Business

WASHINGTON — Federal Reserve Chair Jerome Powell on Tuesday acknowledged that the United States will see inflation rise this year, but the uptick in prices will not be substantial.

Stock markets and some economists have grown nervous in recent weeks that the US economy's expected recovery this year as the COVID-19 pandemic recedes coupled with trillions of dollars in government stimulus could push prices upwards.

Speaking to the House Financial Services committee, Powell acknowledged that scenario could indeed play out, but the price increase would likely be temporary.

"We do expect that inflation will move up over the course of this year," said the central bank chief, noting that this would be partly due to major economic sectors recovering from the deep slumps of March and April 2020, when business restrictions to stop COVID-19 were at their most intense.

"Our best view is that these effects on inflation will be neither particularly large nor persistent."

The Fed slashed its benchmark lending rate to zero last March as the pandemic began, and later in 2020 unveiled a new inflation targeting policy that will keep rates low until inflation hits 2 per cent and stays there, in a bid to maximise employment.

The bottomed-out rates are viewed as one of the reasons for the boom on Wall Street over the past months, and markets have grown nervous that an uptick in inflation could cause the Fed to raise rates sooner than expected.

Also fueling the concerns are a series of relief packages approved by Congress to support the economy through the downturn, the latest of which is a $900 billion measure passed in December, and a $1.9 trillion bill approved this month.

RAS AL KHAIMAH — The aviation industry has suffered most during the COVID-19 pandemic, due to the lockdowns imposed by most countries, experts agreed at the 2021 Arab Aviation Summit.

Under the theme, “Arab Aviation in the New Normal”, the 2021 Arab Aviation Summit, which started on Monday brought together experts to evaluate the impact of the COVID-19 pandemic on the industry and provide ways to overcome it.

Experts agreed on how “catastrophic” the pandemic’s impact has been on the aviation industry, describing it as “the most brutal and most challenging crisis the aviation industry has ever faced”. 

 The International Air Transport Association (IATA) said earlier that airlines would lose $84.3 billion in 2020.

“Aviation has a huge contribution into every country’s economy. Most of the businesses were impacted negatively by the pandemic, but the pandemic’s impact on the aviation sector is the most difficult, as we have the most expensive liabilities.” Adel Al-Ali, Air Arabia Group CEO, said during his opening remarks.

Al-Ali said the aviation sector is resilient and agile, as people want to travel.

 “It is about connecting; people want to be connected which is our job, to connect people together,” he explained.

“The Arab Aviation Summit was created to promote the knowledge of aviation to the public as people know a little about aviation,” he added.

“In the MENA region, people have the need to travel because everybody has someone in another city or country and that dictates for us to travel. People travel for all kinds of purposes. This need brings creativity, so our goal is not to go back to the way things were before but to adapt and have a new norm,” Al-Ali said.

“The industry is fighting for profitable growth, which will allow us to face all the challenges. I have no doubt that life ahead will be better and our industry will bounce back…,” according to Al-Ali.

Raki Phillips, Ras Al Khaimah Tourism Development Authority CEO, said: “The COVID-19 pandemic has been very challenging for the aviation and tourism industry. As an industry, social distancing is not ideal for us. But right now we are hopefully moving in the right direction.”

“During my career, I have experienced many tragedies which affected our industry, but I can proudly say that the tourism sector always made a comeback with the aviation partners as it is a resilient sector,” Phillips added.

As an industry, aviation was able to “pivot and adapt to the new norm” in a short time on such a short notice, according to Phillips.

“Tourism and aviation will create a much stronger cooperation together, to help tourists travel by air safely.” Phillips noted.

“The past year has been one of the hardest days of my working career even though I have been through many other crises, but this pandemic had been the most frustrating as it is uncontrollable. And it got more frustrating especially when employees ask what will happen next, we do not want anyone to lose their job,” Al-Ali noted.

Voicing optimism, he said: “I think we will reach the end in a positive way”. 

 IATA predicted that the aviation industry would be in a recovery mode in 2021, but still well below pre-crisis levels.

The recovery will be long and progressive, according to IATA.

ROME — Amazon workers in Italy held their first nationwide strike on Monday as unions claimed employees were being pushed harder than ever during the coronavirus pandemic. 

