Delta Joins Other Airlines in Cutting Jobs, Schedule
Delta Air Lines joined other major carriers in cutting its flight schedule and work force even though U.S. airlines began receiving the $5-billion cash portion of a $15-billion federal rescue package. The aid also includes $10 billion in loan guarantees.
Delta said it will eliminate 13,000 jobs as airlines worldwide laid off thousands of workers and paring their operations to weather the abrupt decline in air travel since the Sept. 11 terrorist attacks.
Airline caterers, hotels and other travel-related firms also announced layoffs because business is down sharply. More than 100,000 jobs among employees of U.S. airlines alone have been lost. Global passenger traffic is expected to drop 5% for 2001, which will be only the second decline since World War II, the International Air Transport Assn. reported.
President Bush visited Chicago’s O’Hare International Airport to announce more air-travel security measures and to urge the public to fly again, but many carriers said their planes are flying half-full.
Some U.S. airlines, meanwhile, infuriated organized labor by invoking force majeure contract clauses, under which they can cut jobs without giving notice or severance payments because their problems stemmed from an act outside the carriers’ control. But the heads of several airlines also said they’ll give up their compensation for the rest of the year.
James F. Peltz
Consumer Confidence at Lowest Level in 5 1/2 Years
U.S. consumer confidence plunged in September to the lowest level in more than 5 1/2 years, the Conference Board said, as job losses, falling stocks and terrorist attacks threatened an economy on the brink of recession.
The board’s consumer confidence index, taken from a survey conducted before and after the terrorist attacks, fell to 97.6 this month from 114 in August. The September reading was the lowest since 88.4 in January 1996, the month before the index began a four-year rise, and reflects pessimism about the future as well as unease about current conditions.
The number of U.S. workers seeking unemployment benefits surged to the highest level in nine years as people dismissed in the wake of the terrorist attacks begin to file claims.
Bloomberg News
Stock Markets Stage Partial Recovery
Wall Street ended its worst quarter in at least 14 years on a positive note last week as U.S. stock markets staged a partial recovery from the steep losses that followed the terrorist attacks.
Major indexes clawed their way back as investors bet prices are cheap, given the Federal Reserve’s eight interest-rate cuts so far this year. The week’s economic news wasn’t great--some economists are predicting the U.S. economy is already in a recession--but it wasn’t as bad as many were predicting.
For the week, the Dow Jones industrial average gained 7.4%, its best weekly performance since 1984. But the blue-chip Dow average lost 15.8% during the third quarter--its worst performance since December 1987.
The Nasdaq composite index, home to many major technology stocks, rose 5.3% for the week. The index tumbled 30.9% during the quarter, its second-worst quarterly performance ever. And the Standard & Poor’s 500 index climbed 7.8%, bringing its third-quarter loss to 15%. Overseas markets also rallied, with European bourses making their strongest showing since early 1975.
Reuters
Heating Bills Will Be Lower Than Last Winter
Winter heating bills in California will be much lower than last winter because natural gas prices have declined and supplies are plentiful, gas utilities said.
The winter bill for the average residential customer of Southern California Gas will drop to about $60 from about $80, the Los Angeles-based utility said. Bills for customers of Pacific Gas & Electric and San Diego Gas & Electric also will be lower.
Nancy Rivera Brooks
World Events Have OPEC Over a Barrel
OPEC ministers agreed to keep their oil production unchanged, even as plummeting demand in the wake of the terrorist attacks has prices in retreat.
In holding the line on production--and pledging instead to do a better job of sticking to its quotas announced earlier--the Organization of Petroleum Exporting Countries hopes to stabilize prices without squeezing supplies so much as to harm the global economy.
OPEC “doesn’t want to be blamed for taking the world into a deep recession,” a European fund manager said. “I don’t think it’s in their interest to see an oil price of $28 or $30” a barrel.
