hong Kong-based ones. Almost three-quarters of family concerns are operated…Continue reading

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ApprovedBusinessBusiness and finance

Companies are moving faster than many governments on carbon pricing

Disney offsets its air miles

ECONOMISTS have long argued that the most efficient way to curb global warming is to put a price on the greenhouse-gas emissions that cause it. A total of 41 OECD and G20 governments have announced either a carbon tax or a cap-and-trade scheme, or both. Add state and local schemes, and they cover 15% of the world’s emissions, up from 4% in 2010. Voters concerned about climate change are egging them on. So, too, are corporate bosses. More firms are imposing such pricing on themselves, even in places where policymakers are dragging their feet.

Of the 6,100-odd firms which report climate-related data to CDP, a British watchdog, 607 now claim to use “internal carbon prices”. The number has quadrupled since CDP first began posing the query in its annual questionnaire three years ago. Another 782 companies say they will introduce similar measures within two years. Total annual revenues of these 1,389 carbon-price champions amount to a hefty…Continue reading

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ApprovedBusinessBusiness and finance

Having rescued recorded music, Spotify may upend the industry again

IN JUST a few short years Spotify has evolved from bête noir of some of the world’s most prominent recording artists to perhaps their greatest benefactor. The Swedish company transformed the way people listen to music, and got them used to paying for it again after digital piracy had crippled sales. Global revenues from music streaming, which Spotify dominates with 70m subscribers, more than tripled in three years, to an estimated $10.8bn last year, for the first time surpassing digital and physical sales of songs and albums.

But if it is earning billions for others, Spotify is losing money for itself—with an operating loss of nearly $400m in 2016—because it pays out at least 70% of its revenues to the industry, mostly in royalties. As it prepares for a “direct” listing on the New York Stock Exchange (see article) it must convince…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

How China won the battle of the yuan

“THE horse may be out of the proverbial barn.” So wrote Ben Bernanke, a former chairman of the Federal Reserve, in early 2016, arguing that capital controls might be powerless to save China from a run on its currency. He was far from alone at the time. As cash rushed out of the country, analysts debated whether the yuan would collapse, and some hedge funds bet that day was coming fast. But two years on, the horse is back in the barn: the government’s defence of the yuan has succeeded, in part through tighter capital controls.

The latest evidence was an 11th consecutive monthly increase in foreign-exchange reserves in December. During that time China’s stockpile of official reserves, the world’s biggest, climbed by $142bn, reaching $3.14trn, roughly double the cushion usually regarded as needed to ensure financial stability. Another sign of China’s success is the yuan itself. At the start of 2017 the consensus of forecasters was that the currency would continue to weaken; it finished the year up by 6% against the dollar.

Investors and analysts were not wrong in viewing Chinese capital controls as porous. Enterprising types had—and have—umpteen ways to sneak money out, from overpaying for imports to smuggling cash across the border in luggage. But there is a wide spectrum between a fully open and fully closed capital account, and China has…Continue reading

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ApprovedBusinessBusiness and finance

Artificial intelligence dominated the Consumer Electronics Show

WHEN the electronics industry meets in Las Vegas at CES, its main trade show, buzzwords abound. But rarely has one been as pervasive as this week. “Artificial intelligence” or variations on the theme (“AI-driven”, “AI-powered” and so on) were slapped across most new products—although often the artificial overcame the intelligence.

Those attending gawped at an interactive bathroom mirror on the stand of Haier, a giant Chinese white-goods maker. Look into it, like the Wicked Queen in Snow White, and instead of being told you are the fairest, your data profile appears on the glass. It displays weight (from an interactive scale), urine-test results (from a sensor on a connected lavatory) and other health-related things.

For those attentive visitors who could see past the AI assault, another theme could be identified: firms innovating around how they innovate. Haier’s stand also had a new device that is the result of combining its product development with that of…Continue reading

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ApprovedBusinessBusiness and finance

India’s tea industry is going through tepid times

Tasseography in progress

BULK tea sales at the offices of J Thomas in Kolkata, which first started auctioning the stuff in 1861, lack the boisterousness of years past. Gone is the noisy trading pit, replaced by a handful of buyers sitting behind their laptops in a silent auditorium. Armed with tasting notes, they bid electronically on hundreds of lots drawn from the city’s hilly hinterlands in Assam and West Bengal. To passing visitors, it appears as if everyone in the room could do with a little caffeination. Yet within only three hours or so, enough tea changes hands to brew 24 Olympic-sized swimming pools.

