Month: February 2022

The budget carrier posted quarterly loss of over $107 million

Europe’s low-cost airline, Ryanair, reported missing its target of 11 million passengers in December, instead carrying 9.5 million, due to “media hysteria” over the Covid-19 Omicron variant.

The company’s loss for the final three months of 2021 amounted to €96 million ($107 million), although this was a significant improvement over the €321 million ($359 million) loss in the same period in 2020.

Customer numbers, at 31.1 million, were more than three times higher, and revenues of €1.47 billion ($1.6 billion) were 331% up on 2020 levels.

“The sudden emergence of the Omicron variant and the media hysteria it generated in December … forced European governments to reimpose travel restrictions in the run-up to Christmas,” Ryanair chief executive Michael O’Leary explained. That had “significantly weakened” peak last-minute bookings and fares over Christmas and new year, cutting December traffic and load factors, he added.

READ MORE: WHO predicts end of pandemic in Europe

The company has warned of a “hugely uncertain” financial outlook, saying that the first three months of 2022 would require “significant price stimulation at lower prices” to attract customers.

The airline also said it hopes the roll-out of booster jabs and evidence about Omicron being less virulent than other variants will lead to easing of restrictions and restoration of consumer confidence ahead of Easter. Ryanair sees capacity this summer topping pre-pandemic levels.

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Doha is exploring opportunities for long-term gas supply contracts with the bloc instead of spot market agreements

The world’s second-biggest producer of liquified natural gas (LNG), Qatar, has reportedly requested that the European Union restrict the reselling of its gas outside the bloc, if it is to provide emergency shipments in the event of a disruption of deliveries from Russia.

“Qatar’s supply wouldn’t be conditional on requests. But the issues need to be dealt with to ensure long-term and short-term solutions for Europe’s LNG crisis,” unnamed sources briefed on the talks said, as quoted by Reuters.

The news comes amid the continued speculation fueled by the US that Russia is preparing to invade Ukraine. In the event of a military conflict, Moscow has been threatened with severe economic sanctions that may target the country’s energy exports.

Russian gas supplies account for nearly 40% of Europe’s consumption. Any interruption will inevitably exacerbate the existing energy crunch amid the rapid recovery of major economies after the pandemic-related slowdown.

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Although Qatari producers lack enough spare gas, Doha has pledged to divert some volume from its Asian consumers with mediation from Washington. However, sources told Reuters that no such request has so far been made.

Qatar also wants the EU to conclude a 2018 investigation into the country’s long-term contracts, which the European Commission had said might be inhibiting the free flow of gas in Europe and its single gas market.

“That will ensure the EU can enter into long-term contracts with Qatar and others, instead of more costly spot contracts or searching for short-term solutions during a crisis,” the source said, as quoted by the agency.

Doha is also asking for guarantees that EU member states will divert any surplus LNG only within the bloc.

“If not implemented, emergency shipments to the EU could be resold as spot shipments for a profit out of the EU, basically prolonging the energy shortage in the EU,” the source said.

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BlackRock and Goldman Sachs holding on to Russian investments, expecting diplomatic solution to crisis

The latest hysteria around the uneasy relationship between Russia and Ukraine has reportedly failed to scare global investors away from Russia’s debt. International investment majors like Goldman Sachs, BlackRock, Fidelity and Pimco are betting a diplomatic solution could boost interest earnings.

Yields on Russian government and corporate bonds have reportedly surged since the beginning of the year, with the spread between Treasuries and 10-year local-currency sovereign debt rising to 7.8 percentage points at the peak.

The total return on a local-currency 10-year sovereign bond was 6.3% in 2020 and 6% in 2021, versus 1.92% and 0.9% for the equivalent US Treasury note.

Meanwhile, the Russian ruble has depreciated 3.5% against the greenback so far this year and was trading at its weakest level in more than a year last week, before recovering moderately. The Central Bank of Russia suspended its planned foreign-exchange purchases on Monday in an attempt to support the domestic currency. The regulator has hiked interest rates seven times since March 2021, to tame the surging inflation due to the pandemic.

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Russian bonds reportedly make up 7% of a popular emerging-market debt index run by JPMorgan Chase & Co. that is used as a benchmark by many fund managers.

“Russian assets could have a big rally back,” Abrdn PLC’s Viktor Szabo, who continues to hold some ruble-denominated Russian sovereign bonds, said, as quoted by WSJ. “It’s not so easy for investors to fully walk away.”

