Surprise profit launches Sears shares
Copyright by The Associated Press
9:40 AM CDT, May 22, 2009
http://www.chicagotribune.com/business/chi-sears-earnings-credit-line-may21,0,5227146.story
Shares of Sears Holdings Corp. are soaring, a day after the retailer surprised investors by posting a first-quarter profit.
Sears shares are up $8.38, or 17 percent, to $58.57 in morning trading Friday.
The parent of Sears and Kmart stores announced late Thursday that its first-quarter profit was $26 million, or 21 cents per share. That was a marked improvement from the year before, when the retailer led by financier Edward Lampert lost $56 million, or 43 cents per share.
Excluding one-time items the company earned $47 million, or 38 cents per share, for the three months that ended May 3. Analysts said that the adjusted per share profit was less than 38 cents, but was still sharply better than the forecast loss of 88 cents per share.
Barclays analyst Robert Drbul told investors the company's results were "significantly better," and he boosted his 2009 and 2010 earnings per share estimates.
Also on Thursday Sears Holdings worked out a deal with banks to extend its closely watched credit facility by two years, but starting in March the line will be worth only $2.4 billion instead of the $4 billion currently, the company said.
The announcement came after the market closed Thursday as Sears reported a first-quarter profit as it cut advertising and payroll costs amid declining sales.
Investors and vendors had been keeping a close eye on Sears' $4 billion credit agreement, due to expire in March 24, 2010.
On Thursday Sears amended the agreement, increasing the credit line to $4.1 billion through March 24. After that, a $2.4 billion credit line will be available through June 2012, the company said.
Sears said the new deal provides it "more than adequate liquidity for standby letters of credit and working capital needs." It also has a so-called accordion feature that allows Sears to use existing collateral to obtain another $1 billion after March 24.
The banks leading the deal include Banc of America Securities LLC, Wells Fargo Retail Finance and GE Capital Markets.
Tribune reporter Sandra M. Jones contributed to this story.
Friday, May 22, 2009
22 Percent And Out Of Ideas
22 Percent And Out Of Ideas
By Harold Meyerson
Copyright by The Washington Post
Friday, May 22, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052103759.html
The dizzying downward spiral of the Republican Party continues apace. Yesterday, the Pew Research Center released a survey showing that the percentage of Americans who answer to the name Republican is down to 22 percent -- about as low as a party can go in a two-party system.
Also yesterday, former vice president Dick Cheney delivered a prolonged defense of "enhanced interrogation techniques" even as President Obama, speaking alongside the Declaration of Independence and the Constitution at the National Archives, repudiated torture and spelled out the toll that the torture tactics used by the Bush-Cheney administration inflicted on America's standing in the world.
Cheney has become the GOP's Banquo's ghost -- a constant reminder (and, unlike poor Banquo, defender) of past crimes who just won't leave the dinner party.
But even when Republicans speak of the future these days, they sound like the voice of the past. They turn for new ideas to Newt Gingrich, whose biggest idea was to close down the federal government to force Bill Clinton to slash Medicare payments. They turn to Cheney for guidance on national defense and to Rush Limbaugh to set the standards for party orthodoxy.
They hold anti-tax rallies to protest an administration that has cut taxes for the vast majority of Americans. They see a bill that would rein in credit card companies as an opportunity to slip in an amendment that would allow Americans to bring concealed and loaded guns into national parks. Their national committee considers a resolution expressing the sense of the body that the Democrats should rename themselves the "Democrat Socialist Party."
They offer no solutions for the nation's problems but are chock-full of solutions for issues (such as the lack of concealed weapons in Yellowstone) that aren't problems. They play with renaming the Democrats while they're the ones with the identity crisis.
But there's a reason they enumerate old themes and gravitate to the most peripheral ones imaginable -- a reason that's neither old nor peripheral. The economic crisis has plunged their worldview into crisis, if not negated it altogether. What's more, several leading conservative economists and thinkers have acknowledged as much, though none has really suggested a plausible alternative course.
Some of this rethinking has taken the form of mea culpas from key economic figures of the Reagan age. Alan Greenspan confessed to a congressional committee late last year that his basic assumptions about the self-corrective tendencies and fundamental rationality of both the economic system and its leading players (the banks) were wrong. Former General Electric CEO Jack Welch, whose elevation of shareholder value over other corporate goals has been hugely influential since he began preaching that gospel in the early 1980s, has now said that shareholder value is just one of many goals that a business should pursue.
The most comprehensive repudiation by a conservative thinker of the tenets of laissez-faire has come from federal judge (and prolific off-bench author) Richard Posner, who has been a seminal influence on the conservative law-and-economics movement that has moved judges to consider economic efficiency in their rulings. In his new book, "A Failure of Capitalism," Posner argues that the current downturn, unlike any since the Great Depression, reveals that capitalism is not self-correcting, that market forces cannot in themselves produce a recovery for a crisis this systemic, and that what we are experiencing is, well, a failure of capitalism.
All this leaves Posner in a bit of a bind, since he remains hesitant to recommend the full range of governmental activism that, by his own lights, is all that's left to rebuild the economy because the markets cannot do it themselves. His writing, like that of other conservative intellectuals such as the New York Times' David Brooks, has a kind of Emily Litella "never mind" quality to it now: repudiating many of the conservative verities that they themselves advanced over the past several decades while refraining from actually embracing the kinds of remedies that the Obama administration is advancing.
Since the end of World War II, American conservatism defined itself above all by its anti-communism and, since the late '70s, by its support of a radical, laissez-faire capitalism. Win one, lose one, but the cumulative consequence of the collapse of the Soviet Union and, in more attenuated fashion, of the Wall Street banks is that the Republican Party isn't left with much of a defining doctrine. Packing heat in Yosemite and waterboarding in Guantanamo are not only stunningly dumb ideas, they're also no way to build a party.
meyersonh@washpost.com
By Harold Meyerson
Copyright by The Washington Post
Friday, May 22, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052103759.html
The dizzying downward spiral of the Republican Party continues apace. Yesterday, the Pew Research Center released a survey showing that the percentage of Americans who answer to the name Republican is down to 22 percent -- about as low as a party can go in a two-party system.
Also yesterday, former vice president Dick Cheney delivered a prolonged defense of "enhanced interrogation techniques" even as President Obama, speaking alongside the Declaration of Independence and the Constitution at the National Archives, repudiated torture and spelled out the toll that the torture tactics used by the Bush-Cheney administration inflicted on America's standing in the world.
