European Business News (EBN), 97-07-10

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From: The European Business News Server at <http://www.ebn.co.uk/>

Page last updated Thu, July 10 6:24 PM CET

CONTENTS

[01] British Airways expects to increase the number of flights tomorrow

[02] Bank of England boosts rates a quarter point to 6.75%

[03] Hambros loses managers after Co-op probe

[04] Apple Chairman Amelio quits, triggering new turmoil

[05] Allianz sees double digit growth in 1997

[06] European Union Commission is confident Boeing will find remedies for its concerns

[07] Tietmeyer calls for wider economic focus

[08] ValuJet buys AirTran in stock swap

[09] Clinton is mulling a tougher tobacco policy

[10] British Telecom warned by Oftel over OneNumber service

[11] Economic and Corporate Briefs

[12] World News Briefs

[01] British Airways expects to increase the number of flights tomorrow

Today, the airline was operating 25% more flights out of Heathrow and Gatwick airports than yesterday, and plans a further 20% increase tomorrow, the final day of the strike.

That would bring the number of flights operating close to half the normal schedule.

Flights operating from Heathrow that British Airways were unable to run yesterday include services to Edinburgh, Glasgow, Geneva, Copenhagen, Bilbao, Nice, Delhi and San Francisco.

The flights were grounded early yesterday when the 8,500-member British Airline Stewards and Stewardesses Association walked off the job in a dispute over a pay restructuring package.

British Airways was running the increased schedule with staff from a breakaway union, Cabin Crew 89, whose 3,500 members accepted the pay deal in March, as well as members of the striking union who were defying the walkout. The airline has also recruited 500 new staff since the deal was implemented two months ago.

For up-to-date information on British Airways flights click here.

[02] Bank of England boosts rates a quarter point to 6.75%

The decision to increase rates was made difficult, however, it said, by the 'combination of rapid expansion of domestic demand led by consumption and the further appreciation of sterling.'

The central bank's monetary policy committee, after a two-day meeting, said continued output growth at 'well above trend rates would be unsustainable.'

It concluded that recent economic data, notably the upward revision of estimated output growth in the last quarter of 1996, monetary growth and retail sales, indicated higher rates were necessary. Thursday's rate rise was the third quarter-point move since Labour won the May 1 general election.

Minutes of this week's monetary meeting will be published August 13. Minutes of the last meeting, held June 6, will be published July 16.

Meanwhile, the British Chancellor of the Exchequer Gordon Brown said he endorsed the rise in the official lending rate and blamed the previous Conservative government for failing to nip inflation in the bud.

'Today, the Bank of England has agreed with me that we must prevent a return to the cycle of boom and bust and that inflationary pressures in the economy, which despite persistent warnings, the previous government negligently failed to tackle, must be brought under control,' Brown said in a statement, released by the Treasury.

[03] Hambros loses managers after Co-op probe

It said the inquiry by law firm Norton Rose had found while those concerned in the bid at Hambros had not had any dishonest intent, their conduct 'fell well short of the standards of good business practice'.

There had also been failures of implementation of Hambros' internal control procedures.

Hambros said the report had found those at Hambros who knew that confidential information from CWS had or might become available without proper authority 'failed to appreciate that it was not appropriate for them either to receive or use that information'.

It said it would introduce recommended changes to tighten internal controls and bring in some additional procedures.

These include client and transaction clearance procedures, a strengthening of the compliance function and its relationship with the corporate finance division and 'a number of other improvements and safeguards in systems'.

The bank said it was not possible to publish the report for legal reasons but it had been sent to the Bank of England and the Securities and Futures Authority. It will introduce the changes suggested as quickly as possible and will institute further reviews of high level internal controls.

Nigel Pantling, head of the corporate finance division, has resigned and will be replaced by William Nabarro. Peter Large and Andrew Salmon, who were directly involved in the transaction, have also resigned with immediate effect.

A number of members of staff are also subject to internal disciplinary measures, Hambros said.

Hambros advised entrepreneur Andrew Regan and his Galileo bidding vehicle in its 1.2 billion pound ($2 billion) attempt to takeover mutually-owned supermarkets-to-funeral parlours group CWS. The bid collapsed after prolonged legal action by CWS and the withdrawal of key financial backing.

[04] Apple Chairman Amelio quits, triggering new turmoil

Apple also said Steve Jobs, the Apple co-founder who recently returned as an adviser to Dr. Amelio, will assume a broader role at the company.

It wasn't clear what that role would be, or what role, if any, Mr. Jobs had in Dr. Amelio's departure. However, Mr. Jobs is known to have privately criticized Dr. Amelio in conversations with friends and board members.

Dr. Amelio's departure was announced after the close of major financial markets yesterday. Apple's brief statement provided no explanation for Dr. Amelio's sudden departure from the company, whose problems he had pronounced as 'very fixable' when he took over in February 1996.

