News Archive

German business leaders fear U.S. tariffs after Merkel-Trump talks

BERLIN (Reuters) – German business leaders voiced disappointment on Saturday over the outcome of talks between Chancellor Angela Merkel and U.S. President Donald Trump, saying they feared he would impose tariffs on steel and aluminum imports.

U.S. President Donald Trump and Germany’s Chancellor Angela Merkel hold a joint news conference in the East Room of the White House in Washington, U.S., April 27, 2018. REUTERS/Brian Snyder

The United States imposed import tariffs of 25 percent on steel and 10 percent on aluminum in March, but it provided a temporary exemption until May 1 for the European Union. Trump will decide then whether to make the exemption permanent.

“I regret the fact that the chancellor’s visit to Washington produced no palpable progress on the contentious issues between Germany and the United States,” said Dieter Kempf, president of the BDI industry body.

Merkel and Trump aired differences over trade and NATO on Friday at a White House meeting where they tried to put on a show of warmth and friendship.

During a joint news conference, Trump lamented his country’s trade deficit with the EU. Merkel said any decision on whether to exempt the bloc from tariffs permanently was now in the president’s hand.

“The threatened tariffs remain a major burden on transatlantic relations,” added Kempf.

French President Emmanuel Macron also pressed Trump on trade during a three-day state visit in the same week as Merkel’s quick trip. Neither leader appeared to have made progress convincing Trump to make the exemptions permanent.

“Unfortunately, it doesn’t look like the EU will be exempted from the unfair U.S. tariffs,” said Volker Treier of the DIHK industry and commerce chambers.

Reporting Tom Koerkemeier and Gernot Heller; Writing by Joseph Nasr; Editing by Helen Popper

Article source:

China Fosun dials up tourism push with $1.74 billion Atlantis Sanya luxury resort

SANYA, China (Reuters) – China’s Fosun International Ltd (0656.HK) on Saturday launched its Atlantis Sanya luxury resort in a $1.74 billion bet that the sail-shaped development will become an icon in Hainan – China’s Hawaii – and a beacon to both domestic and foreign tourists.

FILE PHOTO: A company logo of Fosun International is seen at the Fosun Fair held alongside the annual general meeting of the Chinese conglomerate in Hong Kong, China May 28, 2015. REUTERS/Bobby Yip/File Photo

The conglomerate’s 11 billion yuan ($1.74 billion) investment in China’s southernmost province is in line with the central government’s desire to further boost tourism in Hainan, already popular among Chinese holidaymakers.

Fosun, co-founded by Chinese billionaire Guo Guangchang, has been one of the country’s most acquisitive overseas dealmakers.

But like peers including Dalian Wanda Group and HNA Group, Fosun – China’s largest privately held conglomerate – has faced increased scrutiny by Beijing for debt-fuelled, big-ticket foreign deals and is now pursuing a development path more closely aligned with Beijing’s priorities.

Tourism is viewed as key to China’s shift towards a more consumption-driven model of economic growth from an investment and export-led one. Beijing aims to raise the country’s tourism market revenue to 7 trillion yuan by 2020, from 5.3 trillion yuan last year.

Hainan, one of China’s top holiday destinations, has sought to internationalise its tourism sector since 2010 after winning approval from the central government to develop international tourism. But only 1.1 million out of 67 million visitors came from abroad in 2017.

Located on Haitang Bay, one of the major bays in Sanya and known for its 22-kilometre strip of white, sandy beaches, Atlantis Sanya was inspired by Dubai’s Atlantis, The Palm. The integrated resort offers hotel suites with views of underwater marine life, as well as a water park and a shopping mall.

The resort, owned by Fosun and managed by Kerzner International [KZL.UL], occupies an area of 540,000 square metres – equal to 66 soccer pitches – and has 1,314 guest rooms.

“Atlantis Sanya is not only a forerunner of the supply-side reform of the tourism industry, but is also becoming a new landmark of Hainan tourism,” Xu Zhenling, vice mayor of Sanya said at a news conference on Saturday ahead of the resort’s grand opening scheduled for the evening.

She said the resort will also raise Hainan’s profile overseas, as the island province – China’s largest economic development zone – seeks to further open up its economy and focus on developing modern tourism, services and high-technology industries.

Plans to build China’s first Atlantis resort in Hainan, the third in the world, were first unveiled in 2013.

The resort adds to a broad portfolio owned by Fosun Tourism and Culture Group, a key profit growth driver for the conglomerate, which also owns the French Club Med holiday company and a stake in Canadian theatrical production company Cirque du Soleil.

