>>> Oi to consider all options for telecoms consolidation in Brazil

Oi to consider all options for telecoms consolidation in Brazil 

Oi, the Brazilian telecom, is taking into account all available options for the consolidation of the telecommunications industry in Brazil, according to a newswire report.

When asked about a potential meerger with peer TIM, CEO Bayard Gontijo told Reuters that Oi is not prejudiced against any type of combination.

The company would carry out consolidation efforts not through issuing debt or shares, but from the proceeds of the sale of its assets in Portugal, the Portuguese-language item said.

(Spiegel) Airbus Has Product-Quality Problem, Von Der Leyen Tells Spiegel

(pdf in german attached)
She need reliable figures, says Katrin Suder, no intermediate states. It's Monday night this week, Defense Ministry in Berlin, the Office of the Secretary of State. She Bernhard Gerwert Airbus Defence & Space guest, to professionals. Suder is not amused at all.
     They talk about the A400M, a transport aircraft for the military, which was to fly since 2008. But only at the end of last year, Airbus has delivered the first copy to the Air Force. Five more were to follow later this year. Since last week, it is certain that this will not happen. A series of mishaps galactic scale continues.
     How many machines this year ?, asks Suder. Not no, says Gerwert. Maybe two. Maybe three. When? End of the year, but also the end of the year was still 2015, says Gerwert. Suder said, it is reported, it is irrelevant whether the machine come in December 2015 or in January 2016 and. Is relevant that the machine for a year missing. And the others were still missing longer. Gerwert offers a compensation. Airbus plans to hire the Bundeswehr a factory tanker aircraft A330 with military approval. They wanted to meet the Government and with "Euro Fighter". But it can not replace the A400M. Suder decide instead to spare parts for the old Transall that must fly longer now.
     There are problems with the hull. Which existed earlier, just as there were problems with the engine, the software, the arrival
operation, the loading dock. The only machine that is now in the Air Force in Wunstorf, six years came too late, is equipped worse, but 40 percent more expensive than planned.
     This means that the policy had resigned. But that extradition further delayed Suder makes a bad mood. It is changed to Defense of McKinsey including with arms sales Minister Ursula von der Leyen not as embarrassing as their predecessors. And now, another delay. The A400M is the breakdown bird of the republic. "The measures announced by Airbus renewed delays in the A400M meet the worst possible time," says von der Leyen, "here is far more at stake than the image of an industrial company, it's about Germany's reliability in its alliances."
     In over ten years evolution was absurd much wrong. And even before that, in the years of planning, the project came to a slippery slope, because politicians were not looking for a sensible solution, but a politically appropriate.
     Der Spiegel has the history of the A400M reconstructed from the early plans today. For discussions were held with many stakeholders, politicians, civil servants, a test pilot; also managed to sift confidential reports and documents. The image of a disaster, are responsible for the political calculus, bureaucratic, technical incompetence, lack of control and the monopoly of Airbus arises. It is also about Europe, at the cost of supply
sammenwachsens.
     What has happened around the military transporter, happened and is happening on other projects of the Bundeswehr, the NH90 transport helicopter, during the reconnaissance drone "Euro Hawk". You're late, are much more expensive or do less than expected. This story is therefore also for others. It stands for the problems that must be solved Ursula von der Leyen.
     Sevilla, in October 2014: Thomas Wilhelm sitting in the cockpit of an A400M, which is in a factory of Airbus. Screens, switches, levers, this great obscurity from which the fly is created. I Hope So. A screen is not working. No matter Wilhelm skips the routine. He explains joyful, almost lovingly. He likes this aircraft. His face is narrow, the mustache trimmed precisely, shorn hair short; round wire-rimmed glasses, athletic body. William is a test pilot at Airbus.
     Koblenz, in December 2014: Ronald Ebbers, 49, sitting in a meeting room that is sparsely furnished, tables square, a coffee pot, plastic jars with coffee cream, the great wasteland to grow out of ideas. Ebbers begins his third cup of coffee. "We walk here on coffee," he says. Full-bodied, bald. He was a naval aviator, he now works at BAAINBw, the military procurement office of the Bundeswehr. It developed, tested, one buys. Ebbers is the project manager for the A400M.
     Nothing has the professional lives of William and Ebbers as strongly as this aircraft

The general purpose flyer


3D graphics Facts and figures on the A400M transport aircraft: How much charge it can support? What components are finished - and which still does not? An overview.
convincing. For nearly 20 years, they are concerned with the transport plane, as a pilot, other than official. Both had moments where they could no longer believe
that the military Airbus will ever fly. Now he flies a bit. And both men have a share in it. The history of the aircraft is also theirs.
     The mid-nineties, Thomas Wilhelm sitting in the cockpit of a transport aircraft Transall C-160, the Bundeswehr and fly to Sarajevo. The civil war in the former Yugoslavia has just ended, but still be drunk irregulars drive around in the Serb-controlled areas, and sometimes they shoot at aircraft.
     Wilhelm must fly to steep the runway, the steeper, the shorter the approach, the lower the risk to be made. He tends the plane with an approach angle of six degrees. Three degrees are normal in air traffic. The Sarajevo-approach becomes a fixed term in the flyer language.
     Lieutenant Colonel Wilhelm you fly the Transall, but he knows that she is too weak and too small for what is to come, the auxiliary and military operations around the world. In addition, it is already being used since 1967. In the drawers of the Defense Ministry in Bonn have been available since the eighties plans for a "Future Large Air- craft ", a large transport aircraft for the future.      When Thomas Wilhelm fly to Sarajevo, Volker Ruhe's defense minister a black-yellow coalition under Chancellor Helmut Kohl. He finally wants to be a successor to the Transall in order. In 2008 it will be ready.      The machine must be able: lift 32 tons into the sky. Transport over a hundred paratroopers and off in the air
     


set. Distant targets without stopping reach. In the air to be refueled, discard freight pinpoint accuracy. Start and land on short runways, on grass or gravel. Detect enemy radar and anti-aircraft missiles distracted by a fireworks rain. The Sarajevo-approach.
     There is a prototype of a machine, the Antonov An-70, which can most of it, which would only be further developed. However, it has a problem, she comes from Russia and Ukraine. The alternative would be a new development of a joint venture of States of the European Union, today's Airbus Group.
     Rühe relies on the Antonov. It is relatively cheap and would have after some upgrades soon. But above all, the French are skeptical. The examination of the two alternatives is to be completed by 1999. One of the examiners is Ronald Ebbers. In 1998, he worked as a consultant in military procurement office in Koblenz. "The Antonov was for those days a very convincing transport aircraft," Ebbers says today.
     In the fall of 1998 federal election. Black and yellow loses, Chancellor Gerhard Schröder is, Scharping defense minister.
     They give the insistence of the French and other Europeans and opt for the Western European transport aircraft. For them it is not about technology or money, it's about politics. The aircraft is to deepen European integration and the unemployment


