TheChek News Flow

United and Delta dominate industry profits by promoting premium travel options like carved up cabins and luxe lounges

There is a clear formula for running a winning airline in 2024. It’s paying off most for the biggest carriers.

Carving up cabins, catering to high-end travel, and putting a price on nearly every aspect of the flying experience has helped larger airlines haul in more cash from their planes. That is one reason why two companies, Delta and United, accounted for almost 85% of the U.S. airline industry’s profits in the first nine months of this year.

For fliers, the message is simple:

“The more you pay, the more you get,” Delta President Glen Hauenstein said this past week.

Airlines are preparing for a record crush of travelers to descend on airports this Thanksgiving—a test of the way they have been battling for fliers’ business, which has changed dramatically since the Covid-19 pandemic. What was once a race to offer the cheapest tickets and capture the biggest volume of passengers is now all about trying to stand out with a superior flying experience. The result has been a shakeout at the budget end of the industry—Spirit Airlines declared bankruptcy this past week—and a bonanza for bigger carriers flying high from selling first-and business-class tickets.

Airlines that haven’t yet embraced the upselling approach are racing to catch up. Spirit told a bankruptcy court this week that “Project Bravo,” a strategic pivot that includes a new suite of upscale bundles, is its ticket back to success. Even Southwest, which has carried an egalitarian approach to flying for more than 50 years, is soon ditching open seating and adding rows of extra legroom.

Bigger airlines offer a dizzying array of amenities, such as the option to move up a few rows, that can cost a few bucks or hundreds of dollars. Less than half of Delta’s passenger revenue now comes from selling regular coach tickets—something that flipped this year.

The lucrative trade off is a reversal from decades when upstart carriers forced heavyweights to try to match their low prices without hemorrhaging cash. Now, the aviation titans are riding a wave of demand for premium tickets, far-flung locales, and revenue from lucrative co-branded credit cards.

“The ultralow-cost carriers built a better mousetrap than us for customers that only cared about price,” United Chief Executive Scott Kirby acknowledged earlier this year. But that’s no longer the case: “We just are winning. It is structural. It is permanent.”

Bigger airlines are wielding their cheaper-fare options as a competitive weapon. United said that volumes in its bare-bones basic economy—where passengers aren’t allowed a carry-on bag—were up 21% in the third quarter from a year earlier.

After losing over $2 billion since the start of the Covid-19 pandemic, Spirit’s new playbook calls for selling tickets that come with extras such as free Wi-Fi, carry-on bags, snacks and drinks, an adjacent empty middle seat, and more legroom. The carrier said its data is showing that new options are resonating with fliers. Other budget carriers are doing the same.

“We had to change the game we were playing to try to compete better, because they were competing better,” Matt Klein, Spirit’s chief commercial officer, said of Spirit’s bigger competitors.

For years, upper class seats were basically loss leaders for airlines. Most customers didn’t shell out to sit in swankier sections, but sometimes got upgraded as a reward for flying a lot, even on cheap tickets.

At Delta, paying customers accounted for 12% of its domestic first-class cabin 15 years ago. To nudge more passengers to pay for first class, Delta did something counterintuitive: It began selling those seats at somewhat cheaper prices.

After the pandemic, the airline found that travelers, including leisure fliers, were more willing to buy the seats. Now around three-quarters of the cabin is paid for.

Premium sections now occupy a larger share of Delta’s plane seats—around 30% currently, compared with roughly 10% two decades ago.

Some airline executives believed that travelers would soon return to their thrifty ways once long-sought trips occurred and they burned through pandemic savings. That wasn’t the case.

Coming out of the pandemic, United also aspired to a fancier image. The carrier is outfitting planes with seat back screens and bluetooth technology—improvements that burnish the airline’s image, Kirby has said. And with a massive aircraft order in 2021, the airline said it would eventually boost premium seats by about 75% per departure. The airline has said its premium demand is growing more quickly than non-premium.

“To give them credit, Delta proved that air travel is not a commodity,” Kirby said at a conference in March.

Michael Pomposello, who runs a digital-advertising firm in New York, said it’s often worth paying for a better class of service.

“It achieves the absence of discomfort,” he said.

The industry is piling in. American Airlines is increasing premium seating on its planes and CEO Robert Isom said the portion of travelers who are paying to sit in premium cabins is “historically high.”

Alaska Air is also installing more first-class seats on planes, boosting the share of premium seats to 28% from 25%.

Starting in 2026, those who have booked the cheapest fares on Southwest flights will have seats assigned before departure, while people buying pricier tickets will be able to pick theirs at booking. Today, no seats are assigned so anyone has a shot at their favored seat, though customers can pay for options to get a better spot in the boarding line.

The airline is also retrofitting its cabins so about a third of seats will have extra legroom, for those willing to pay more. And a number of standard seats will be deemed “preferred” (read: not free) due to their locations closer to the front of the plane.

“What you’re seeing actually is the transition of the airplane cabin to look a lot more like American society,” said Vik Krishnan, an aviation consultant at McKinsey.

The selling strategy extends beyond the physical cabin.

United, Delta and American have upward of five fare options on long-haul routes, ranging from the bare-bones to the most luxurious. They also sell add-on features like priority security-line access, and the option to get a full refund as opposed to a flight credit if a passenger cancels.