If Indian tea delights those who get to drink the country’s finest blends, it frustrates all those who plant, pluck and peddle it. Archaic government regulations have in recent years pushed up production costs to around 175 rupees ($2.70) per kilogram, well above average auction prices of 140 rupees, which makes large cultivators grumble. Pickers complain about…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Accountancy takes root in the inhospitable soil of Afghanistan

Waiting for the auditor

WHEN Afghan lawmakers were debating rules of conduct for accountants, some were confounded by their strictness. Why should those found guilty of murder, asked one member of parliament, be struck off? That is a sign of the challenges facing the professional body for bean-counters, Certified Professional Accountants (CPA) Afghanistan, which was launched last month.

Attempts to establish a home-grown profession start from a low base. Back in 2009 Kabul, a city of around 4m, had fewer than 20 qualified accountants. Neither standards nor oversight for the profession were in place. Most local outfits were branches of firms from elsewhere in South Asia or farther afield.

Boring old accountancy might not seem a priority for a war-torn country. But in business it can foster trust and transparency—scarce commodities in a country where corruption is systemic. Because of the difficulty of verifying borrowers’ financial positions and valuing…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Natural disasters made 2017 a year of record insurance losses

THAT 2017 suffered from more than its fair share of natural catastrophes was known at the time. In the wake of Hurricane Harvey, the streets of Houston, Texas, were submerged under brown floodwater; Hurricane Irma razed buildings to the ground on some Caribbean islands. That the destruction was great enough for insurance losses to reach record levels has only just been confirmed. According to figures released on January 4th by Munich Re, a reinsurer, global, inflation-adjusted insured catastrophe losses reached an all-time high of $135bn in 2017 (see chart). Total losses (including uninsured ones) reached $330bn, second only to losses of $354bn in 2011.

A large portion of the losses in 2011 was caused by one catastrophe: the earthquake and tsunami in Japan. Losses in 2017 were largely traceable to extreme weather. Fully 97% were weather-related, well above the average since 1980 of 85%. If climate change brings more frequent extreme weather, as Munich Re and others expect, last year’s loss levels may…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Donald Trump’s difficult decision on steel imports

EVERY Tuesday, senior members of the administration gather in the White House to discuss trade. They are divided between hawks, who argue that America needs to be tougher in its defence against what they see as economic warfare waged by China, and doves, who worry about the costs of conflict. So far, against all expectations when President Donald Trump entered the White House, the doves have prevailed. The first of a series of legal deadlines could soon unleash the hawks.

Last April Wilbur Ross, the commerce secretary, initiated a probe into whether steel imports were a threat to America’s national security. His department pointed to a “dramatic” increase in steel imports over the previous year and to the idling of nearly 30% of America’s steel-production capacity, as imports feed a quarter of its consumption. If the report, due by January 15th, finds imports are a threat, Mr Trump, under Section 232 of the Trade Expansion Act of 1962, will have 90 days to respond.

The…Continue reading

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ApprovedBusiness and financeFINANCEFinance and economics

Bitcoin is no long the only game in crypto-currency town

IT STARTED as a joke. Dogecoin was launched in 2013 as a bitcoin parody, using as its mascot a Japanese shiba inu dog, a popular internet meme. The crypto-currency was never really used, except for tipping online, and one of its founders has called it quits. But recently its price has soared: on January 7th the dollar value of all Dogecoins in circulation reached $2bn, a sign of how crazy crypto-currency markets have become. It is also a reminder that, for all the focus on bitcoin, it is no longer the only game in town. Its market capitalisation now amounts to only about one-third of the crypto-market (see chart).

A new crypto-currency is born almost daily, often through an “initial coin offering” (ICO), a form of online crowdfunding. CoinMarketCap, a website, lists about 1,400 digital coins or tokens, including UFO Coin, PutinCoin, Sexcoin and InsaneCoin (worth $7m). Most are no more than curiosities, but by January 10th, around 40 had a market capitalisation of more than…Continue reading

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ApprovedBusinessBusiness and finance

As gyms hit peak season, the market does the splits

EVERY year, like clockwork, swathes of humanity go through the same routine. On December 26th and January 1st, as the fog of cheese, chocolate oranges and champagne lifts, remorse creeps in. Online searches for “get fit” and “lose weight” surge (see chart). Health clubs of all shapes and sizes stand ready to respond. “Intent typically takes seven to 14 days to turn into reality,” notes Humphrey Cobbold, chief executive of Pure Gym, Britain’s largest gym chain. So this week will be one of the busiest for the gym industry globally.

There will be other ripple effects, too. According to recent data from Cardlytics, which monitors spending in Britain, people spend 18% more in sports shops the week before joining a gym (compared with the week prior), and 16% more in speciality health shops. Spending on fashion items also increases around the time of joining a gym.

Many gym recruits will wear their new togs for an ordeal known as high-intensity interval training. In the basement of…Continue reading

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