Russia’s current-account surplus increased by 3.5 times in 2021 through November, boosted by rallying crude prices. In January, the country’s international reserves rose to an all-time high of nearly $640 billion. Russia also enjoys a relatively small debt load, at 17% debt-to-GDP. Those factors keep luring investors, who see the underlying financial strength as very promising.

Some of the world’s biggest investors are still sticking to positions in Russian debt.

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“My base case is that there likely won’t be a full invasion. We’re in a situation where you still have this frozen conflict, since 2014,” Uday Patnaik, head of emerging-market debt at Legal & General Investment Management, who bought Russian sovereign bonds maturing in 2042 last week, told media.

A complete ban on trading Russia’s government debt was included in the debated list of potential sanctions that Washington and its allies have pledged to introduce against Moscow in case of a military assault in Ukraine. Russian authorities have rejected the idea of war with Ukraine, accusing Western officials of provocative rhetoric that just ramps up tensions.

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Digital currency project Diem raised security and reliability concerns

After months of speculation and regulatory opposition, Meta, formerly known as Facebook, said this week it was shutting down its digital currency project, Diem. The company said the underlying technology had been bought by a crypto-focused bank for $182 million.

“Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down,” Meta said.

The initiative made progress, but “it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead,” Diem Networks’ US CEO Stuart Levey explained.

Silvergate bought development, deployment and operations infrastructure, as well as tools for running a blockchain-based payment network for payments and cross-border wire transfers.

The Diem Association (initially known as Libra) was launched by Facebook in 2019 with the support of a number of partners including Visa and Mastercard, as well as tech companies Lyft and Spotify. The social media giant had been hoping that getting into crypto payments would provide it with a fresh income stream, but questions about its involvement led to several of the founding partners pulling out.

READ MORE: ‘Crypto winter’ is coming – analysts

The organization was renamed as Diem at the end of 2020 in a bid to show the currency would be independent from Facebook. However, those measures did not convince regulators, with some arguing that the network effects available to Meta through its social network could increase its circulation and undermine the fiat currencies of weak economies.

“The combination of a stablecoin issuer or wallet provider and a commercial firm could lead to an excessive concentration of economic power,” US regulators said in a 2021 report.

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Daimler restores corporate name Mercedes-Benz for the first time in nearly 25 years

From February 1, German car manufacturer Daimler AG is formally changing its name to Mercedes-Benz Group AG. The rebranding, announced last week, is the latest in a string of structural changes for the automaker.

Last year, the company announced that its truck and bus business would be spun off as Daimler Truck AG. The new company is now listed separately on the Frankfurt Stock Exchange. The move, approved by Daimler AG stockholders in October, resulted in creating two independent companies, each with their own management and chairman.

The step is expected to help the company to unlock shareholder value for both divisions and tap into the full potential of its business in a zero-emissions, software-driven future.

“We have a real chance to raise the multiple,” Daimler CEO Ola Kaellenius said last week, providing no details on a specific target valuation for the company, which is currently worth just under €77 billion ($87 billion).

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Last year, the company reportedly sold over 2.4 million cars, CUVs, SUVs, and vans despite the supply crunch that led to major chip shortages across the industry. Moreover, Daimler reportedly set sales records for HEVs, PHEVS, and EVs, as well as high-end Maybach, AMG, and G-Class vehicles.

The automaker is now seeking to change its car line-up to one powered entirely by electric motors by 2030, and gradually shift toward a direct sales model to better control pricing, and increase net revenue per vehicle as well as from digital services. It is also planning to spend some $68 billion on its transformation between 2022 and 2026.

As part of the new strategy, the producer will keep developing electric vehicles, vans, SUVs, luxury cars, and self-driving cars. Meanwhile, Daimler is expected to focus on zero-emission drivelines for trucks and buses, and integration of autonomous driving technology into its heavy-duty vehicles.

The Daimler-Benz alliance traces its origins to Carl Benz, who founded Benz & Cie in 1883, and to Gottlieb Daimler and Wilhelm Maybach, who launched Daimler Motoren Gesellschaft in 1890. Daimler first used the Mercedes name in 1902, and is named for the daughter of Daimler dealer Emil Jellinek. The first Mercedes-Benz branded vehicles were produced in 1926, shortly after the merger of the two companies into Daimler-Benz.

In 1998, Daimler-Benz AG merged with the Chrysler Corporation to become DaimlerChrysler. When Daimler sold Chrysler to Cerberus in 2007, the corporation changed its name to Daimler AG.

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