Delta said this week that it wants to go further. The airline said it’s still experimenting and declined to say exactly what other add-ons there could be, but said that each of its cabins will likely have “good,” “better” and “best” options. Delta’s starting in its main cabin and will be testing options in its Comfort+ section, a step above coach, by the end of next year.

The next step could be deconstructing the business-class ticket. Those pricey fares generally come with all the extras—checked bags, the ability to select a seat, and in the case of international tickets, access to airport lounges. That could change.

Some overseas airlines already offer tiered business-class service. Air France-KLM, a Delta partner, has options on some routes such as “Business Light” and “Business Flex.” Business Light offers passengers only one checked bag and no lounge entrance while Business Flex is a refundable ticket and includes seat selection.

German carrier Lufthansa’s new Allegris cabin configuration includes several business class seating options, most of which will come at added cost. Think an extra-long bed, additional privacy, or surfaces for getting work done.

CEO Carsten Spohr said next year the airline will “see new ancillary revenue streams on business class where, historically, of course, we had none.”

The key for U.S. carriers will be to avoid alienating their high-paying customers by charging them for services that were once included, or annoying them with a deluge of offers. Delta executives said their goal is to provide more choices, not to take features away.

Some consumers are skeptical.

“I just think it’s a money grab,” said Daniel Rivera, 37, an X-ray technologist in Pensacola, Fla. He often flies in Delta’s Comfort+ or Premium Select cabins and fears that the changes will mean he has to pay more for the amenities that are currently included. “It should just come the way it comes now,” he said.

Meta loses ground to Bluesky as users abandon Elon Musk’s X

Social media giant’s Threads app makes changes as smaller competitor to X surges

Meta’s Threads is losing ground to social media start-up Bluesky in capitalising on the exodus of users from Elon Musk’s X following Donald Trump’s election.

Since election day, app usage of Bluesky in the US and UK skyrocketed by almost 300 per cent to 3.5mn daily users, according to data from research group Similarweb. The site was boosted as academics, journalists and left-leaning politicians abandoned X, whose billionaire owner is a prominent supporter of the president-elect.

Prior to November 5, Threads had five times more daily active users in the US than Bluesky, which has just 20 full-time staff and was initially funded by Twitter when Jack Dorsey was its chief executive. Now, Threads is only 1.5 times larger than its rival, Similarweb said.

Bluesky’s growth in the US and UK comes after Meta chief executive Mark Zuckerberg chose to deliberately reduce the prominence of political content across its apps, including Facebook and Instagram.

That move was widely interpreted as an attempt to rise about the partisan fray and avoid being dragged into debates over free speech. Trump, who has long castigated social media platforms for allegedly censoring conservative voices, previously labelled Meta “an enemy of the people” and threatened Zuckerberg with jail were he to return to office. Last month, Trump said he liked Zuckerberg “much better now” because he was “staying out of the election”. 

This contrasts with X, which under Musk’s ownership, has cut back content moderation to allow more freewheeling content to proliferate.

Since its launch in July last year, Threads has prioritised engaging content from accounts that users did not follow, a model closer to that of its photo app Instagram. However, Meta on Thursday backtracked on that choice.

This week, it also swiftly rolled out the ability for users to curate “custom feeds” around topics or people they want to follow, mimicking existing Bluesky capabilities, after testing the feature for only five days.

The moves sparked speculation that Meta was trying to curb Bluesky’s rise.

Meta said: “We regularly roll out new Threads features and updates — dozens in the last few months alone — to serve the now over 275 million Threads users. And we’ll continue to share more as we work to serve this growing community.”

Experts have noted the Threads timeline was not effective for people seeking content on real-time events.

“There is this moment here where they are going to have to make this decision, whether to bring back political content and real-time [conversation],” said Katie Harbath, a former policy director who worked on Meta’s elections strategy for a decade. “Particularly if these Bluesky numbers stay up.”

Adam Tinworth, a lecturer in journalism at City St George’s, University of London described Bluesky as “essentially a Twitter spin-off” and so a “natural replacement” to those disillusioned with X.

“Threads is a very different proposition [and] fluffed it completely during the US election because it pushed news and politics out of the feed,” he said.  

Bluesky was unveiled by Dorsey in 2019 with the aim of developing a single standard, or protocol, upon which social platforms and other developers could build more tailored offerings.

Now led by digital rights activist and software engineer Jay Graber, users can post short messages and images in an interface much like that of X. Growth has been helped by a new feature called “starter packs”, which allow users to follow groups of accounts curated by users with the click of a button.

However, the platform has also suffered from increased outages and glitches as it grows quickly, with questions about how it will create a working business model in the future. Initially funded by Twitter, it raised $15mn in venture funding last year, and $8mn the prior year. 

Adam Mosseri, the head of Threads, said last week that the app had gained “more than 15mn sign-ups in November alone, and [was] going on three months with more than a million sign-ups a day”. But he added: “Now we have a lot more work to do.”

A key indicator has fallen below zero for the first time as market braces for higher German borrowing

Investors are betting on reform of the “debt brake” enshrined in Germany’s constitution as markets brace for an increase in borrowing by Berlin.

A sell-off in Germany’s 10-year debt in recent weeks has seen its yield trade above the rate for euro interest rate swaps of the same duration for the first time, a key market indicator that is sensitive to expectations of future bond issuance.

