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Saturday, March 15, 2008

United Airlines charging $50 For a second checked Bag

Forcing customers to pay for service previously included with ticket purchases, UAL Corp.'s United Airlines and US Airways Group Inc. will begin charging $50 round-trip for checking a second piece of luggage on May 5, and Southwest Airlines Co. has already implemented a similar fee for checking a third bag. Other airlines may follow, eager to collect hundreds of millions of dollars without raising ticket prices.

Airlines are under severe financial pressure from high fuel prices, and their finances may worsen if recession curbs some travel. Carriers have been scrambling for ways to "up-sell" fliers, including selling first-class upgrades, fancy alcoholic drinks and day passes to airport clubs.

But they've also been stripping out previously free services and charging customers for anything more than basic transportation -- everything from use of skycaps and telephone reservationists to on-board meals and, at a few carriers, assigned seats and exit-row or bulkhead legroom.

Customers have adapted to most of that, and giving fliers the chance to pay reasonable fees to improve their travel experience has been popular.

Baggage fees may be different, however. The stiff penalties can add hundreds of dollars to a family vacation, especially if travelers show up at the airport with bags heavier than 50 pounds or larger than the size limit airlines use -- 62 linear inches, the combined measurements of height, length and width.

Fees for overweight and oversized bags have been raised by some airlines in the past year, even as baggage-service reliability has declined. And the fees are charged cumulatively -- an extra bag that is overweight and oversized gets hit with three fees. So a second checked bag that is overweight and oversized will cost $450 round-trip at United after May 5. At Delta Air Lines Inc., a third checked suitcase that weighs 71 pounds and is oversized costs $660 round-trip.

Baggage policies vary greatly these days. At ultra-cheap discounters like Skybus Airlines Inc. and Spirit Airlines Inc., customers pay $10 to check even one bag, but fees are generally low. Skybus charges $50 round-trip for an oversized bag, for example, compared to $100 round-trip at Southwest and JetBlue Airways Corp. and $200 round-trip at AMR Corp.'s American Airlines, United, Delta and Continental Airlines Inc. ACE Aviation Holdings Inc., a pioneer in a la carte airline pricing, offers customers a $3 discount if they don't check bags.

Beyond the potential expense, baggage fees test the boundaries of what constitutes basic airline service. What do you get when you buy a ticket, beyond transport from one city to another? Since most of us need clothes when we travel, baggage service has always been part of the deal, like a bed, shower and television in a hotel room. Is it fair for airlines to make it an add-on service the way hotels charge extra for movies, meals and telephone calls?

Some travelers say no, especially when security rules limiting liquids force many to check more bags, and weight limits and the airline proclivity to lose bags encourage people to opt for multiple suitcases.

"There's a reasonable expectation of being able to travel with the bags I need, and I think two bags is reasonable," said Joseph South of Phoenix. "It's bad enough having to weigh my bags before leaving the house, but now I have to try to miraculously put the same number of clothing changes into a trash compactor in order to condense them into one single bag."

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Wayne Peterson of Dallas is a road warrior with elite status on several airlines who rarely travels with more than one bag. But he does take his son on photographic expeditions at national parks -- with multiple bags. "The [second bag] policy seems to be one more method to nickel and dime us to death, and seems targeted at families traveling for pleasure rather than business travelers," he said.

Golfers and skiers will be hit hard by the new policies. Most airlines count a set of golf clubs or a pair of skis as one checked bag. Add a suitcase, and passengers on United and USAirways will have to pay the second-bag charge. Some extra items are exempt, such as duffle bags for military personnel and mobility devices such as scooters for disabled passengers. Many carriers automatically charge extra for scuba tanks. The rules, found on each airline's Web site, can be arcane and confusing, even getting down to fees and requirements on checking antlers, kayaks and surf boards. American, for example, allows each passenger to check one javelin for a $160 round-trip fee; Delta does not allow javelins.

United says one of every four customers checks multiple bags, and they are more likely to be leisure travelers -- who likely paid cheaper fares than other travelers. United did exempt its elite-level frequent fliers and travelers with expensive, refundable tickets from the new baggage fees. The new second-bag fee by itself will generate $100 million in annual revenue, the airline said. That's two million customers hit with round-trip second-bag fees.

Dennis Cary, United's senior vice president of marketing, says the definition of basic airline service is evolving, and different airlines today have different answers of what comes standard with a ticket.

"Unbundling" services means travelers will pay only for what they use, he says. Currently, every customer pays for baggage service, whether used or not. "We believe it has been too much of a one-size-fits-all model," Mr. Cary said.

United and other airlines believe selling extras like upgrades and better seating, along with charging for previously free services, will make the airline business more sustainable by helping carriers cover their costs. But the baggage decision was difficult, Mr. Cary said, because "changing customer expectations is obviously difficult."

US Airways, a marketing partner with United, was studying a second-bag fee when United announced its policy last month and opted to follow along beginning May 5, executives said. US Airways decided to include international travel in the new fees; United's policy applies only to domestic travel. Like United, US Airways exempts top-tier frequent fliers and first-class passengers, but all other customers have to pay even if they bought expensive refundable fares.

