Key jobs data reflects resilient US economy

Gulf Daily News Saturday, 8th November 2014
Jet Airways’ gains hit $11.3 million
n Industry and Commerce Minister Dr Hassan Fakhro received
Huma Fakhar, who is currently preparing a study to assess
developments of the free trade agreement with the US in the
framework of Bahrain Trade Capacity Development Project in
collaboration with UNDP.
NEW DELHI: Struggling Jet Airways, one
of India’s biggest carriers, reported yesterday a quarterly profit for the first time in
two years, boosted by a one-off gain from
the sale of a frequent-flyer scheme.
The Indian carrier, in which fast-growing Gulf airline Etihad Airways has bought
a 24 per cent stake, remained in the red
when the sale proceeds were stripped out,
but the airline still improved its operating
performance markedly.
Jet announced a 698 million rupee
($11.3m) net profit for the second financial
quarter to September in contrast with a 8.9
billion rupee net loss in the same year-ago
“I am extremely pleased by the progress that is evident across several areas,”
Jet Airways chief executive Cramer Ball,
known as a turnaround specialist, said.
The publicly traded airline, which last
reported a quarterly profit in 2012, has
been seeking to pilot its way back to profitability in India’s congested skies.
While India’s passenger aviation market
is one of the fastest-growing globally,
cut-throat fare wars and too many carriers
mean most of the country’s airlines are
losing money, analysts say.
Stripping out the 3.05 billion rupee
earnings from the sale of its frequent
flyer scheme, Jet lost 2.35bn rupees, said
the statement. But this was still a vast
improvement from its year-earlier loss.
“This is in keeping with our three-year
turnaround plan,” Ball said.
Key jobs data reflects
resilient US economy
growth increased at a fairly
brisk clip in October and the
unemployment rate fell to a
fresh six-year low of 5.8 per
cent, underscoring the economy’s resilience in the face
of slowing global demand.
Despite the strengthening
labour market picture, wage
growth remained tepid, suggesting the Federal Reserve
would be in no hurry to start
lifting interest rates.
Employers added 214,000
new jobs to their payrolls last
month, the Labour Department
said yesterday. The unemployment rate fell from 5.9pc, even
as more people entered the
labour force, a sign of strength
in the jobs market.
Data for August and
September were revised to
show 31,000 more jobs created
than previously reported.
“Today’s jobs report confirms that the US remains
the bright spot in a global
economic picture filling with
clouds,” said Michael Griffin,
managing director at CEB in
Arlington, Virginia.
Economists polled by Reuters had
forecast 231,000 new jobs last month
and for the unemployment rate to hold
Monthly job growth has exceeded
200,000 for nine straight months, the
longest stretch since 1994, sufficient
strength to keep the economy on a
higher growth path after it expanded at
a 3.5pc pace in the third quarter.
The Fed last month struck a fairly upbeat tune on the jobs picture as
n A worker unloads grocery goods in Washington ... data boost
it ended its bond buying programme,
dropping its characterisation of labour
market slack as “significant” and replacing it with “gradually diminishing.”
However, sturdy job gains on their
own will probably not be enough to
convince the US central bank to start raising interest rates before the second half of
2015, given a still low level of inflation.
Wage growth is the missing piece of
the jobs recovery and without significant increases, most economists say the
Fed will be in no rush to lift benchmark
lending rates that it has kept near zero
since December 2008.
The employment report showed that
average hourly earnings rose only three
cents last month, leaving the year-onyear change at 2pc, the range it’s been
in for the last few years. But other
data have begun to show wage growth
picking up.
Details of the October employment
report were fairly upbeat.
The labour force participation rate and
the ranks of the long-term unemployed
both improved. These metrics are on
Fed chair Janet Yellen’s so-called dashboard and are being watched for clues
on the timing of the first rate increase.
The participation rate, or the share
of working-age Americans who are
employed or at least looking for a job,
increased by one-tenth of percentage
point to 62.8pc, bouncing back after two
straight months of declines.
The employment-to-population ratio
increased to 59.2, the highest level since
July 2009.
Swiss Re net profit surges to $1.2bn
ZURICH: A stronger than expected profit rise at Swiss Re
boosted hopes yesterday that
the reinsurance group will join
the slew of insurers sharply
raising their dividend payouts.
Swiss Re’s third-quarter net
profit of $1.2 billion, reflecting lower disaster payouts compared with the prior-year period. Analysts had expected a net
profit of $891 million
Major European insurers are
offering shareholders a bigger
share of their earnings in dividends this year, as a low level
of payouts for damage claims
has allowed them to build up
large cash piles.
Swiss Re’s rival Munich Re
for instance has been returning
surplus capital to shareholders
by buying back its own shares
and raising its dividend.
Swiss Re chief financial
officer David Cole said it was
too early to comment on a special dividend on its 2014 results
and the issue would be addressed
in February, when the reinsurer
reports full-year earnings.
“Our shareholders should
expect us to approach this with
the same discipline and the
same philosophy that we have
demonstrated over the last several years,” Cole said yesterday
after Swiss Re posted a 14 per
cent rise in net profit in the
third quarter.
However, investors saw
potential for an increased payout after the results.
“Solvency levels remain at
record high and together with
another very solid cash-generating quarter, dividend prospects have further improved,”
said Vontobel analyst Stefan
Schuermann. “Barring major
losses in the fourth quarter we
clearly expect a special dividend
to be paid for the full-year 2014.”
Swiss Re said it sees reinsurance prices stabilising in some
areas as the sector tries to ride
out competition from institutional investors such as pension
funds venturing into the market.
It expects to book an aftertax loss of less than $200m
in the fourth quarter after
the sale of US life insurance
arm Aurora National Life
Assurance Company.
IAG plans
LONDON: British Airways owner IAG laid out plans to pay a
maiden dividend, coming of age
three years after it was created in
a merger between BA and Spain’s
International Airlines Group
said it was confident of increasing
profit by more than 10 per cent
a year between 2016 and 2020,
on top of significant growth this
year and next. As a result it said it
anticipated announcing next year
that it would start paying shareholders.
“We remain confident in meeting our 2015 financial targets
which we see as the trigger to
introducing a dividend,” it said
ahead of an investor day yesterday.
BA and Iberia sealed an $8
billion merger in 2011, a move
which helped both stem huge losses following the worst industry
downturn in decades. Years of
tough restructuring followed –
with thousands of job cuts and
salary and capacity reductions.
Before the 2011 tie-up, neither
BA nor Iberia had paid a dividend
since 2008.
The dividend due to be introduced next year would be based
on a payout ratio of 25pc of the
company’s underlying profit after
tax, IAG said.
The restructuring plus the
introduction of new, more fuel
efficient planes has put IAG
on a strong footing, leaving its
European rivals fighting to keep
up in the face of competition from
short-haul budget airlines and
long-haul Gulf carriers.
It has outperformed Air FranceKLM and Lufthansa, which have
a history of stormy relations with
their powerful unions and have
been hit by strikes.
Also helping IAG’s profits are
the healthier economic growth in
the British and US economies – to
which it has more exposure due to
its strong trans-Atlantic business
– compared with the French and
German economies on which the
rival airlines are more reliant.
And while Lufthansa and Air
France try to expand their discount operations and reduce costs
to compete with budget carriers
like Ryanair and easyJet, IAG
has already been benefiting from
its acquisition of Spanish no-frills
airline Vueling in 2013.
Looking to the 2016 to 2020
period, IAG said it would target average earnings per share
growth of over 10pc a year and
an operating profit margin of 10
to 14pc.