Posts tagged business
When each of the three largest U.S. airlines launched their merger proposals, one primary argument made to regulators and the public kept recurring. 

The marriage in question, they claimed over and over agin, would result in a healthier airline with the financial wherewithal to invest in the operation and improve the overall experience. 

Flying, the public was told, is often a nightmarish ordeal because of pinched finances and, by extension, airline employees nervous about their job security. 

With the trio of megamergers in various states of completion, Delta Air Lines’ (DAL) executives brag that their operation—which integrated Northwest in a smooth fashion virtually unknown among airlines—is a template for how customer service and financial performance can travel together. 

Delta acquired Northwest in 2008 and has been reporting record financial profits, plus the restoration of its quarterly dividend. The airline finished fourth in the 2013 Airline Quality Rating, an annual compilation (pdf) of how U.S. carriers performed in on-time performance, denied boardings, baggage handling, and customer complaints. 

The analysis is performed by Embry-Riddle Aeronautical University and Wichita State University. “Bigger hasn’t always been better, but in Delta’s case we are seeing a large airline perform at levels usually only seen by smaller low-fare carriers,” Wichita State marketing professor Dean Headley, one of the report’s co-authors in a news release. As Airlines Grow Bigger, Do They Actually Get Better? - Businessweek

When each of the three largest U.S. airlines launched their merger proposals, one primary argument made to regulators and the public kept recurring.

The marriage in question, they claimed over and over agin, would result in a healthier airline with the financial wherewithal to invest in the operation and improve the overall experience.

Flying, the public was told, is often a nightmarish ordeal because of pinched finances and, by extension, airline employees nervous about their job security.

With the trio of megamergers in various states of completion, Delta Air Lines’ (DAL) executives brag that their operation—which integrated Northwest in a smooth fashion virtually unknown among airlines—is a template for how customer service and financial performance can travel together.

Delta acquired Northwest in 2008 and has been reporting record financial profits, plus the restoration of its quarterly dividend. The airline finished fourth in the 2013 Airline Quality Rating, an annual compilation (pdf) of how U.S. carriers performed in on-time performance, denied boardings, baggage handling, and customer complaints.

The analysis is performed by Embry-Riddle Aeronautical University and Wichita State University. “Bigger hasn’t always been better, but in Delta’s case we are seeing a large airline perform at levels usually only seen by smaller low-fare carriers,” Wichita State marketing professor Dean Headley, one of the report’s co-authors in a news release. As Airlines Grow Bigger, Do They Actually Get Better? - Businessweek

Golden Parachutes

A new study out today shows how top CEOs are walking away from their jobs with literally hundreds of millions of dollars—even after they do a crummy job. That’s wild. Gary Rivlin writes about the news today:

“You’re fired” can be the sweetest words these days when you’re the CEO of a publicly traded company. Sure, Leo Apotheker must have felt lousy when Hewlett-Packard dumped him as chief executive last September after less than a year on the job. But the sting of humiliation was no doubt softened by a $12 million cash payment the company gave him despite the lousy job he had done.

But now a new study released Wednesday shows that $12 million ain’t nothing in the age of the imperial CEO. GMI, a well-regarded research firm that monitors executive pay, looked at the largest severance packages ex-CEOs have received since the start of 2000.

To earn a spot in the top 20, a CEO would need to have received a golden parachute in excess of $100 million.

Read it on the Beast.

Presenting this week’s cover.
How would some of the nation’s biggest thinkers fix America? We asked 18 CEOs to weigh in. Excerpts:

T. BOONE PICKENSTEXAS OILMAN
MY FIX: There are 8 million  18-wheelers in the U.S., each drinking somewhere between 20,000 and  30,000 gallons of diesel fuel a year. But what if new trucks ran on  natural gas instead? It’s 30 percent cleaner than diesel, and more  plentiful.
ROBIN CHASEFOUNDER, ZIPCAR
MY FIX: Make cars smarter. Find more uses for the  wireless devices that we already use to pay tolls and get directions. We  could install a “Cinderella app” that won’t allow a 16- or 85-year-old  to drive past curfew, or a “Prius meter” to keep tabs on energy  efficiency.
STEVE BALLMERCEO, MICROSOFT
MY FIX: Here are three: (1) Increase exports by  freeing up the backlog of free-trade agreements with South Korea and  parts of Latin America. (2) Improve education in the sciences to make  our grads more competitive. (3) Permanent corporate-tax reform.

Presenting this week’s cover.

