News Archive


UK PM May promises to protect planemakers’ supply chains in Brexit

LONDON (Reuters) – Prime Minister Theresa May will on Monday seek to reassure aviation bosses that her under-fire Brexit plan won’t disrupt their supply chains, and promise that the industry will flourish as Britain leaves the European Union.

Britain’s Prime Minister, Theresa May, appears on the BBC’s Andrew Marr Show in London, Britain July 15, 2018. Jeff Overs/BBC Handout via REUTERS – ATTENTION EDITORS – THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY – NO RESALES – NO ARCHIVES

May’s words, to be delivered at the Farnborough Airshow south west of London, come at a crunch time for the prime minister as pro-Brexit lawmakers in her party threaten revolt over an EU exit strategy they say leaves Britain subject to Brussels’ rule.

“We will take back control of our borders, our laws and our money. But we will do so in a way that is good for business and good for our future prosperity,” May will say, according to advance extracts of her speech.

Businesses have been getting increasingly frustrated about the lack of clarity over future trading relations less than nine months before Brexit day on March 29, 2019.

  • Planemakers plot course through trade, Brexit worries to air show deals

Airbus (AIR.PA), Europe’s biggest planemaker which employs around 15,000 people in Britain, warned earlier this month that if Britain left the EU without a deal – a so-called “hard” Brexit – it could result in production at its factories stopping and aircraft being grounded.

At Farnborough, aerospace firms will be setting out wares from luxury jets to lethal drones, hoping trade tensions will not deter airlines from buying planes even as geopolitical uncertainty allows them to sell more weapons.

Brexit is also likely to loom large in their conversations.

The prime minister will set out in detail how her Brexit proposal – which was agreed by cabinet earlier this month but then sparked a wave of ministerial resignations – will protect the supply chains of firms like Bombardier (BBDb.TO) and Rolls Royce (RR.L) as well as Airbus.

No specifics were provided in advance, but the government has proposed a customs arrangement that will see it closely aligned with the EU on regulations and standards under a so-called “common rule book”.

May will also announce 343 million pounds ($454 million) of investment for research and development projects, investment in electric aircraft technology, and reconfirm Britain is looking at how it can remain part of EU bodies such as the European Aviation Safety Agency.

“By working closely together, government and industry have ensured we remain at the forefront of civil aviation and that our air power is second to none,” May will say. 

“Today I want us to build on that, and ensure not only that we retain our prominence, but that in an increasingly competitive industry we make the most of the opportunities that lie ahead.”

The aerospace sector directly employs around 120,000 people in the United Kingdom, and supports a further 118,000 jobs indirectly, according to trade body ADS Group. It generated almost 28 billion pounds of exports in 2016.

($1 = 0.7557 pounds)

Reporting by William James; Editing by Mark Potter

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Thyssen and Kone owners held merger talks on elevator ops: paper

FRANKFURT (Reuters) – Large shareholders of Thyssenkrupp (TKAG.DE) and Kone (KNEBV.HE) have held talks on a potential merger of the elevator businesses of the two companies, according to a German daily.

FILE PHOTO: Thyssenkrupp’s logo is seen close to the elevator test tower in Rottweil, Germany, September 25, 2017. REUTERS/Michaela Rehle/File Photo

Handelsblatt reported on Sunday that the Alfried Krupp foundation, which owns 21 percent of Thyssen, and Kone’s largest shareholder Antti Herlin have held talks about a deal. The first conversations took place as early as two years ago, but the proposal was rebuffed by Thyssen’s then-chief executive Heinrich Hiesinger, the paper said.

The foundation said it had told Kone that questions regarding the elevator unit should be referred to Thyssenkrupp. It said it had informed Thyssen’s executive board about the talks, and that it was up to the company to make decisions or respond to queries.

Thyssenkrupp declined to comment, while Kone and Antti Herlin were not immediately available for comment.