The US e-commerce giant employs around 9,500 people in Italy, but unions say the protest also involves suppliers and delivery drivers.

In a joint statement, unions said employees are called "indispensable" but "are not treated as such", calling them "an army of some 40,000 workers who never stop".

The Filt Cigl, Fit Cisl and Uiltrasport unions claimed that an average 75 per cent of workers stayed out, rising to 90 per cent in some areas.

"Amazon made huge profits thanks to the pandemic-era boom in online commerce and it is right that it should share part of these profits," the unions said in a statement.

Workers should have lower work burdens, better pay, more union rights and an indemnity in case they fall ill with COVID-19, unions said, accusing Amazon of refusing to talk to them.

Drivers, they said, have come under huge pressure as online orders boom during the pandemic, delivering as many as 180-200 packages per day.

As its profits have continued to rise, Amazon has come under increasing pressure over the past year to improve pay and working conditions.

Amazon country manager Mariangela Marseglia said the company respected workers' right to "express their position."

The Seattle-based company, she said, offers "a safe, modern and inclusive workplace, with competitive salaries that are some of the highest in the industry, benefits, and great opportunities for career growth".

Last month, Amazon said profit in the fourth quarter of 2020 more than doubled to $7.2 billion from the year-ago period, while revenue climbed 44 per cent to a record $125.6 billion.

In Italy, the company announced last week the opening of a new distribution centre in the north and the creation of 900 new jobs, expanding its workforce to 10,400. 

RAS AL KHAIMAH — The impact of the COVID-19 pandemic has been significantly more difficult in the Arab region than it is internationally, according to experts participating in the Arab Aviation Summit 2021.

Experts agreed on the importance of air travel while there is no alternative to use, especially in the Arab world.

Moreover, the global pandemic affected about 75,000 people working in the tourism sector alone, they indicated.

The issue is not only regional, it is also international, but it has been more difficult on the MENA region, according to Abdul Wahab Teffaha, secretary general of the Arab Air Carriers Organisation.

 In the Arab region, many family members live in different countries, so they need to travel to see each other. Also, people travel a lot for religious tourism and medical treatment, not to mention the unique opportunities the region offers in the fields of investment, work and economic exchange, he said. 

“This region is peculiar in terms of the need for travel and what we are facing in the region nowadays is not good.” Teffaha noted.

Global airlines losses measured up to 65 per cent while in the MENA region and Arab airlines, it went up to 72 per cent of losses, which is approximately 33+ billion dollars, Teffaha explained.

What is really crucial is the industry’s contribution to the economy… hit hardest in the world in terms of the pandemic’s impact, he explained, adding that the lessons learned from the pandemic indicate that globalisation is the right solution and the way to recovery.” Teffaha highlighted.

The pandemic did not prevent people from travelling, but it is “governments’ strict measures and closures” that prevented air travel, according to Teffaha. 

“So now it is about how governments facilitate the recovery both short and long term,” he said.

According to Teffaha, for the longer term recovery, both technology and globalisation are essential.

“Governments imposing lockdowns, quarantine and multiple PCR tests will slow down the recovery, if the governments continue measures driven by fear, the recovery will take longer, however, if governments facilitate the measures we would recover by 2024 maximum.” Teffaha explained.

According to Kamil Al Awadhi, IATA regional vice president for Africa and the Middle East, the Pandemic affected various economic sectors in various countries of the world. 

“…Despite the difficulty that the sector faced during the past year and early this year now, there is a sign of hope to find opportunities to get out of this crisis with the lowest costs and losses, with the availability of vaccines.” Al Awadhi explained.

Al Awadhi indicated that the precautionary measures decided by the governments have contributed to the revitalisation of the aviation sector, as these measures have led to preserving community health and promoting tourism, travel and transportation.

“This has been the longest crisis the aviation sector has ever faced, the longer it is the more pain the airlines would feel. The right solution for the road to recovery is to apply a more unified approach to the aviation industry so it can open up safely, it can only be done if all stakeholders unite and face those challenges together.” Al Awadhi added.

