AFP

German national carrier Lufthansa said Thursday that ticket prices could rise as the cost of energy soars following the Russian invasion of Ukraine. 

Increases in the prices for jet fuel were “too high to be offset by additional cost reductions”, group chief financial officer Remco Steenbergen told a press conference.

Higher energy costs meant “ticket prices will have to rise”, Steenbergen said.

The carrier had already “pushed through a couple of price hikes” that have been “accepted” by business and leisure travellers alike, he added. 

Lufthansa CEO Carsten Spohr said the airline was projecting a record summer for tourist activity, with the latest data showing passenger numbers bouncing back from the coronavirus pandemic. 

Spohr said the number of passengers on Lufthansa flights had “more than quadrupled” in the first quarter to 13 million, from three million in 2021, when travel restrictions in many markets were more severe.

“New bookings are increasing from week to week,” he told a press conference. 

“We are expecting strong growth in the summer and probably more holiday-makers than ever before,” Spohr said.

For business travel, the group is expecting traffic to reach “around 70 percent” of its pre-coronavirus level by the end of the year, it said in a statement.

In all, Lufthansa expects to offer “around 75 percent” of its pre-crisis capacity over the year.

The figure would be higher in the summer for popular tourist destinations, reaching 95 percent on short-haul routes in Europe and 85 on transatlantic services, the group said.

– ‘On track’ –

Lufthansa also said Thursday it had seen a considerable improvement in its financial results for the first quarter, supported by the recovery in passenger numbers.

The group recorded a net loss of 584 million euros ($620 million) over the first three months of 2022, down from one billion euros in the same quarter last year.

Lufthansa’s cargo division had a “record result” in the first quarter, the carrier said, as demand for freight remained high amid turmoil in global supply chains. 

The segment recorded an operating result — a key measure of underlying profitability — of 495 million euros, up from 315 million euros in the first quarter of 2021.

Europe’s largest airline group — which includes Eurowings, Austrian, Swiss and Brussels Airlines — struggled at the outbreak of the pandemic and was saved from bankruptcy by a government bailout.

But business has picked up and Lufthansa said last November it had repaid the nine-billion-euro loan it had received from the government. 

The group was now “on track” to make a positive operating profit in the second quarter and over the year, CFO Steenbergen said.

The “extremely volatile” price of fuel however kept the group from committing to improve its official financial outlook for the year, he said. 

Strains were also being felt by “airports, air traffic control and caterers who are confronting a personnel shortage” leading to disruption to services, CEO Spohr said.

Some of the issues would not be resolved “before the summer”, he added.

China’s strict zero-Covid policy has led to a plunge in confidence among European companies operating in the country as supply chains are tangled, revenue projections fall and staff leave, according to a business group survey released on Thursday.

Beijing remains wedded to its strategy of stamping out coronavirus clusters with lockdowns and mass testing, even as the fast-spreading Omicron variant makes this increasingly difficult.

But the European Union Chamber of Commerce said in a report that the strict containment measures in dozens of Chinese cities, including the financial capital Shanghai, had caused “disruption on an epic scale”.

“While the war (in Ukraine) has had an impact on European businesses operating in China, Covid-19 presents a far more immediate challenge and has caused a considerable drop in business confidence,” the Chamber added.

Its survey of more than 370 members was conducted in late April.

Nearly a quarter of respondents are now considering moving current or planned investments in China to other markets — more than doubling from two months ago.

Almost 60 percent decreased their revenue projections for this year, while around a third saw a drop in staffing, results showed.

Most companies also reported a negative hit on supply chains, with struggles accessing raw materials and components, or delivering finished products.

“The Chinese market has lost a considerable amount of allure for many respondents,” the Chamber said, adding that Covid measures have made it less attractive for investment.

“The predictability of the Chinese market is gone,” EU Chamber President Joerg Wuttke told reporters on Thursday, adding that the current “whack-a-mole” method of stamping out flare-ups is unnerving.

“The fact that it took down Shanghai has sent shockwaves through headquarters… Where is that going to end?” Wuttke said.

The Chamber said a vast majority of firms surveyed agreed with proposals to focus more on vaccinating China’s entire population, allowing mild positive cases to quarantine at home, and allowing mRNA vaccines to be used.

