Delta Airlines' decision to buy an oil refinery has caught the imagination. It seems to make a lot of sense and if the numbers actually come true it will look like a stroke of genius.
Delta says that it could get savings of $300 million a year by cutting out the middle man and refining its own jet fuel, all for the cost of one medium-size new airliner. It sounds like a no-brainer so I put the question to a CEO of an Asia airline: did he think that individually or as a group that Asian airlines would get together to look at a similar arrangement.
It does make some sense. According to Cathay Pacific Airways, fuel costs accounted for 41.5% of total operating costs last year. That's a lot higher than the 30% average for global airlines. The reason why Cathay and other Asian arilines have proportionally higher fuel bills is that they are mainly long-haul operators, and the fuel component of a long-haul flight can be twice as high as a short-haul flight - 60% fuel cost on long-haul versus 30% on short haul.
Fuel costs were the main reason by long-haul budget airline AirAsia X to cut back its services. Its short-haul flights are still performing strongly.
But buying a refinery is not on anyone's agenda among Asian airlines. Not yet at least. But what is on the radar relating to fuel costs is fracking - the process of extracting gas and oil through hydraulic pressure fracturing of rocks. It has revolutionized the gas industry in the U.S. Gas prices are at a 10-year low, prompting oil-energy users such as power companies to look at switching to gas-fired plants, a relatively easy transtition.
As oil users switch to gas, airlines are hoping there could be a knock-on effect to the price of oil as demand starts to fall. It may be a long shot at this stage, but in the airline industry it's one of the very few bright spots on an otherwise bleak outlook for controlling one of the biggest costs in the business.
Hong Kong (CNN) – Over the weekend, China announced it was doubling the trading band of the yuan against the U.S. dollar.
The move was widely lauded as a step toward liberalizing the Chinese exchange rate and moving the yuan toward an internationally traded currency like the U.S. dollar, yen and euro.
“This underlines China's commitment to rebalance its economy toward domestic consumption and allow market forces to play a greater role in determining the level of the exchange rate,” said Christine Lagarde, managing director of the International Monetary Fund, in a statement.
(Image credit: Getty Images)
Hong Kong (CNN) -– If you’re a glass “half full” or a glass “half empty” kind of person, you’ll see what you want to see in China’s latest inflation number. The hard number: March CPI came in at 3.6%.
On the positive side, March is the second month in a row that inflation was below 4%. Last month, China’s Premier Wen Jiabao announced a 4% inflation target for the country. FULL POST
(Image credit: Getty Images)
(CNN) – Samsung is predicting a record boost to its profits for the start of 2012, thanks to burgeoning smartphone sales.
The South Korean technology giant expects an operating profit of $5.15 billion for the first three months of the year - almost double the figure it reached a year ago, according to its press release. FULL POST
(Image credit: AFP/Getty Images)
(CNN) – India will overtake China as the world’s biggest economy by 2050, a new report says.
This follows China’s rise to the top spot in 2020 at the expense of the United States, according to the 2012 Wealth Report by Knight Frank and Citi Private Bank.
The survey was published as India hosts the BRICS summit of emerging economies, which also includes China, Russia, Brazil and South Africa. FULL POST
Hong Kong (CNN) - Dismissed by many Western sceptics, the ancient philosophy of Feng Shui plays a key role in shaping life in Hong Kong.
CNN's Richard Quest reports on the theory's impact on architecture, business and lifestyles in the territory.
Hong Kong (CNN) - The men’s magazine FHM has come under fire again after a saucy cover of Filipina actress Bela Padilla was claimed as racist.
The cover shows fair-skinned Padilla coming forward of a group of dark-skinned Filipina models with the caption, “Bela Padilla stepping out of the shadows.”
Padilla is not the first case of Asian FHM covers launching controversies. In December last year, Pakistani actress Veena Malik (shown above) appeared on the Indian edition of FHM, wearing nothing but the tattoo bearing the initials ISI, the acronym for the Pakistan’s inter-services Intelligence agency.
Malik said that that FHM doctored the cover to show her without clothes. FHM India said Malik was aware of the conditions and approved the photographs.
The local FHM publisher in the Philippines, Summit Media, dumped the March cover in favor of a less controversial Padilla shot after the company previewed the racy cover on its Facebook page last Saturday, triggering heated reaction on social media and the magazine’s website.
Hong Kong, China – After a white knight failed to come to its financial rescue Monday, Japan’s biggest memory chip maker – Elpida – filed for bankruptcy protection.
The company's been running from a $5.5 billion specter of debt, but now lays claim to the unenviable title of being the biggest Japanese manufacturer to file for bankruptcy protection since World War II.
Hong Kong (CNN) – It’s the stuff of urban myth that if a billion Chinese all jumped off a chair at the same time, the earth would shift off its axis.
Now the World Bank is considering just such a question in the context of China’s breakneck growth: Can a billion Chinese become middle class without disrupting the world, fouling the environment and tearing apart the fabric of their own society?
The World Bank report “China 2030: Building a Modern, Harmonious, and Creative High-Income Society,” released on Monday, says China has the potential to become a modern and creative high-income society – but it won’t be easy.
Hong Kong, China (CNN) – With a Greek debt deal successfully brokered on Tuesday, the world’s economic skies seem a bit less likely to fall. That new $173 billion bailout for Greece on the brink of bankruptcy is now staunching a bit of the hemorrhage of confidence in the continent.
As for the “stuff” that actually flies through those economic skies? The volume of that over our heads, homes and offices is, in fact, falling.
And Hong Kong is one of the best places to take a measure of it all.
This Asian hub of commerce boasts the busiest air cargo airport in the world. And air cargo volumes are an excellent thermometer to gauge the health of global trade.
According to Hong Kong airport data, 3.9 million tons of cargo passed through this Chinese territory in 2011. But for all that volume, the huge number actually revealed a drop of nearly 5% year on year.
Just as Hong Kong is the world’s number one cargo hub, Cathay Pacific Airways is the world’s number one air cargo carrier. In 2011, Hong’s Kong’s flagship airline transported more than 1.6 million tons of cargo around the world. But that represented a drop as well – of nearly 9% year on year.
The reason for this season of slumps is found not in Asia but halfway around the world: in the United States and Europe.
The U.S. is still clawing back from its Great Recession.
Europe, which buys 30% of all of China’s exports, is still focused on its highly-indebted nations. And for the next several months and years, Spain, Portugal, Ireland, Italy– and yes Greece- will still be the word.
It’s a decline in demand from all these places – for cheaper Asian-assembled electronics and your Wal-Mart apparel – that led to a slump in air cargo traffic last year.
And the 2012 skies don’t look much brighter.
The International Air Transport Association, more famously known as IATA, forecasts absolutely no growth for global air cargo traffic this year.
Cathay Pacific’s CEO John Slosar predicts his company’s air cargo business might not take off again until the second half. That’s not great news since the company relies on cargo for 30% of its annual profit.
And some oil analysts foretell of $150 per barrel ifIrantensions boil over into conflict.
All this may be conspiring for a collision course with catastrophe. But reroutes do exist.
To offset losses, airlines have successfully booked more people into their seats. Cathay reported nearly 12% more passengers this past January, year on year.
That’s on top of rising ticket prices as any flier – frequent or not – can attest.
And just this past December, Cathay announced it would delay the purchase of two new Boeing 747-8F freighters until 2013.
The bottom line for the air cargo industry? Despite short-term fixes, its long-term recovery will depend on the pace of improvement in the U.S. and Europe.
Until then, better profits from global air cargo will hang on a wing and a prayer.
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