A400M project Ebbers "Three steps forward and four back"
relieve fluid.
     What happens then is stupid. The politicians say Antonov off before they have a price has been agreed with Airbus. This policy has created a monopoly situation, and the revenge immediately. Walter Kolbow, Secretary of Defense, wrote in October 2000: "However, Airbus Military looks after the competition in a monopoly situation and shows only a limited responsiveness of prices and key points such as a price escalation clause."
     In September 2001, looks at the Green parliamentary deputy Oswald Metzger in Section 14 of the 2002 budget for the defense department and wonders. Scharping want to order 73 Airbus Military, but what he wants to pay? The Bundestag has ten billion dollars (5.1 billion euros) for this
ses project approved. After assessment butcher's enough for 40 aircraft. Scharping says that he needs 8.5 billion euros, almost 17 ​​billion dollars. Metzger fought it on.
     But 2002 is an election year, the Red-Green coalition can not use internal strife. Metzger and two other household Green politicians are asked by their group leaders for an interview. As a butcher enters the room, he is stunned. There sits, without notice, the green Foreign Minister and Vice Chancellor Joschka Fischer.
     Metzger says, the A400M was overpriced, he could not agree to the project so. Fischer is loud, running around the room, gesturing. "This will not do," he exclaims, "You, the government in question."
     In order to keep costs under control, Scharping tried the "Commercial" approach (Commercial Approach). As in the civil aviation sector he wants to negotiate a fixed price with the manufacturer. Which is then largely due upon delivery. This Scharping protects the timely households, and he protects, theoretically, in a cost explosion. The manufacturer must avoid so that its margin remains.
     Scharping told that he had invited the former head of the Airbus Group, Louis Gallois to the Defense Ministry and requires a fixed price. "Otherwise we are not," he said. Gallois agrees.
     An important question is still unsettled. Where does the engine? It must be extremely powerful to the heavy aircraft
with a heavy load safely drive through Sarajevo approaches. Pratt  &  Whitney can build such a power plant, which is why Airbus proposes the politicians to shop there. But Pratt  &  Whitney has a problem. The company is not in Russia, but in North America, and Schroeder and French President Jacques Chirac have the ambition to be built, the A400M completely in Western Europe.
     Therefore, to develop a new engine, a European consortium. The price is 436 million euros over the Pratt  &  Whitney. For confidential documents of the government shows that German officials the "unacceptable" consider. But the consortium refuses to go down far enough with the price.
     What to do? Politicians are more likely than others willing not to accept reasonable prices because they do not pay the bill itself, but the taxpayers.
     At the edge of the four summit on the European Security and Defence Policy in Brussels on 29 April 2003, Schroeder and Chirac agree that it from "economic, employment and technology policy reasons acceptable would be" to provide the European consortium a grant of 100 million euros. Now the citizens pay their taxes twice for the A400M - the total price at Airbus and part of the engine price the consortium.
     On 27 May 2003, the contract for the Airbus A400M is signed. The machine
The first of its kind


Video (2:07) SPIEGEL editor Gordon repinski has the first A400M, which the Bundeswehr scored delivered inspected, - his impressions in the video. (PHOTO: MAURICE WHITE / OSTKREUZ / DER SPIEGEL)
can be developed and built.
     The first to screw it up really, are the engineers working on the engine. First, they had the idea, no com-
to develop convert pletely new propeller unit, but the jet engine of a French fighter jets. This saves cost, good idea. They developed and devel-
oped, but soon they realized that this engine is too weak for the A400M. They start from the beginning. But even with the technology of the new engine it hakelt.
     For Thomas Wilhelm is in 2005 a dream come true. Even when studies in Munich the A400M has irritated him. "I want to work on it that the bird will fly someday," he thought. Now he works for the inspection service of the Bundeswehr Technical Center of the Bundeswehr in Manching near Ingolstadt. He seeks to support the development of the A400M. His specialty is the flight management system, the digital machine head. In six years he spent 550 days working at Airbus in Toulouse, where the cockpit is built. Because there are problems, massive.
     The engineers in Toulouse had an idea that would save money. They went out from the cockpit of civil engine A380. But a military aircraft must be capable of much more, for example, must second accuracy can fly to a precise location, and then throw a pallet on a parachute.
     The civilian software refuses to speak to military service, she bucks and bucks. In 2008, when the transport plane was supposed to be delivered, a low point is reached. "There were moments when I thought the machine would never take off," says William.
     Similar crises experienced Ronald Ebbers, operating from 2004 to 2008 in the OCCAR in Bonn, a kind of umbrella organization, the joint defense projects of European countries coordinated. He is there adviser to the director with
special responsibility for risk management. All problems of all countries with the A400M run together with him.
     Soon he realizes how complicated this project. The bureaucracy makes it difficult to respond quickly to problems, to act. "Everywhere there are working groups on various topics," says Ebbers. A printed PowerPoint presentation he shows the structure of responsibilities, they will not fit on a single sheet. In red, blue and yellow boxes working groups and hierarchy levels are interconnected. There are dozens. Even Ebbers has struggled to find his finger between the different sheets get all the right boxes as he explains the responsibilities.
     "In 2007 began a difficult time," he recalls. "For the manufacturer Airbus, the complexity of the project was immense." Common themes emerge that no one had considered. Emergency meetings, experts from across Europe will discuss in Toulouse. "Then the left again," says Ebbers.
     The commercial approach shows its drawbacks. The authorities can work on aircraft control only at pre-set times, otherwise only when Airbus agrees. You can not specify in detail how the technology has to look as long as a certain result is achieved Airbus. "Functional Specification" called Ebbers that.
     Example: The contract is not that powerful propellers shall be fixed as a protection from the wind with a mechanical brake if the A400M on the airfield
is. Airbus therefore plans no propeller brake. We need a brake, the Defense Ministry intervenes, if it were a matter of course. Airbus says: Look into the contract because their is nothing of a brake, so there is no brake.
     week long dispute, but Airbus offers just a cheap solution. Belts should fix the propeller. No straps, says the ministry. There could wish for an elegant solution, a button in the cockpit, fixing your fingertips. Just so the goal of "Fit for Purpose" had been reached maturity.
     knob counter belt. The dispute takes place over months. Then Airbus gives in. But now there is a bad mood in Toulouse.
     "At the time we had to find the first time," says Ebbers, "that there are different views as the contract is to be interpreted." The mood was visibly irritated, often you went to the meeting with no result apart. As of 2007, Ebbers has the impression that something random "into trouble". You could tell that, he says, "the dialogue was no longer fertile." Ebbers got a "bad feeling".
     As is the Sarajevo-simulated approach, the propeller will start to wobble. Problems even at the loading dock. Problems in the control of the motors. Problems with drive. However, problems here are not called problems, but poor performance, although this does not sound better.
     But there is a success. The engine engineers proudly turboprops, the