($1 = 6.3325 Chinese yuan renminbi)

Reporting by Shu Zhang and Bobby Yip in SANYA; Writing by Ryan Woo; Editing by Kenneth Maxwell

Article source:

U.S. judge blocks Fujifilm, Xerox merger temporarily

(Reuters) – Fujifilm Holdings Corp’s (4901.T) merger with U.S. firm Xerox Corp (XRX.N) was temporarily blocked on Friday following a court ruling, handing its activist investors a win after they sued to stop the deal.

A man is silhouetted in front of Fujifilm Holdings’ logo ahead of its news conference in Tokyo, Japan January 31, 2018. REUTERS/Kim Kyung-Hoon

The ruling reopened nominations to Xerox’s board on Friday after investor Darwin Deason filed a lawsuit against the company last month opposing the deal and asking to add his own nominees to the board.

The preliminary injunction came a day after the companies reopened deal talks on their $6.1-billion merger. They are discussing a higher price after Xerox, under pressure from top investors, asked to renegotiate the terms, Reuters had reported earlier.

Judge Barry Ostrager of the Supreme Court of the State of New York, County of New York, granted the injunctions, saying Xerox Chief Executive Officer Jeff Jacobson sought to conclude the deal even though he was advised to end negotiations.

“The facts abduced at the evidentiary hearing clearly show that Jacobson, having been told on Nov. 10 that the Board was actively seeking a new CEO to replace him, was hopelessly conflicted during his negotiation of a strategic acquisition transaction that would result in a combined entity of which he would be CEO,” the ruling said.

FILE PHOTO: The logo of Xerox company is seen on a building in Minsk, Belarus, March 21, 2016. REUTERS/Vasily Fedosenko/File Photo

The proposed merger is opposed by Deason and Carl Icahn, two of Xerox’s top shareholders, who have said the agreement dramatically undervalues Xerox.

Fujifilm said it would consider all options, including whether to appeal against the decision.

“We disagree with and are disappointed by the judge’s ruling,” the Japanese firm said in a statement.

“We strongly believe that all Xerox shareholders should be able to decide for themselves the operational, financial, and strategic merits of the transaction,” it said.

Xerox said it “will immediately appeal the court’s decision”.

“Xerox disagrees with the court’s ruling to enjoin the shareholder vote on our proposed combination with Fuji Xerox and to waive the advance notice bylaw,” the U.S. firm said in a statement. “The company strongly believes that its shareholders should be allowed to exercise their right to vote on the transaction and decide for themselves.”

In its statement, Xerox said, “The Xerox board undertook a rigorous process to reach its decision to approve the proposed transaction, including a comprehensive review of the company’s strategic and financial alternatives, as well as potential transaction structures in its negotiations with Fujifilm over a 10-month period.”

“Xerox’s board believes that a combination with Fuji Xerox is the best path forward to create value for the Company and all of its shareholders,” Xerox said.

Deason could not be reached immediately for comment.

In February, Deason asked a court to block the merger with Fujifilm Holdings, arguing the U.S. photocopier maker’s board had failed shareholders by approving a deal that undervalues the company.

Icahn and Deason, who own a combined 15 percent of the U.S. printer and copier maker, have called the deal structure “tortured” and “convoluted”.

Reporting by Liana Baker in NEW YORK, Abinaya Vijayaraghavan in BENGALURU, and Makiko Yamazaki and Osamu Tsukimori in TOKYO; Editing by Sandra Maler and Paul Tait

Article source:

Rising costs, inflation on radar as U.S. earnings season unfolds

NEW YORK (Reuters) – Fresh worries about rising costs and inflation face U.S. stock investors looking toward the coming week and the next leg of the first-quarter earnings period.

In the latest week, the busiest for first-quarter reports, several companies warned about or cited higher costs.

Caterpillar (CAT.N) said it was worried about higher prices for steel it needs for manufacturing. Alphabet (GOOGL.O) said margins were squeezed by rising costs related to marketing and acquiring streaming rights for YouTube’s new TV service, while Procter Gamble (PG.N) cited higher commodities and transportation costs.

Shares of all three companies declined even though their quarterly earnings were mostly strong.

Investors will be alert for more signs of rising costs next week, which brings results from several big consumer names like Kellogg (K.N) and market-cap leader Apple (AAPL.O). Also on tap will be a Federal Reserve meeting, the April jobs report and data on wages and inflation.