Cheney has become the GOP's Banquo's ghost -- a constant reminder (and, unlike poor Banquo, defender) of past crimes who just won't leave the dinner party.
But even when Republicans speak of the future these days, they sound like the voice of the past. They turn for new ideas to Newt Gingrich, whose biggest idea was to close down the federal government to force Bill Clinton to slash Medicare payments. They turn to Cheney for guidance on national defense and to Rush Limbaugh to set the standards for party orthodoxy.
They hold anti-tax rallies to protest an administration that has cut taxes for the vast majority of Americans. They see a bill that would rein in credit card companies as an opportunity to slip in an amendment that would allow Americans to bring concealed and loaded guns into national parks. Their national committee considers a resolution expressing the sense of the body that the Democrats should rename themselves the "Democrat Socialist Party."
They offer no solutions for the nation's problems but are chock-full of solutions for issues (such as the lack of concealed weapons in Yellowstone) that aren't problems. They play with renaming the Democrats while they're the ones with the identity crisis.
But there's a reason they enumerate old themes and gravitate to the most peripheral ones imaginable -- a reason that's neither old nor peripheral. The economic crisis has plunged their worldview into crisis, if not negated it altogether. What's more, several leading conservative economists and thinkers have acknowledged as much, though none has really suggested a plausible alternative course.
Some of this rethinking has taken the form of mea culpas from key economic figures of the Reagan age. Alan Greenspan confessed to a congressional committee late last year that his basic assumptions about the self-corrective tendencies and fundamental rationality of both the economic system and its leading players (the banks) were wrong. Former General Electric CEO Jack Welch, whose elevation of shareholder value over other corporate goals has been hugely influential since he began preaching that gospel in the early 1980s, has now said that shareholder value is just one of many goals that a business should pursue.
The most comprehensive repudiation by a conservative thinker of the tenets of laissez-faire has come from federal judge (and prolific off-bench author) Richard Posner, who has been a seminal influence on the conservative law-and-economics movement that has moved judges to consider economic efficiency in their rulings. In his new book, "A Failure of Capitalism," Posner argues that the current downturn, unlike any since the Great Depression, reveals that capitalism is not self-correcting, that market forces cannot in themselves produce a recovery for a crisis this systemic, and that what we are experiencing is, well, a failure of capitalism.
All this leaves Posner in a bit of a bind, since he remains hesitant to recommend the full range of governmental activism that, by his own lights, is all that's left to rebuild the economy because the markets cannot do it themselves. His writing, like that of other conservative intellectuals such as the New York Times' David Brooks, has a kind of Emily Litella "never mind" quality to it now: repudiating many of the conservative verities that they themselves advanced over the past several decades while refraining from actually embracing the kinds of remedies that the Obama administration is advancing.
Since the end of World War II, American conservatism defined itself above all by its anti-communism and, since the late '70s, by its support of a radical, laissez-faire capitalism. Win one, lose one, but the cumulative consequence of the collapse of the Soviet Union and, in more attenuated fashion, of the Wall Street banks is that the Republican Party isn't left with much of a defining doctrine. Packing heat in Yosemite and waterboarding in Guantanamo are not only stunningly dumb ideas, they're also no way to build a party.
meyersonh@washpost.com
Obama Set to Approve New Rules for Credit Cards
Obama Set to Approve New Rules for Credit Cards
By Nancy Trejos and Debbi Wilgoren
Copyright by The Washington Post
Friday, May 22, 2009; 10:10 AM
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/22/AR2009052200430.html?hpid=topnews
President Obama this afternoon will sign into law a bill that prevents credit card companies from raising interest rates arbitrarily and limits the fees they can charge, meeting his own deadline of enacting the bill before Memorial Day.
The new law offers "needed reforms that provide American consumers with the strong and reliable protections they deserve," the White House said in a statement.
Both the House and Senate passed the credit card legislation by wide margins and with broad bipartisan support. The House later agreed to send the Senate version of the bill, which contained the more stringent reforms, to the White House for Obama's signature.
The Senate legislation, authored by Banking Committee Chairman Christopher J. Dodd (D-Conn.), prohibits card companies from raising interest rates on existing balances unless the borrower is at least 60 days late paying a bill. If the cardholder pays on time for the following six months, the company will have to restore the original rate.
On cards with more than one interest rate, issuers will have to apply payments first to the debts with the highest rates. Before increasing rates on future purchases, the card company will have to give cardholders 45 days' notice.
Card executives have said the changes would prevent them from properly distinguishing between risky and non-risky borrowers and force them to charge everyone higher rates and annual fees. But supporters of the legislation dispute those claims.
Obama and his top economic aides pushed hard for the bill's passage as it was debated in the Senate last week, with the president making the legislation a focal point of the town hall meeting he held May 14 in Albuquerque.
"These practices, they've only grown worse in the middle of this recession, when people can afford them least," Obama told the crowd of about 2,000 people, after being introduced by a resident who is struggling with credit card debt. "You should not have to worry that when you sign up for a credit card, you are signing away all your rights."
The bill will take effect nine months after it is signed. The new law provides much stronger protections than credit card regulations passed by the Federal Reserve in December. Those regulations are scheduled to go into effect in July 2010.
By Nancy Trejos and Debbi Wilgoren
Copyright by The Washington Post
Friday, May 22, 2009; 10:10 AM
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/22/AR2009052200430.html?hpid=topnews
President Obama this afternoon will sign into law a bill that prevents credit card companies from raising interest rates arbitrarily and limits the fees they can charge, meeting his own deadline of enacting the bill before Memorial Day.
The new law offers "needed reforms that provide American consumers with the strong and reliable protections they deserve," the White House said in a statement.
Both the House and Senate passed the credit card legislation by wide margins and with broad bipartisan support. The House later agreed to send the Senate version of the bill, which contained the more stringent reforms, to the White House for Obama's signature.
The Senate legislation, authored by Banking Committee Chairman Christopher J. Dodd (D-Conn.), prohibits card companies from raising interest rates on existing balances unless the borrower is at least 60 days late paying a bill. If the cardholder pays on time for the following six months, the company will have to restore the original rate.
On cards with more than one interest rate, issuers will have to apply payments first to the debts with the highest rates. Before increasing rates on future purchases, the card company will have to give cardholders 45 days' notice.
Card executives have said the changes would prevent them from properly distinguishing between risky and non-risky borrowers and force them to charge everyone higher rates and annual fees. But supporters of the legislation dispute those claims.