Defence Minister von der Leyen (*) Project on slate path (STEFFISBURG LOOS / COMMON LENS / DDP IMAGES)
achieve an output of about 8200 kilowatts. The above has so far only the Antonov.
     However, there is a new problem. When Antonov the distance to the fuselage is greater than in the A400M. In addition, the twin propellers work in the opposite direction, which reduces the vibrations. This technique is in the A400M not in use.
     At high power, it shakes the body through so that no screw thread
remains. So the hull must be strengthened. No Problem. When this is done, the technician noted that the machine is overweight and may no longer stand out. The bird is bold like a Christmas goose and also sedate. Desperately the engineers working on a hull. The project seems doomed to fail.
     How could happen so many mishaps? One reason is that the manufacturer of 2006
Almost a thousand people, including many engineers, detracts from the A400M to the A380. The development of the passenger plane makes problems, and companies prefer to have trouble with the state as private customers such as Lufthansa. "The public customer is perceived as stupid customer," says Rudolf Scharping. In the confusion of responsibilities can the question of guilt darken easily when there are problems.
     As the reviewers of the KPMG surveyed the disaster in the A400M and other military major projects in the past year, they came to the conclusion that the withdrawal of professionals, the "strong utilization of resources ", ultimately" was an important cause "for the delay. "It can be assumed that not A400M (more) comes first in the Airbus internal prioritization of programs." Thus passes the year 2008, the year of the planned deliveries.
     On 11 December 2009 raises a prototype of the A400M first time off. The software does not work properly, the engines are not working properly. Only with difficulty can avoid the test pilots to abort the first flight.
     Less than a month later, the lame bird is in its assembly plant in Seville. Here the bulk items will be delivered the hull of Germany, the cockpit from France, the wings from the UK. Now is quiet in the hall, a lectern, chairs for visitors New Year press conference with Tom Enders, who now for the A400M
is responsible, the son of a shepherd from the Westerwald, paratroopers, Boyfriend pithy words.
     The A400M threaten "the whole company to compromise," he calls to journalists. The plane cost about eleven billion euros more than planned, he would have to cancel the project if no help coming. "We hope for the best and plan for the worst."
     A bluff? Enders traveling to Germany and makes the Chancellor's Office and the Ministry of Defence realized that he would have no problem to write off the investment made ​​and to pay penalties. If you Enders today asks, he says: not a bluff. A new contract is negotiated. Fixed price ade.
     Hans-Peter Bartels, now chairman of the Defense Committee, was then in the SPD defense expert. He also emphasized the "high industrial policy and national economic interest" in the project. Now he does not want it to be a failure. "Enders has left us no choice," says Bartels, "it was just a matter of saving the project anyway." He agrees new contract and convinces his own group. "It was at this point there is no realistic alternatives to the A400M more," says Bartels. Because the politicians do not want to end up with empty hands, they are vulnerable to blackmail.
     The cost of the customer to increase by two billion euros, Germany must carry around a third of it. In addition, Airbus gets a loan of 1.5 billion euros
Due ready


Video (3:43) The military equipment of the Bundeswehr is not in good condition. Many combat and transport aircraft of the Air Force are not airworthy and must remain on the ground. SPIEGEL TV about the dilapidated condition of the army. (AXEL HEIMKEN / DPA)
at very favorable terms. And a new, later delivery plan is agreed.
     The contract is adventurous: higher costs
th, fewer aircraft, lower power planes, and even later.
     The Bundeswehr gets only 40 machines. Another 13 are to time to the rest
Countries be resold. Four initially requested properties are eliminated. Thus, the viability of the ramp is reduced. 81 functions are added later. From the jump apparatus for paratroopers over the air refueling to self-protection system that lacks pretty much everything that could distinguish the A400M by a civilian cargo plane.
     The household politicians are not initially able to discover the true cost of each machine, since the new contract so has become complicated. It was not until February 2014 gives the federal government the cost increase to: instead of planned 125 million euros, the machine will now cost 175 million euros, an increase of 40 percent.
     On 14 October 2014 the sun shines over Sevilla, hardly any wind, isolated cumulus clouds. In the early afternoon Thomas Wilhelm sitting in the cockpit of the first A400M for the Air Force. He and his crew, a co-pilot and four engineers, ready for its first flight. Start time: 14.30 clock. 20 km cable must now work 2000 computer systems. Fear? Discomfort? No. "Time to think about feelings, is not a" Wilhelm says later.
     At exactly 14.30 clock takes off the machine. Pilot honor.
     William controls the aircraft to the south, via Malaga across the Mediterranean, "restricted flight zone" in a. If the machine crashes, it should take no residential area.
     The crew is testing the systems. 130 pages of minutes they have to work off. It tests before
everything that makes the plane, if something does not work. William and his people to switch from hydraulic systems, see if the two parallel systems start. Only turn one and then the other engines and observe how the airplane responds.
     It responds well. The machine behaves exactly as planned the engineers. To 19.28 clock Wilhelm lands back in Seville. It fixes the propeller of a button? No, there is not this function.
     The technicians on the ground form a guard of honor for the crew. William holds in one hand his pilot bag, with the other he claps his hands off. Now that the stress falls, he noted that he was under stress. Later he says: "If something goes wrong, I can not pull over just right."
     For Wilhelm, a full circle, from his days in the Transall, the endless development time, the hours when everything was on the edge. "The guys in the Air Force will get an excellent aircraft," he says.
     The auditor of the Bundeswehr Technical Center see it differently. On November 10, they travel to Sevilla and are disappointed in the cockpit after a few minutes. Control panels are loose, wiggle wall panels, screws are not tightened, dirt everywhere. The cockpit had "presented in a total of extremely poor condition," write the auditors in the internal handover protocol.
     They suggest that the technicians of
Airbus tighten everything, then the test will continue. The technicians refuse. Crisis meeting. The Germans say that the quality management in the work "obviously does not work or does not exist". That is what the handover protocol.
     The examiners note 875 defects. Mold in the kitchen sink leaked hydraulic oil to the main chassis and to the tires, missing insulation of electric cables, bad paint on the tail rudder. Since they are German, they noted "lack of cleanliness" in the hall. The tool is not properly labeled. Their conclusion: "Airbus seems to be a serious problem with his understanding of product quality to have."
     And there is still a problem. As the Defense Minister of the participating nations could build the machine after the civil registration process, they may initially make no military flights. You may refrigerators ship, but not issue a paratrooper. Now big bureaucrats art is required.
     To take into account is the Joint Service Regulation 19/1. Responsible is the Bundeswehr Technical Center 61. To accomplish: to make up for the type certificate. Under the provisions would have an official monitor the final assembly of each A400M for the Air Force in person. But it was no one there when the first machine was assembled. How can you straighten it? It's about magic, technical authorities.
     In desperation officials devise a


