Business

LONDON — Airlines must operate more flights in Britain this summer as demand recovers from the pandemic — or lose lucrative take-off and landing slots, the UK government warned on Monday.

Carriers operating in Britain are currently using about 50 per cent of their slots as the sector continues to recover from the long-running COVID crisis.

This has helped to ensure that airlines have avoided carbon-intensive "ghost flights" — with none or few travellers during pandemic restrictions.

Carriers operating in Britain have traditionally been required to use 80 per cent of their slots, but the target was suspended owing to COVID.

From the end of March, carriers must use slots at least 70 per cent of the time in order to keep them, the Department for Transport (DfT) said in a statement on Monday.

But airlines will also "benefit from added flexibility over when they are justified not to use them", the DfT said.

During the pandemic, the rule had been eased "to provide financial stability to the sector and prevent environmentally damaging ghost flights", added Aviation Minister Robert Courts. 

"As demand for flights returns, it's right we gradually move back to the previous rules while making sure we continue to provide the sector with the support it needs."

Monday's news was welcomed by London airports.

The move "strikes the right balance between driving recovery and promoting competition", said a Heathrow spokeswoman.

The aviation sector was slammed by the COVID-19 health emergency that started in early 2020, grounding planes worldwide and decimating demand for air travel.

Recovery has been hampered by frequent changes to travel restrictions and testing requirements following the emergence of the Omicron variant late last year.

WASHINGTON — Blocks from the White House, an unassuming edifice in downtown Washington that once held offices used by the US Department of Justice is set to be converted into homes for hundreds of people.

The transformation of the vacant office space is among a surge of "adaptive reuse" projects that swept the US property market in 2021, where developers bought hotels and offices that were struggling to get business and announced plans to turn them into apartments.

"The market spoke, and it said the value was greater for a conversion than for it continuing as office space," said Michael Abrams, managing director of Foulger-Pratt, the property development firm that is turning the 14-storey building on New York Avenue into 255 apartments.

A survey by apartment listing service RentCafe found about 20,100 apartments were built out of converted properties in the United States last year, almost double the number converted in the year prior.

Such conversions could offer a way forward for US downtowns, which haven't been the same since office workers fled as COVID-19 broke out nearly two years ago, leaving landlords and local businesses struggling.

"The slow office market recovery is just going to make it that much more expensive to carry vacant office buildings," Abrams said.

Conversions may also play a role in easing a shortage of affordable housing, particularly in cities like Washington, where notoriously high rents are a feature of life.

"From the overall perspective, we just need increased supply. By having more supply, both the home price growth will come down and the rents will come down," said Lawrence Yun, chief economist of the National Association of Realtors.

Even more expensive 

Despite the downturn caused by COVID-19, the median price of existing homes climbed 15.8 per cent over the course of 2021, and by last month supply had hit an all-time low, according to NAR data, likely exacerbating a crisis of affordable housing that predated the pandemic.

As of 2017, 48 per cent of tenants were considered "rent burdened" by the US Government Accountability Office — meaning they paid more than 30 per cent of their income on rent — a figure that had risen 6 percentage points over the preceding 16 years.

The United States, meanwhile, has a glut of offices. With many of them dating to the 1980s, they are now too old to be attractive to companies, said Tracy Hadden Loh, a fellow at Brookings Metro.

With their designs centered around outdated needs like space for file cabinets, "Really just the entire building is obsolete", she said in an interview.

Corporate pullout 

Marc Ehrlich, chief investment officer at Rose Associates, which has converted New York City offices into housing, said such projects tend to be "well-located properties that need a higher and better use".

One of his firm's latest undertakings is the transformation of an office once used by telecommunications firm AT&T into a place people want to live.

Lacking amenities like covered parking, the building is unlikely to attract commercial tenants, Ehrlich said.

However, the new apartments will feature co-working spaces, since many tenants will likely want to continue working from home, he said. 

In Washington, developers are pouncing on properties formerly rented by the region's top employer, the federal government. 

This includes The Wray, an office building used by the State Department, but which has been totally renovated to house apartments.

The only signs of its former use are in the lobby, where the tiles are original, as is a directory listing the names of State Department offices once based there.

"The pool of tenants that goes back into these buildings is dramatically diminished, and that's what's putting the stress on that tier of property, that's what's creating the opportunity," said Abrams.

Adaptive reuse projects tend to demand high rents, Loh said, since they often require expensive renovations such as the construction of new bathrooms in buildings where they were once communal.