Obama and his top economic aides pushed hard for the bill's passage as it was debated in the Senate last week, with the president making the legislation a focal point of the town hall meeting he held May 14 in Albuquerque.
"These practices, they've only grown worse in the middle of this recession, when people can afford them least," Obama told the crowd of about 2,000 people, after being introduced by a resident who is struggling with credit card debt. "You should not have to worry that when you sign up for a credit card, you are signing away all your rights."
The bill will take effect nine months after it is signed. The new law provides much stronger protections than credit card regulations passed by the Federal Reserve in December. Those regulations are scheduled to go into effect in July 2010.
Washington Post Editorial: The Bounds of War/New York Times Editorial: The Real Path to Security/Cheney Lost to Bush
Washington Post Editorial: The Bounds of War - President Obama sketches a legal framework that's been absent since the Sept. 11 attacks.
Copyright by The Washington Post
Friday, May 22, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052103483.html
"WE ARE indeed at war with al-Qaeda and its affiliates. We do need to update our institutions to deal with this threat. But we must do so with an abiding confidence in the rule of law and due process, in checks and balances and accountability."
This lucid declaration by President Obama yesterday perfectly outlined the challenges facing a nation battling a violent, nonstate enemy. By framing the matter in the context of war, Mr. Obama correctly acknowledged the limitations of traditional law enforcement tools and venues to contain and bring to justice those who would harm the United States. Yet he repudiated what he called the Bush administration's "ad hoc," the-ends-justify-the-means approach and spoke eloquently about the need to craft legitimate and effective legal structures that give meaningful rights to the accused while protecting the country's national security interests.
Mr. Obama spoke in greatest detail about his plans for dealing with the 240 detainees held at the U.S. Naval Base at Guantanamo Bay, Cuba. Batting aside the fear-mongering of lawmakers who this week withheld funds to close the detention center, Mr. Obama made clear that any detainees brought to the United States would be held in the highest-security prisons -- from which no inmate has ever escaped. Those who can be prosecuted in federal court, Mr. Obama said, will be tried there. Those who are accused of violating the laws of war will be tried before military commissions that Mr. Obama has vowed to revamp with extra legal protections for defendants. In perhaps the most controversial proposal -- but one that the president is right to consider -- Mr. Obama said that he would work with Congress to craft a legal regime to provide for the detention of suspects who are deemed too dangerous for release but against whom there is not enough admissible evidence to bring formal charges.
Mr. Obama is criticized for both sides of his equation. From the left, some deny that the battle against al-Qaeda should be considered in the context of the law of war. From the right, critics suggest that to construct fair rules or demand accountability in the conduct of that war will hamstring the nation's defense. The Bush administration understood the first half but stubbornly refused to work with Congress to establish the necessary institutions; the result was years of false starts, immoral behavior and terrible blows to America's reputation. Former vice president Richard B. Cheney's rebuttal speech yesterday not only failed to acknowledge his administration's failures but falsely posited the national security choice as one between a "comprehensive strategy [that] has worked" and a view that Sept. 11, 2001, "was a one-off event . . . not sufficient to justify a sustained wartime effort."
Mr. Obama's wisdom lies in accepting the reality of war but insisting that it can be fought in fidelity to U.S. values. Yesterday, he spelled out the crucial difference. "I want to be very clear that our goal is to construct a legitimate legal framework for the remaining Guantanamo detainees that cannot be transferred," he said. "Our goal is not to avoid a legitimate legal framework."
New York Times Editorial: The Real Path to Security
Copyright by The New York Times
Published: May 21, 2009
http://www.nytimes.com/2009/05/22/opinion/22fri1.html?_r=1&th&emc=th
We listened to President Obama’s speech on terrorism and detention policy with relief and optimism.
For seven years, President George W. Bush tried to frighten the American public — and successfully cowed Congress — with bullying and disinformation. On Thursday, President Obama told the truth. It was a moment of political courage that will make this country safer.
Mr. Obama was exactly right when he said Americans do not have to choose between security and their democratic values. By denying those values, the Bush team fed the furies of anti-Americanism, strengthened our enemies and made the nation more vulnerable.
Such clarity of thought is unlikely to end the partisan posturing. It certainly didn’t quiet former Vice President Dick Cheney, who was fear-mongering in full force on Thursday. But we hope that lawmakers who voted this week against closing the prison in Guantánamo Bay, Cuba — starting with the Senate majority leader, Harry Reid — were listening closely.
We do not agree with every aspect of Mr. Obama’s solutions, especially his opposition to the court-ordered release of photographs of prisoner abuse and the positions he has taken on state secrets. But the course he outlined was generally based on due process and democratic governance.
Mr. Obama flatly rejected Mr. Cheney’s claims that torture saved “hundreds of thousands” of lives and reminded Americans that those abuses were ineffective, recruited more terrorists than they brought to justice, destroyed the nation’s image and will make it much harder to try some of the most dangerous terrorists.
Affirming that a detention policy has to be based on law and subject to Congressional and judicial scrutiny, Mr. Obama voiced the profound truth that eluded Mr. Bush, “In our constitutional system, prolonged detention should not be the decision of any one man.”
Mr. Obama said he had no intention of releasing any dangerous terrorist but added that some detainees must be tried and jailed in this country — a message to Democratic lawmakers who first demanded the closing of Guantánamo and now take the ludicrous position that no inmate can set foot in the continental United States, even in irons and headed for a maximum-security prison.
Mr. Obama sensibly grouped the prisoners into five categories, starting with those who can and should be tried in civilian criminal courts on terrorism charges.
There are Guantánamo prisoners who violated the laws of war and should be tried in military tribunals, but not the existing ones created by Congress in 2006. That law should not be tinkered with. It should be scrapped and those prisoners should tried under military law.
Some prisoners can be transferred to other governments’ custody and some, who committed no crimes, should be released. And, yes, some should be allowed to live in the United States.
The most troubling category is the one for prisoners — like Abu Zubaydah, an alleged top member of Al Qaeda — who seem to be highly dangerous terrorists but were tortured. It’s hard to imagine how they can be tried on that evidence. Some can be tried on other terrorism charges, like Ahmed Ghailani, whom the administration is properly moving to a civilian federal court to face charges related to the 1998 embassy bombings in Africa.
Mr. Obama vowed to deal with the rest of the prisoners under the law and the Constitution, but forthrightly admitted he wasn’t sure how. There are proposals to create a new “preventive detention” regime that we are not convinced is needed.