The move ahead of federal elections in February signals investors’ belief that “a snap election means debt brake reform”, according to Tomasz Wieladek, chief European economist at asset manager T Rowe Price. “That in turn would mean more issuance.”

So-called “swap spreads” have long been positive in Germany — unlike in other major bond markets where they have often traded below zero — meaning investors have been willing to accept a lower return to hold Berlin’s debt relative to expectations of long-term interest rates.

This unusual feature of Germany’s bond market has been a function of the relative scarcity of Bunds, which serve as the benchmark risk-free asset for the entire euro area and have often been in short supply due to the country’s reluctance to borrow heavily.

The debt brake caps new borrowing by the federal government at 0.35 per cent of GDP, adjusted for the economic cycle, and also bars Germany’s 16 individual states from taking on any new debt at all.

It was written into the German constitution in 2009 and took effect in 2016, though it was suspended during the Covid-19 pandemic and again after Russia’s full-scale invasion of Ukraine, before being reinstated this year.

But economists have often criticised the rule as being too inflexible.

And it has become a bone of contention between the left and right in German politics, the former arguing it should be reformed to allow major investments in areas such as infrastructure and the latter insisting it must be maintained to protect future generations against a huge debt burden.

The debt rule was one of the main reasons why Chancellor Olaf Scholz’s three-party coalition fell apart earlier this month.

Scholz, a social democrat, demanded his finance minister Christian Lindner, leader of the fiscally hawkish FDP party, suspend the debt brake to allow for more aid to Ukraine. Lindner refused, so Scholz sacked him. The FDP then quit the government.

Scholz, who has now lost his parliamentary majority, will table a confidence vote on December 16, paving the way for early elections on February 23 which the opposition Christian Democratic Union is widely expected to win.

The CDU’s leader, Friedrich Merz, had long considered the debt brake sacrosanct. However, last week he said for the first time that it could be reformed.

Speaking to a business conference last Wednesday, he said only a few articles of the constitution were immutable. “Everything else can be debated,” he said.

The decisive question, he added, was what the new borrowing was used for. “Is the result that we spend more money on consumption and welfare? Then the answer is no,” he said. “Is it important for investments, is it important for progress, is it important for our children’s’ livelihood, then the answer can be different.”

Rohan Khanna, head of European rates research at Barclays, said the switch-around in yields and swaps was the culmination of a broader shift in Germany’s economy from one of high growth and low borrowing, to low growth and higher borrowing, making it more like other Eurozone markets.

It is a “reflection of the fact that the German bond market broadly and the economy ideologically have lost their specialness,” he said.

Covid lockdown sceptic is frontrunner to lead Trump health agency

Jay Bhattacharya at the NIH would be the latest ally of Robert F Kennedy Jr to take a role overseeing US healthcare

Stanford University professor and Covid-19 lockdown sceptic Jay Bhattacharya has emerged as the frontrunner to run the National Institutes of Health, according to two people familiar with the matter.

The nomination of Bhattacharya, who rose to prominence during the pandemic for opposing lockdown restrictions, would put another ally of Robert Kennedy Jr, the vaccine sceptic who is Trump’s pick to run the US health department, in charge of one of the country’s most powerful public health agencies.

With an annual budget of $48bn, NIH is the biggest government-funded biomedical research agency in the world, providing more than 60,000 grants a year to support medical and scientific research.

Senior officials within Trump’s transition team have spoken with Bhattacharya, who runs Stanford’s Center on the Demography and Economics of Health and Aging, in recent days, the people said.

The pick for NIH director is likely to be announced in the coming days but plans may change and another candidate may emerge, the people added.

Representatives for Trump’s transition team and Kennedy did not immediately respond to requests for comment. Bhattacharya could also not be reached for comment.

Late on Friday, Trump’s transition team announced a flurry of high profile nominations, including Treasury secretary, Labor secretary and three key health official picks.

Marty Makary, a Johns Hopkins surgeon who opposed the Covid-19 vaccine mandate, was nominated to run the Food and Drug Administration. Physician and former GOP congressman Dave Weldon, who has cast doubts on vaccine safety, was tapped to run the Centers for Disease Control and Prevention.

Bhattacharya appeared alongside Kennedy at a campaign event during his independent campaign for President, during which he unveiled his running mate Nicole Shanahan.

Since backing Trump’s bid for presidency in August, Kennedy has been given significant influence over the president’s healthcare policy agenda as part of his “Make American Healthy Again” campaign. Trump’s choice of Fox News medical contributor Janette Nesheiwat was the only one of the health appointees so far not close to Kennedy, the people added.

Alongside two other professors, Bhattacharya became the face of the “Great Barrington Declaration” during the pandemic, an open letter published in October 2020 opposing widescale lockdowns and instead calling for restrictions focused on at-risk groups, such as elderly individuals. The letter provoked criticism from then-NIH director Francis Collins, who dismissed the authors as “fringe experts”.

Much of Bhattacharya’s public criticism of the NIH has focused on how Collins and Anthony Fauci — former director of the US National Institute of Allergy and Infectious Diseases, a division of NIH — responded to the pandemic.

Bhattacharya told the Financial Times this month that he supported term limits for NIH directors. “I think there’s too much concentration of power in the hands of too few people: there should not be another Tony Fauci,” he said.