The first quarter was the first reporting period since U.S. President Donald Trump in March imposed a duty on imports of steel and aluminum. Prices for those and other commodities have risen sharply, with U.S. crude oil CLc1 up 7.5 percent in the first quarter.

“The wind was at the backs of these companies for a long time. Now it’s sort of turned. Input costs are up for most people,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

“How are companies able to handle that, and what are they able to do to offset it? Those are the kinds of things investors will look at.”

Higher input costs squeeze profits for companies. Compounding these worries, the yield on 10-year U.S. Treasuries US10Y=RR, a benchmark for rates, this week hit 3 percent for the first time in more than four years, requiring more cash to service company debt.

To be sure, estimated SP 500 profit growth for the first quarter has risen since the start of the reporting period and is now on track to rise 24.6 percent, the strongest year-over-year growth since the fourth quarter of 2010, according to Thomson Reuters data. That is thanks largely to changes in the U.S. tax law that slashed the corporate tax rate to 21 percent from 35 percent.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 27, 2018. REUTERS/Brendan McDermid

Some companies have had surprisingly strong results, like Facebook (FB.O), whose stock jumped 9.1 percent and helped support a rally in the market Thursday after its results.

“Worries around corporate earnings are to what degree you’re starting to see those input costs chip away at margins,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. So far, “earnings growth is being produced by well above-trend levels of revenue.” SP quarterly revenue growth is forecast at 8.1 percent.

But if cost and inflation worries undermine investor sentiment further, it could throw another obstacle in the U.S. stock market’s attempt to reclaim record highs.

The SP 500 .SPX is flat since April 13, when JPMorgan Chase (JPM.N) kicked off the earnings season, and the index is down about 7 percent from its Jan. 26 record high.

Among other consumer names expected to report next week are Clorox (CLX.N) and Kraft Heinz (KHC.O).

The consumer staples sector has the second-weakest estimated profit growth after real estate for the quarter, at 12.1 percent, based on Thomson Reuters data.

The SP consumer staples index .SPLRCS, down about 11.3 percent since Dec. 31, is the weakest sector in the SP 500 so far this year.

A government report Friday said U.S. labor costs increased more than expected in the first quarter, and wages and salaries recorded their biggest gain since 2007. This may draw attention to average hourly earnings and other data in next Friday’s U.S. jobs report.

“Companies are talking more about wages. I think they know (wage pressures) are around the corner,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis, Missouri.

Reporting by Caroline Valetkevitch; Editing by Alden Bentley and David Gregorio

Article source:

Alphabet’s Sergey Brin says company must assume greater responsibility

SAN FRANCISCO (Reuters) – Alphabet Inc (GOOGL.O) President Sergey Brin said on Friday that technology companies must take greater responsibility for the social impact of their work, his first comments following a year of heightened global awareness about misuse of digital services.

Sergey Brin, Google co-founder and founder of Bayshore Global Management attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland January 19, 2017. REUTERS/Ruben Sprich

Brin delivered the message through Alphabet’s annual shareholder letter, which he signed for the first time since 2014 instead of Chief Executive Larry Page.

“We’re in an era of great inspiration and possibility, but with this opportunity comes the need for tremendous thoughtfulness and responsibility as technology is deeply and irrevocably interwoven into our societies,” Brin wrote after quoting from Charles Dickens’ novel “A Tale of Two Cities” about the “the best of times” and “the worst of times.”

Alphabet’s primary unit, Google, has become a top target in Silicon Valley for regulators, authorities and critics in advertising and media. It has drawn global scrutiny for its dominance in online search advertising, its policies around user privacy and its role in helping politically consequential misinformation spread online.

Brin did not touch on those issues, nor did he specify any actions the company would take to recognize new responsibilities.

But Brin focused on artificial intelligence, computer systems that are able to learn without humans hard-coding them. Artificial intelligence enables self-driving cars and software that can identify diseases.

Brin said that Alphabet would tread with “serious thought and research” about societal consequences such as eliminating jobs and advancing biases as the company expands use of artificial intelligence.

“While I am optimistic about the potential to bring technology to bear on the greatest problems in the world, we are on a path that we must tread with deep responsibility, care and humility,” he said.

Alphabet separately announced Friday details regarding its annual shareholder meeting, which it scheduled for June 6. The company recommended shareholders reject each of the seven proposals brought by investors that call for it to provide more information around gender pay disparity, environmental impact policies, content moderation and other issues.