As he moves forward, we hope Mr. Obama bears in mind a point he made on Thursday. The problem is not the crime of terrorism, which the judicial system can normally handle. It is the way Mr. Bush undermined that system — and this country’s reputation and security — with his policies of arbitrary detention and abuse.
Cheney Lost to Bush
By DAVID BROOKS
Copyright by The New York Times
Published: May 21, 2009
http://www.nytimes.com/2009/05/22/opinion/22brooks.html?th&emc=th
President Obama and Dick Cheney conspired on Thursday to propagate a myth. The myth is that we lived through an eight-year period of Bush-Cheney anti-terror policy and now we have entered a very different period called the Obama-Biden anti-terror policy. As both Obama and Cheney understand, this is a completely bogus distortion of history.
The reality is that after Sept. 11, we entered a two- or three-year period of what you might call Bush-Cheney policy. The country was blindsided. Intelligence officials knew next to nothing about the threats arrayed against them. The Bush administration tried just about everything to discover and prevent threats. The Bush people believed they were operating within the law but they did things most of us now find morally offensive and counterproductive.
The Bush-Cheney period lasted maybe three years. For Dick Cheney those might be the golden years. For Democrats, it is surely the period they want to forever hang around the necks of the Republican Party. But that period ended long ago.
By 2005, what you might call the Bush-Rice-Hadley era had begun. Gradually, in fits and starts, a series of Bush administration officials — including Condoleezza Rice, Stephen Hadley, Jack Goldsmith and John Bellinger — tried to rein in the excesses of the Bush-Cheney period. They didn’t win every fight, and they were prodded by court decisions and public outrage, but the gradual evolution of policy was clear.
From 2003 onward, people like Bellinger and Goldsmith were fighting against legal judgments that allowed enhanced interrogation techniques. By 2006, Rice and Hadley brought Khalid Shaikh Mohammed in from a secret foreign prison to regularize detainee procedures. In 2007, Rice refused to support an executive order reviving the interrogation program. Throughout the second Bush term, officials were trying to close Guantánamo, pleading with foreign governments to take some prisoners, begging senators to allow the transfer of prisoners onto American soil. (It didn’t occur to them that they could announce the closure of Gitmo first, then figure out what to do with prisoners.)
Cheney and Obama might pretend otherwise, but it wasn’t the Obama administration that halted the practice of waterboarding. It was a succession of C.I.A. directors starting in March 2003, even before a devastating report by the C.I.A. inspector general in 2004.
When Cheney lambastes the change in security policy, he’s not really attacking the Obama administration. He’s attacking the Bush administration. In his speech on Thursday, he repeated in public a lot of the same arguments he had been making within the Bush White House as the policy decisions went more and more the other way.
The inauguration of Barack Obama has simply not marked a dramatic shift in the substance of American anti-terror policy. It has marked a shift in the public credibility of that policy.
In the first place, it is absurd to say this administration doesn’t take terrorism seriously. Obama has embraced the Afghan surge, a strategy that was brewing at the end of the Bush years. He has stepped up drone activity in Pakistan. He has promoted aggressive counterinsurgency fighters and racked up domestic anti-terror accomplishments.
As for the treatment of terror suspects, Jack Goldsmith has a definitive piece called “The Cheney Fallacy” online at The New Republic. He lists a broad range of policies — Guantánamo, habeas corpus, military commissions, rendition, interrogation and so on. He shows how, in most cases, the Obama policy represents a continuation of or a gradual evolution from the final Bush policy.
What Obama gets, and what President Bush never got, is that other people’s opinions matter. Goldsmith puts it well: “The main difference between the Obama and Bush administrations concerns not the substance of terrorism policy, but rather its packaging. The Bush administration shot itself in the foot time and time again, to the detriment of the legitimacy and efficacy of its policies, by indifference to process and presentation. The Obama administration, by contrast, is intensely focused on these issues.”
Obama has taken many of the same policies Bush ended up with, and he has made them credible to the country and the world. In his speech, Obama explained his decisions in a subtle and coherent way. He admitted that some problems are tough and allow no easy solution. He treated Americans as adults, and will have won their respect.
Do I wish he had been more gracious with and honest about the Bush administration officials whose policies he is benefiting from? Yes. But the bottom line is that Obama has taken a series of moderate and time-tested policy compromises. He has preserved and reformed them intelligently. He has fit them into a persuasive framework. By doing that, he has not made us less safe. He has made us more secure.
Copyright by The Washington Post
Friday, May 22, 2009
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/21/AR2009052103483.html
"WE ARE indeed at war with al-Qaeda and its affiliates. We do need to update our institutions to deal with this threat. But we must do so with an abiding confidence in the rule of law and due process, in checks and balances and accountability."
This lucid declaration by President Obama yesterday perfectly outlined the challenges facing a nation battling a violent, nonstate enemy. By framing the matter in the context of war, Mr. Obama correctly acknowledged the limitations of traditional law enforcement tools and venues to contain and bring to justice those who would harm the United States. Yet he repudiated what he called the Bush administration's "ad hoc," the-ends-justify-the-means approach and spoke eloquently about the need to craft legitimate and effective legal structures that give meaningful rights to the accused while protecting the country's national security interests.
Mr. Obama spoke in greatest detail about his plans for dealing with the 240 detainees held at the U.S. Naval Base at Guantanamo Bay, Cuba. Batting aside the fear-mongering of lawmakers who this week withheld funds to close the detention center, Mr. Obama made clear that any detainees brought to the United States would be held in the highest-security prisons -- from which no inmate has ever escaped. Those who can be prosecuted in federal court, Mr. Obama said, will be tried there. Those who are accused of violating the laws of war will be tried before military commissions that Mr. Obama has vowed to revamp with extra legal protections for defendants. In perhaps the most controversial proposal -- but one that the president is right to consider -- Mr. Obama said that he would work with Congress to craft a legal regime to provide for the detention of suspects who are deemed too dangerous for release but against whom there is not enough admissible evidence to bring formal charges.
Mr. Obama is criticized for both sides of his equation. From the left, some deny that the battle against al-Qaeda should be considered in the context of the law of war. From the right, critics suggest that to construct fair rules or demand accountability in the conduct of that war will hamstring the nation's defense. The Bush administration understood the first half but stubbornly refused to work with Congress to establish the necessary institutions; the result was years of false starts, immoral behavior and terrible blows to America's reputation. Former vice president Richard B. Cheney's rebuttal speech yesterday not only failed to acknowledge his administration's failures but falsely posited the national security choice as one between a "comprehensive strategy [that] has worked" and a view that Sept. 11, 2001, "was a one-off event . . . not sufficient to justify a sustained wartime effort."