"Virtual national military aviation authority to operate the A400M". Has now become, ultimately, with 400 professionals have their desks in a former barracks in Cologne-Wahn from the fixed idea "the Aircraft Office of the Armed Forces". You should solve the problem once and for all admission.
     Also Ebbers is involved. Because of approval
sungsprobleme has his team in recent months met 21 times. "Sometimes you went to three and four steps back," says Ebbers. "As you sit at a round table, and everyone has opinions on everything."
     The officials finally have an idea. To access a dubious maneuvers and transmit the examination of the machine kurzer-
hand the colleagues of the Spanish Administration. Thus, the first copy for the Air Force end of last year can fly to Wunstorf, ask the Spaniards of the machine from a transfer admission. For the first test flights in Germany, the machine receives a conditional approval.
     But there's a problem: the maintenance. End of October 2014 Read the members of the Budget Committee is an amazing number in the documentation for the A400M: The maintenance contract with Airbus has an estimated total of 645.5 million euros. The MPs turn on the Federal Court.
     Its quick analysis shows that the maintenance contract even more the monopolist Airbus delivers the State. "The rights of the Bundeswehr in terms of integrating their own staff are not adequately described," criticizing the auditor. It is not sufficient ensured that the Bundeswehr "by building knowledge the function of the Contractor" Reduce. Overall, the contract had failed inconvenient, too expensive, too much risk for the federal government. As before.
     In addition, the auditor complain that the project management had delivered a report on the status of the project since April 2014 due to "staff shortages". This is "risk management" has been weakened.
     However, the Federal Court agrees, otherwise the "initial flight mode" is not possible. The blackmail still works.
     The sad story of the A400M continues. The dominance of industrial policy objectives, unrealistic price expectations in the policy, the monopoly position politically produced by the manufacturer, its priority for civilian customers, the lack of control, bureaucratic procedures, the tangle of responsibilities and the friction between public authorities and companies - has everything on this and other . disasters out
     as Ursula von der Leyen in December 2013 Defense Minister will, she hears a warning often: If you fail in this office, then to an armament projects. Since von der Leyen has no interest in such a course, she cleans up quickly. Who is currently in charge of armor, his post soon has to acknowledge the Secretaries of State Rüdiger Wolf and Stéphane Beemelmans, the department head Detlef Selhausen. Industrial policy interests should take a less important role in the future according to the will of von der Leyen. "To keep important technologies in Germany and to promote is correct. Nevertheless, the military interests behind it must not stand back, "says von der Leyen. "The Bundeswehr with their equipment a job and is at its partners in the Word."
     A few months after taking office assigns the Minister a consulting contract to the auditors of KPMG, the job: the structural weaknesses of military projects to find out the risk management and controlling improve .
     In August von der Leyen makes the company


Technicians for maintenance of the A400M in Wunstorf mold in the kitchen sink (MAURICE WHITE / THE MIRROR)
take consultant Katrin Suder Secretary of State. At McKinsey is Suder has earned a reputation as a competent and rigorous reformer. She is taking her colleagues Gundbert Scherf with the Ministry.
     end of December sits Scherf, horn-rimmed glasses, waisted jacket, the Ministry of Defence and drawing with a pencil on the structures with which a disaster is to be avoided like the A400M. "So far, the project had to overcome seven hierarchical levels to arrive at the Secretary of State," says Scherf. He thwarts the seven lines from the bottom to the top. "As of now, is additionally directly."
     Scherf and have the external consultants
detected after several conversations that project managers are the most important people in the armament projects. "They have great skills and are committed to the success of the project," says Scherf, "these people we need." One of them is Ronald Ebbers.
     Once a month he makes now Suder and Scherf and reports on the progress of the A400M. Especially exactly he reported if there is no progress. And he does not have to wait until his appointment when things go bad. "The Secretary of State has said, here is my e-mail, please write to me directly," he says. Ebbers looks incredulously. He has never seen anything like it. "Here now blowing really an appreciable difference," says Ebbers.
     But still does not bear the plane. Shortly before Christmas 2014 grill the A400M for those responsible at Airbus Bernhard Gerwert and Chief Financial Officer Harald Wilhelm. You have to admit that the hull is still causing problems. You have to admit that other components can not be ready in time. The apparatus for dropping cargo comes later than expected.
     As Airbus Chief Enders hearing about it is acidic. His company had already paid on top of more than one billion for the A400M, and now it will even more. All lose in this project. The Minister, because they now have to live any longer without the A400M. "I expect that the Group uses all the levers to the impact of the company's internal problems of the Bundeswehr to keep as low as possible
th "says von der Leyen.
     The Minister has begun to purify the bureaucratic procedure, but that is no liberation. The state remains a monopolist delivered, the price could rise further as long as Airbus rumwerkelt to the retrofits. Also Minister von der Leyen is still agonize over this project. And for the next few mishaps they will be responsible.
     Last Tuesday opens in Wunstorf, Lower Saxony, at the airbase of the Air Force as a heavy iron door marked "room 0.44 - Hangar A400M". Here is the first transport Airbus Bundeswehr Tactical Plate 54 + 01. The wings extend through the entire hall, front towers above the thick black nose almost to the wall. The plane looks a bit chubby.
     It is pleasantly warm in the hall, all materials should be tested under conditions comforting. Operational test, the final hurdle. On a stage mechanic screw on the wings through the window of the cockpit looking for a soldier eye contact with a comrade, cowering under the aircraft.
     The ground is free from dirt and dust, you are in Germany. Bright spotlights illuminate every corner of the hall. From inside the machine enters a monotonous whistling in the hall, which hardly seems like an airplane hangar at this moment. It acts like a giant hospital room in which a particular patient is treated, a patient in Federal


Test pilot William "I can not pull over" (LUKE SCHULZE / PICTURE ALLIANCE / DPA)
Armed Forces Gray, needs a lot of help and you want to save anyway. * In an A400M at the International Aerospace

>>> Sports Direct rules out Debenhams takeover; takes option ove

Sports Direct rules out Debenhams takeover; takes option over 16.6%

Sports Direct International plc ("Sports Direct" or "the Group"), the UK's leading sports retailer, announced on 23 January that it has terminated the put option over a 6.6% stake in Debenhams plc ("Debenhams") that was announced on 16 January 2014 (comprising 81,224,081 ordinary shares in Debenhams) and has, at the same time, entered into a new Put Option Agreement (the "Put Option") with Goldman Sachs International referencing 128,927,113 ordinary shares of Debenhams (representing 10.5% of the issued share capital of Debenhams).

To the extent that the market price of Debenhams' ordinary shares is less than an agreed exercise price (the "Exercise Price") on expiry of the Put Option, Sports Direct may be required to settle the Put Option by acquiring ordinary shares in Debenhams at the Exercise Price.

Pursuant to the terms of the Put Option, Sports Direct will receive a premium, which is payable on expiry of the Put Option. To the extent that the market price of Debenhams' ordinary shares is greater than the Exercise Price on expiry of the Put Option, Sports Direct will receive the premium and will have no further obligations.