Reporting by Paresh Dave; Editing by Cynthia Osterman

Article source:

T-Mobile, Sprint finalizing merger terms: sources

(Reuters) – U.S. wireless carriers T-Mobile US Inc (TMUS.O) and Sprint Corp (S.N) are finalizing terms as they seek to sign a merger by Monday that could value Sprint at around $26 billion, people familiar with the matter said on Friday.

Pedestrians walk past a T-Mobile store in New York, U.S., April 27, 2018. REUTERS/Lucas Jackson

The combined company, with more than 127 million customers, would have added clout to challenge industry leaders Verizon Communications Inc (VZ.N) and ATT Inc (T.N) in the race to expand offerings in next-generation 5G wireless technology.

T-Mobile majority-owner Deutsche Telekom (DTEGn.DE) will own a little over 40 percent of the combined company, but will have voting control so it can consolidate the company on its books, the sources said. The sources requested anonymity to discuss the confidential negotiations.

  • Sprint, T-Mobile deal may cast shadow over tower companies

Sprint shares ended up 8.3 percent at $6.50 on the news first reported by Reuters, close to where the deal values the company based on the implied stock exchange ratio tied to T-Mobile’s shares. T-Mobile shares rose 0.6 percent to $64.52, giving the company a market capitalization of $55 billion.

Slideshow (3 Images)

T-Mobile and Sprint are aiming to announce the deal on Sunday, though the timing could change, the sources said. Talks between Deutsche Telekom and Japan’s SoftBank Group Corp (9984.T), Sprint’s controlling shareholder, could still end unsuccessfully at the last minute, the sources added.

Deutsche Telekom owns more than 63 percent of T-Mobile, while SoftBank owns 84.7 percent of Sprint.

Sprint, T-Mobile, Deutsche Telekom and SoftBank did not respond to requests for comment.

The companies came close to a merger deal in November before SoftBank Chief Executive Masayoshi Son pulled out of the talks at the last minute over valuation disagreements. Deutsche Telekom CEO Tim Hoettges left the door open by saying, “You always meet twice in life.”

Even though Sprint’s customer base has expanded under CEO Marcelo Claure, growth has been driven by discounting. Analysts have said that without T-Mobile, Sprint lacks the scale needed to invest in its network and to compete in a saturated market.

T-Mobile, under CEO John Legere, has fared better than Sprint, even if it remains a distant third to Verizon and ATT. It has scored sustained market share gains, as innovative offerings, improving network performance and good customer service attract new customers, according to Moody’s Investors Service Inc.

T-Mobile became the first major U.S. carrier to eliminate two-year contracts, a shift quickly embraced by consumers and copied by competitors. The company has also unsettled rivals with its unlimited data plans.

Regulatory hurdles could also block to the deal. Sprint and T-Mobile’s first round of merger talks ended in 2014 after U.S. President Barack Obama’s administration expressed antitrust concerns about it.

ATT agreed to acquire U.S. media company Time Warner Inc (TWX.N) in October 2016 for $85 billion. The U.S. Department of Justice has sued to block the deal over concerns about the companies’ pricing power in the media market. ATT and Time Warner are defending their proposed merger in court.

The U.S. government has also opened a probe into alleged coordination by ATT, Verizon Communications and a telecommunications standards organization to hinder consumers from easily switching wireless carriers, a person briefed on the matter said last week. This signals U.S. regulators’ growing concern about consumer prices.

Reporting by Greg Roumeliotis in New York; Editing by Nick Zieminski and Richard Chang

Article source:

Canada stock markets, abruptly shut by technical issue, to resume on Monday

TORONTO (Reuters) – Canada’s stock market, the world’s sixth-largest, abruptly shut down on Friday after an outage cut market participants off the main exchanges but will resume trading on Monday after resolving “internal technical issues,” the exchange operator said.

A darkened television studio is seen at the offices of TMX Group, which operates the Toronto Stock Exchange, after the company announced it was shutting down all markets for the rest of the day after experiencing issues with trading on all its exchange platforms in Toronto, Ontario, Canada April 27, 2018. REUTERS/Chris Helgren

TMX Group Ltd (X.TO), which operates the main Toronto Stock Exchange and smaller trading platforms around Canada, said in a series of Tweets that all users had been “equally impacted and are unable to connect to our exchanges” and it decided to shut down markets for the remainder of the day.

The operator said it had identified the issue, was working to fix it and trading would resume at its regular hour on Monday.

The outage was not due to “a hack,” a Toronto Stock Exchange spokesman said.

Shutdowns are rare occurrences because exchanges typically have back-up systems that quickly come online when there is a technical failure.