Mr. Obama's wisdom lies in accepting the reality of war but insisting that it can be fought in fidelity to U.S. values. Yesterday, he spelled out the crucial difference. "I want to be very clear that our goal is to construct a legitimate legal framework for the remaining Guantanamo detainees that cannot be transferred," he said. "Our goal is not to avoid a legitimate legal framework."
New York Times Editorial: The Real Path to Security
Copyright by The New York Times
Published: May 21, 2009
http://www.nytimes.com/2009/05/22/opinion/22fri1.html?_r=1&th&emc=th
We listened to President Obama’s speech on terrorism and detention policy with relief and optimism.
For seven years, President George W. Bush tried to frighten the American public — and successfully cowed Congress — with bullying and disinformation. On Thursday, President Obama told the truth. It was a moment of political courage that will make this country safer.
Mr. Obama was exactly right when he said Americans do not have to choose between security and their democratic values. By denying those values, the Bush team fed the furies of anti-Americanism, strengthened our enemies and made the nation more vulnerable.
Such clarity of thought is unlikely to end the partisan posturing. It certainly didn’t quiet former Vice President Dick Cheney, who was fear-mongering in full force on Thursday. But we hope that lawmakers who voted this week against closing the prison in Guantánamo Bay, Cuba — starting with the Senate majority leader, Harry Reid — were listening closely.
We do not agree with every aspect of Mr. Obama’s solutions, especially his opposition to the court-ordered release of photographs of prisoner abuse and the positions he has taken on state secrets. But the course he outlined was generally based on due process and democratic governance.
Mr. Obama flatly rejected Mr. Cheney’s claims that torture saved “hundreds of thousands” of lives and reminded Americans that those abuses were ineffective, recruited more terrorists than they brought to justice, destroyed the nation’s image and will make it much harder to try some of the most dangerous terrorists.
Affirming that a detention policy has to be based on law and subject to Congressional and judicial scrutiny, Mr. Obama voiced the profound truth that eluded Mr. Bush, “In our constitutional system, prolonged detention should not be the decision of any one man.”
Mr. Obama said he had no intention of releasing any dangerous terrorist but added that some detainees must be tried and jailed in this country — a message to Democratic lawmakers who first demanded the closing of Guantánamo and now take the ludicrous position that no inmate can set foot in the continental United States, even in irons and headed for a maximum-security prison.
Mr. Obama sensibly grouped the prisoners into five categories, starting with those who can and should be tried in civilian criminal courts on terrorism charges.
There are Guantánamo prisoners who violated the laws of war and should be tried in military tribunals, but not the existing ones created by Congress in 2006. That law should not be tinkered with. It should be scrapped and those prisoners should tried under military law.
Some prisoners can be transferred to other governments’ custody and some, who committed no crimes, should be released. And, yes, some should be allowed to live in the United States.
The most troubling category is the one for prisoners — like Abu Zubaydah, an alleged top member of Al Qaeda — who seem to be highly dangerous terrorists but were tortured. It’s hard to imagine how they can be tried on that evidence. Some can be tried on other terrorism charges, like Ahmed Ghailani, whom the administration is properly moving to a civilian federal court to face charges related to the 1998 embassy bombings in Africa.
Mr. Obama vowed to deal with the rest of the prisoners under the law and the Constitution, but forthrightly admitted he wasn’t sure how. There are proposals to create a new “preventive detention” regime that we are not convinced is needed.
As he moves forward, we hope Mr. Obama bears in mind a point he made on Thursday. The problem is not the crime of terrorism, which the judicial system can normally handle. It is the way Mr. Bush undermined that system — and this country’s reputation and security — with his policies of arbitrary detention and abuse.
Cheney Lost to Bush
By DAVID BROOKS
Copyright by The New York Times
Published: May 21, 2009
http://www.nytimes.com/2009/05/22/opinion/22brooks.html?th&emc=th
President Obama and Dick Cheney conspired on Thursday to propagate a myth. The myth is that we lived through an eight-year period of Bush-Cheney anti-terror policy and now we have entered a very different period called the Obama-Biden anti-terror policy. As both Obama and Cheney understand, this is a completely bogus distortion of history.
The reality is that after Sept. 11, we entered a two- or three-year period of what you might call Bush-Cheney policy. The country was blindsided. Intelligence officials knew next to nothing about the threats arrayed against them. The Bush administration tried just about everything to discover and prevent threats. The Bush people believed they were operating within the law but they did things most of us now find morally offensive and counterproductive.
The Bush-Cheney period lasted maybe three years. For Dick Cheney those might be the golden years. For Democrats, it is surely the period they want to forever hang around the necks of the Republican Party. But that period ended long ago.
By 2005, what you might call the Bush-Rice-Hadley era had begun. Gradually, in fits and starts, a series of Bush administration officials — including Condoleezza Rice, Stephen Hadley, Jack Goldsmith and John Bellinger — tried to rein in the excesses of the Bush-Cheney period. They didn’t win every fight, and they were prodded by court decisions and public outrage, but the gradual evolution of policy was clear.
From 2003 onward, people like Bellinger and Goldsmith were fighting against legal judgments that allowed enhanced interrogation techniques. By 2006, Rice and Hadley brought Khalid Shaikh Mohammed in from a secret foreign prison to regularize detainee procedures. In 2007, Rice refused to support an executive order reviving the interrogation program. Throughout the second Bush term, officials were trying to close Guantánamo, pleading with foreign governments to take some prisoners, begging senators to allow the transfer of prisoners onto American soil. (It didn’t occur to them that they could announce the closure of Gitmo first, then figure out what to do with prisoners.)
Cheney and Obama might pretend otherwise, but it wasn’t the Obama administration that halted the practice of waterboarding. It was a succession of C.I.A. directors starting in March 2003, even before a devastating report by the C.I.A. inspector general in 2004.
When Cheney lambastes the change in security policy, he’s not really attacking the Obama administration. He’s attacking the Bush administration. In his speech on Thursday, he repeated in public a lot of the same arguments he had been making within the Bush White House as the policy decisions went more and more the other way.