While expanding inventory has been shown to relieve price pressures elsewhere in the housing market, "This isn't a solution to the housing crisis," she added.

"This is a solution to revitalise areas like downtowns that are super dominated by places like office spaces."

COLOMBO — Sri Lanka consumer prices shot up a record 14 per cent in December, surpassing a previous high of 11.1 from a month earlier, official figures showed on Saturday as food and fuel shortages worsen.

Senior ministers warned parliament last week of a growing food crisis with rice harvests due in March expected to be drastically lower after an agrochemical import ban last year saw farmers abandoning more than 30 per cent of agricultural land.

The country’s tourism-dependent economy has been hammered by the pandemic with the government imposing broad import restrictions to avert a foreign exchange crisis, triggering a shortage of essential goods.

The Census and Statistics Department said year-on-year inflation in December was the highest since the National Consumer Price Index (NCPI) was established in 2015.

It said food inflation also hit a record 21.5 per cent, up from 16.9 per cent in November and 7.5 per cent a year ago.

The use of substandard organic fertiliser and pesticides has sharply reduced vegetable and fruit crop yields. 

After intense farmer protests, the government lifted its agrochemical import ban in October, but banks are still short of dollars to finance imports.

Supermarkets have been rationing milk powder, sugar, lentils and other essentials for months with a top official warning last month of more restrictions to feed those most in need.

But agriculture ministry secretary Udith Jayasinghe was sacked hours after calling for a formal rationing scheme to ensure that mothers, the elderly and the sick could be fed in the months ahead.

Sri Lanka's foreign reserves have tanked since President Gotabaya Rajapaksa took office in 2019, going from $7.5 billion to $3.1 billion at the end of December. The current figure is enough to finance less than two months of imports.

International rating agencies have downgraded Sri Lanka over fears of default on its $35 billion foreign debt. The government has insisted it can meet the obligations.

TOKYO — Tokyo stocks closed higher on Thursday, bouncing back from sharp losses in the previous session as China's central bank cut key lending rates, brightening market sentiment.

The benchmark Nikkei 225 index added 1.11 percent, or 305.70 points, to 27,772.93, while the broader Topix index gained 0.98 percent, or 18.81 points, to 1,938.53.

The dollar fetched 114.48 yen in Asian trade, against 114.33 yen in New York late Wednesday. 

Gains in Tokyo shares were "a reaction to yesterday's losses", Makoto Sengoku, senior equity market analyst at Tokai Tokyo Securities, said

Aside from the rebound, there were some positive factors at play, he said: "China cut key rates, and investors are reacting positively to that."

On Wednesday, the Nikkei fell more than three per cent as market heavyweight Sony plummeted on news of Microsoft's plans to buy US gaming giant Activision Blizzard.

The ongoing semiconductor shortage, worries over US inflation and rising virus cases in Japan also weighed on the market during Wednesday's session.

"I think yesterday's fall was excessive. But the market did face many negative factors," Sengoku said.

On Thursday, Sony Group shares rebounded 5.84 per cent to 13,135 yen after plunging nearly 13 per cent in the previous session. 

Toyota, which had previously fallen on news that it no longer expects to meet its annual production target, rose 1.71 per cent to 2,342.5 yen, while Panasonic edged up 0.03 per cent to 1,293.5 yen.

WASHINGTON — After Microsoft announced it would spend tens of billions of dollars to buy a video game company, World Bank President David Malpass on Wednesday drew a contrast between the deal and the amount of money rich nations have pledged to help poor countries facing higher debt loads. 

"I was struck this morning by the Microsoft investment -- $75 billion in a video gaming company" compared to just $24 billion over three years in aid for the poorest countries, Malpass said, referring to donations allocated in December by 48 high- and middle-income governments.

"You have to wonder, is this the best allocation of capital?" he said of the Microsoft deal in a discussion at the Peterson Institute for International Economics.

"There has to be more money and growth flowing into the developing countries."

Microsoft on Tuesday announced the purchase of US gaming giant Activision Blizzard, the firm behind hits like "Call of Duty."

Malpass has called on the richest nations in the Group of 20 to provide more debt relief to the world's least-developed countries that qualify for interest-free loans.

A G-20 debt service suspension initiative expired at the end of 2021, and this year alone, those countries must pay $35 billion in debt service.

"The debt payments are staggering," and it has become a "compounding" problem, Malpass said.

PARIS — The oil market could face another volatile year but demand is surging higher as the sector has weathered the impact of the Omicron coronavirus variant, the International Energy Agency (IEA) said on Wednesday.