Kennedy’s nomination as Health and Human Services secretary has worried the pharmaceutical industry and public health bodies because of his sceptical views on vaccines, his stated aim to eliminate “entire departments” within the FDA and his plans to remove fluoride from drinking water. However, Kennedy has promised not to limit vaccine access.

In an article on digital media site UnHerd published last week, Bhattacharya brushed away concerns about some of Kennedy’s debunked claims, saying: “Kennedy is not a scientist, but his good-faith calls for better research and more debate are echoed by many Americans.”

He added that “the American public voted for disrupters like RFK Jr in 2024, and academic medicine now has an opportunity to atone for its Covid-era blunders.”

Hospitals should check staff use of WhatsApp to ensure patient safety, UK watchdog says

Information Commissioner warns improper use of popular messaging app could be ‘hugely problematic’ for NHS

Hospitals in England should carry out spot checks on doctors’ and nurses’ phones to ensure they are safely using WhatsApp to discuss patient care, the head of the data watchdog has said.

John Edwards, Information Commissioner, told the Financial Times that use of the messaging app could be “hugely problematic” for NHS staff and patients if not used “properly”.

His intervention came after the FT reported last month that frontline health service workers routinely use WhatsApp on personal phones to share confidential patient details, test results and medical documents, prompting experts to warn of a “wild west” for data.

“We have to recognise that [the use of WhatsApp] is a reality,” Edwards said in an interview, but “it needs to occur out in the open and in a way that is in accordance with policies and procedures”.

Citing the Russian proverb “trust but verify”, Edwards added: “I am a big fan of audit and particularly random audit. So from time to time, you just go and say to somebody: ‘I need to look at your WhatsApp, I need to check the settings.’ That’s going to remind people.” 

After years of uncertainty around the use of WhatsApp, the most popular messaging app in the UK, NHS England published official guidance for staff in 2020. It allows the use of mobile messaging to discuss patients but warns that staff “should take sufficient steps to safeguard confidentiality”.

The guidance states that any clinical decisions made on a messaging app must be added to a patient’s formal health record “as soon as possible” and that staff should “delete the original messaging notes”.

Healthcare workers are also advised to unlink the app from their phone’s photo library and disable message notifications when the screen is locked.

Frontline health workers said WhatsApp was an efficient workaround for official systems that were often siloed, making it difficult to access information quickly. However, they also conceded that not all staff followed the guidance at all times and that there was little oversight.

In its guidance for public authorities, the Information Commissioner’s Office says “records management policy should set out mitigating measures for staff if they use non-corporate communications channels for official business”.

For example, if “staff use instant messaging services, then auto-delete options should be in line with the retention policies of your official systems”.

Asked if hospital management should be able to look at staff phones if they were being used to share NHS patient data, Edwards said: “I am sure that they can say ‘I need to check NHS data on your system and you need to show it to me’.”

Used correctly, WhatsApp’s end-to-end encryption may “be more secure than many official systems or sanctioned systems” to share data, Edwards noted, since it allows only the sender and recipients to read messages.

“Two things can be true at the same time,” he added. “These technologies can be used safely and these technologies can create significant risks.”

NHS England has previously said individual trusts must assume responsibility for their own policies on the use of mobile apps, and that they should take “sufficient steps” to safeguard confidentiality.

“My expectation of a trust is that they need to have the policies and they need to be reminding staff of them regularly,” Edwards said.

“Just as they don’t grab hold of any new medical device and start using it on patients without having a process of checking and regulation, [clinicians and trusts] need also to be satisfying themselves that new communications and record-keeping channels can be used safely, before doing it,” he added.

NHS England said trusts were “responsible for their own policies on the use of communication tools, including mobile apps, and should take sufficient steps to safeguard confidentiality through regular training and staff reminders around good practice, including current ICO guidance”.

UK wealth managers warn Rachel Reeves over plan to levy inheritance tax on pensions

AJ Bell boss tells chancellor that ‘complex and costly’ Budget proposal will ‘undermine’ retirement savings system

Rachel Reeves’ plan to levy inheritance tax on pensions will “undermine” the retirement savings system and risk leaving beneficiaries with higher costs and lengthy delays before receiving their money, UK wealth managers have warned.

In a letter seen by the Financial Times, Michael Summersgill, chief executive of investment site AJ Bell, told the chancellor that the Budget proposal was “arguably the most complex and costly way of raising tax from unused pensions on death”.

“If the government presses ahead with the proposals as written, it will risk fundamentally undermining the UK pensions system,” he warned, noting that there were “simpler” ways for the Treasury to raise money via the retirement savings system.

The government said in the Budget that from April 2027, pensions would no longer be exempt from inheritance tax — a move that could raise almost £1.5bn a year by 2030, according to official estimates.

The changes will result in the “double taxation” of unused pension funds on death after the age of 75 because retirement pots will be subject both to inheritance tax (IHT) and income tax.

Summersgill said the changes risked leaving higher-rate taxpayers paying, in effect, a rate of 64 per cent on an inherited pension. He also warned that beneficiaries could face delays in receiving the pension money, since unused retirement pots will have to go through probate before being distributed from April 2027.

“At what will be an emotionally challenging time for those close to the deceased . . . the process of distributing much-needed support will end up stalled in a much more complicated probate process,” he told Reeves.

The warning comes as wealth managers that offer pension advice such as AJ Bell, Hargreaves Lansdown and Quilter rush to rethink retirement savings plans.