The inauguration of Barack Obama has simply not marked a dramatic shift in the substance of American anti-terror policy. It has marked a shift in the public credibility of that policy.
In the first place, it is absurd to say this administration doesn’t take terrorism seriously. Obama has embraced the Afghan surge, a strategy that was brewing at the end of the Bush years. He has stepped up drone activity in Pakistan. He has promoted aggressive counterinsurgency fighters and racked up domestic anti-terror accomplishments.
As for the treatment of terror suspects, Jack Goldsmith has a definitive piece called “The Cheney Fallacy” online at The New Republic. He lists a broad range of policies — Guantánamo, habeas corpus, military commissions, rendition, interrogation and so on. He shows how, in most cases, the Obama policy represents a continuation of or a gradual evolution from the final Bush policy.
What Obama gets, and what President Bush never got, is that other people’s opinions matter. Goldsmith puts it well: “The main difference between the Obama and Bush administrations concerns not the substance of terrorism policy, but rather its packaging. The Bush administration shot itself in the foot time and time again, to the detriment of the legitimacy and efficacy of its policies, by indifference to process and presentation. The Obama administration, by contrast, is intensely focused on these issues.”
Obama has taken many of the same policies Bush ended up with, and he has made them credible to the country and the world. In his speech, Obama explained his decisions in a subtle and coherent way. He admitted that some problems are tough and allow no easy solution. He treated Americans as adults, and will have won their respect.
Do I wish he had been more gracious with and honest about the Bush administration officials whose policies he is benefiting from? Yes. But the bottom line is that Obama has taken a series of moderate and time-tested policy compromises. He has preserved and reformed them intelligently. He has fit them into a persuasive framework. By doing that, he has not made us less safe. He has made us more secure.
Beijing Auto signals Opel interest - Chinese carmaker faces three rival bids
Beijing Auto signals Opel interest - Chinese carmaker faces three rival bids
By John Reed in London and Patti Waldmeir in Shanghai
Copyright The Financial Times Limited 2009
Published: May 22 2009 11:42 | Last updated: May 22 2009 11:42
http://www.ft.com/cms/s/0/6d918216-46ba-11de-923e-00144feabdc0.html
China’s Beijing Automotive Industry Corp (BAIC) has expressed an interest in buying a stake in Opel together with the rest of General Motors’ European operations, for which three other companies have already entered entered bids this week.
The Chinese automaker sent a letter expressing interest in Opel to Commerzbank’s Dresdner Kleinwort unit, which is advising GM on the stake sale, on Thursday - a day after a bidding deadline passed, according to two people close to the deal.
BAIC could not be reached for comment, and a GM spokesman at its European headquarters in Zurich declined to comment.
BAIC’s offer was described as an expression of interest rather than a formal bid, and is unlikely to move forward, one of the people said. Italy’s Fiat, Canada’s Magna, and Brussels-listed RHJ International all entered bids for the strategic stake on Wednesday, for which GM is seeking about €650m ($900m).
BAIC is one of China’s leading commercial vehicle manufacturers, and manufactures Hyundai passenger cars in a joint venture with the Korean carmaker. It sold 250,000 vehicles in the first quarter of this year, making it the fifth largest Chinese automaker, according to official figures.
GM’s sale of a stake of Opel/Vauxhall has aroused significant interest despite its financial problems, which could see the company file for “surgical” bankruptcy protection in the US as soon as June 1.
GM’s European operations are to be spun off as a new German-headquartered company, for which the Detroit carmaker is seeking €3.3bn of German and other European government loan guarantees, and in which it will retain a significant stake.
Fiat wants to merge Opel with its own autos division and recently-acquired Chrysler, and Magna’s bid – if successful – would also see Russian automaker Gaz join it in making cars.
One of the people briefed on BAIC’s bid said the carmaker was primarily interested in importing Opel cars or technology to China, where it would compete with GM, one of the country’s largest carmakers. “They would be discouraged from going forward,” this person said, requesting anonymity because of nondisclosure requirements around the sale.
Industry analysts in China were also sceptical about whether BAIC could be a serious bidder, given the costs involved. “No Chinese car company can afford to pay that much money,” said Li Chunbo of Citic Securities in Beijing.
The Chinese government has also discouraged Chinese car companies from making hasty overseas acquisitions of distressed overseas brands that they lack the expertise to manage.
BAIC missed Wednesday’s deadline, and talks on the stake are now “moving quickly,” the second person said, as GM vets the three formal bids before signing a memorandum of understanding with one or more groups.
Magna’s offer has gained key political and union support for its bid. Unlike Fiat, which is offering its assets as payment for the deal, Magna and RHJ are also said to be offering cash, which GM prefers as it faces a liquidity crunch.
By John Reed in London and Patti Waldmeir in Shanghai
Copyright The Financial Times Limited 2009
Published: May 22 2009 11:42 | Last updated: May 22 2009 11:42
http://www.ft.com/cms/s/0/6d918216-46ba-11de-923e-00144feabdc0.html
China’s Beijing Automotive Industry Corp (BAIC) has expressed an interest in buying a stake in Opel together with the rest of General Motors’ European operations, for which three other companies have already entered entered bids this week.
The Chinese automaker sent a letter expressing interest in Opel to Commerzbank’s Dresdner Kleinwort unit, which is advising GM on the stake sale, on Thursday - a day after a bidding deadline passed, according to two people close to the deal.
BAIC could not be reached for comment, and a GM spokesman at its European headquarters in Zurich declined to comment.
BAIC’s offer was described as an expression of interest rather than a formal bid, and is unlikely to move forward, one of the people said. Italy’s Fiat, Canada’s Magna, and Brussels-listed RHJ International all entered bids for the strategic stake on Wednesday, for which GM is seeking about €650m ($900m).
BAIC is one of China’s leading commercial vehicle manufacturers, and manufactures Hyundai passenger cars in a joint venture with the Korean carmaker. It sold 250,000 vehicles in the first quarter of this year, making it the fifth largest Chinese automaker, according to official figures.
GM’s sale of a stake of Opel/Vauxhall has aroused significant interest despite its financial problems, which could see the company file for “surgical” bankruptcy protection in the US as soon as June 1.
GM’s European operations are to be spun off as a new German-headquartered company, for which the Detroit carmaker is seeking €3.3bn of German and other European government loan guarantees, and in which it will retain a significant stake.
Fiat wants to merge Opel with its own autos division and recently-acquired Chrysler, and Magna’s bid – if successful – would also see Russian automaker Gaz join it in making cars.