Earlier this month, the Alfried Krupp foundation, which has two seats on Thyssen’s supervisory board, said that a break-up of the industrial conglomerate would not happen, following similar remarks from the company’s chairman.

Chairman Ulrich Lehner had said that there were no plans to divest the group’s elevator unit, its most profitable business, which some investors and analysts have said would rid Thyssenkrupp’s share price of a large conglomerate discount.

By contrast, activist investor Cevian, Thyssen’s second-largest shareholder with a 18-percent stake, has been vocal in calling for a strategic review of all of Thyssenkrupp’s business areas, saying each might thrive better in a different set-up.

Speculation about Thyssenkrupp’s future intensified following the recent resignation of Hiesinger, who cited a lack of shareholder support, and who has been replaced for the interim by Chief Financial Officer Guido Kerkhoff.

Hiesinger’s resignation came only days after he clinched an historic steel joint venture deal with Tata Steel (TISC.NS) and followed months of shareholder pressure over the company’s strategy.

Reporting by Arno Schuetze and Jussi Rosendahl; Editing by Catherine Evans

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Boeing concerned about tariff talk, but no business impact yet

LONDON (Reuters) – Boeing Co (BA.N) is concerned about the impact of possible trade tariffs on the cost of running its supply chain, but has not yet seen any impact from U.S.-Chinese trade tensions on its business, Chief Executive Dennis Muilenburg said on Sunday.

FILE PHOTO: President, Chairman and CEO of The Boeing Company Dennis Muilenburg speaks at the “What’s Next?” conference in Chicago, Illinois, U.S., October 4, 2016. REUTERS/Jim Young/File Photo

“The discussion right now is proposed tariffs, ongoing discussions. So in terms of actual implementation and things that are impacting us, we haven’t seen a material impact yet,” Muilenburg told reporters.

“We are very much engaged in the discussion. We are concerned that it could affect supply chain costs. But note that supply chains are flowing in both directions between (these) countries as we both support existing fleets as well as build new airplanes.”

Washington recently imposed 25-percent tariffs on $34 billion of Chinese imports, and Beijing responded with tariffs on the same amount of U.S. exports to China..

The U.S. administration then raised the stakes, threatening 10-percent tariffs on $200 billion of Chinese goods, prompting China to warn it would hit back.

“Rhetoric about potential penalty actions are a concern to us,” Muilenburg said.

Speaking ahead of the Farnborough Airshow, Muilenburg, who has struck up good relations with U.S. President Donald Trump, said both the United States and China understood the importance of aerospace to their economies.

China needs planes to boost its transport capacity and the United States relies on the sector for thousands of valuable export jobs, he said.

“Aerospace thrives on global trade, free and open trade,” Muilenburg said, adding the sector drove economic benefit globally.

Besides industry concerns about trade tariffs, and in some cases disruption from Britain’s exit from the European Union, planemakers are also on the alert for any disruption stemming from tightness in global supply chains due to record output.

“It’s on all of our radars everyday,” Muilenburg said.

MID-MARKET JET

On Boeing’s plans for a potential new passenger plane, Muilenburg said the U.S. company would not take a decision on whether to launch the potential middle-of-the-market design until 2019.

He stressed it would not let the entry to service slip beyond a target of 2025, even though it is taking the time needed to hone the business case for the novel type of jet.

“We want a 2025 airplane,” Boeing Commercial Airplanes CEO Kevin McAllister said, adding it would be more economic to run than other aircraft in its category.

Boeing is looking at developing a plane to try to stimulate new routes in a gap between its benchmark 737 single-aisle model and the smallest version of its wide-body 787 jetliner.

Analysts say the deadline is crucial because it represents the sweet spot for replacements of elderly 757 and 767 fleets.

Any sign of delay would allow European rival Airbus (AIR.PA) to argue that airlines would do better to pick an improved version of its hot-selling A321neo plane, covering many of the same missions.

Boeing executives said the market would be better served by a tailor-made aircraft with superior economics. Airbus says its A321neo already accounts for a large slice of that sector.