The government’s proposals would require pension providers to use a “personal representative” of the deceased pension owner to calculate how much of their pot could be exempt under the nil-rate band — the amount of an estate that is free from inheritance tax.

But this extra administration would raise costs, Summersgill warned, adding that completing the process in six months — the time limit for paying inheritance tax — would “not just be difficult” but “in many cases . . . prove impossible”.

Delays would be most likely when the deceased had not left a will and had several pension pots from multiple employers. Pension funds that hold hard-to-sell investments could exacerbate delays. 

Instead of bringing pensions within the IHT regime, Summersgill called on Reeves to scrap a quirk in the system where beneficiaries do not have to pay income tax on the proceeds if the pensioner dies before the age of 75.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, the UK’s largest “DIY” investment site, said: “If the process takes longer than six months to pay the inheritance tax bill then HM Revenue & Customs will start to charge interest, which will add extra headaches for families at what is already an extremely difficult time.”

Jon Greer, head of retirement policy at Quilter, said that while the current interest rate on outstanding IHT was 7.25 per cent, it had previously risen as high as 7.75 per cent.

“At present, pensions offer significant tax benefits, and pulling the rug out from under those who have planned their futures based on the current framework feels retrospective and unfair without some form of transition,” he said. “The government must strike a balance between simplification, fairness and operational feasibility.”

A Treasury spokesperson said inherited pensions will be subject to “inheritance tax once and, if due, income tax once, as is the case with other savings”.

“We continue to incentivise pensions savings for their intended purpose of funding retirement instead of them being openly used as a vehicle to transfer wealth.”

Price-conscious buyers hunt for deals while others seek goods that can hold value in times of uncertainty

At a cavernous underground store near Shanghai’s Hongqiao airport, shoppers peruse aisles stacked with goods from some of the biggest names in the world of luxury — Louis Vuitton, Dior and Gucci.

But in contrast to the gleaming malls downtown, the items here are not brand new. “Here are gift-ready items . . . with most of their original packaging,” says one sign. “Be yourself,” says another, “and think second-hand first.”

The ZZER store is a bricks-and-mortar incarnation of a thriving online second-hand market for luxury goods, at a time when the wider industry has come under mounting pressure in what was once a booming market.

Luxury groups including Cartier owner Richemont, Gucci parent Kering and LVMH reported third-quarter sales drops in the Asia-Pacific region outside Japan, which is dominated by China. Richemont’s chief Nicolas Bos has said that the Chinese consumer slowdown “is probably a mid- to long-term phenomenon”, while Kering warned profits would halve this year.

While concerns over demand for new luxury products in China are growing amid heightened fears over the economy, there are signs of a strong appetite for second-hand goods. In September, luxury resale platform Hongbulin was acquired by Zhuanzhuan Group, an online marketplace for used goods.

The wider market surpassed Rmb1tn ($138bn) in 2020, compared with just Rmb300bn in 2015, according to a report from consulting firm Frost & Sullivan and Tsinghua University.

Although there is a lack of recent data on the second-hand luxury market, there has been a rise in users of online platforms such as ZZER and Xianyu that provide a venue for users to resell luxury goods for a commission.

The ZZER store in Shanghai, which opened its doors in 2022, alone says it receives 5,000 new products a day, highlighting the sheer volume of handbags and high-end clothing circulating the country.

On Xianyu, users comment on aggressive bargaining, suggesting heightened price sensitivity among consumers.

Jacob Cooke, chief executive of Beijing-based marketing group WPIC, pointed to “growing interest in second-hand luxury as a cost-effective alternative” during the Covid-19 pandemic, given its economic pressures and travel restrictions that prevented people from buying goods abroad.

“We’re still seeing economic pressures post-pandemic,” he added.

“People like us who are close to the middle class, who have a salary of over Rmb10,000 a month, might be reluctant to invest in luxury goods,” said a 28-year-old shopper at ZZER who gave her name as Li and was visiting Shanghai from Xi’an. “[We might prefer] to save money.”

While some price-conscious buyers such as Li are looking for deals, others are searching for high-end products that can “preserve their value or even appreciate”, according to Mark Tanner, managing director of Shanghai-based marketing agency China Skinny. Tanner noted that there was a preference among Chinese second-hand luxury goods buyers for “the higher end of the market”.

In ZZER, a bag labelled Louis Vuitton is on sale for Rmb4,762, compared with an original price of Rmb14,300.

A few miles away in Shanghai’s French Concession neighbourhood, many shops specialise in second-hand bags. In one, a Chanel bag dating from about 2014 is on sale for Rmb35,800, down from Rmb41,000 originally.

As with a distinct grey luxury market that relies on new products brought in from overseas, some question the authenticity of the products on sale. ZZER, which started as an online app, allows sellers to list goods at prices they select and has its own authentication process. The company declined to comment.

For Li, it was her first time in a second-hand store, which she discovered on the Chinese social media app Xiaohongshu. “It’s not that I can’t afford luxury goods, but I think the value for money here is very high,” she said. “If such a store opened in Xi’an, I’d probably go after work.”

Li added: “They did not have this kind of business model before the pandemic.”

The second-hand market “saps demand” from new products, Cooke suggested, and could “hurt brand equity”.