For now, Wuttke said China’s zero-Covid policy is unlikely to change, as it has been a strong political signal of Beijing’s triumph. 

But he cautioned that “China runs the risk of becoming a victim of its past success.”

Businesses are also being bogged down by the war in Ukraine, the survey showed, with the disruption of logistics to and from Europe.

Rail freight is no longer an option and aircraft need to circumvent Russian and Ukrainian airspace — increasing distance and costs.

And “the susceptibility of operations to future shocks must be weighed, in particular the prospect of a deterioration in EU-China relations”, the Chamber said.

Stock markets rallied Thursday after the Federal Reserve played down chances of an even bigger US interest rate hike in the near future.

Oil prices steadied, one day after big gains as the European Commission proposed a gradual ban on Russian crude over Moscow’s invasion of Ukraine.

The Federal Reserve on Wednesday announced an expected half-point lift in borrowing costs — the biggest since 2000 — as part of its battle to rein in inflation.

However, traders were given some much-needed cheer when Fed boss Jerome Powell said a 75 basis-point rise, which had been flagged by many observers, was not being considered.

“Relief has rippled through the financial markets as the Federal Reserve seems committed to keep to the path it had mapped out to try and tame roaring inflation,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The Fed has also indicated that it will start rolling back its massive stimulus programme by offloading bonds from its balance sheet “on a more gradual incline than some feared”, Streeter added.

On Wall Street Wednesday following the Fed update, all three main indices closed up by about three percent thanks to a surge in tech firms, which are most susceptible to higher rates.

Strong gains in New York filtered through to Asia and Europe on Thursday.

At 1100 GMT, the Bank of England is expected to announce a fourth straight hike to its main interest rate as UK inflation sits at the highest level in 30 years.

News that Turkish inflation soared to 70 percent in April highlighted the battle central bankers face in controlling prices.

– OPEC+ decision –

Inflation has been dragged higher globally in large part owing to surging energy prices.

OPEC+ members meeting on Thursday are expected to agree a marginal increase in oil production as tight supply concerns caused by the Ukraine war are offset by lower demand risks triggered by China’s renewed Covid lockdowns.

OPEC+ includes members of the OPEC oil producers cartel, notably Saudi Arabia, as well as key energy producer Russia.

Traders on Thursday digested also earnings updates from some of the world’s biggest companies.

Shares in Airbus soared more than seven percent in Paris after the European aircraft maker said late Wednesday that its net profit more than tripled in the first quarter to 1.2 billion euros ($1.3 billion), despite the impact of sanctions against Russia.

The results confirm the company’s recovery after the Covid-19 pandemic slammed the air travel industry in 2020.

– Key figures at around 0945 GMT –

London – FTSE 100: UP 0.8 percent at 7,551.92 points

Frankfurt – DAX: UP 1.3 percent at 14,156.82

Paris – CAC 40: UP 1.5 percent at 6,493.45

EURO STOXX 50: UP 1.2 percent at 3,771.35

Hong Kong – Hang Seng Index: DOWN 0.4 percent at 20,793.40 (close)

Shanghai – Composite: UP 0.7 percent at 3,067.76 (close)

New York – Dow: UP 2.8 percent at 34,061.06 (close)

Tokyo – Nikkei 225: Closed for a holiday

Brent North Sea crude: UP 0.2 percent at $110.34 per barrel

West Texas Intermediate: DOWN 0.1 percent at $107.72 per barrel

Euro/dollar: DOWN at $1.0598 from $1.0625 on Wednesday

Pound/dollar: DOWN at $1.2567 from $1.2632

Euro/pound: UP at 84.33 pence from 84.06 pence

Dollar/yen: UP at 129.63 yen from 129.05 yen

Turkey’s official inflation rate spiralled to nearly 70 percent in April, data showed on Thursday, posing a huge challenge to President Recep Tayyip Erdogan, whose unconventional economic policies are often blamed for the economic turmoil. 

The consumer price index rose by 69.97 percent year-on-year in April compared with 61.14 percent in March, the national statistics agency said.

Erdogan insists that sharp cuts in interest rates are needed to bring down soaring consumer prices, flying in the face of economic orthodoxy. 