The IEA revised its demand estimates, saying it increased by 5.5 million barrels per day in 2021 and would grow by 3.3 million bpd in 2022 — 200,000 bpd higher than its previous estimate.

This will take total demand above pre-Covid levels in 2022, at 99.7 million barrels per day.

While Covid cases have soared, "measures taken by governments to contain the virus are less severe than during earlier waves and their impact on economic activity and oil demand remain relatively subdued", the IEA said.

But the agency, which advises governments on energy policy, said supply growth expectations were being tempered by "disruptions and production shortfalls" by some members of the OPEC+ group of top oil producers.

"If demand continues to grow strongly or supply disappoints, the low level of stocks and shrinking spare capacity mean that oil markets could be in for another volatile year in 2022," the IEA said.

Oil prices tanked as the pandemic emerged in 2020, but have recovered since then, reaching their highest levels in more than seven years on Tuesday.

NEW YORK — Microsoft announced on Tuesday a landmark $69 billion deal to purchase US gaming giant Activision Blizzard, grabbing the sex harassment scandal-hit firm as the tech colossus seeks to boost its power in video games.

Merging with troubled Activision will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony, it said, a major shift in the booming world of games.

"This acquisition will accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse," Microsoft said in a statement.

Activision, the California-based maker of "Candy Crush" has been hit by employee protests, departures, and a state lawsuit alleging it enabled toxic workplace conditions and sexual harassment against women.

Over the past seven months the company has received about 700 reports of employee concerns over sexual assault or harassment or other misconduct, in some cases separate reports about the same incident, The Wall Street Journal has reported.

Nearly 20 per cent of Activision Blizzard's 9,500 employees have signed a petition calling for CEO Bobby Kotick to resign.

"Acquiring Activision will help jump start Microsoft's broader gaming endeavors and ultimately its move into the metaverse with gaming the first monetisation piece of the metaverse in our opinion," Wedbush analysts said after the news broke.

Troubled Activision 

"With Activision's stock under heavy pressure [CEO related issues/overhang] over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward," Wedbush added.

Microsoft has just marked 20 years of the "Halo" video game franchise that turned its Xbox console into a hit.

Microsoft launched a host of initiatives to mark two decades of both Halo and the Xbox, including a virtual museum exploring key moments in the console's history.

Xbox remains a key player in a video game industry now thought to be larger than the movie sector, with market research firm Mordor Intelligence valuing it at $173.7 billion in 2020.

Troubles, meanwhile, have stacked up for Activision over its sex harassment and discrimination scandal.

In July, California state regulators accused the company of condoning a culture of harassment, a toxic work environment, and inequality.

In September the Securities and Exchange Commission launched a probe into the company over "disclosures regarding employment matters and related issues".

And two months later the Journal reported that Kotick, accused of mishandling the harassment complaints, had signalled he would consider stepping down if he failed to quicky fix the company culture. He has led the company for more than three decades.

Late last year chief operating officer Daniel Alegre pledged a 50 per cent increase in female and non-binary staff over the next five years so that they will account for more than a third of Activision's workers.

LONDON — European stock markets climbed on Monday as China's unexpectedly muted growth slowdown and optimism over the impact of the Omicron coronavirus variant boosted investor confidence.

Oil rose modestly on limited supply concerns, while the dollar was up against major rivals as Wall Street was closed for a US public holiday.

The fast-spreading Omicron strain had initially sparked fears for the global economic recovery, but studies indicating that it causes milder illness and government booster vaccine programmes have calmed traders' nerves.

London, Paris and Frankfurt all ended the day higher.

"The relatively lower mortality rates, coupled with ongoing vaccinations efforts, has raised hopes we will transition to endemic and that the economy will recover strongly," said market analyst Fawad Razaqzada of ThinkMarkets.

Britain's benchmark FTSE 100 index climbed to new highs in 2022 after pharma giant GlaxoSmithKline rejected a bid worth £50 billion ($68 billion, 60 billion euros) from Pfizer for a consumer healthcare unit.

GlaxoSmithKline shares rose to the top of the index, while Pfizer's sank to the bottom as the US pharma behemoth said it would press on with a bid for GSK Consumer healthcare.

Concerns over soaring inflation and the US Federal Reserve's stance on hiking interest rates to counter it did not temper investor confidence in European stocks.

The trend was "due to a relatively more dovish central bank and the potential for a strong rebound in economic growth as nations ease travel restrictions amid ongoing booster vaccination efforts", said Razaqzada.

