Business

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.

By Julie Chabanas
Agence France-Presse

WASHINGTON — Mortgage rates are finally ticking up in the United States, one year after the Federal Reserve cut its lending rate, a step taken to boost the economy as the COVID-19 pandemic arrived, but that is not expected to cool the hot housing market.

While the wider US economy has struggled after states restricted business to stop COVID-19, real estate was one of the few bright spots in 2020, boosted both by low mortgage rates and the shift towards remote work caused by the pandemic.

"We've seen mortgage rates move higher in the past month or so," Joel Kan of the Mortgage Bankers Association indicated.

The housing market is a key part of the world's largest economy, and mortgage rates are closely watched to gauge the ease with which Americans can buy property.

They are tied into the wider US Treasury bond market, where yields have been rising in recent weeks as traders fear that the economy's improving health could bring inflation with it.

Rates on 30-year mortgages are now ticking up and expected to hit 3.5 per cent by the end of the year, after dropping in July below three per cent, a low not reached before.

"In that sense, it is bad news for buyers, because now they are facing higher interest rates, higher monthly payments," said Lawrence Yun, chief economist at the National Association of Realtors.

'Incredibly low' rates 

Mortgage rates have hovered around four per cent for the past decade, but US homebuyers have seen much higher borrowing costs in the past.

Rates were around eight per cent in the early 2000s, and hit their record high of more than 18 per cent in the early 1980s, according to government-sponsored lender Freddie Mac.

Despite the recent uptick in rates, Yun says they remain "incredibly low," and predicts better economic growth that puts more money into Americans' pockets will help them overcome the increased borrowing costs and push real estate sales up 15 per cent this year.

Even with the expectation that offices will reopen as COVID-19 vaccinations become widespread, some employees could continue working remotely and look for new houses that accommodate that — a dynamic viewed as already boosting sales last year.

Kan said the market is "still looking pretty strong", and noted mortgage costs are only once component of the decisions that go into home buying, along with finding a property the buyer likes.

Supply squeeze

Yet, as more buyers have closed on homes across the United States, supply has grown short, pushing prices up and sending developers scrambling.

Sales of existing homes were up 5.6 per cent last year from 2019, their highest level since the booming housing market of 2006, just before the housing bubble burst and 2008-2010 global financial crisis began.

New homes have also seen brisk sales, pushing prices up from an average of $384,000 in January 2020 to $408,800 in January of this year, a gain of 6.5 per cent, according to the Commerce Department.

Rubeela Farooqi of High Frequency Economics predicted "record-low inventories are likely to support to building activity, especially in the single-family sector."

However, Chuck Fowke, president of the National Association of Home Builders, warned that increases in both interest rates and costs of lumber and other materials have already caused builders to slow some construction of single-family homes.

MILAN — Italian energy giant Eni said on Thursday it had filed a request with a Milan court to pay 14 million dollars (11.8 million euros) to settle an investigation into corruption in Congo-Brazzaville levied at the company and one of its managers. 

According to Italian media, the probe was first launched in 2017, and relates to payment of suspected bribes when oil licences in Congo-Brazzaville were being renewed in 2015.

To secure renewal, Eni was accused of agreeing to sell parts of its licence to a shell corporation maintained by Congolese public officials. 

In a statement, Eni said the request was not an admission of guilt, "but an initiative aimed at avoiding the continuation [of] a judicial process that would entail further expenditure of resources from Eni and all the involved parties".

The court reducing the alleged offence from international corruption to undue inducement had paved the way for a settlement, the company explained. 

Eni refused to divulge the name of the manager implicated. 

The news comes the day after an Italian court cleared Eni and Shell of charges related to a major oil exploration deal in Nigeria in which $1.1 billion allegedly ended up in the pockets of corrupt politicians and middlemen.

Among the 13 individual defendants was Eni's chief executive, Claudio Descalzi, for whom prosecutors sought an eight-year prison term.

Descalzi was targeted by another investigation by a Milan court in 2019, accused of not disclosing a potential conflict of interest regarding Eni's activities in Congo-Brazzaville, allegations dismissed by the company as "without any foundation".