Flanked by many of Boeing’s top executives as the company prepares to play up innovation at the July 16-22 air show, Muilenburg said he saw a future for supersonic and hypersonic technology but that it was too early to talk about the timing.

Boeing executives highlighted the value of its investments in Britain after a trade row between Boeing and Canada’s Bombardier threatened jobs in Northern Ireland, where Prime Minister Theresa May depends on support for her majority.

Britain is said to be nearing a decision to award a new contract for early-warning planes to Boeing, prompting a backlash from Airbus and others wanting a formal competition.

Additional reporting by Mike Stone; Editing by Mark Potter and Jane Merriman

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Planemakers plot course through trade, Brexit worries to air show deals

FARNBOROUGH, England (Reuters) – Aerospace firms are setting out wares from luxury jets to lethal drones at back-to-back British air shows this week, hoping trade tensions will not deter airlines from buying jetliners even as geopolitical uncertainty allows them to sell more weapons.

FILE PHOTO: An Airbus A350 aircraft flies in formation with Britain’s Red Arrows flying display team at the Farnborough International Airshow in Farnborough, Britain July 15, 2016. REUTERS/Peter Nicholls/File Photo

The quintessentially English atmosphere of the Royal International Air Tattoo, where straw-hatted VIPs watch fighters thunder over picturesque Cotswolds villages, gives way on Monday to the Farnborough Airshow, where the hard-nose business deals in the $800 billion aerospace and defense sector will be done.

Trade tensions between the United States and both China and Europe, disputes over the consequences of Britain’s exit from the European Union and an increase in global protectionist rhetoric have barely dented a prolonged industry boom.

“The overall environment will reflect industry health, despite the dark clouds of Brexit and other global trade setbacks in the background,” said analyst Richard Aboulafia of Teal Group.

“In short, we’ll see more of what we’ve seen for years: aviation remaining a strangely protected and happy corner of a turbulent world.”

Boeing (BA.N) is expected to confirm demand for air transport is rising after Airbus (AIR.PA) lifted forecasts last week, citing strong economic growth in emerging markets and the need to replace older planes in Western markets.

The bullish outlook was underscored ahead of the show by forecasters Flightglobal Ascend.

The two giants will add to record orders for benchmark narrowbody jets, whose waiting lists underpin their near-record share prices, while seeking a recovery in sales of bigger jets.

After a lull, Boeing will be looking for a boost to its largest twinjet, the future 777X. Sources said recently it is in talks for an eye-catching deal with Saudi Arabia.Airbus will hope to end uncertainty over AirAsia’s support for its A330neo jet after a showdown on prices. That could also involve a deal for smaller planes, though doubts have been expressed over financial commitments to Airbus.

Farnborough is the first such event since Airbus and Boeing shook up the industry by agreeing to absorb key commercial programs of smaller rivals Canada’s Bombardier and Brazil’s Embraer as they prepare for future competition from China.

  • Airbus near deal to sell A350s to Taiwan’s StarLux: sources
  • Airbus in talks for new Viva Aerobus jet order: sources

The result should be a fierce contest for sales in the 100-150-seat sector even before Boeing closes its Embraer deal.

A new airline, Moxy, is expected to confirm a large order for the rebranded Airbus A220, the former Bombardier CSeries.

Airbus, Boeing and SP500 in 2018: reut.rs/2LlnTyG

INDUSTRIAL POKER

The event is also expected to provide new evidence of strong demand for freight planes as e-commerce drives up shippers’ profits despite global trade tensions.

Analyst predictions for total commercial orders and commitments vary from last year’s 900 to about half that.

While high fuel prices make efficient new planes attractive, they hurt the bottom line of buyers, delaying some decisions.

“We are not blind: there are things that need to remain on watch,” the head of major engine-maker CFM said on Saturday.

Farnborough will also be an opportunity for aerospace firms to plot next moves on civil and defense for decades to come.

The July 16-22 show is not only about order headlines but also about sending signals to investors, keeping competitors guessing and keeping potential buyers interested.