The collapse of the lira has pushed up the cost of energy imports and foreign investors are now turning away from the once-promising emerging market. 

Russia’s invasion of Ukraine and the coronavirus pandemic have exacerbated the energy price spikes and production bottlenecks.

Turkey’s annual inflation rate — the highest since Erdogan’s ruling AKP party stormed to power in 2002, is largely linked to his unconventional economic thinking, analysts say. 

Erdogan has put pressure on the nominally independent central bank to start slashing interest rates. 

In April, the bank kept its benchmark interest rate steady for the fourth consecutive month, bowing to the pressure despite high inflation. 

The biggest price increases in April were for the transport sector, standing at 105.9 percent, while the prices of food and non-alcoholic drinks jumped 89.1 percent.

– ‘Spectacular failure’ –

“True it’s about food and energy price increases but also the spectacular failure of monetary policy in Turkey,” Timothy Ash, emerging markets strategist at BlueBay Asset Management, said in a note to clients. 

“Low interest rates cause inflation. Period. Fact. The reality,” he said, accusing Erdogan of “trying to re-write economics to say the opposite which is the economics equivalent of calling the earth flat.”

Treasury and Finance Minister Nureddin Nebati on Monday brushed aside concerns, saying that the current inflationary trend was fleeting and would “not spread over the long term and be permanent”. 

“We will increase the welfare and purchasing power of our citizens over the past level,” he said.

Turkey has cut taxes on some goods and offered subsidies for some electricity bills for vulnerable households but even this has failed to stem inflation.

The Turkish currency has lost 44 percent of its value against the dollar last year and more than 11 percent since the start of January. 

Erdogan’s government has responded by using state banks to buy up liras in a bid to cut the currency’s losses. 

There is also speculation that the central bank sells dollars to stem the lira’s slide. 

The former deputy general manager of Turkey’s state bank Ziraat shared information he received from banking circles, Turkish media reported. 

“The central bank sells $2.5-3 billion a week through public banks,” he was quoted as saying this week. 

Jason Tuvey, emerging markets economist at the London-based Capital Economics, predicted that inflation would hover around the current high rates for much of this year.

He said there were “no signs that policymakers are about to shift tack and hike interest rates as they remain wedded to the ‘new economic model’.” 

Erdogan, who faces a crucial presidential vote next year, has also shifted policy to mend broken alliances with cash-rich Gulf states to draw financial support. 

Last week, he visited Saudi Arabia in a bid to reset relations since the 2018 killing of Riyadh critic journalist Jamal Khashoggi in the kingdom’s consulate in Istanbul. 

Erdogan said his government agreed with Saudi Arabia to “reactivate a big economic potential”. 

British energy giant Shell on Thursday logged soaring first-quarter net profit as surging oil prices offset a sizeable charge linked to its Russia exit.

Profit after tax leapt 26 percent to $7.1 billion (6.7 billion euros) from a year earlier, Shell said in a statement.

While the group took a $3.9-billion charge on its exit from Russia after Moscow invaded Ukraine, it saw lower costs elsewhere.

Underlying earnings spiked almost three-fold to a quarterly record of $9.1 billion, sparking fresh calls in Britain for a windfall tax on energy majors.

UK consumers are enduring a cost-of-living crisis caused by the highest rate of inflation in decades, also as economies reopen from pandemic lockdowns.

Prime Minister Boris Johnson, who faces a key mid-term test in local elections Thursday, has dismissed calls for a windfall levy on oil giants, arguing it would slow their efforts to invest in cleaner energy.

Yet environmental campaigners and opposition politicians are calling for a one-off tax to ease household budgets and curb reliance on fossil fuels.

– Windfall tax –

“A windfall tax on these unexpected record profits of unimaginable sums would be the fastest and fairest way to ease pressure on households feeling the pinch and reduce our dependence on oil and gas, which is the root cause of the cost of living crisis,” said Greenpeace UK’s Philip Evans.

Shell added Thursday that revenues rallied 51 percent to $84.2 billion in the first three months of the year.

Oil prices have surged in recent months on concerns over tight supplies following the invasion of Ukraine by major oil and gas producer Russia.