One of the people briefed on BAIC’s bid said the carmaker was primarily interested in importing Opel cars or technology to China, where it would compete with GM, one of the country’s largest carmakers. “They would be discouraged from going forward,” this person said, requesting anonymity because of nondisclosure requirements around the sale.
Industry analysts in China were also sceptical about whether BAIC could be a serious bidder, given the costs involved. “No Chinese car company can afford to pay that much money,” said Li Chunbo of Citic Securities in Beijing.
The Chinese government has also discouraged Chinese car companies from making hasty overseas acquisitions of distressed overseas brands that they lack the expertise to manage.
BAIC missed Wednesday’s deadline, and talks on the stake are now “moving quickly,” the second person said, as GM vets the three formal bids before signing a memorandum of understanding with one or more groups.
Magna’s offer has gained key political and union support for its bid. Unlike Fiat, which is offering its assets as payment for the deal, Magna and RHJ are also said to be offering cash, which GM prefers as it faces a liquidity crunch.
Citigroup looks to slash tech costs - Integration could save more than $1bn
Citigroup looks to slash tech costs - Integration could save more than $1bn
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2009
Published: May 21 2009 22:53 | Last updated: May 21 2009 23:09
http://www.ft.com/cms/s/0/24808782-462b-11de-803f-00144feabdc0.html
Citigroup is ramping up efforts to slash its huge technology costs, with the bank’s management believing it can save significantly more than $1bn in 2009 by integrating hundreds of systems that have been separate for years.
The company declined to comment, but people close to the situation said Citi’s internal projections targeted savings that were a multiple of the $1bn the bank had originally identified for technology in 2009.
The move underlines a shift in strategy being championed by Vikram Pandit, chief executive, to rebuild a company that has suffered billions of dollars in losses and has been repeatedly bailed out by the US government.
Mr Pandit is striving to shrink the troubled bank’s balance sheet and create a more cohesive company out of businesses that have never been fully integrated since the 1998 merger between John Reed’s Citicorp and Sandy Weill’s Travelers.
Citi had originally estimated it could save $3bn over three years by rationalising its operations and technology functions, which employ 140,000 people, including 25,000 software developers – more than many information technology companies.
But progress in reducing overlaps and linking IT infrastructure across businesses that had run individual systems prompted Citi executives to increase its target.
People close to the company say the deal-making tactics employed by Mr Weill, who ran Citi until 2003, favoured keeping IT systems separate as it made it easier to sell businesses.
But Mr Pandit’s lieutenants argue that integrating the disjointed IT infrastructure would cut waste across the group’s sprawling portfolio of businesses.
Don Callahan, a former IBM executive who is Citi’s chief administrative officer, told investors last year: “If you think about Citi when Sandy was leading it, each of these businesses had very strong returns, and the economics to the shareholder was quite nice. But there was something that was being left on the table. [What] was clear to us was that it wasn’t integrated.”
Citi does not disclose its exact operations and technology costs but regulatory filings show that IT and communication expenses were $4.9bn in 2008. Operations costs are believed to amount to several billions more.
People close to Citi said increased savings in IT would not have a major impact on its target of reducing overall expenses to $50bn-$52bn by the end of 2009 from $71bn last year.
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2009
Published: May 21 2009 22:53 | Last updated: May 21 2009 23:09
http://www.ft.com/cms/s/0/24808782-462b-11de-803f-00144feabdc0.html
Citigroup is ramping up efforts to slash its huge technology costs, with the bank’s management believing it can save significantly more than $1bn in 2009 by integrating hundreds of systems that have been separate for years.
The company declined to comment, but people close to the situation said Citi’s internal projections targeted savings that were a multiple of the $1bn the bank had originally identified for technology in 2009.
The move underlines a shift in strategy being championed by Vikram Pandit, chief executive, to rebuild a company that has suffered billions of dollars in losses and has been repeatedly bailed out by the US government.
Mr Pandit is striving to shrink the troubled bank’s balance sheet and create a more cohesive company out of businesses that have never been fully integrated since the 1998 merger between John Reed’s Citicorp and Sandy Weill’s Travelers.
Citi had originally estimated it could save $3bn over three years by rationalising its operations and technology functions, which employ 140,000 people, including 25,000 software developers – more than many information technology companies.
But progress in reducing overlaps and linking IT infrastructure across businesses that had run individual systems prompted Citi executives to increase its target.
People close to the company say the deal-making tactics employed by Mr Weill, who ran Citi until 2003, favoured keeping IT systems separate as it made it easier to sell businesses.
But Mr Pandit’s lieutenants argue that integrating the disjointed IT infrastructure would cut waste across the group’s sprawling portfolio of businesses.
Don Callahan, a former IBM executive who is Citi’s chief administrative officer, told investors last year: “If you think about Citi when Sandy was leading it, each of these businesses had very strong returns, and the economics to the shareholder was quite nice. But there was something that was being left on the table. [What] was clear to us was that it wasn’t integrated.”
Citi does not disclose its exact operations and technology costs but regulatory filings show that IT and communication expenses were $4.9bn in 2008. Operations costs are believed to amount to several billions more.
People close to Citi said increased savings in IT would not have a major impact on its target of reducing overall expenses to $50bn-$52bn by the end of 2009 from $71bn last year.
BA plunges to record £401m loss - Airline scraps dividend
BA plunges to record £401m loss - Airline scraps dividend
By Kevin Done, Aerospace Correspondent
Copyright The Financial Times Limited 2009
Published: May 22 2009 08:22 | Last updated: May 22 2009 15:46
http://www.ft.com/cms/s/0/4abb7680-46a0-11de-923e-00144feabdc0.html
British Airways plunged to a record loss in its last financial year to the end of March from a record profit a year earlier with a £1.3bn reversal in its fortunes, the worst slump in its history.
Willie Walsh, chief executive, warned on Friday that the “prolonged nature of the global downturn makes this the harshest trading environment we have ever faced.” He said there was “no immediate improvement visible.”
The airline scrapped its dividend, which had only been reinstated a year earlier after a prolonged gap of paying no dividends since 2001.
Shares in BA fell 6.8 per cent in early London trading but recovered some of those losses to stand 7.1p or 4.4 per cent lower at 155.7p in afternoon trading.
Martin Broughton, BA chairman, said “any recovery is likely to take longer than initially envisaged.”
The UK flag carrier said the airline industry “continues to face very difficult trading conditions, with considerable uncertainty over the likely timeframe of the global economic downturn.”