Boeing will want to maintain interest in a potential new mid-market plane, while giving itself until next year to decide whether to launch the new 220-270-seat jet.

While it is further ahead in pre-development than at the same stage on earlier programs, it must convince airlines it can be ready in 2025, the deadline for many fleet overhauls.

Airbus may talk up its possible new A321XLR, designed to address a shortfall in transatlantic performance of its longest-range single-aisle jet and targeted at U.S. majors.

The aircraft, with an improved take-off weight of 100 tonnes and 4,500 nautical miles range, has already had an unannounced commercial launch in a bid to head off Boeing’s proposed new jet from 2021, industry sources said.

U.S. sources doubt it will do everything Airbus claims.

Both planemakers are likely to deepen a push into high-margin services, announcing maintenance and operational deals in competition with airlines and parts providers. It’s part of a tug of war for profits between planemakers and their partners.

Suppliers will be trying to gauge how far the jetmakers are prepared to go in buying up parts of their supply chain. And many in Europe will be discussing how to prepare for a possible ‘hard Brexit’ or a disorderly UK exit form the European Union.

Sensitive UK choices over international partnerships are also expected to loom large in the defense side of the show.

The UK government will set out a combat air strategy with potential repercussions for defense suppliers around the world.

It could ignite efforts to develop a successor to the four-nation Eurofighter but is expected to leave open whether Britain would seek to enter a project already underway between France and Germany, or risk a repeat of costly procurement splits.

For now, Sweden is shaping up as the most likely partner and South Korea, Japan and Turkey or Gulf arms-buying countries like Saudi Arabia could be drawn in, arms analyst Francis Tusa said.

“It is a game of industrial poker,” he told Reuters.

Additional reoporting by Victoria Bryan, Sarah Young, Mike Stone; Editing by Mark Potter

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Airbus near deal to sell A350s to Taiwan’s StarLux: sources

FARNBOROUGH, England (Reuters) – Airbus (AIR.PA) is close to a deal to sell A350 long-haul jets to Taiwanese start-up StarLux Airlines, people familiar with the matter said on Sunday.

The logo of StarLux Airlines is printed on a backdrop at a launching news conference, in Taipei, Taiwan May 8, 2018. REUTERS/Tyrone Siu

The planned airline has selected the Airbus A320neo family to start medium-haul operations, and was reported earlier this year to be looking at 14 larger wide-body Airbus or Boeing (BA.N) jets.

Airbus, which is expected to unveil several orders at this week’s Farnborough Airshow, declined to comment.

The airline, founded with the aim of challenging Asian network carriers by former EVA Airways (2618.TW) chairman Chang Kuo-wei, was not available for comment.

If confirmed, a deal for 14 A350s would be worth about $4 billion at list prices.

Reporting by Tim Hepher, Editing by Eric M. Johnson

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/8UIEd7sQ824/airbus-near-deal-to-sell-a350s-to-taiwans-starlux-sources-idUSKBN1K50U8

German transport ministry confirms official hearing on Opel emissions

FRANKFURT (Reuters) – The German transport ministry confirmed on Sunday that the country’s federal motor vehicle authority (KBA) is conducting an official hearing into the emissions technology used in three models of car made by Opel.

The Opel development centre is pictured in Ruesselsheim, Germany July 5, 2018. REUTERS/Ralph Orlowski

Weekly Bild am Sonntag reported on Sunday that the KBA had found reliable evidence that exhaust gas treatment in some models of diesel car made by PSA Group’s Opel division shuts down during driving.

“Before the outcome of this hearing, nothing conclusive can be said about the inadmissibility of the defeat device,” a spokeswoman for the ministry said.

Some 60,000 Opel cars worldwide of model lines Cascada, Insignia and Zafira equipped with the latest Euro-6 emissions standard are affected by the issue, 10,000 of which are in Germany where Opel is based, the newspaper reported.

The affected models’ emissions of nitrogen oxides (NOx) exceeded statutory limits more than tenfold, it said.