“The war in Ukraine is first and foremost a human tragedy, but it has also caused significant disruption to global energy markets and has shown that secure, reliable and affordable energy simply cannot be taken for granted,” noted chief executive Ben van Beurden.

“The impacts of this uncertainty and the higher cost that comes with it are being felt far and wide.”

The London-listed group last month flagged it would take a hit of between $4 billion and $5 billion in the first quarter as a result of impairment from assets and additional charges relating to its Russian activities.

Shell announced in late February that it would sell its stakes in all joint ventures with Russian state energy giant Gazprom after the Kremlin launched its assault on Ukraine.

– Share buyback –

The company then decided in March to withdraw from Russian gas and oil in line with UK government policy.

Britain, which is far less dependent than the rest of Europe on Russian energy, plans to phase out oil imports by the end of 2022 and eventually stop importing its gas. 

Shell’s British rival BP on Tuesday booked its biggest-ever quarterly loss, at $20.4 billion, after a mammoth $25.5 billion charge on its Russian withdrawal.

However, BP also logged record-high underlying profits for the first quarter on high oil prices.

Shell has meanwhile begun the second tranche of its $8.5-billion share buyback unveiled in February.

The group’s share price rallied 3.1 percent to £22.95 in morning deals on London’s rising stock market.

“The recovery in energy prices from the depths of the pandemic had already allowed Shell to reduce net debt and begin a renewed focus on shareholder returns,” said Interactive Investor analyst Richard Hunter

World oil prices rocketed close to $140 per barrel in early March, although they have since fallen back to around $100.

Both BP and Shell had suffered vast losses in 2020 as the coronavirus pandemic slashed energy demand and prices.

Markets rallied Thursday after the US Federal Reserve played down chances of a huge interest rate hike in the near future, while oil extended gains as the European Union moved to ban imports from Russia.

US central bank officials announced an expected half-point lift in borrowing costs — the biggest since 2000 — as part of its battle to rein in inflation, while unveiling a timetable to offload its vast bond holdings.

However, traders were given some much-needed cheer when Fed boss Jerome Powell said a 75 basis-point rise, which had been flagged by many observers, was not “not something the committee is actively considering”.

While he flagged more 50-point hikes to come, the news fuelled a rally on Wall Street, where all three main indexes piled on around three percent thanks to a surge in tech firms, which are most susceptible to higher rates.

“This was a reflection of relief, as investors came into the meeting fearful that the committee would be overly aggressive in tightening monetary policy,” said Clara Cheong of JP Morgan Asset Management.

She added that if inflation began showing signs of slowing, it could allow the Fed to be less aggressive as it treads a fine line between containing prices and nurturing the post-pandemic economic recovery.

“It remains to be seen if the Fed can pull off this fine balancing act and orchestrate a soft landing, but for now we believe that the US economy is in a strong enough position to weather higher rates,” Cheong said.

“There is still, however, a risk that an overly aggressive approach can run the risk of tipping the economy into a mild recession in 2023.”

The gains in New York filtered through to Asia, where while Hong Kong, Sydney, Taipei, Mumbai, Manila, Bangkok and Wellington rose. Singapore dipped.

Shanghai advanced after returning from a long break with traders seemingly unmoved by data showing activity in China’s services sector fell to the lowest level since the outset of the pandemic.

The news reinforced the view that China’s strict zero-Covid measures were hammering the world’s number two economy.

London, Paris and Frankfurt soared at the open.

– Oil extends gains –

“Removing some of the uncertainty is helpful in getting some of the cash that has been on the sideline back into the markets, whether it’s bonds or equities,” Erin Gibbs, of Main Street Asset Management, told Bloomberg Television.

The Fed hike was the latest in a series of steps by central banks around the world to contain inflation, and came ahead of an expected lift by the Bank of England later Thursday.

News that Turkish inflation soared to 70 percent in April highlighted the battle central bankers face in controlling prices.

Still, analysts warned there was only so much central banks could do to bring inflation under control as the spike was also being fuelled by supply chain problems caused by China’s Covid-related lockdowns and surging energy costs, particularly oil.

Oil extended Wednesday’s big gains after the European Commission proposed a gradual ban on Russian crude over Moscow’s invasion of Ukraine.