Current levels of traffic volume and average fare levels had not improved from the last quarter of the financial year from January to March, and BA said it was unable to provide any financial guidance for the current year or even for the first half “because of the difficulty in forecasting revenues.”
It is continuing to cut thousands of jobs with 2,500 posts eliminated since last summer, and is locked in difficult negotiations with its trades unions on further cuts and productivity improvements.
BA said it was cutting capital expenditure in an effort to conserve cash. It was not paying management bonuses, no base pay increases were planned and it was offering staff the option of unpaid leave and temporary or permanent part time working.
Its results last year already included £78m of charges for redundancy-related costs.
BA was hit last year by reduced passenger and cargo demand, with a particularly sharp fall in demand from the most lucrative business travellers, and by high fuel prices last summer.
It reported on Friday a precipitous slide in its financial performance to a pre-tax loss of £401m last year from a pre-tax profit of £922m a year earlier. It had an operating loss of £220m, including the severance costs of £78m, down from an operating profit of £878m a year earlier.
Revenues for the full year rose slightly from £8.76bn to £8.99bn, but there was an underlying fall of 3.7 per cent excluding exchange effects.
Crucially the airline was hit by a rise of nearly £1bn in its fuel bill to £3bn, as its large volume of high price fuel hedges prevented it from benefiting from the sharp fall in the fuel price from the peak last summer. It forecast a fall in the fuel bill of around £400m this year.
As the recession tightened its grip, the airline’s performance slumped in the final three months of the financial year, with revenues dropping by 8.4 per cent, and it incurred an operating loss of £309m in the final quarter. Yields excluding exchange fell by 16 per cent in the quarter.
BA said it had changed its focus during the final quarter from January to March from driving yields (average fares) to cutting fares to secure volume, as its customers became much more price sensitive.
The airline said it was being forced to cut capacity again by a further 4 per cent in the coming winter season with the grounding of 16 aircraft following cuts in capacity of 3.1 per cent last winter and of 2.5 per cent this summer.
BA’s financial strength was undermined as its cash balance fell to just under £1.4bn at the end of March, down £483m on the previous year. Net debt was £2.4bn, up £1.1bn on March 2008, including £554m due to retranslation of foreign debt.
It said the retranslation of foreign debt and the mark-to-market movement on fuel and currency hedges had reduced its reserves by £988m, reflecting the weakness of sterling and lower fuel prices.
BA is also facing a rapid rise in its pension deficit, one of the factors that has undermined its negotiations on a merger with Spain’s Iberia.
It warned that if the financial markets deteriorated further, its pension deficit might increase, increasing its balance sheet liabilities, which might affect its ability to raise additional funds.
By Kevin Done, Aerospace Correspondent
Copyright The Financial Times Limited 2009
Published: May 22 2009 08:22 | Last updated: May 22 2009 15:46
http://www.ft.com/cms/s/0/4abb7680-46a0-11de-923e-00144feabdc0.html
British Airways plunged to a record loss in its last financial year to the end of March from a record profit a year earlier with a £1.3bn reversal in its fortunes, the worst slump in its history.
Willie Walsh, chief executive, warned on Friday that the “prolonged nature of the global downturn makes this the harshest trading environment we have ever faced.” He said there was “no immediate improvement visible.”
The airline scrapped its dividend, which had only been reinstated a year earlier after a prolonged gap of paying no dividends since 2001.
Shares in BA fell 6.8 per cent in early London trading but recovered some of those losses to stand 7.1p or 4.4 per cent lower at 155.7p in afternoon trading.
Martin Broughton, BA chairman, said “any recovery is likely to take longer than initially envisaged.”
The UK flag carrier said the airline industry “continues to face very difficult trading conditions, with considerable uncertainty over the likely timeframe of the global economic downturn.”
Current levels of traffic volume and average fare levels had not improved from the last quarter of the financial year from January to March, and BA said it was unable to provide any financial guidance for the current year or even for the first half “because of the difficulty in forecasting revenues.”
It is continuing to cut thousands of jobs with 2,500 posts eliminated since last summer, and is locked in difficult negotiations with its trades unions on further cuts and productivity improvements.
BA said it was cutting capital expenditure in an effort to conserve cash. It was not paying management bonuses, no base pay increases were planned and it was offering staff the option of unpaid leave and temporary or permanent part time working.
Its results last year already included £78m of charges for redundancy-related costs.
BA was hit last year by reduced passenger and cargo demand, with a particularly sharp fall in demand from the most lucrative business travellers, and by high fuel prices last summer.
It reported on Friday a precipitous slide in its financial performance to a pre-tax loss of £401m last year from a pre-tax profit of £922m a year earlier. It had an operating loss of £220m, including the severance costs of £78m, down from an operating profit of £878m a year earlier.
Revenues for the full year rose slightly from £8.76bn to £8.99bn, but there was an underlying fall of 3.7 per cent excluding exchange effects.
Crucially the airline was hit by a rise of nearly £1bn in its fuel bill to £3bn, as its large volume of high price fuel hedges prevented it from benefiting from the sharp fall in the fuel price from the peak last summer. It forecast a fall in the fuel bill of around £400m this year.
As the recession tightened its grip, the airline’s performance slumped in the final three months of the financial year, with revenues dropping by 8.4 per cent, and it incurred an operating loss of £309m in the final quarter. Yields excluding exchange fell by 16 per cent in the quarter.
BA said it had changed its focus during the final quarter from January to March from driving yields (average fares) to cutting fares to secure volume, as its customers became much more price sensitive.
The airline said it was being forced to cut capacity again by a further 4 per cent in the coming winter season with the grounding of 16 aircraft following cuts in capacity of 3.1 per cent last winter and of 2.5 per cent this summer.
BA’s financial strength was undermined as its cash balance fell to just under £1.4bn at the end of March, down £483m on the previous year. Net debt was £2.4bn, up £1.1bn on March 2008, including £554m due to retranslation of foreign debt.
It said the retranslation of foreign debt and the mark-to-market movement on fuel and currency hedges had reduced its reserves by £988m, reflecting the weakness of sterling and lower fuel prices.
BA is also facing a rapid rise in its pension deficit, one of the factors that has undermined its negotiations on a merger with Spain’s Iberia.
It warned that if the financial markets deteriorated further, its pension deficit might increase, increasing its balance sheet liabilities, which might affect its ability to raise additional funds.
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