The airline considered charging $5 for every checked bag, but decided that would result in long lines and slower service. Since only 8% of US Airways customers check a second bag, the carrier doesn't think the new fee will clog airports. But it will generate $75 million for the airline.

"At the end of the day, it's a price increase," says US Airways Chairman and Chief Executive Douglas Parker.

US Airways spends roughly $250 million a year on baggage service, Mr. Parker says, and passing some of that cost to customers who actually use the service helps the airline offer lower basic fares. Consumers will switch airlines over even a $5 fare difference, airlines say, but are less sensitive to fees paid at the airport.

"It may be a better pricing model to segment some of the services we provide," said Mr. Parker.

That doesn't mean fees will result in better baggage handling, however, though reducing the volume of checked bags could help airlines. Last year, United ranked fifth best in baggage handling among the 10 biggest airlines, and US Airways was worst among major carriers.

US Airways says if you pay fees for baggage handling and the airline doesn't deliver, it will consider refunding fees on a case-by-case basis, likely depending on how long you have to wait for your bag to be found and delivered. United, however, says it won't refund baggage fees even if it loses your bag.

Thursday, March 13, 2008

Investment Banks

Shares of investment banks fell in early Thursday trading after Lehman Brothers analyst Roger Freeman said banks are likely to face widening losses on asset write-downs.

Bear Stearns Cos. shares fell the furthest, declining $7.30, or 12.1 percent, to $54.28, after earlier hitting $52.43, their lowest point since the fall of 2002.

Freeman said any gains Bear Stearns would have received from wider spreads would be offset by write-downs on alt-A mortgage assets. Alt-A mortgages are loans given to customers with minor credit problems or who do not have the documentation to get a traditional, prime loan.

Freeman estimates Bear Stearns will earn 90 cents per share for the quarter ending Feb. 29.

Bear Stearns book value per share was $84.85 at the end of the quarter, Freeman estimated.

Bear Stearns is likely to lose $50 million in its merchant banking division and reduce the value of its alt-A exposure by about 8 percent during the quarter, Freeman wrote in a research note.

Among other investment banks with quarters ending Feb. 29, Freeman estimated Goldman Sachs Group Inc. earnings will likely be hurt by high losses in its investment portfolio. Freeman lowered his first-quarter earnings estimate for Goldman Sachs to $1.95 per share from $2.10 per share.
Shares of Goldman Sachs fell $3
.50, or 2.2 percent, to $159.51.

Morgan Stanley will also be negatively affected by asset write-downs and investment losses, which could be partially offset by some gains in structured debt, Freeman said.
Shares of Morgan Stanley fell 82 cents, or 2 percent, to $40.19.

Wednesday, March 12, 2008

Tech stocks look for direction in early trading

Technology stocks put in a mixed early trading performance Wednesday. Gains came from Dell Inc. (DELL:19.98, +0.15, +0.8%) , Oracle Corp. (ORCL:19.63, +0.12, +0.6%) and Google Inc. (GOOG:444.29, +4.45, +1.0%) , while decliners included Apple Inc. (AAPL:126.20, -1.15, -0.9%) , Hewlett-Packard Co. (HPQ:47.54, -0.38, -0.8%) and IBM Corp. (IBM:116.41, -0.08, -0.1%) . Take-Two Interactive Software Inc. (TTWO: 25.00, +0.35, +1.4%) shares rose 31 cents to $24.99 after the video game publisher on Tuesday raised its quarterly outlook due to strong advance orders of "Grand Theft Auto IV." The tech-heavy Nasdaq Composite rose 7 points to 2,262.

Tuesday, March 11, 2008

Yahoo research centre in Israel

Web search company Yahoo Inc.said on Tuesday it has launched a new research lab in Israel, its first in the region.

The research lab in the northern port city of Haifa will be led by Ronny Lempel, an information organisation and retrieval expert. He previously worked at the Information Retrieval Group at IBM's Haifa Research Lab, focusing on research and development for enterprise search systems.

The lab, which opened on Tuesday, will focus on simplifying complex technology problems in searching the Web, Yahoo said.

Rival Google opened its second R&D centre in Israel in June. Its Israeli centres are in Tel Aviv, Israel's financial and cultural centre, and Haifa.

"Search is still in its infancy," Prabhakar Raghavan, head of Yahoo Research, said in a statement. "At Yahoo, we are working on the hard core science that can lead to search experiences that are significantly beyond the current art." (Reporting by Tova Cohen, editing by Elizabeth Fullerton)

EU approves Google's DoubleClick bid

European Union regulators say Internet portal giant's $3.1 billion bid for online ad tracker won't hurt competition.

European Union regulators have given a green light to Google Inc.'s $3.1 billion (€2.13 billion) bid for online ad tracker DoubleClick, saying the deal will not hurt competition for online ads.
Critics have complained the deal would give Google (GOOG) too much power.

But the European Commission says it found no proof that Google and DoubleClick would be able to squeeze out competitors. That is because Microsoft, (MSFT) Yahoo (YHOO) and AOL provided "credible" alternatives for placing ads on Web sites.

