© Reuters. FILE PHOTO: Ryanair Chief Executive Michael O’Leary speaks during a Reuters Newsmaker event in London, Britain October 1, 2019. REUTERS/Peter Nicholls
By Conor Humphries and Tim Hepher
DUBLIN (Reuters) -The boss of Ireland’s Ryanair on Monday ramped up a war of words with Boeing (NYSE:), calling the U.S. planemaker “delusionary” for imposing what he termed a double-digit percentage price hike for 737 MAX 10 jets in talks this year.
Chief Executive Michael O’Leary also said Boeing needed to “get its shit together” after what he described as delays in the delivery of 65 jets from an existing MAX order, though he was “reasonably confident” they would arrive for the summer peak.
A Boeing spokesperson said it was committed to supporting Ryanair as a long-standing partner, but added it would “continue to be disciplined” in commercial decisions.
Industry sources blamed the delays on shipping problems for galleys linked to a worldwide logistics logjam.
Europe’s largest low-cost carrier in September abruptly ended talks with the U.S. planemaker over an order of 737 MAX 10 jets worth tens of billions of dollars because of differences over price.
Speaking on Monday following the airline’s latest financial results, O’Leary said Boeing’s approach was “delusionary”.
“Boeing out of the blue sought a … substantial double-digit price increase. I don’t understand the strategy,” he said, before reiterating that Boeing badly needs Ryanair’s business. In a call with investors, O’Leary said he was having a “marital tantrum” with Boeing, Ryanair’s long-time sole supplier.
O’Leary in September said Ryanair had been in talks to order at least 100 of the 230-seat MAX 10.
Sources say the dispute over MAX 10 was already rumbling when Ryanair ordered 75 more of the smaller MAX 8-200 version in December last year. Two industry sources said Ryanair had rejected previous lower offers on the MAX 10 since that date.
Asked on an investor call whether the price increase was compared to an earlier offer or compared to prices paid in the past, O’Leary declined to comment.
Insiders say brinkmanship and flared tempers are more common in the cut-throat aerospace industry than executives care to admit, in contrast with the polished ‘win-win’ arguments favoured whenever such hard-fought deals are announced publicly.
Ryanair and Boeing have often clashed behind the scenes as Europe’s pioneering low-cost carrier insisted on the lowest possible prices, echoing fraught negotiations between Airbus and some of its key low-cost customers. But it is unusual for the knockabout to become public. The spat partly reflects two sources of abnormal volatility stemming from overlapping crises, industry sources say. First is uncertainty over the shape of the recovery, with Ryanair and Boeing appearing to bet on different paths. While O’Leary has said Boeing is ignoring reality about prices, he has also said demand is likely to snap back quickly. Second is the uncertainty that swirled around valuations for the MAX – once Boeing’s most reliable cash and profit benchmark – in the wake of a two-year safety crisis. The MAX 10 has struggled to keep up with runaway sales of the Airbus A320neo and the industry began the year uncertain how much the market would pay for it. But a deal for United Airlines to order 200 MAX 10 in June encouraged Boeing to set the bar higher, driving up the offer for Ryanair, market sources said.
Consultancy Ascend by Cirium said in September MAX values had increased “very slightly” as inventory declines.
With hundreds of MAX yet to be delivered after the grounding and COVID-19 crisis, sources say Ryanair believes prices should be set lower than previous MAX 10 offers, but the planemaker has drawn a line on the grounds that it would be uneconomic to produce and industry sources say the talks remain deadlocked.
Boeing declined comment on confidential talks. A Ryanair spokesman said it had nothing to add to O’Leary’s comments.
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Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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