How would some of the nation’s biggest thinkers fix America? We asked 18 CEOs to weigh in. Excerpts:

T. BOONE PICKENS
TEXAS OILMAN

MY FIX: There are 8 million 18-wheelers in the U.S., each drinking somewhere between 20,000 and 30,000 gallons of diesel fuel a year. But what if new trucks ran on natural gas instead? It’s 30 percent cleaner than diesel, and more plentiful.

ROBIN CHASE
FOUNDER, ZIPCAR

MY FIX: Make cars smarter. Find more uses for the wireless devices that we already use to pay tolls and get directions. We could install a “Cinderella app” that won’t allow a 16- or 85-year-old to drive past curfew, or a “Prius meter” to keep tabs on energy efficiency.

STEVE BALLMER
CEO, MICROSOFT

MY FIX: Here are three: (1) Increase exports by freeing up the backlog of free-trade agreements with South Korea and parts of Latin America. (2) Improve education in the sciences to make our grads more competitive. (3) Permanent corporate-tax reform.

Best LittleCo of 2010: Tumblrhttp://www.readwriteweb.com/archives/best_littleco_of_2010_tumblr.php

urlesque:

azspot:

Tumblr launched back in 2007, but this year it really took off in terms of growth - crushing its nearest light blogging rival, Posterous. Tumblr achieved this growth at surprisingly low staffing levels: just 16 employees, with an estimated 20 before end of 2010. It’s got plenty of money behind it, though. The company has raised $40m. $30m of that was raised this month from existing investors Spark Capital and Union Square Ventures, plus new investors Sequoia Capital (who backed Google in 1999, before it went big).

Tumblr currently boasts over 11 million blogs running on its service, perhaps leading to some performance hiccups recently.

In a recent comparison we did between Tumblr and the popular blogging service Wordpress, we discovered that people who visit Tumblr blogs view far more pages per person and twice as many pages in total. WordPress still has many more publishers and far more site visitors, but Tumblr is doing better on a user engagement level.

Heading into 2011, Tumblr has a full tank of funding petrol and is racing full speed up the page view growth slope. Content curation is expected to be a big trend of 2011, so next year could be another tipping point again for this trendy New York startup.

/gratz to the Tumblr crew…

Equality Myth: Should Women Flirt Their Way to the Top? Damn Straight, Says Forbes.http://equalitymyth.com/post/1015333446/should-women-flirt-their-way-to-the-top-damn-straight

Well this is sure to cause an uproar. In today’s ForbesWoman, author Jenna Goudreau posits that women who don’t flirt are ignoring “one of their greatest career assets”—a valuable strategic tool (if used effectively), she says, to climb up the corporate ladder.

We’ve tackled this issue before. But, um, without the photo gallery of “tips.”

Michael Lewis’s The Big Short is considered the definitive history of the financial crisis. But to understand American finance, you need to understand Ace Cash Express as well as you do Goldman Sachs. Which is why Gary Rivlin’s Broke, USA is a necessary companion. While Lewis tells the story of mortgage-backed assets and the bankers who flogged them, Rivlin tells the story of the underlying mortgages and the folks who bought them. “To me, it was so counterintuitive,” Rivlin says. “People with no money in their pockets is good for business?” But they were profitable. By 1996, there were more payday lenders than all the McDonald’s and Burger Kings in the land combined.

Welders looking for an advance on a paycheck became unwitting cash cows for big banks. Schoolteachers taking out home loans became the collateral for leveraged bets on housing worked out in London and Greenwich, Conn. But before they were Wall Street grist, the working poor had to first become big business.

Unlike traditional banking, it wasn’t about finding good credit risks who could repay their loans promptly. Quite the opposite, actually. The central insight was that you wanted people who couldn’t quite stay ahead of the loan. Then you could use late fees and new loans to bleed them.

Ezra Klein, on one of the under-reported aspects of the financial meltdown. For a fantastic account of this whole ugly business, see Daniel Brook’s really nice “Usury Country” in Harpers.

Arianna Huffington and the Future of Publishing



Photo: Charles Ommanney / Getty Images for Newsweek

Lyons takes a look at the HuffPo. A taste:

The hard truth is that advertisers want to put messages on Web sites, but they just don’t want to pay very much for that privilege. And perhaps for good reason. When was the last time you clicked on an Internet ad? Or even noticed one? “Maybe it’s time that someone says the unsayable—that online advertising just doesn’t work. A Web site turns out to be a not very good advertising vehicle,” says Michael Wolff, the Vanity Fair columnist who also runs Newser, an ad-supported news-aggregation Web site that attracts 2 million unique visitors a month and will generate a few million in revenue this year. Online advertising rates have been dropping for a decade. Wolff says his average CPM (what he can charge for delivering 1,000 impressions of an ad) fell 20 percent in the past two years, from $10 to $8. The average for the Internet is only $2.43, according to comScore, a market-research firm that tracks Internet traffic and ad spending. And nobody expects ad rates to bounce back up—ever.