Sports Direct is required to transfer cash collateral to cover its obligations under the Put Option. The amount of collateral required during the life of the Put Option can increase or decrease by reference to the underlying market price of Debenhams' ordinary shares. After taking into account the premium it will receive, the Group's maximum exposure under the Put Option is limited to approximately GBP 85m.

Sports Direct is making this announcement pursuant to Listing Rule 10.2.10(1)(b) which requires the aggregation of the Group's maximum exposure under the Put Option with Sports Direct's maximum exposure of approximately GBP 46m under the put option over a 6.1% stake in Debenhams (referencing 74,185,742 ordinary shares) that was announced on 6 November 2014. Collectively, these investments currently represent a 16.6% interest in Debenhams' ordinary shares.

Sports Direct reiterates its intention to be a supportive stakeholder and create value in the interests of both Sports Direct's and Debenhams' shareholders. Sports Direct does not intend to make an offer for Debenhams and would encourage the Debenhams' leadership team to concentrate fully on delivering their strategic plans.

Reuters - Greek leftists Syriza keep poll lead ahead of election

Greek leftists Syriza keep poll lead ahead of election

ATHENS (Reuters) - Greece's leftwing Syriza party kept its steady lead in the last opinion polls to be issued ahead of Sunday's general election, with questions remaining over whether it will be able to govern alone or need the support of a coalition partner.

Under the election rules, it would need just over 40 percent of the vote to be guaranteed a majority of its own although it could win with slightly less, depending on the results of the other parties.

Here is a summary of the results of polls issued since the beginning of the year.

FT : Aer Lingus set to recommend latest IAG bid

Aer Lingus set to recommend latest IAG bid

Aer Lingus is expected to recommend a takeover bid from IAG, the owner of British Airways and Spain’s Iberia, that would value the Irish flagship carrier at €1.34bn.
IAG’s €2.50 a share cash takeover approach marks its third bid in just over a month, after two earlier offers of €2.30 and €2.40 a share were rejected by Aer Lingus.

People familiar with the matter said that the two sides could announce the start of formal talks to finalise a deal in the next few days, but warned that the situation remained fluid. IAG and Aer Lingus declined to comment.
The deal has been cast as an opportunity for Aer Lingus to join forces with the larger operator at a time when many flagship airlines have struggled to compete globally. Profits for European airlines in particular have been squeezed by both low-cost carriers and government-subsidised long-haul operators from the Middle East.
The latest offer could face opposition from the Irish government, which owns a 25.1 per cent stake in Aer Lingus.
In a sign of the political sensitivity surrounding the bid, members of the Irish parliament grilled the transport minister last week on how the government intended to protect routes between Ireland and London’s Heathrow.
Opposition transport spokesman Timmy Dooley urged the government not to sell its stake, saying that an IAG takeover could have a significant impact on Dublin, Cork and Shannon airports. “Dumping this stock in order to raise some short-term cash to fund election promises would be a major mistake that the travelling public will quickly regret,” he said.
Dublin, in particular, has seen its status as a regional hub climb in recent years and flights between London and Dublin rank as one of the most frequent routes in Europe.
Aer Lingus has a lucrative niche on transatlantic routes, offering customs and immigration clearance in Dublin and Shannon for flights to the US. These hubs also benefit from shorter flight times to the US than London.
IAG is interested in freeing up capacity in an already overcrowded Heathrow by transferring some of its regional passengers from the UK through the Dublin and Shannon hubs. It has tried to assure Aer Lingus that a deal would not affect connectivity and would bring the Irish airline into the BA-led Oneworld alliance.
Rival Ryanair, the low-cost airline with a 29.9 per cent stake in Aer Lingus, would also have to be persuaded by the deal.
Combined with Ireland’s geographical location on the periphery of Europe, Aer Lingus is much less attractive to other carriers but has been seen as a logical target for BA due to its main hub at Heathrow.
The Irish carrier has the third-largest number of take-off and landing slots with 23 pairs at Heathrow, behind BA and Virgin. One analyst valued a pair of slots at €15m. In addition, Aer Lingus had net cash of about €381m in November.
Sky News earlier reported the improved offer.

Barron's: German Stocks to Buy in a QE Euro Zone

German Stocks to Buy in a QE Euro Zone

Dow Jones Global Indexes | Global Stock Markets
The European Central Bank on Thursday finally fulfilled investors’ hopes that it would start buying government bonds as part of its battle to lift the euro zone’s chronically low inflation and kick-start its moribund economy.
ECB President Mario Draghi said the central bank would buy 60 billion euros ($69 billion) worth of assets each month from March until the end of September. These purchases will include sovereign debt, private sector bonds, and debt issued by European institutions. The figure exceeded analysts’ forecasts.
Quantitative easing has been a thorny issue in Europe since it was mooted last year, with wealthier euro-zone countries such as Germany reluctant to take on the credit risk of poorer ones. Some claimed it would destroy any incentive for governments to implement painful structural reforms in the euro zone’s more troubled economies.
There were also concerns that QE would go beyond simply lifting inflation and push the euro zone toward the hyperinflation suffered by Germany in the 1920s.
Despite that, European stock markets have been buoyed by growing expectations that the ECB would follow the U.S, Britain, and Japan into full-blown QE. The Stoxx Europe 600 index had by Wednesday’s close—and ahead of the announcement—risen 4.6% since the start of the year.
The promise of QE appeared to insulate investors against recent market setbacks, such as crumbling oil prices and the Swiss National Bank’s ceasing to cap the Swiss franc against the euro—a move widely assumed to be in anticipation of QE. The index added over 3% more by the European market close on Friday.
Stocks have risen, but the euro has fallen, dropping to its lowest level against the dollar in over a decade. Tim Gregory, head of global equities at London’s Psigma Investment Management, says Germany may have given into pressure within the ECB because its economy is best placed to benefit from QE.
Says Gregory, “QE will drive down the euro, which clearly gives an advantage to exporting economies, of which Germany is Europe’s biggest.”
He adds that with prices skirting dangerously close to deflation, German concerns about QE bringing high inflation no longer seem credible. Since slashing euro-zone interest rates to near zero hasn’t boosted inflation, the ECB had no choice but to dig into its tool-box of alternative measures.
Euro-zone consumer prices fell an annual 0.2% in December, leaving it well short of the ECB target of just under 2%.
Morgan Stanley’s chief European economist, Elga Bartsch, says that cyclical sectors have usually performed best around previous QE announcements, especially autos, industrials, chemicals, and media. Utilities, banks, real estate, and food and beverages have consistently been relative underperformers, she says.
AUTO STOCKS FIGURE prominently in the list of German companies that Gregory says could do well from QE. His main play is auto-parts maker Continental (ticker: CON.Germany), which should see earnings lifted by its exposure to the dollar relative to the falling euro. He also likes auto makers BMW (BMW.Germany), Daimler (DAI.Germany), and German chemical company Linde (LIN.Germany).
“BMW would definitely benefit from a lower euro,” Gergory says. “Linde should benefit but it did lower guidance last year as a result of weak end markets. It’s a major emerging-markets growth story though, so a long-term winner facing short-term head winds.”
JPMorgan Cazenove analyst Jose M. Asumendi has Continental at Neutral with a 178 euro ($202) price target. “Although we are Neutral on the stock, we retain our positive view of Continental’s operational performance as the automotive group continues to outgrow global auto production by four to five percentage points thanks to market-share gains,” he says. The stock closed at €202.90 on Friday.
Asumendi has BMW and Daimler at Overweight with price targets of €105 and €78, respectively. “BMW will enter a strong product-momentum phase between full-year 2015 and full-year 2018 with over 70% of its volumes being renewed during the period,” he says. BMW shares closed at €102.80 on Friday.
On Daimler he says: “We believe Daimler’s earnings should see growth over the next couple of years from better product momentum.” Its shares closed at €79.75 on Friday.
Barclays European chemicals analyst Andreas Heine has Linde at Overweight with a €177 price target. “We do not assume industrial production picks up,” he says, but the strong dollar should drive earnings next year.
Heine adds that 55% of Linde’s sales are in the U.K. and in dollar-linked regions. Its stock closed on Friday at €165.30.