WASHINGTON — The Canadian Pacific (CP) Railway plans to merge with US-based Kansas City Southern (KCS) to create the first rail network linking Canada, the United States and Mexico, the companies said on Sunday.

The deal is valued at $29 billion, including the assumption of $3.8 billion in outstanding KCS debt, a joint statement said. 

"This transaction will be transformative for North America, providing significant positive impacts for our respective employees, customers, communities and shareholders," said CP President and Chief Executive Keith Creel.

"This will create the first US-Mexico-Canada railroad."

The combined network of 20,000 miles (32,000 kilometers) will give Calgary-based CP access to the American heartland via Kansas City, from which a vast rail network reaches from the farms of the US Midwest to the ports of the Gulf of Mexico. 

The resultant network will also link the ports and factories of Mexico to the ports and energy resources of Canada and the factories of the northeast US.

Mexico is a major exporter of automobiles, electronics and agricultural products, while also importing large amounts of grain and manufactured goods.

By enlarging market access and providing new transportation options, the joint statement said, the deal is expected to boost North American economic growth.

It said the merger would benefit from the United States-Canada-Mexico Agreement on trade ratified a year ago by the three countries. 

The USMCA "makes the efficient integration of the continent's supply chains more important than ever", Creel said.

The boards of both companies have approved the deal, which still requires green-lighting from regulators of the US Surface Transportation Board.

Canadian Pacific, the second largest Canadian rail operator after CN Rail, will offer KCS shareholders $275 per share, in cash and CP shares.

That is a 23 per cent premium above the KCS closing price on Friday.

KCS shareholders will hold one-fourth of the capital of the Canadian company once the deal is concluded.

The combined company will employ nearly 20,000 people and generate total revenues of $8.7 billion, based on 2020 revenues, the statement said.

RIYADH — Energy giant Saudi Aramco on Sunday posted a 44.4 per cent slump in 2020 net profit due to lower crude prices, as the coronavirus pandemic weighed heavily on global demand.

Aramco has revealed consecutive falls in profits since it began disclosing earnings in 2019. That has piled pressure on government finances as Riyadh pursues multibillion dollar projects to diversify the oil-reliant economy.

"Aramco achieved a net income of $49 billion in 2020," the company said in a statement — down from $88.2 billion in 2019.

Saudi Arabia, the world's biggest crude exporter, was hammered last year by the double whammy of low prices and sharp cuts in production.

Aramco chief executive Amin Nasser described it as "one of the most challenging years in recent history".

The firm said "revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins."

But compared to many of its loss-generating international peers, the company, which made its stock market debut in 2019, played up its "strong financial resilience" despite the challenges.

Crude prices have risen in recent weeks to over $60 per barrel.

But in the short term, analysts say the Saudi giant is bracing for possible further waves of coronavirus infections that could undermine a tentative global economic recovery.

As the global vaccination programme gains momentum, however, Aramco said it was seeing a pick-up in crude demand in energy-hungry Asia and other parts of the world.

Analysts say the company's debt levels surged last year as it offered shareholders a bumper dividend even as its earnings plunged.

Aramco said it stuck to its commitment of paying shareholders dividends worth $75 billion in 2020 — an amount that exceeds the declared profit and available cash flow.

Dividend payments from Aramco help the Saudi government, the company's biggest shareholder, manage its ballooning budget deficit.

A brake on reforms 

Without addressing the company's debt, Aramco's Nasser said belt-tightening had kept the firm's financial position "robust", enabling it to pay out the dividends.

"As the enormous impact of COVID-19 was felt throughout the global economy, we intensified our strong emphasis on capital and operational efficiencies," Nasser said.

Aramco has also slashed hundreds of jobs as it seeks to reduce costs, Bloomberg News reported last June.

The statement said Aramco "expects capital expenditure for 2021 to be around $35 billion, significantly lower than the previous guidance of $40-$45 billion".

The full-year results are in line with analysts' expectations. But given Aramco's sliding revenue, market research firm Bernstein said its capital expenditure targets for this year were higher than expected.

A drop in oil income is expected to hinder Saudi Arabia’s Crown Prince Mohammed Bin Salman's ambitious "Vision 2030" reform programme to overhaul the kingdom's energy-reliant economy.