"As we head into 2022, we believe that the post-pandemic bull market remains broadly intact," added Bank of Singapore analyst Eli Lee.

"Historically, bull markets do not end at the beginning of rate hike cycles, and positive trends in global economic growth and earnings continue to be positive fundamental drivers for the market."

China on Monday defied expectations and posted growth figures of 8.1 per cent in 2021, although this slowed in the final months amid fresh coronavirus outbreaks, disruptive regulatory crackdowns and property market crises.

COVID infections in the world's second-largest economy climbed to their highest level since March 2020 as Beijing pursues its zero-COVID policy ahead of the Winter Olympics.

But mainland China shares were supported by news that the country's central bank had cut interest rates for the first time since the height of the pandemic last year as officials look to kickstart stuttering growth.

"Rising infections in China just three weeks before the Winter Olympics could lead to widespread economic uncertainty, particularly if the situation is not handled effectively in the short term," said XTB market analyst Walid Koudmani.

Benchmark oil contract Brent North Sea briefly reached the highest level for more than three years at $86.71 per barrel, adding to strong inflation concerns.

"Markets remain focused on the delicate balance between supply and demand which has appeared to impact price fluctuations quite significantly throughout most of the post pandemic economic recovery," said Koudmani.

Credit Suisse fell almost 1.8 per cent after the Swiss bank's chairman resigned less than a year after taking the reins following reports he had broken COVID quarantine rules.

Antonio Horta-Osorio's immediate departure adds to the bank's troubles after it was last year rocked by links to the multibillion-dollar meltdowns at financial firms Greensill and Archegos.

TUNIS — Tunisia's crisis-stricken economy needs "deep reforms" such as slashing its vast public wage bill, the International Monetary Fund's (IMF) outgoing country chief has said as the government seeks a new bailout.

Jerome Vacher, speaking in an interview at the end of his three-year term as the global lender's envoy to the North African country, said the coronavirus pandemic had helped create Tunisia's "worst recession since independence" in 1956.

"The country had pre-existing problems, in particular budget deficits and public debt, which have worsened," he said.

Tunisia's debts have soared to nearly 100 per cent of Gross Domestic Product.

Its GDP plunged by almost 9 per cent in 2020, the worst rate in North Africa, only modestly offset by a 3 per cent bounceback last year.

That is "quite weak and far from enough" to create jobs to counteract an unemployment rate of 18 per cent, Vacher said.

He said young graduates face particular challenges in finding work, despite the country being able to offer "a qualified workforce and a favourable geographic location".

Since president Zine Al Abidine Ben Ali was toppled by mass protests in 2011, Tunisia's troubled democratic transition has failed to revive the economy.

President Kais Saied sacked the government and suspended parliament on July 25 last year, and the government has since asked the IMF for a bailout package — the fourth since the revolution.

Tunisian authorities say they are optimistic about reaching a deal by the end of this quarter.

Vacher said discussions are still at an early stage and that the IMF first wants "to understand what they're planning in terms of economic reforms".

"It's an economy that needs very deep, structural reforms, especially to improve the business environment," the French economist said.

Hefty public wage bill 

But Vacher added that the government "understands the main challenges and problems, which is already a good basis", urging Tunisia to come up with a "solid and credible" reform plan.

To do that, it must tackle its huge spending on public sector salaries.

"The public wage bill is one of the highest in the world," Vacher said.

In a country of 12 million people, more than half of public spending goes to paying the salaries of around 650,000 public servants — a figure that does not include local authority wages.

Nor does the figure include Tunisia's hefty public companies, which often hold monopolistic positions across sectors from telecoms to air transport and employ at least 150,000 people at the public expense.

All this drains resources that the state could be investing in education, health and infrastructure, Vacher said.

"There needs to be a big efficiency drive in the public sector [to meet] public expectations in terms of services," he said.

The IMF has long called for a restructuring of Tunisia's system of subsidies on basic goods such as petrol and staple foods, which essentially see more state funds doled out to the biggest consumers — a system Vacher said was unfair.

The lender recommends scrapping subsidies and instead creating a system of targeted cash payments to needy groups.

The IMF's recommendations are important as not only could it lend billions more to Tunisia, but other bodies including the European Union have said they will condition future aid on the global lender's green light.

For Vacher, the biggest responsibility lies in the hands of Tunisia's decision makers.

"It's up to them to act to find solutions, put forward reforms, a vision and an ambition," he said.

While many observers have predicted doom for Tunisia's public finances, Vacher said the situation is "not optimal, but manageable".

But "there is an urgent need to make the public finances more sustainable."