>>> Weekly Market Update: Quantitative Easing, Redux

Weekly Market Update: Quantitative Easing, Redux

The European Central Bank launched a quantitative easing program of its very own this week, pledging to expand its balance sheet by at least €1.1 trillion via purchases of Eurozone sovereign bonds. The ECB move had been extremely well telegraphed to markets but European equities rocked higher and the euro tanked on the news nevertheless (the EuroStoxx50 gained 5.6% on the week, EUR/USD plummeted to 12-year lows). The Shanghai and Hong Kong indices saw robust gains as the mixed 2014 Chinese GDP report gave investors hope that more PBoC easing might be right around the corner. More current data only highlighted China's slowdown: the January flash HSBC PMI reading suggested manufacturing could contract for a second consecutive month. In the US, equities made back most of their losses from last week and the 10-year UST yield consolidated below 1.85% while many European government bond rates hit new lifetime lows after the QE announcement. Markets also digested an influx of corporate earnings reports and 2015 outlooks. For the week, the DJIA added 0.9%, the S&P500 gained 1.6% and the Nasdaq rose 2.7%.

The ECB will purchase €60 billion of sovereign debt from Eurozone member states every month until at least September 2016. The program may very well go on longer, until, as Draghi said, "we see a sustained adjustment in the path of inflation." In a concession to German QE skeptics, both the ECB and member national central banks will buy bonds, sharing the risk of default. The Germans were hardly appreciative: Bundesbank President Weidmann rejected the new QE program and said it would be very challenging to hike rates when they were needed. The euro plunged after the announcement, with EUR/USD testing the lower end of 1.11, for 12-year lows. Some analysts suggested EUR/USD could go to parity soon. Yields on peripheral Eurozone debt plunged to all-time lows, while the 10-year bund yield dropped to a record low of 0.353%.

Less than a week after the Swiss National Bank yanked away its euro peg, markets were surprised by another central bank as the Bank of Canada unexpectedly cut its key rate just a day ahead of the ECB QE announcement. The Bank of Canada cut rates 25 basis points to 0.75% justifying the move on grounds of falling oil prices and slowing reduction of excess capacity. Less surprisingly, the Danish central bank cut its deposit rate to -0.20% and its lending rate to 0.05% to offset the ECB action. Meanwhile the minutes of the last Bank of England meeting revealed a big shift on the MPC: two former hawkish members changed their policy stances, saying the bank should hold off on rate hikes due to prolonged low inflation.

The IMF cut its 2015 global GDP forecast to 3.5% from 3.8% and reduced its 2016 global outlook to 3.7% from 4.0%. China and Japan were cut 0.3 pts and 0.2 pts to 6.8% and 0.6%, respectively for 2015, while the US was the only major economy to have its outlook raised. The IMF remarked that the dimming outlook worldwide underscores need for stronger policy action to boost growth, and that even the positive aspect of lower oil prices is offset by the broad slowdown.

Swiss officials were out in force defending their decision to drop the EUR/CHF floor. SNB Chief Jordan said the cap was no longer justified because the Swiss economy was improving and was never meant to be permanent anyway. Jordan acknowledged that the economic situation in Switzerland was more difficult after the decision while pleading that SNB monetary policy couldn't make everybody happy. Swiss Finance Minister Widmer-Schlumpf estimated that EUR/CHF at 1.10 was a reasonable level for the nation's exporters. EUR/CHF approached last week's low of 0.9749, prompting chatter the SNB would have to cut rates again.

The decline in crude prices slowed this week, with both WTI and Brent hovering around the mid-to-high-$40s range throughout the week. At Davos, OPEC Secretary General El-Badri asserted that oil prices would stay around $45-50 as global economic weakness kept prices low. Back at the ranch in Saudi Arabia, King Abdullah finally passed away after several weeks of rumors he had already died. Salman bin Abdulaziz Al Saud, the 79-year old brother of the king and a former Minister of Defense, was installed as the new monarch. Reports suggest he is in poor health and possibly has dementia, with the complicated royal family riven by factional disputes. Crude saw a brief rally on the confirmation of Abdullah's death, but returned to trend as Salman pledged to continue all of his predecessor's policies.

In earnings, oil services names Halliburton and Baker Hughes both topped market expectations in fourth-quarter reports, with solid earnings and very good revenue growth. Airlines Southwest and United Continental saw solid gains after both firms comfortably beat earnings expectations. US-traded Industrials Honeywell and General Electric gained after solid quarterly results. Shares of German software giant SAP dumped after the company cut its profit outlook through its 2017 fiscal year, while IBM sank after disclosing yet another quarter of y/y revenue contraction and some less than stellar FY15 guidance. American Express unveiled a plan to restructure, cutting 6% of its workforce. UPS skidded after cutting its FY14 outlook on greater-than-expected fourth-quarter expenses. McDonald's fourth quarter results were severely undercooked: the firm missed on the top- and bottom lines, while comps remained negative in all major regions. Netflix soared on good gains in subscribers, especially in international markets.

After a very mixed Q4 in China, there had been fears that China's 2014 GDP would miss both official and market expectations. The figure came in at 7.4%, beating the 7.3% consensus outlook but below Beijing's 7.5% target, the first time the official goal has been missed since 1998 and the lowest rate of growth in 24 years. The consumption component of GDP rose to 51.2% from 48.2% in 2013, reflecting continued rebalancing of the economy. December industrial production topped estimates to reach a 3-month high, as power generation beat the low power consumption figure estimated by the National Energy Administration last week. Later in the week, the PBoC injected liquidity into money markets via reverse repos for the first time in nearly a year in anticipation of Lunar New Year holiday cash demand. HSBC flash manufacturing PMI also beat expectations and improved to 49.8 despite remaining in contraction territory for the 2nd straight month. After a perilous 7.7% plunge on Monday due to regulatory scrutiny of margin securities at trading firms, the Shanghai Composite regained its footing, testing a 5-year high above 3,400 on Friday.