In a subsequent conference call with analysts and reporters, however, Apple executives said that Dr. Amelio stepped down under pressure from the board. Other Apple executives said the board discussed their displeasure with the company's performance at meetings with Dr. Amelio over the weekend.

Through the quarter ended in March, Apple's losses totalled more than $1.6 billion since Dr. Amelio took the helm. In the fiscal third quarter that ended in June, Apple is expected to have incurred a loss of as much as another $100 million.

Dr. Amelio's departure immediately fanned speculation that Apple's third- quarter results may be worse than the company has already projected, and that the company may again be considering putting itself up for sale.

[05] Allianz sees double digit growth in 1997

'That depends on damage claims, which were again favorable in the first half of the year, remaining low' in the coming months, Allianz Chairman Henning Schulte-Noelle said at the company's shareholders' meeting.

The company also announced plans to issue employee shares this autumn as part of a profit-sharing plan, but didn't immediately provide further details.

On the issue of the Ergo mega-merger, announced last week, Europe's second largest insurer Allianz will not rule out a withdrawal. Allianz owns about 10% of Ergo as a result of its 20% stake in Hanburg-Mannheimer, a unit of rival Munich Re. Munich Re formed Ergo by merging its DKV and Hamburger- Mannnheimer with Victoria Holding.

The company has not yet decided what to do with its Ergo stake and it has 'not fully ruled out' pulling out of the venture, chief executive Henning Schulte-Noelle said at the firm's annual meeting. Allianz also reiterated it sees a 'moderate double-digit percentage growth' in 1997 net profit, with gross premium income up around 11% to about 83 billion marks.

[06] European Union Commission is confident Boeing will find remedies for its concerns

But the Commission reiterated that the onus is on E.U. aircraft maker Boeing to come forward with remedies to allay E.U. competition concerns over its merger with McDonnell Douglas.

Reacting to comments by a Federal Trade Commission official Wednesday that the E.U. is pushing Boeing to sell McDonnell Douglas' civil aviation division after the merger, a spokesman for E.U. Competition Commissioner Karel Van Miert said ''It isn't the E.U. Commission's role to identify potential remedies.''

He added that the issue of Douglas Aircraft raised by William J. Baer, director of the FTC's Bureau of Competition, ''is just one of the main concerns expressed by the E.U. Commission.''

''There's still important business in terms of flying and maintaining McDonnell Douglas planes,'' he said, adding that the Commission still insists that, despite the FTC position, McDonnell Douglas plays a role in the civilian aviation market.

[07] Tietmeyer calls for wider economic focus

According to the treaty, a country's deficit must not exceed 3.0% of gross domestic product, except in temporary or exceptional circumstances; debt cannot be more than 60% of GDP, or be making steady progress toward that goal.

'The 3.0% (deficit ratio) is a very important indication, but it would be wrong to view it alone. It must be taken in the whole context,' Tietmeyer said. He added that a country's ability to sustain the fiscal criteria is a decisive factor to membership. 'It would be wrong to judge all countries by an equal standard,' he said.

Asked about the Bundesbank's view on the introduction of a 1997 supplementary budget, due to be discussed in Germany's cabinet Friday, Tietmeyer said the measure 'doesn't stand in the way of a sustainable path to fiscal consolidation.' Tietmeyer added that he and Bundesbank chief economist Otmar Issing will attend the cabinet meeting Friday.

Turning back to the subject of Germany's inflation picture, Tietmeyer said the recent rise of inflation has been due to special factors. 'They are due to seasonal factors and we don't expect this to be a beginning of an upward trend,' he said.

According to preliminary figures for June, western Germany inflation rose 1.6% year-on-year and 0.2% from May. Tietmeyer also said he doesn't 'see any need to change the M3 target for the time being.' The Bundesbank is aiming for M3 money supply growth of 3.5%-6.5% in 1997. 'We are close to our M3 target,' Tietmeyer said, noting that the M3 aggregrate remains the Bundesbank's primary indicator of inflation trends.

[08] ValuJet buys AirTran in stock swap

The deal will be accomplished though a stock swap valued at $61.8 million. The combination of ValuJet and AirWays Corp., AirTran's parent company, would have 2,742 employees and serve 46 cities with 40 aircraft and 238 peak daily departures. A location for the headquarters of AirTran Holdings, as the new company will be called, has not been decided, but Orlando, Florida, is the leading candidate. AirWays Corp. is based there.

The merger is expected to be completed within four months. ValuJet has been losing money ever since the May 11, 1996, crash of Flight 592, which killed all 110 people on board. The airline became the subject of an intense safety review after the crash, and was grounded by the Federal Aviation Administration for more than three months.