That was compounded by data showing stockpiles shrinking and a weaker dollar caused by lower expectations for US rate hikes.

“The oil market will remain tight going forward, and now that a peak in the dollar is in place, crude prices should have extra support here,” said OANDA’s Edward Moya. 

– Key figures at around 0720 GMT –

Hong Kong – Hang Seng Index: UP 0.5 percent at 20,973.33 

Shanghai – Composite: UP 0.7 percent at 3,067.76 (close)

London – FTSE 100: UP 1.6 percent at 7,610.48

Tokyo – Nikkei 225: Closed for a holiday

West Texas Intermediate: UP 0.5 percent at $108.36 per barrel

Brent North Sea crude: UP 0.7 percent at $110.90 per barrel

Euro/dollar: DOWN at $1.0599 from $1.0625 on Wednesday

Pound/dollar: DOWN at $1.2542 from $1.2632

Euro/pound: UP at 84.51 pence from 84.06 pence

Dollar/yen: UP at 129.53 yen from 129.05 yen

New York – Dow: UP 2.8 percent at 34,061.06 (close)

TikTok on Wednesday announced an ad revenue-sharing program with the social media platform’s most prominent creators, moving closer to a model already used by its competitors.

The short-video format app has become wildly popular in recent years with more than a billion active users globally, but has been criticized for not providing a way for creators to effectively monetize content.

Under the new TikTok Pulse program, companies can place their ads next to user content in specific categories, including health, fashion, cooking, gaming and others — and creators will get a cut.

“We will begin exploring our first advertising revenue share program with creators, public figures and media publishers,” the company, a subsidiary of Chinese tech firm ByteDance, said in a statement.

“We’re focused on developing monetization solutions in available markets so that creators feel valued and rewarded on TikTok.” 

Only accounts with at least 100,000 subscribers will be eligible for the first phase of the program, TikTok said.

The firm’s North America General Manager Sandie Hawkins told tech website The Verge that Pulse will roll out in the United States in June, and that approved creators will get a 50 percent cut of ad revenue.

In 2021, TikTok generated an estimated 4.6 billion dollars in revenue, according to industry publication Business of Apps.

That figure is more than double the previous year’s revenue, but remains roughly on par with competitor Snapchat, which has about 300 million daily users, according to Snapchat’s data. 

Other major social networks that focus on video, such as YouTube, Instagram and Snapchat, have already implemented revenue-sharing systems.

China’s strict zero-Covid policy has led to a plunge in confidence among European companies operating in the country as supply chains are tangled, revenue projections fall and staff leave, according to a business group survey released Thursday.

Beijing remains wedded to its strategy of stamping out coronavirus clusters with targeted lockdowns and mass testing, even as the fast-spreading Omicron variant makes this increasingly difficult.

But the European Chamber of Commerce said in a report that the strict containment measures in dozens of Chinese cities, including the biggest Shanghai, had caused “disruption on an epic scale”.

“While the war (in Ukraine) has had an impact on European businesses operating in China, Covid-19 presents a far more immediate challenge and has caused a considerable drop in business confidence,” the Chamber added.

Its survey of more than 370 members was conducted in late April.

Nearly a quarter of respondents are now considering moving current or planned investments in China to other markets — more than doubling from two months ago.

Almost 60 percent of respondents decreased their revenue projections for this year, while around a third saw a drop in staffing, results showed.

Most companies also reported a negative hit on supply chains, with struggles accessing raw materials and components, or to deliver finished products.

“The Chinese market has lost a considerable amount of allure for many respondents,” the report said, adding that Covid measures have made it less attractive for investment.

The Chamber said a vast majority of firms surveyed agreed with proposals to focus more on vaccinating China’s entire population, allowing positive cases with no or mild symptoms to quarantine at home, and allowing mRNA vaccines to be used.

Businesses are also being bogged down by the war in Ukraine, according to the survey, with the disruption of logistics to and from Europe.

Rail freight is no longer an option and aircraft need to circumvent Russian and Ukrainian airspace — increasing distance and costs.

And “the susceptibility of operations to future shocks must be weighed, in particular the prospect of a deterioration in EU-China relations”, said the report.