As anticipated, the Bank of Japan maintained its key policy tool to expand the monetary base by ¥80 trillion a year, while also extending its low-rate funding scheme by a year and boosting provision to each institution from ¥1T to ¥2T. The BoJ also kept its overall economic assessment, but raised its view on industrial output to state that it has bottomed. Accompanying the decision, the BOJ released its updated forecasts of growth and inflation, lowering the 2015 GDP target to -0.5% from +0.5% but raising its forecasts for the next two years. The CPI outlook was particularly less rosy for FY15/16, as Governor Kuroda lowered the target to 1.0% from 1.7% and effectively acknowledged that Japan would miss its 2-year time frame to return to 2% inflation. Speaking in Davos on Friday, Kuroda maintained there's still plenty of scope to adjust policy if needed.

>>> US Close Dow-0,79% S&P-0,55% Nasdaq+0,16% Russell-0,14%

Closing Market Summary: Stocks Slip, But Maintain Weekly Gains

The stock market capped a solid week with a shaky Friday session. The S&P 500 lost 0.6%, but still gained 1.6% for the week while the Nasdaq Composite (+0.2%) was able to register its fifth consecutive advance.

Equity indices began the day amid selling activity that started in the futures market after UPS (UPS 102.93, -11.32) issued disappointing guidance due to weakness in the U.S. domestic segment. The logistics company plunged below its 100-day moving average to end lower by 9.9%. The big loss weighed on the Dow Jones Transportation Average, which lost 1.8% and pressured the industrial sector (-0.8%).

The S&P 500 followed the opening slip with an eight-point rally off its morning low after European Central Bank member Benoit Coeure said the bank will need to do more if the quantitative easing program that was announced yesterday does not produce the desired outcome.

Despite the morning charge off session lows, the index never made it into the green and slid to a new low during the final hour of the trading day. The industrial sector kept the pressure on the market throughout the day while other influential groups like financials (-1.0%) and consumer staples (-1.1%) kept the S&P 500 from moving into the green.

The financial sector struggled despite better than expected reports from a slew of regional banks. The economically-sensitive group widened its January decline to 3.5% in response to a combination of slow global growth and sinking yields around the world.

Elsewhere, the consumer staples sector hovered near the bottom of the leaderboard after Kimberly-Clark (KMB 111.65, -7.33) reported below-consensus results and issued cautious guidance, which failed to justify the company's rich valuation.

Also of note, the energy space (-0.9%) spent the bulk of the day in-line with the market, but finished among the laggards as crude oil remained weak. The energy component showed overnight volatility after it was reported Saudi Arabia's King Abdullah has died.

WTI crude was able to make an intraday appearance in the green, but ended lower by 1.8% at $45.56/bbl. Once again, dollar strength was a headwind with the Dollar Index (94.92, +0.86) spiking 0.9%.

On the upside, utilities (+0.3%) and technology (+0.2%) were the only two advancers. The utilities sector solidified its spot atop the January leaderboard (+4.2%) while technology received support from large cap names. Chipmakers were not as fortunate with the PHLX Semiconductor Index ending lower by 0.3%. The high-beta group finished ahead of the S&P 500, but behind the tech sector after KLA-Tencor (KLAC 65.42, -5.53) issued disappointing guidance that overshadowed better than expected results.

Outside of technology, the consumer discretionary sector (-0.2%) was the only other group able to finish near its flat line. Starbucks (SBUX 88.12, +5.38) soared 6.5% even though its in-line report featured below-consensus guidance for the second quarter while McDonald's (MCD 89.56, -1.33) lost 1.5% after missing estimates and priming the market for negative comparable store sales in January.

Treasuries ended near their highs with the 10-yr yield sliding six basis points to 1.80%. Meanwhile, the long bond spiked to pressure its yield to the lowest close on record (2.39%).

Participation was a bit below average with roughly 765 million shares changing hands at the NYSE floor.

Economic data was limited to Existing Home Sales and Leading Indicators:
  • Existing home sales increased 2.4% in December to 5.04 million SAAR from a downwardly revised 4.92 million SAAR (from 4.93 million SAAR) in November while the consensus expected an increase to 5.10 million SAAR. 
    • Improvements in the labor market, gains in stock prices, and a general decline in mortgage rates were not enough to boost housing demand in 2014. For the year, 4.93 million homes were sold, which was down 3.1% from the 5.09 million homes sold in 2013 
  • The Conference Board's Leading Economic Index increased 0.5% in December (consensus 0.5%) after increasing a downwardly revised 0.4% (from 0.6%) in November 
There is no economic data on Monday's schedule, but investors will be responding to the results of the Greek election and its implications for financial markets.
  • Nasdaq Composite +0.5% YTD 
  • S&P 500 -0.3% YTD 
  • Dow Jones Industrial Average -0.8% YTD 
  • Russell 2000 -1.1% YTD 

(BN) Pfizer’s Deal Hunt Said to Have Included Rebuffed Teva Approach


Pfizer’s Deal Hunt Said to Have Included Rebuffed Teva Approach
2015-01-23 20:58:41.390 GMT


By Cynthia Koons, David Wainer and Manuel Baigorri
(Bloomberg) -- In pursuit of growth, Pfizer Inc. is casting
a wide net that included an approach to Teva Pharmaceutical
Industries Ltd. late last year, people familiar with the matter
said.
The Israeli drugmaker immediately rejected Pfizer’s
overtures, so the contours of a transaction never took shape,
said the people, who asked not to be identified because the
matter was private.
The approach by Pfizer underscores how broad the company’s
search for options has become after failing to strike an almost
$120 billion deal with U.K. drugmaker AstraZeneca Plc last year.
In October, Chief Executive Officer Ian Read said he felt
pressure to do a deal to bulk up the innovative part of the
business. The loss of key patents for blockbuster drugs has left
Pfizer with some revenue holes to fill. “Certainly I feel a
sense of urgency on utilizing our balance sheet and our capital
to do deals that are incremental, add incremental value and
certainly add revenue growth in the innovative space,” Read
said on a conference call with analysts in October. “We are
aggressively looking at all alternatives.”
Press representatives for Teva and Pfizer declined to
comment. Teva is valued at about $50 billion, based on today’s
trading.
While a full-blown takeover of Teva would’ve faced
significant hurdles, Teva’s $9.2 billion-a-year generic drugs
business offers Pfizer a way to beef up its portfolio of off-
patent medicine and give it infrastructure to eventually spin
off into a separate company, three of the people said.
Those products, drugs like Pfizer’s Lipitor that have lost
patent protection but are still well-known brands, require
little additional investment and can generate substantial cash.
Teva makes generic versions of blood pressure drug Diovan, blood
thinner Plavix and antibiotic amoxicillin.