The commission says Google and DoubleClick are not currently rivals. It says Google's purchase even of a potential competitor would not hurt competition in the online ad market.

7 Stocks You Need to Know for Tuesday

Stocks endured a third straight day of heavy selling, as investors dumped financial stocks with renewed vigor. Oil surged above $108 per barrel, another record high, and the dollar continued its downward spiral.

The Dow lost -153.54, the Nasdaq Composite -43.15, and the S&P 500 -20.00.

Here are 7 stocks to watch

Bear Stearns (NYSE:BSC) plunged more than 11%, its largest fall since the '87 crash, on liquidity concerns. BSC's Short Term PowerRating is 6.

Blackstone Group (NYSE:BX) reported an 89% decline in Q4 profit, but its shares rose nearly 3%.

Texas Instruments (NYSE:TXN) cut its Q1 revenue and profit forecasts. TXN's Short Term PowerRating is 4.

WellPoint (NYSE:WLP) lowered Q1 and full-year guidance. WLP's Short Term PowerRating is 5.

After the close, homebuilder Hovnanian Enterprises (NYSE:HOV) missed earnings estimates by -$0.11. HOV's Short Term PowerRating is 5.

And before the market open, Kroger (NYSE:KR) is expected to report earnings of $0.47. KR's Short Term PowerRating is 4.

McDonald's (NYSE:MCD) reported an 11.7% rise in same store sales for the month and an 8.6% rise year-to-date. MCD's Short Term PowerRating is 5.

Monday, March 10, 2008

Not 'going to get into a fight' with Microsoft

News Corp. (NWS.A:17.79, -0.37, -2.0%) (NWS) Chairman Rupert Murdoch reiterated Monday that the company has no interest in getting into a bidding war with Microsoft (MSFT) over Yahoo (YHOO) . "Yahoo missed out," Murdoch said of the search engine and portal, having acquired Overture several years ago, only to underspend on it and watch Google (GOOG) overtake Yahoo with a more than 60% share of the search engine market share in the U.S. "We're very happy to be in the Google camp," Murdoch went on. "They sell out search advertising, and they pay us well for it." News Corp. is the parent company of Dow Jones, which includes MarketWatch.

McDonald's February Sales


McDonald's Corp. said Monday that February sales at restaurants open more than a year jumped a better-than-expected 11.7 percent, boosted by growth in Europe, the weak dollar and the benefit of an extra selling day this year.

Two straight months of solid results to start the year have reassured investors worried about the impact of the economic slowdown on the world's largest fast-food chain, among other restaurant companies.

McDonald's shares increased $1.11, or 2.1 percent, to $53.38 in morning trading.

The leap year boosted same-store sales by about 4 percent last month, the Oak Brook-based company said.
Same-store sales in the U.S. rose 8.3 percent during the month ending Feb. 29, led by breakfast and coffee offerings. European same-store sales grew by an impressive 15.4 percent on strong results in the U.K., France, Germany and Russia.

Same-store sales in the Asia Pacific region, Middle East and Africa rose 10.9 percent for the month, mostly on strength in Australia, China and Japan.

Systemwide sales, which include restaurants owned by franchisees and affiliates operating under joint-venture agreements rose 13.2 percent in February.

Goldman Sachs analyst Steven Kron said McDonald's is well-positioned to navigate through economic challenges because of its tiered menu platform which offers a mix of value and more expensive new products.

Paul Westra of Cowen and Co. said he is hearing positive feedback from the rollout of McDonald's specialty coffees, now available in more than 1,000 U.S. restaurants en route to being in all of them by mid-2009.

"We strongly believe that February's solid results were positively impacted by the rollout of its two Southern-style chicken sandwiches (breakfast and lunch sandwiches) ahead of a likely spring 2008 media launch. This fact bodes well" for a strong second quarter, he said in a note to investors.

Sunday, March 9, 2008

Deutsche Bank Chief Investigated

Berlin prosecutors confirmed Saturday that they are investigating allegations against the chief executive of Deutsche Bank regarding a loan to the Russian energy company Gazprom.


The bank says the claims are part of a revenge campaign by former media tycoon Leo Kirch

The Berlin prosecutor's office is looking into the allegation, brought by a private individual, that CEO Josef Ackermann gave "improper advantage" to former deputy finance minister Caio Koch-Weser, spokesman Michael Grunwald said.

Koch-Weser in 2005 agreed to the government's guaranteeing a loan worth at least 1 billion euros to Gazprom from Deutsche Bank. Three months later, Koch-Weser was named vice chairman of the Deutsche Bank group -- a move widely questioned by opposition parties at the time.

Grunwald would not elaborate, but Deutsche Bank said the complaint was filed by Kirch, who is involved in a lawsuit against Deutsche Bank.

"We have full confidence in the work of the investigative authorities and assume that the investigation will quickly show the groundlessness of the accusations," said Christian Streckert, spokesman for Deutsche Bank.

Streckert said it was a "revenge campaign" by Kirch, who is suing Deutsche Bank AG for $1.85 billion over claims the bank's former CEO undermined his group's creditworthiness and contributed to its eventual bankruptcy by implying in a television interview in February 2002 that banks would not lend the group any more money.