Etihad allows flyers to bid to keep adjacent seats empty

THERE are few things that airlines will not now put a price on. Even so, Etihad Airways has come up with an intriguing idea. The Adu Dhabi-based carrier is offering flyers the chance to bid to keep adjacent seats on a flight empty. Passengers can suggest the price they are willing to pay to block up to three berths, and the chance to stretch out a bit.

Anyone who regularly suffers the ignominy of economy-class flying knows that there is no finer feeling than discovering that a flight is half empty and that there is no need to sit cheek-by-jowl with fellow members of the hoi polloi. Most travellers can recount with glee a journey in which they found they had an entire row to themselves, could raise the armrests, and sleep soundly and horizontally for the duration of the flight. It is surely the only time that it is preferable to have a booked ticket in the middle column of seating. (A particularly pleasing <a…Continue reading

This post was originally published in the Economist.

Etihad allows flyers to bid to keep adjacent seats empty

Qatar Airways wants a 10% stake in American Airlines

IT SEEMED, at first blush, to be a masterclass in how to bait a rival. For years, American Airlines, along with other big American carriers, has complained of “unfair” competition from Middle Eastern operators, which stand accused of taking state subsidies. On June 22nd one of those accused, Qatar Airways, said it planned to take an unsolicited 10% stake in the firm.

In a regulatory filing, it was revealed that Qatar, which reported a profit of $540m in 2016, wants to buy at least $808m of American’s shares. The move has not gone down well with some. Doug Parker, American’s boss, described it as “puzzling”. One airline union accused Qatar of “using enormous government subsidies to gain a greater foothold in US markets”. Adding “They’re coming after our routes, which means the jobs of our members are at stake.”

Politicking from America, in turn, has been making life tough for Qatar’s national carrier. This month Donald Trump backed the decision of several Gulf states to cut diplomatic ties with…Continue reading

This post was originally published in the Economist.

Qatar Airways wants a 10% stake in American Airlines

Fund managers rarely outperform the market for long

THE big investment shift of recent years is from active to passive. Clients have been buying index funds, which passively track a benchmark like the S&P 500 index, and shunning fund managers who actively try to pick the best shares.

One reason for the shift is that passive managers charge lower fees than active funds. Many clients would be happy to pay more if that translated into better performance. However, it is very difficult for investors to select fund managers who can reliably beat their peers. Performance does not persist, as the latest data from S&P Dow Jones Indices show clearly.

Suppose you had picked one of the best-performing 25% of American equity mutual funds in the 12 months to March 2013. In the subsequent 12 months, to March 2014, only 25.6% of those funds stayed in the top quartile (see chart). That result is no better than chance. In the subsequent 12-month periods, this elite bunch is winnowed down to 4.1%, 0.5% and 0.3%—all figures that are worse than…Continue reading

This post was originally published in the Economist.

Fund managers rarely outperform the market for long

Why the falling oil price isn’t hurting markets

INVESTORS could easily get confused about the impact of oil-price rises on the economy and markets. The story seemed to be clear: high prices bad, low prices good. The two great oil shocks in the 1970s were unambiguously bad for Western economies—ushering in stagflation and transferring spending power to the oil-producing countries. In turn, low oil prices in the late 1990s coincided with the dotcom boom.

But when oil fell in the second half of 2015, that was seen as a bearish sign for the global economy and markets. Now oil is falling again, with both Brent crude and West Texas intermediate dropping more than 20%. But the decline has barely made a dent in the upward march of the S&P 500 index.

The key to the differing market reaction is why the oil price is falling. Back in 2015, the fear was falling demand. Investors worried in particular that the Chinese economy was slowing. If that assumption had been right, demand for much more than oil would have suffered. The equity markets did not…Continue reading

This post was originally published in the Economist.

Why the falling oil price isn’t hurting markets

Investors snap up Argentina’s 100-year bonds

ONE hundred years ago, Argentina was not the country it is today. Thanks to a belle époque of lavish foreign investment, rapid inward migration and bountiful agricultural exports, its GDP per person in 1917 was comparable to that of Germany and France. Although the first world war brutally interrupted international trade and investment, the country profited from filling the bellies of soldiers on the front with tinned corned beef.

No one knows how Argentina may change over the next 100 years. But many investors seem willing to bet on one forecast: that its government will in 2117 repay $2.75bn-worth of dollar-denominated, 100-year bonds, sold to enthusiastic investors on June 19th.

Since Argentina has defaulted six times in the past 100 years, that belief seems brave. But instead of looking backwards, investors are looking from side to side, at the miserable yields on offer elsewhere. Argentina’s “century” bonds yield almost 8%. That…Continue reading

This post was originally published in the Economist.

Investors snap up Argentina’s 100-year bonds

Amazon’s big, fresh deal

JEFF BEZOS does not like sitting still. In his annual letter to Amazon’s shareholders this year, he warned of “stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death.” Competitors are toiling to avoid the same fate but it is hard to keep up. On June 16th Amazon said it would pay $13.7bn for Whole Foods, an upscale grocer known for its organic produce. Lest be accused of sloth, four days later Amazon announced a new service to let shoppers try clothes at home, for no fee, then return those they don’t like.

The news that Amazon would make clothes shopping even easier is a blow to America’s apparel chains, many of which are already in the middle of that excruciating decline. Yet it was the Whole Foods deal, more than ten times bigger than any acquisition Amazon has made so far, that caused the bigger stir.

The deal’s precise impact is hard to gauge. Buying Whole Foods hardly gives Amazon a stranglehold on food and drink: the combined…Continue reading

This post was originally published in the Economist.

Amazon’s big, fresh deal

Cisco adapts to the rise of cloud computing

WHEN John Chambers ran Cisco, the world’s biggest maker of networking gear, his hyperactivity nearly matched that of the high-speed switches and routers that made the firm’s fortune. He pushed Cisco into dozens of new businesses, from set-top boxes to virtual health care. He travelled the world preaching the virtues of connectivity. In interviews it was hard to get a word in edgeways. Conversations invariably ended on a restless question: “What should we do differently?”

Chuck Robbins, who succeeded Mr Chambers in July 2015, has two decades of experience selling Cisco gear and seems more comfortable talking about its core business than about diversifications. He avoids the limelight and comes across as almost shy. But he, too, is aware of the need to keep moving. “Networking is getting complex. We need intuitive networks that are secure and can learn and adapt.”

Different times require different bosses. Mr Chambers led Cisco to the top during the dotcom boom; in…Continue reading

This post was originally published in the Economist.

Cisco adapts to the rise of cloud computing