An Opel spokesman said in an email responding to the Bild am Sonntag report that the company had “already in December 2015 recognized the potential for improvement and started a technology initiative to raise transparency, credibility and efficiency for the benefit of customers”.

Reporting by Arno Schuetze; Editing by Catherine Evans

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/ZNtFnaB9sMY/german-transport-ministry-confirms-official-hearing-on-opel-emissions-idUSKBN1K50RS

Top House Republican urges Trump, China’s Xi to meet on trade: Fox

WASHINGTON (Reuters) – The top Republican lawmaker overseeing trade policies on Sunday called for a meeting between U.S. President Donald Trump and Chinese Premier Xi Jinping to ease trade tensions, warning that U.S. tariffs would likely dampen U.S. economic growth this year.

Chairman of the House Ways and Means Committee Kevin Brady (R-TX) holds up a sample tax form as he speaks during a media briefing after the House Republican conference on Capitol Hill in Washington, U.S., April 17, 2018. REUTERS/Joshua Roberts

House Ways and Means Committee Chairman Kevin Brady said U.S. tax cuts had helped drive stronger U.S. growth but trade tariffs on steel and aluminum, and against Chinese imports, could now undermine that impact.

“At some point this year it will show up in the economy and that is what we are trying to avoid,” Brady told Fox News in an interview. “I am confident this president, meeting face to face with President Xi, can level that playing field, can create a new set of trade rules for both of our countries.”

Reporting by Lesley Wroughton; Editing by Phil Berlowitz

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Embraer pushes E2 jet’s low maintenance, fuel costs amid Airbus rivalry

FARNBOROUGH, England (Reuters) – Brazilian planemaker Embraer (EMBR3.SA) is pushing the low maintenance costs and fuel burn of its E2 jet as it battles tougher competition from the rival A220, now backed by Airbus (AIR.PA), executives said on Sunday.

FILE PHOTO: An Embraer E190-E2 is seen during its unveil in Sao Jose dos Campos, Brazil, February 25, 2016. REUTERS/Nacho Doce/File Photo

“I’m hopeful that we’ll be able to present a good showing on Tuesday,” John Slattery, President and CEO Embraer Commercial Aviation, told Reuters onboard its E190-E2 jet, looking ahead to possible order announcements at this week’s Farnborough air show.

Boeing (BA.N) earlier this month struck a deal for a controlling stake in the commercial aircraft arm of Embraer under a new $4.75 billion joint venture, coming after Airbus completed a deal to take control of rival Bombardier’s (BBDb.TO) Cseries program.

Embraer was dealt a blow last week when JetBlue opted for the A220-300, formerly known as the Cseries, over the Embraer model.

Speaking separately ahead of the air show, Bombardier Commercial Aircraft President Fred Cromer said the Airbus deal allowed the former Cseries to reach its full potential.

“It’s the best aircraft in that segment. It’s a clean-sheet design, it’s not a re-engine of an existing platform,” he said, adding its benefit lay in low operating costs and fuel savings.

The E190-E2, which Embraer is showing at Farnborough with a shark painted on its nose, is the first of three new-generation aircraft in Embraer’s commercial jet line-up with new wings and new Pratt Whitney (UTX.N) engines aimed at improving fuel efficiency.

“The combination of knowledge gained from the first generation and the new technology is what makes us unique,” Rodrigo Silva e Souza, vice president marketing, Embraer Commercial Aviation, said, highlighting fuel burn and longer maintenance intervals as the main savings for operators.

The smallest version of the E2, the E175-E2 has been slowed due to a scope clause in U.S. pilots’ contracts that bars it from the U.S. regional aviation market due to its weight.

Slattery said Embraer was still planning entry into service towards the end of 2021, adding he saw opportunities outside of North America, such as replacing turboprops being flown in south-east Asia and CIS countries.

Bombardier’s Cromer said he didn’t expect the scope clause to be changed any time soon, adding that benefited its CRJ airplane.