'The merged company will benefit from access to AirWays' maintenance facility in Orlando and the ValuJet launch order for 50 firm and 50 option McDonnell Douglas MD-95s,' ValuJet president and chief executive D. Joseph Corr said. He will serve as president and CEO of the new company. Robert D. Swenson, AirWays chairman and president, will serve as non-executive chairman of the combined company.

[09] Clinton is mulling a tougher tobacco policy

Clinton said he was most concerned that the deal, which would settle 40 state lawsuits against cigarette makers, would forbid the U.S. Food and Drug Administration from reducing or banning nicotine, if doing so would create a black market for full-strength brands.

Cigarette makers, in a statement, defended the black market provision as one that ''should be a legitimate concern to all Americans.'' The companies pledged to ''make the case for keeping intact the provisions of the proposed resolution as negotiated.''

Clinton has not made up his mind about the rest of the complex settlement - and top officials do not expect Wednesday's criticism to be the last.

''You shouldn't interpret it as the only thing the president has concerns about,'' said Health and Human Services Secretary Donna Shalala, who expects to spend several more weeks analyzing the deal.

Clinton and Congress would have to approve the deal before it could take effect.

Top health groups, led by former Surgeon General C. Everett Koop and former FDA chief David Kessler, urged a tougher policy in a report delivered to the White House and Congress. Among their demands:

-No FDA curbs. The settlement forbids a nicotine ban for 12 years and requires a lengthy, court-involved process if the agency even wants to lower levels.

-Fine tobacco companies if teen-age smoking does not drop within two years, instead of waiting the settlement's five years.

-No smoking in any workplace or outdoor gathering places such as sports stadiums. The settlement would ban workplace smoking but exempt restaurants, bars and casinos.

''If there is to be a settlement, the public health measures in that settlement must be unequivocal,'' said Kessler.

[10] British Telecom warned by Oftel over OneNumber service

The regulator said the way British Telecommunications runs the service is anti-competitive and 'in clear breach of its licence.'

Competitors rely on British Telecom for its network but also compete with the company to provide these services via the network. OneNumber offers customers a 'find me anywhere' personal telephone number, which also offers voicemail.

British Telecom hasn't made available to competitors the network services needed to provide voicemail for their services. The company has until Oct. 31 to make the network services available to competitors, and until then it can't sign up new customers to the voicemail element of OneNumber.

Oftel Director General Don Cruickshank said: 'BT cannot be allowed an unfair competitive advantage because of its network.'

[11] Economic and Corporate Briefs

Vical and Rhone-Poulenc's Pasteur Merieux Connaught unit initiated a Phase I clinical trial of an experimental DNA vaccine against the parasite that causes malaria. In a press release, the companies said they are sponsoring the trial under their research, collaboration and licensing agreement, which covers potential naked DNA vaccines against six infectious disease targets.

Norway's inflation rate increased to 2.9% for the 12 months ending on June 15 from the 2.7% rate reported a month earlier and 0.9 percent in June 1996, the state statistics agency announced. Statistics Norway said the consumer price index for June was 270.4, compared to 269.7 in May and 262.9 a year ago. All the figures use 1979 as a base year with an index of 100. The agency said a sharp increase in rental rates for houses and vacation homes was a main cause of the higher inflation rate.

Spain's jobless rate dropped to 13.06 in June from 13.26% in May, the Labor Ministry said. A ministry statement said the number of people registered as out of work was down by 31,881, to a rounded 2.09 million at the end of June. The ministry figure is one of two rates used to measure unemployment and jobless in Spain. The other rate, compiled from a quarterly survey of 64,000 households, put the unemployment rate at 21.49% for in the first quarter of 1997.

[12] World News Briefs

Torrential rains triggered a massive flash flood and landslide in Kagoshima Prefecture, southwestern Japan, early today, killing 19 people and leaving two missing and 13 injured, police said. Of the injured, two are in serious condition, police said. The landslide occurred along the Harihara River in the city of Izumi, overflowing a landslide-protection barrier and burying 15 homes with 39 residents under mud and rocks.

Israeli troops forced hundreds of Arab merchants to close their shops in the Israeli-controlled part of Hebron, a day after shots were fired at a Jewish settler compound. The shots came from the Palestinian-run area, but the gunmen were not caught. The rounds hit the Beit Hadassah compound, but no one was hurt. The shops were closed under orders from the West Bank army commander, apparently in retaliation for the shooting.

Persistent rains have kept flood waters high in southern China, causing at least 56 deaths and more than 1.8 billion yuan ($220 million) in economic damage. A week of nearly ceaseless rain has swollen tributaries of the Pearl River in Guangdong province, which borders Hong Kong, and in neighboring Guangxi.

From the European Business News (EBN) Server at http://www.ebn.co.uk/

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