Aramco was listed on the Saudi bourse in December 2019 following the world's biggest initial public offering, generating $29.4 billion for 1.7 per cent of its shares.

In January, Prince Mohammed said the kingdom would sell more Aramco shares in the coming years.

The kingdom's de facto ruler said future share offerings would be a key way to boost the Public Investment Fund, the kingdom's sovereign wealth fund which is the main engine of its diversification efforts.

But analysts say further share offerings could struggle to generate investor interest amid a downbeat energy market, as the coronavirus pandemic saps global demand.

There are also concerns over an uptick in drone and missile attacks on Aramco's facilities in the kingdom, claimed by Yemen's Huthi rebels.

A drone strike sparked a fire at a Riyadh oil refinery on Friday, in the second major assault this month on Saudi energy installations.

ROME — Italy's government approved on Friday a 32-billion-euro ($38-billion-dollar) economic relief package for coronavirus-stricken businesses and workers.

It included 11 billion euros of grants to worst-affected firms that will be paid out by the end of April, Prime Minister Mario Draghi said in a news conference.

Draghi called the decree a "partial answer" to those who are struggling with the fallout from the pandemic, "but the best that we could do" given budgetary constraints.

Around 8 billion euros were earmarked for welfare support, including for furloughed and unemployed workers, and almost 5 billion euros for vaccinations and the health sector. 

A freeze on job dismissals, expiring in late March, was prolonged until the end of June, with a further extension until late October valid for some industries.

The measures were funded by public debt, and Draghi said the government would borrow even more this year to finance more economic stimulus measures. 

Friday's decree included an amnesty on unpaid tax bills, which was championed by Matteo Salvini's far-right League and opposed by leftists in the national unity coalition.

There were other measures for categories badly affected by mandatory shutdowns, including seasonal workers, theatre and cinema employees, and the ski industry. 

Italy, which 13 months ago became the first European country to be hit by the coronavirus pandemic, has been plunged into its worst recession since World War II. 

Last year, gross domestic product fell by 8.9 per cent, while almost 450,000 people lost their jobs, with disproportionately high numbers among women, young people and the self-employed. 

Draghi is hoping to provide some relief by ramping up a sluggish vaccination programme, and is drafting an economic relaunch plan to be funded by European Union grants and loans.

Italy is eligible for around 200 billion euros from the bloc's flagship virus recovery fund, but in return, it has to commit to an ambitious reform plan, subject to Brussels' approval.

Huge expectations are riding on Draghi, a former European Central Bank president famous for doing "whatever it takes" to save the euro, and installed as Italy's premier in February.

Since then, he has mostly worked behind the scenes, attracting some criticism. Friday marked his first news conference in more than a month in office. 

MOSCOW — Russia's central bank on Friday raised its key interest rate to 4.5 per cent in a surprise move, as authorities struggle to cap soaring food prices and the threat of new sanctions looms.

In recent months, Russia has faced accelerating inflation and a weak ruble, with authorities coming under pressure as the price of basic goods increased during the coronavirus pandemic.

"The fast recovery of demand and elevated inflationary pressure call for a return to neutral monetary policy," the central bank said in a statement, adding that further hikes could follow.

The increase by 0.25 percentage points — the first since late 2018 — surprised many analysts.

Economist Tatyana Evdokimova said the hike was a response to inflation exceeding forecasts.

"Looks like the regulator was caught by surprise as the hike happened despite no clear signal of upcoming tightening," Evdokimova tweeted.

Consumer prices started to climb in March 2020, driven by a slump in oil prices and a drop in the ruble's value after months of historically low inflation.

Timothy Ash, a strategist at Bluebay Asset Management, said he had expected a hike and pointed to rising geopolitical risks and the threat of new Western sanctions.

"This is nothing to do with inflation but all to do with geopolitics," he said in a note to clients, adding that the central bank was under pressure from the Kremlin.

"There are times it gets the call from the Kremlin and they tell them what to do. The message was 'sanctions are coming, macro financial risks are coming, Fortress Russia settings, hike rates'."

In February, inflation stood at 5.7 per cent in year-on-year terms.

The Bank of Russia expects it to peak in March before declining. 

It said inflation would return to its 4 per cent target in the first half of next year.