HuffPo CEO Eric Hippeau says the site charges well above the average for its advertising space by creating a better-than-average experience for its audience. Even so, HuffPo and other online publications must find ways to acquire content at low cost. These sites run lean; HuffPo has 88 editorial employees, while big newspapers might have several times that many. Online jobs used to pay far less than print jobs, but now salaries for entry-level staffers are comparable: $35,000 to $40,000. To hold down the costs, sites get a lot of content free, aggregating articles from other sites and getting readers to create the content themselves, as HuffPo does via its 6,000 unpaid bloggers. Cheap content, however, begets cheaper ad rates. Social networks like Facebook, the ultimate creator of user-generated content, get only 56 cents per thousand ad impressions, according to comScore.

In Which the Nation’s Top Execs Make a Not-So-Subtle Request that Obama Stop Regulating them So Damn Much

Fareed, on "Obama’s CEO Problem:"

The Federal Reserve recently reported that America’s 500 largest nonfinancial companies have accumulated an astonishing $1.8 trillion of cash on their balance sheets. By any calculation (for example, as a percentage of assets), this is higher than it has been in almost half a century. And yet, most corporations are not spending this money on new plants, equipment, or workers. Were they to begin loosening their purse strings, hundreds of billions of dollars would start pouring through the economy. And these investments would likely have greater effect and staying power than a government stimulus.

[snip]

Now, let me be clear. I think there is a strong case for a temporary and targeted government stimulus….But government spending can only be a bridge to private-sector investment. The key to a sustainable recovery and robust economic growth is to get companies to start investing in America. So why are they reluctant, despite having mounds of cash lying around? I put this question to a series of business leaders over the past few days. They were all expansive on the topic, and all wanted to stay off the record, for fear of offending people in Washington.

Economic uncertainty was the primary cause of their caution. “We’ve just been through a tsunami, and that produces caution,” one said to me. But in addition to economics, they kept talking about politics, about the uncertainty surrounding regulations and taxes. Some have even begun to speak out publicly. Jeffrey Immelt, the CEO of General Electric, complained last Friday that government was not in sync with entrepreneurs. The Business Roundtable, which had supported the Obama administration, has begun to complain about the myriad new laws and regulations being cooked up in Washington.

Making a value judgment about deflation depends in part on which side of the balance sheet you sit on, and on what’s going on in the broader economy. Borrowers with fixed-rate loans—like the government, many companies, and homeowners—will cheer for inflation and worry about deflation. When wages and prices grow modestly each year, it’s easier to stay current with existing debt. And when there’s lots of unused economic capacity—shuttered factories, large numbers of unemployed people—a little inflation can be just what the doctor ordered. Continually falling prices act as a disincentive to investment and risk taking. Moreover, many economists and most central bankers believe the ideal rate of inflation is slightly above zero. “Experience shows that a rate of inflation around 2 or 3 percent helps the economy to perform at full potential with maximum sustainable employment,” says Joseph Gagnon, senior fellow at the Peterson Institute for International Economics. In fact, the Federal Reserve, the nation’s chief inflation fighter, actually wants prices to rise. One of the Fed’s mandates is to provide “price stability,” which means a consistent, reliable annual inflation rate. Without saying it in so many words, the Fed designs monetary policy to target inflation of between 1.5 and 2.0 percent per year.

China’s White-Collar Underclass

Melinda Liu and Marije Vlaskamp have a nice piece on the country’s ever-growing underclass of college grads:

Since the ’90s, Chinese universities have doubled their admissions, far outpacing the job market for college grads. This year China’s universities and tech institutes churned out roughly 6.3 million graduates. Many grew up in impoverished rural towns and villages and attended second- or third-tier schools in the provinces, trusting that studying hard would bring them better lives than their parents had. But when they move on and apply for jobs in Beijing or Shanghai or any of China’s other booming metropolises, they get a nasty shock.

They may be smart and energetic, but some are starting to ask if the promise of a better life was a lie. They’re known as “ants,” for their willingness to work, their dirt-poor living conditions, and the seeming futility of their efforts. “These ants have high ambitions but virtually no practical skills,” says Prof. Zhou Xiaozheng, a leading sociologist at the People’s University of China. It’s a potentially explosive situation. Unrest is sweeping the manufacturing sector, where strikers at several factories have demanded not only better pay but also the right to elect their own representatives for collective-bargaining efforts—a demand that could pose a serious political challenge to the regime.