Prices in London and New York rose during the last three trading sessions, staging a modest rebound after touching two-year lows in the wake of the attacks. Still, oil for November delivery finished its bumpy week at $23.43 a barrel, down 9.8% from the previous Friday, on the New York Mercantile Exchange.
A Times Staff Writer
Napster Reaches Deal With Publishers
Taking a giant step toward legitimacy, Napster Inc. announced a tentative deal with U.S. music publishers that would settle the publishers’ copyright-infringement claims and grant Napster the right to use their songs in a new fee-based song-sharing service online.
The groundbreaking pact called for Napster to pay the publishers $26 million in damages and one-third of all future music royalties--$10 million of it due in advance. That’s an unusually big cut for the publishers, who receive less than 10% of the revenue from CD sales.
A federal judge and individual publishing companies must approve the settlement. The record labels continue to press their lawsuit against Napster. Jon Healey
AT&T; in Talks to Sell Unit to BellSouth
The end of AT&T; Corp. appeared one step closer last week, as reports surfaced that the struggling long-distance giant is in talks to sell its telecommunications operations to BellSouth Corp.
Serious negotiations between the two phone companies have only begun, but analysts were cheered by the prospect and AT&T;’s stock rose $1.51 over two days to close Friday at $19.30 on the New York Stock Exchange.
Terms of a potential deal are still murky, but sources close to AT&T; said the company wants to sell its business and consumer communications businesses to BellSouth once it sells or spins off its cable unit, AT&T; Broadband--a move that would complete the divestiture of all of AT&T;’s businesses.
Sources say the most serious bidder for AT&T;’s cable business continues to be Comcast Corp., which put AT&T;’s cable unit into play with an unsolicited $40-billion bid that was rejected in mid-July.
Elizabeth Douglass
Money Market, CD Yields Drop to New Lows
Yields on money market funds and certificates of deposit dropped to new lows as the Federal Reserve flooded the banking system with cash and investors looked for safe havens.
The average seven-day simple yield for taxable money market mutual funds plunged to 2.55%, the lowest level in the funds’ 30-year history. Tax-free money market yields fell to 1.74%, remaining slightly above the previous all-time low of 1.72%, reached in January 1994.
Bankrate.com, which tracks certificate of deposit rates, said CD yields also have tumbled to the lowest levels since the company began monitoring the rates in 1984. One-year CDs that yielded 5.65% a year ago average 2.94%.
The drops mean most investors’ real returns, after inflation and taxes, are below zero. But analysts said investors are more concerned about safety and liquidity than about yield.
Liz Pulliam Weston
Attacks Won’t Alter Vivendi Forecasts
Vivendi Universal said it’s sticking by forecasts of sales and earnings growth for 2001 and 2002, despite fallout from the terrorist attacks that has prompted rivals such as AOL Time Warner Inc. and Walt Disney Co. to lower expectations.
Chief Executive Jean-Marie Messier said the French-American giant is less dependent on advertising and will grow even in an economic downturn, citing sales of online games, DVD and videos and revenue from Pressplay, the online music-subscription service Vivendi and Sony Corp. are launching.
The company also offered more details on its first-half earnings and sales growth, which was driven by a string of movie hits at Universal Studios, including “Jurassic Park III” and “American Pie 2,” and growth in Vivendi’s telecom business.
Richard Verrier
Nissan to Produce Maximas in U.S.
Moving Japanese auto makers a step closer to being U.S. implants instead of imports, Nissan Motor Co. said it will transfer production of its Maxima sedan to Tennessee from Japan next year.
Nissan’s decision is part of the company’s continuing plan to shutter antiquated, expensive-to-operate plants in Japan and shift vehicle production closer to the marketplace. The model is sold only in North America.
The shift means at least part of each top-selling Japanese passenger car line in the U.S.--except those of the luxury Lexus and Infiniti brands--will be built in North America.
John O’Dell
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Please see Monday’s Business section for a preview of the week’s events.