Meanwhile, U.S. carriers are still interested in the current version of the E175, Slattery said, adding that jet would continue to be produced as long as it’s required.

Reporting by Victoria Bryan and Eric Johnson; Editing by Mark Potter

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U.S. oil boom delivers surprise for traders

LONDON/NEW YORK (Reuters) – The world’s biggest oil traders are counting hefty losses after a surprise doubling in the price discount of U.S. light crude to benchmark Brent WTCLc1-LCOc1 in just a month, as surging U.S production upends the market.

FILE PHOTO: A pump jack is seen at sunset near Midland, Texas, U.S., on May 3, 2017. Picture taken May 3, 2017. REUTERS/Ernest Scheyder/File Photo

Trading desks of oil major BP (BP.L) and merchants Vitol [VITOLV.UL], Gunvor [GGL.UL] and Trafigura [TRAFG.UL] have recorded losses in the tens of millions of dollars each as a result of the “whipsaw” move when the spread reached more than $11.50 a barrel in June, insiders familiar with their performance told Reuters.

The sources did not give precise figures for the losses, but they said they were enough for Gunvor and BP to fire at least one trader each.

The companies declined to comment, and none of them publish details of their individual trading books.

It highlights the challenges of trading in WTI futures CLc1, the benchmark for U.S. crude, when U.S. pipeline and storage infrastructure struggles to keep pace with surging shale output, that has lifted the United States above Saudi Arabia to become the world’s second biggest crude producer behind Russia.

“As the exporter of U.S. crude, traders are naturally long WTI and hedge their bets by shorting Brent. When the spreads widen so wildly, you lose money,” said a top executive with one of the four trading firms.

The discount of WTI to Brent hit $11.57 a barrel on June 6, the widest in more than three years, as U.S. output surged to record highs and surpassed pipeline capacity as traders rushed to export. The discount had been about $5 just a month before.

Betting on the price spread, a popular trade in oil markets, is based on predictions of price differences between European and U.S. market fundamentals.

For a graphic on WTI to Brent Spread, click reut.rs/2Lf0iQ0

“WIDOWMAKER”

The jump in U.S. output, now almost 11 million barrels per day (bpd) from below 5 million bpd a decade ago, has upended the spread. Until 2010, U.S. crude mostly traded at a premium to Brent. But the growing availability of U.S. crude has meant that it has almost always been at a discount since then.

However, it is the big, sudden moves that tend to claim trade casualties, sometimes earning the moniker “widowmaker”.

Since the June spike, the spread has narrowed sharply again. The shrinking discount was helped by a rise in the price of WTI due to an unexpected outage at the Syncrude oil sands site in Canada, which can produce up to 360,000 bpd.

Due to the Canadian outage, inventories last week at the Cushing delivery point for U.S. crude futures fell to their lowest since December 2014, U.S. data showed.

Volatility in the spread has been just one of several trading hazards that emerged in the first quarter of 2018.

Traders have also had to pay heavy premiums to exit U.S. storage leases as the oil price structure flipped to “backwardation”, when near-term prices are higher than those for later delivery, making it unprofitable to store crude.

Climbing U.S. output has put strains on the pipeline network, particularly in the Permian basin in Texas which has been the biggest contributor to the production surge.

A bottleneck that hit U.S. crude for delivery in Midland, Texas WTC-WTM caught BP off guard and led to losses when the discount to WTI shifted sharply during April to June, according to four market sources and one source close to BP.

In late April, the discount was close to $6 a barrel before widening to as much as $13 on May 4. This was followed by a sharp bounce back to around $5 in the second half of May followed by a similar see-saw move in June.

Three BP traders took the heat for losses related to the Midland rollercoaster. The source close to BP said one was sacked and two others were reshuffled internally.

Reporting by Julia Payne, Devika Krishna Kumar and Dmitry Zhdannikov; Additional reporting by Liz Hampton and Gary McWilliams in Houston; Editing by Edmund Blair

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