But it at least attracts customers who might never have made luxury purchases, said Federica Levato, a partner at Bain who leads the consultancy’s global luxury and fashion practice. “[It shows] that a big chunk of the population has the willingness to buy these products,” she said.

Deep in the heart of the Shanghai store, next to handbags branded as Hermès and Chanel, one woman said she heard about the store after her friend sold items there.

One shop assistant, gesturing to a T-shirt, said some of the goods had “never been worn”. The company declined to comment.

ZZER’s Shanghai store has also attracted international customers hunting for bargains. “There’s nothing like this where we are . . . nothing to this scale,” said Conor McLernin, 27, who was visiting Shanghai from Australia.

Russia recruits Yemeni mercenaries to fight in Ukraine

Mysterious Houthi-linked company duping men into joining Moscow’s war machine

Russia’s armed forces have recruited hundreds of Yemeni men to fight in Ukraine, brought by a shadowy trafficking operation that highlights the growing links between Moscow and the Houthi rebel group.

Yemeni recruits who travelled to Russia told the Financial Times they were promised high salaried employment and even Russian citizenship. When they arrived with the help of a Houthi-linked company, they were then forcibly inducted into the Russian army and sent to the front lines in Ukraine.

The appearance of the rag tag group of — mainly involuntary — Yemeni mercenaries in Ukraine shows how the conflict is increasingly sucking in soldiers from abroad as casualties rise and the Kremlin tries to avoid a full mobilisation. They include mercenaries from Nepal and India and some 12,000 North Korean regular army troops who arrived to take part in combat against Ukrainian forces in the Russian province of Kursk.

The Yemeni recruitment effort also underscores how Russia, driven by its confrontation with the west, is growing closer to Iran and allied militant groups in the Middle East. The Houthis, a militant group backed by Tehran, disrupted global supply chains with a missile campaign targeting shipping in the Red Sea after the start of the war in Gaza last year.

US diplomats say the entente between the Kremlin and the Houthis, unimaginable before the war in Ukraine, is a sign of how far Russia is willing to go to extend that conflict into new theatres including the Middle East.

An oil tanker on fire in the Red Sea after it was attacked by Houthi rebels © Eunavfor Aspides/Handout/Reuters

US special envoy for Yemen Tim Lenderking confirmed Russia is actively pursuing contacts with the Houthis and discussing weapons transfers, though he declined to be more specific.

“We know that there are Russian personnel in Sana’a helping to deepen this dialogue,” he said. “The kinds of weapons that are being discussed are very alarming, and would enable the Houthis to better target ships in the Red Sea and possibly beyond.”

Maged Almadhaji, the head of the Sana’a Center for Strategic Studies, a Yemen-focused think-tank, said Russia too is taking an interest “in any group in the Red Sea, or in the Middle East, that is hostile to the US”. He said that the mercenaries are organised by the Houthis as part of an effort to build links to Russia.

A spokesman for Ansar Allah, the official name for the Houthi movement, did not respond to a request for comment. Mohammed al Bukhaiti, a member of the Ansar Allah politburo, told the Russian news website Meduza earlier this month that they were in “constant contact” with the Russian leadership “to develop these relations in all areas, including economics, politics and the military”.

Few of the Yemeni mercenaries have any training and many do not want to be there, according to Farea al Muslimi, an expert on the Gulf region at Chatham House. “One thing Russia needs is soldiers, and it’s clear the Houthis are recruiting, [for them]” Muslimi said, describing it as an overture to Moscow. “Yemen is a pretty easy place to recruit. It is a very poor country.”

Contracts signed by the Yemenis, seen by the FT, listed a company founded by Abdulwali Abdo Hassan al-Jabri, a prominent Houthi politician. Registered in Salalah, Oman, the Al Jabri company’s registration documents identify it as a tour operator and retail supplier of medical equipment and pharmaceuticals.

The recruitment of Yemeni soldiers appears to have begun as early as July. One enlistment contract seen by the FT was dated July 3, and was countersigned by the head of a selection centre for contract soldiers in the city of Nizhnii Novgorod.

One recruit called Nabil, who exchanged text messages with the FT, estimated that he was part of a group of around 200 Yemenis conscripted into the Russian army in September after arriving in Moscow.

While some were experienced fighters, many had no military training. They were tricked into travelling to Russia and signed enlistment contracts they could not read, he said.

Nabil — who asked that his real name not be used — said he was lured by promises of lucrative employment in fields such as “security” and “engineering”, hoping to earn enough to complete his studies.

A few weeks later, he was holed up with four other recently arrived Yemenis in a forest in Ukraine, dressed in military fatigues with Russian insignia, their faces masked by scarves. “We are under bombardment. Mines, drones, digging bunkers,” said one of the men in a video shared with the FT, adding that one colleague had attempted suicide and been taken to a hospital. 

The men in the video said they were carrying wooden planks through a mine-infested forest, apparently to build a bomb shelter. “We don’t even get five minutes to rest, we are so tired.”

Another message sent a few days later said they had no winter clothes. Nabil’s uncle who lives in the UK said last week his nephew was recently injured and in hospital, but was unable to share more details.

Abdullah, another Yemeni who asked that his real name not be published, said he was promised a $10,000 bonus and $2,000 per month, plus eventual Russian citizenship, to work in Russia manufacturing drones.

Arriving in Moscow on September 18, Abdullah said his group was forcibly taken from the airport to a facility in a place five hours from Moscow where a man, speaking in simple Arabic, fired a pistol over their heads when they refused to sign the enlistment contract, which was in Russian.

“I signed it because I was scared,” he said. They were then put on buses to Ukraine, given rudimentary military training and sent to a military base near Rostov, near the Ukrainian border.

Many of the original group of arrivals died in Ukraine, Abdullah said, brought to the war by “scammers who traffic in human beings”. “It was all a lie.”

Al Jabri General Trading & Investment Co SPC did not respond to several phone calls and emails sent to the address listed on its corporate registration documents. Al Jabri, its founder, was also unreachable on his phone number.

Al Jabri is a prominent politician, and member of the Yemeni parliament which was split in 2015 by the civil war, during which he sided with the Houthis. He is a major general in the faction of the army allied with the Houthi Supreme Political Council, and was one of 174 Houthi leaders sentenced to death in absentia by a military court representing the pro-Saudi, UN-recognised government in Aden, in 2021 for his role in a Houthi-led coup in 2015.

The Houthis have sent at least two official delegations to Moscow this year, meeting with senior Kremlin officials such as Mikhail Bogdanov, the Kremlin’s envoy to the Middle East.

US diplomats have said Moscow provides a range of help to Houthis, including targeting data for some missile launches and has been discussing arms sales, including advanced anti-ship missiles, though experts say there is no evidence any weapons sales have gone ahead.

“We’ve seen report that there are discussions around [anti-ship missiles] and other types of lethal equipment that would augment what the Houthis are already able to do,” said Lenderking.

On the subject of Russian recruitment of Yemeni mercenaries, Lenderking said he had seen reports. “I would say that it definitely concerns us,” he said. “It is part of this trend, and it’s not something that would necessarily surprise us.”

Yemen’s ambassador to Moscow Ahmed Salem Wahishi, who represents the Saudi-backed Yemeni government, referred questions about the Russian army’s recruitment of Yemenis to the embassy’s military attaché, who did not respond to phone calls and messages. 

Abdullah was one of 11 Yemenis who was allowed to leave Russia for Yemen via Oman earlier this month, thanks largely to the efforts of the International Federation of Yemeni Migrants, who put pressure on the Yemeni government after a public outcry. 

Ali Al-Subahi, the chair of the Federation’s board, said “this is a humanitarian issue that unites all Yemenis, regardless of political affiliation”. He stressed that hundreds of Yemenis are still in Russia. “We are following up on their removal from the battlefields,” he said.

Western miner Eramet sees no profits in nickel without Chinese partners

Amid falling prices for metal, French group’s Indonesia head says Chinese partners have become expert in cost efficiencies

The head of French miner Eramet’s Indonesian operations has said it has become impossible for western companies to run profitable nickel operations without partnering with their Chinese counterparts, amid a slump in prices for a metal critical to electric vehicle batteries. 

In a Financial Times interview Jérôme Baudelet, chief executive of Eramet Indonesia, said Chinese technology, expertise and equipment were essential to produce nickel at competitive prices. 

“I don’t think you can do without [Chinese companies],” he said. “The risk is not being competitive and to have a much higher capex. So you have to be pragmatic.” 

Eramet is one of a handful of western companies in the nickel industry in Indonesia — the world’s biggest producer of the silvery-white metal essential for stainless steel as well as EV batteries. It operates the Weda Bay mine in Indonesia with its partner, the Chinese nickel company Tsingshan Holding Group.

Earlier this year, Eramet and Germany’s BASF cancelled plans for the joint development of a $2.6bn nickel-cobalt refinery complex in Weda Bay, saying there were adequate supplies of battery-grade nickel in the market. The project was set to be the only nickel plant in Indonesia with 100 per cent western ownership.

Baudelet said the Eramet-BASF project no longer made economic sense due to “difficulties” in the market. Nickel prices have been depressed for two years due to slowing demand growth and Indonesian supplies continuing to increase. 

Eramet remains open to nickel processing opportunities with a partner but the project would have to be associated with mining, he said. 

“You can actually be profitable as a western company if you have the plant built by a Chinese [company], and maybe get the operations done in that particular plant by the Chinese, because they have built a lot of expertise,” said Baudelet. 

He added that Chinese companies’ high-pressure acid leach (HPAL) technology — extracting battery-grade nickel from low-quality ore — was essential for building nickel processing plants. “They also have economies of scale in all the equipment they build for those plants,” he said. 

Over the past two decades, HPAL projects by western companies in New Caledonia, Australia and elsewhere have failed due to high costs and technical issues. But new Chinese technology has enabled such plants to be built quickly and in a more cost-efficient way.

Chinese companies dominate nickel processing in Indonesia, which has the world’s largest nickel reserves. They invested billions of dollars in south-east Asia’s largest economy after Jakarta banned nickel ore exports in 2020 — a move that forced foreign companies to set up refineries onshore.  

Western companies are far fewer. Last year US carmaker Ford partnered with Vale Indonesia and China’s Huayou Cobalt to build a nickel smelter. The FT reported earlier this year that Stellantis was in talks with Huayou for another smelter. 

Indonesia now accounts for 57 per cent of global refined nickel production, and its share is forecast to rise to 69 per cent by the end of the decade, according to Benchmark Mineral Intelligence.