Slideshow (4 Images)

The TSX’ last major outage occurred nearly a decade ago, when a system fault linked to data feeds shut down trading for a full day in 2008, including on the small-cap TSX Venture Exchange.

“In true Canadian fashion, most traders declared ‘beer o’clock’ when they saw that the TMX was closed,” said Karl Schamotta, director of global product and market strategy at Cambridge Global Payments. “It certainly appears to be a technical glitch but there does not seem to be a lot of information about exactly what caused it.”

The TMX, which has been vying to host Saudi Aramco’s IPO overseas listing and exploring partnerships with bourses around the world, declined to elaborate on the nature of the technical issues.

The Ontario Securities Commission said it was in contact with the TMX, adding: “We continue to monitor and watch the situation closely.”

“The remarkable thing is that outages don’t happen more frequently. These are big and complicated systems. They trade a remarkable volume of shares,” said Bryan Routledge, a Carnegie Mellon University professor and financial technology expert.

Outages can inconvenience investors and also prove expensive for the exchanges themselves.

The U.S. Securities and Exchange Commission, for example, last month fined Intercontinental Exchange Inc’s (ICE.N) New York Stock Exchange and two affiliate exchanges a total of $14 million for multiple regulatory failures related to disruptive market events.

The U.S.-listed shares of several Canada-based firms continued trading even as their Toronto-listed securities were idled by the outage. Blackberry Ltd’s (BB.TO) NYSE-listed shares (BB.N), for example, were still trading hours after the company’s TSX-listed shares last traded at 1:38 p.m. EDT (1738 GMT).

“There should be failsafe backup systems that kick in right away,” said Norman Levine, managing director at CFA Portfolio Management. “Nobody needs to get in on a specific date but sometimes people need to get out. If you had to get out today it could have been an issue.” Toronto-based TMX first flagged the issue on Twitter shortly after 2 p.m. EDT, updating numerous times through the hour to say the issues were persisting and that an investigation was underway. The Toronto Stock Exchange’s SP/TSX Composite Index .GSPTSE, the main Canadian index, was up 0.2 percent at 15,688.93 before the issues began. The market operates between 9:30 a.m. and 4 p.m. EDT. “It is fatal for them (TMX) for today,” said Peggy Bowie, senior trader at Manulife Asset Management. “Orders have been shifted to other markets and my understanding is everybody will use the last board lot traded, regardless of where it has been traded, for the close.” The TMX said it would provide a complete list of closing prices later on Friday.

Closing prices for Friday’s truncated session will be determined by the final so-called “board lot” traded price, which refers to trades of at least a certain size. For stocks priced at least $1 a share, a board lot is 100 shares or more. Penny stock board lots have minimal sizes of 500 or 1,000 shares. TMX operates numerous Canadian exchanges, including the small-cap Venture Exchange, the TSX Alpha Exchange, as well as the Montreal Exchange, which trades derivatives, options and futures. TMX exchanges account for the bulk of Canadian securities trading.

Additional reporting by Fergal Smith, Matt Scuffham, Jim Finkle in Toronto and Saqib Ahmed, John McCrank in New York; Writing by Amran Abocar; Editing by Tom Brown and Dan Grebler

Article source:

Wall Street flat as earnings offset inflation jitters

NEW YORK (Reuters) – Wall Street closed nearly flat on Friday as inflation worries and struggling technology and energy stocks were offset by an advance in the consumer discretionary sector led by Amazon.

The SP 500 and the Nasdaq eked out small gains while the Dow Jones Industrial Average edged into negative territory by the end of the session.

All three major U.S. indexes were down for the week at the end of a choppy session, ending two-week winning streaks.

“There’s a ton of cross-currents going on in the market right now and consequently you get trading days like this where the market can’t seem to make up its mind what it wants to do,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Growth in the U.S. economy slowed in the first quarter as consumer spending grew at its weakest pace in nearly five years, according to the Commerce Department. But a jump in wages and lower tax rates suggested the setback could be temporary.

The U.S. Treasuries yield curve flattened as the growth data renewed bets that the Federal Reserve would continue hiking benchmark U.S. interest rates to keep inflation in check.

Wages and salaries increased at their fastest pace in 11 years, according to a report from the Labor Department, adding to inflation jitters.

As companies warn of higher costs eroding margins, markets have fluctuated as investors focus on guidance in the face of the strongest quarterly profit growth in seven years.

“You’ve got investors grappling with a new environment of volatility and how to handle that,” said Carlson. “That means a market like we have now, kind of manic-depressive, passive-aggressive.”