German Partner

The AstraZeneca deal was attractive to Pfizer in part
because of the U.K. company’s oncology pipeline. The proposed
deal would also have let New York-based Pfizer relocate its
legal address overseas, allowing it to lower its U.S. tax bills.
Months after Pfizer dropped its pursuit, the U.S. Treasury
Department imposed rules to limit the tax benefits of so-called
inversion deals. Pfizer’s management hasn’t ruled out doing an
inversion in the wake of those changes.
In November, Pfizer announced a partnership with Germany’s
Merck KGaA, boosting its foothold in oncology by giving it
rights to an experimental drug that’s part of an emerging class
of cancer therapies.
Pfizer is still looking for something to buy after the
failed attempt to acquire AstraZeneca, said people familiar with
the matter. The company has been exploring many ideas, including
talks with Actavis Plc before the company agreed to buy Allergan
Inc., one of the people said.

‘Ample Resources’

For its part, Teva is also looking for deals. The company’s
cash balance provides “ample resources” to look for
acquisitions, Chief Executive Officer Erez Vigodman said in an
investor presentation this month.
Pfizer, the largest U.S. drugmaker, has a legacy of being
an M&A powerhouse. In 2000, New York-based Pfizer paid $116
billion for Warner-Lambert Co.; in 2003 it spent $60 billion for
Pharmacia Corp.; and in 2009 it paid more than $60 billion for
Wyeth LLC -- acquisitions that gave Pfizer blockbuster products
like Lipitor and Prevnar.
Pfizer will probably continue striking deals, in part
because executives have the money to spend, said Damien Conover,
a Chicago-based analyst from Morningstar Inc. The company also
faces pressure to do something because its profit is expanding
relatively slowly, he said.

‘A Lot Left’

“While they do a lot of share repurchases, there’s still a
lot left for them to make acquisitions,” Conover said.
“They’re really motivated to get some growth through some
external collaborations.”
Pfizer should exercise caution in doing deals, said David
Heupel, senior health-care analyst at Thrivent Financial, which
holds Pfizer shares. “I think operationally there are a lot of
positives that are overlooked,” he said. “I’d rather them
execute on that kind of strategy than go out and really stretch
to do a big deal.”

For Related News and Information:
Top Health News: TOP HEA <GO>

--With assistance from Tara Lachapelle and David Welch in New
York.

To contact the reporters on this story:
Cynthia Koons in New York at +1-212-617-5253 or
ckoons@bloomberg.net;
David Wainer in Tel Aviv at +972-3-542-7110 or
dwainer3@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net
To contact the editors responsible for this story:
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net;
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Chitra Somayaji at +44-20-3525-9717 or
csomayaji@bloomberg.net
Drew Armstrong

FT : Saudi oil policy back in focus after King Abdullah’s death

Saudi oil policy back in focus after King Abdullah’s death

Crude prices pared their earlier gains on Friday after the death of Saudi Arabia’s King Abdullah placed renewed focus on the kingdom’s oil policy.
Ice March Brent, the international oil marker, rose 42 cents to $48.94 a barrel in afternoon trading after almost hitting $50 a barrel. Its US counterpart Nymex March West Texas Intermediate dipped 40 cents to $45.90 a barrel, having reached close to $48.
Opec’s largest producer and de facto leader persuaded the cartel’s members in November to hold production at 30m barrels a day in an effort to defend market share. The decision came despite calls from poorer Opec nations for output cuts to shore up prices, which had been dropping since mid-June and have halved in the past year.

Oil prices rose initially on Friday as some investors bet on a change in strategy, but others have said it was unlikely that Saudi Arabia would backtrack, particularly in the near term. As that view prevailed, oil prices retreated.
“Change now can create a lot of uncertainty,” said one oil trader, who added that he believed Ali al-Naimi, Saudi Arabia’s oil minister, would “see his policy through”.
King Abdullah has been succeeded by Salman bin Abdulaziz, the crown prince. In an effort to ensure stability, the new monarch, who is 79, quickly named his own successor — Muqrin bin Abdulaziz, who is in his late sixties.

Analysts said King Salman was likely to stand by the strategy of allowing market forces to determine the oil price and weed out high-cost producers.
“We expect the Saudi oil policy to remain consistent under King Salman. While it would be within his power to make dramatic changes and reverse the current policy, there are no indications at present that he might do so,” said Richard Mallinson, an analyst at Energy Aspects, a consultancy.
John Sfakianakis, Middle East director for Ashmore Group and former chief economic adviser to the Saudi finance minister, echoed this statement. The kingdom, he said, sets policies with a long-term view and makes changes very slowly.
“Saudi is adamant that they will maintain market share. If they change tack now it would show a lack of consistency,” said Riyadh-based Mr Sfakianakis. “If a leadership change meant a policy change, it would show that policy is dictated not by the technocratic class but the political class.”
Before his death King Abdullah said he would tackle the challenges presented by the oil price rout “with a firm will”, according to a speech read on his behalf by his successor and broadcast on state television. Oil market observers believe the new king to be already involved in policy decision-making.
Saudi Arabia has 16 per cent of the world’s proven oil reserves and is the biggest exporter of petroleum liquids in the world, according to the US Energy Information Administration. It maintains the world’s largest crude oil output capacity, meaning it is considered to be the most important oil producer in the world.
Market watchers have said that the death of King Abdullah would focus attention on Mr Naimi, who has been driving decision-making on oil policy in the kingdom since 1995. Mr Naimi is almost 80 and has previously asked to retire.
Mr Mallinson said: “We believe a change is now more likely within the next 18 months, but Naimi may first want to see through the current policy. Any change at this time may create uncertainty in the oil market, which Saudi Arabia would like to avoid.”
Some observers have pointed to Prince Abdulaziz, assistant oil minister and son of King Salman, as his possible successor.
“Prince Abdulaziz will be interesting to watch,” said Simon Henderson, director of the Gulf and Energy Policy programme at The Washington Institute think-tank. “Will he be satisfied to remain in a secondary role or does he have ambition to go for the top job, particularly now that his father is king?”
But traditionally Saudi oil ministers have been non-royal technocrats such as Mr Naimi. This suggests the most likely successor is Khalid al-Falih, the chief executive of Saudi Aramco, said Mr Mallinson.

Mr al-Falih appears to support current Saudi oil policy. He told the World Economic Forum in Davos this week that years of high oil prices, “propped up by geopolitics”, had driven the boom in unconventional supply. He also said the collapse in oil prices would make investors wary of committing large sums to the oil and gas industry.
But the new king has to face a challenging economic landscape due to the dramatic fall in the price of oil and the country’s “political imperative” to maintain spending on social programmes, said Helima Croft, head of commodity strategy at RBC Capital Markets.
“Instead of belt-tightening in the face of eroding oil prices, the Saudi government has opted for a record high level of spending, with large official outlays for education, health, and infrastructure projects,” she said.
Although Saudi Arabia has a huge $750bn war chest to withstand the oil price plunge, the International Monetary Fund has urged Gulf oil exporters to curb spending on wages and reduce subsidies.