The decline in prices and Indonesia pressing ahead with nickel production has triggered mine closures in other countries. 

Baudelet said Eramet would focus on opportunities primarily in mining and exploration as part of its expansion plans in Indonesia. “All that capacity installed in Indonesia will require additional ore in the coming years, and we believe there’s a need for more exploration,” he explained.

Baudelet also said the US was making a mistake by not signing a critical minerals agreement with Jakarta to make Indonesian nickel eligible for incentives under the Inflation Reduction Act. President Joe Biden’s IRA seeks to curb Beijing’s influence in the EV supply chain — though its fate remains uncertain under a Donald Trump presidency.

Currently, most Indonesian nickel does not benefit from the IRA due to the dominant presence of Chinese companies, but the country has been taking steps to qualify. 

“When you have a country that will soon be producing 70 per cent of the world’s nickel . . . and if you just don’t qualify them as a potential supplier, you somehow shoot yourself a little bit in the foot,” Baudelet said. “That’s the most competitive nickel on the planet.”

Sharp raising of threshold before earnings are taxed is key measure in first major initiative of new Ishiba government

The newly formed government of Prime Minister Shigeru Ishiba has approved a $250bn economic stimulus package aimed at giving Japan a “sense of wellbeing” as households battle rising prices and the country adjusts to the idea of life with inflation.

The giant stimulus plan, which envisages support for the AI and semiconductor industries along with cash handouts and energy subsidies for lower-income households, comes as financial markets have become increasingly confident that the Bank of Japan will raise interest rates at its meeting in December.

The scale of the package, and the debate over its necessity, will now be a key focus of a draft supplementary budget that will be submitted to the extraordinary session of parliament being convened later this week.

The package in its current form includes a large and potentially transformational rise in the minimum salary threshold for income tax from its current $6,640 — a level that has remained unchanged for 29 years and one that critics claim has discouraged large parts of the population from fully joining the workforce. 

By setting the threshold to $11,500, argue its proponents, huge numbers of Japanese — especially women — who currently tailor their work and earnings to come in just below the income tax trigger-level will work longer, earn more and consequently push more disposable income into an economy facing long-term pressures of a shrinking, ageing population.

Critically, the income tax plan is the signature initiative of a small opposition party — the Democratic People’s Party — on which Ishiba’s government now depends. The inclusion of the policy, said analysts, highlights the fragility of the new prime minister’s position and his forced reliance on populist initiatives.

“The most important thing is to raise wages for all generations,” Ishiba told reporters on Friday, ahead of the stimulus package being approved by the Cabinet Office.

The DPP’s proposal has triggered fierce debate within the ruling coalition and beyond, particularly because tax revenue would fall by about $45bn under the new threshold, according to a government estimate. Critics see the idea as reckless fiscal expansion, and as a source of greater income inequality. Others fear it could stoke too rapid an increase in inflation.

Ishiba is the latest Japanese prime minister to make wage growth a stated focus of his government, as the country continues to step away from its decades of deflation and attempts to lock in a cycle of rising incomes and moderate inflation.

A recent Reuters survey, said analysts, offered grounds for optimism: 51 per cent of the companies surveyed said they planned to raise wages by at least 3 per cent in the financial year that began in March, up from 37 per cent who had said that in the previous year’s survey. Japanese companies have raised wages by an average 5.1 per cent this year — the largest in three decades.

The stimulus package is Ishiba’s first major initiative since he won an internal party vote to become prime minister in October, then immediately jeopardised that position with a disastrous snap general election in which the ruling bloc lost control of parliament. 

Ishiba survived, but his Liberal Democratic Party and its junior coalition partner Komeito now rule with the co-operation of the DPP, leaving the prime minister on shaky ground. He flipped from fiscal hawk to dove almost immediately on being elevated to prime minister; political analysts already question whether Ishiba will last a full year in the top job.

The ¥39tn stimulus plan, of which roughly a third will be driven by spending from the government’s general account and a significant portion coming from projected private sector spending, is the latest in a long line of vast stimulus packages that have rekindled concerns around fiscal discipline and Japan’s status as the developed country with the largest ratio of public debt to GDP at 263 per cent.

Stefan Angrick, senior economist at Moody’s Analytics, said that while Japanese fiscal packages always look enormous, the actual fiscal expansion was typically smaller than the headline numbers suggested.

The current hand-wringing among domestic media and politicians on the topic of the income tax threshold reflected the fact that Japan is not yet accustomed to thinking about a world with inflation, he said. Inflation boosts tax revenue, shrinks the budget deficit and erodes the debt stock, he added, meaning the changes the DPP has pushed for could be seen as an effort to slow the fiscal contraction. 

“That doesn’t mean this is the right policy. Raising the threshold for personal income tax collection should strengthen consumer spending and generate demand-driven price pressure. But this comes at a time when the supply-driven inflation surge has yet to fully wear off,” said Angrick.

Prices of energy and food in Japan are continuing to feel the effects of the weak yen, which has fallen further against the dollar since the US presidential election victory of Donald Trump. Masamichi Adachi, chief Japan economist at UBS, is among a growing number of analysts who expect the BoJ to raise its policy rate from 0.25 per cent to 0.5 per cent at its next meeting on December 19. 

“The only condition that the BoJ needs for the rate hike should be market stability . . . and we do not expect significant market turmoil through 19 December,” said Adachi.