The Dow Jones Industrial Average fell 11.15 points, or 0.05 percent, to 24,311.19, the SP 500 gained 2.97 points, or 0.11 percent, to 2,669.91 and the Nasdaq Composite added 1.12 points, or 0.02 percent, to 7,119.80.

More than half of the SP 500 companies have reported first-quarter earnings already, 79.4 percent of which have beat consensus estimates. Analysts now expect first-quarter earnings growth of 24.6 percent, more than double expectations at the beginning of the year, according to Thomson Reuters data. led the SP 500 and the Nasdaq, helping them close in positive territory as the online retailer’s shares rose 3.6 percent on the heels of a blockbuster earnings report. Brokerage firms have begun to value the company in excess of $1 trillion.

Microsoft was up 1.7 percent as the technology bellwether beat first-quarter expectations and grew its cloud computing services.

Following a profit miss, Exxon Mobil weighed on the SP 500 and Dow Jones Industrial Average, falling 3.8 percent.

Sprint jumped 8.3 percent following a Reuters report that the wireless carrier and rival T-Mobile were finalizing terms of a merger.

Seven of the 11 major SP sectors were higher, with the defensive telecom and real estate sectors posting the biggest percentage gains, at 1.75 percent and 1.32 percent respectively.

The Exxon drop pulled the energy index down 1.2 percent, the biggest percentage loser.

Advancing issues outnumbered declining ones on the NYSE by a 1.42-to-1 ratio; on Nasdaq, a 1.07-to-1 ratio favored advancers.

The SP 500 posted 17 new 52-week highs and seven new lows; the Nasdaq Composite recorded 60 new highs and 57 new lows.

Volume on U.S. exchanges was 6.13 billion shares, compared to the 6.62 billion average over the last 20 trading days.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 27, 2018. REUTERS/Brendan McDermid

Reporting by Stephen Culp; Editing by Dan Grebler and James Dalgleish

Article source:

Passenger sues Southwest Airlines over fatal engine explosion

NEW YORK (Reuters) – A lawsuit against Southwest Airlines Co (LUV.N) has been filed by a passenger who was flying on last week’s flight 1380, in which an engine exploded and one person was killed.

Emergency personnel monitor the damaged engine of Southwest Airlines Flight 1380, which diverted to Philadelphia International Airport after the engine blew apart and shattered a window, killing one passenger, on a runway in Philadelphia, Pennsylvania, April 17, 2018. REUTERS/Mark Makela

The lawsuit claims that since the accident, the passenger, Lilia Chavez, has suffered post-traumatic stress disorder, anxiety, depression and other personal injuries.

The lawsuit was filed on Thursday in the U.S. District Court for the Eastern District of Pennsylvania.

Dallas-based Southwest has been under intense scrutiny in the days since a CFM56-7B engine on one of its Boeing 737-700 jets blew apart during an April 17 flight, shattering a plane window and flinging shrapnel.

Passenger Jennifer Riordan, one of 149 people aboard, was killed. The incident has raised concerns about the safety of similar engines.

Regulators at the National Transportation Safety Board (NTSB) are investigating.

“Our focus remains on working with the NTSB to support their investigation,” Southwest said on Friday. “We can’t comment on any pending litigation. The safety and security of our employees and customers is our highest priority at all times.”

Also named in the Thursday suit are France’s Safran S.A. (SAF.PA), General Electric Aviation (GE.N) and CFM International, the manufacturers behind the engine that broke apart. CFM is a transatlantic joint-venture co-owned by GE and Safran.

The suit claims that Southwest and the engine makers had “placed profits and business” over passenger safety and continued to operate the engine “even when there was confirmation that an unsafe condition existed.”

A Southwest flight in August 2016 with the same type of CFM56-7B engine made an emergency landing in Pensacola, Florida, after a fan blade separated and debris ripped a hole above the left wing.

After the incident, European regulators gave airlines nine months to check the engines. U.S. regulators were still were considering what to do after proposing some checks.

“Despite knowing of the dangerous condition of the subject aircraft’s engine, the defendants risked the lives of more than a hundred innocent passengers,” including Chavez, the filing reads.

A representative for GE did not return a request for comment. Safran could not immediately be reached.

The incident marked the first fatality on a U.S. commercial passenger airline since 2009.

Southwest shares closed up 0.4 percent. They have lost 18.2 percent year to date.

Reporting by Alana Wise, additional reporting by David Shepardson; editing by Rosalba O’Brien

Article source: