While Germany is taking all its nuclear power plants offline, the EU’s climate policy is aimed at a mix of nuclear and renewable energy sources

Germany has committed itself to phasing out nuclear power by 2022 and to replace the capacities with modern technology for fossil fuels like more efficient coal-burning power plants and renewables. In contradiction to Germany, most European countries and the EU Commission are considering nuclear power as substantial for the European climate and energy policy as nuclear energy is helpful to reduce CO2 emissions and reduces the dependence on fossil fuel imports. Countries like France and Finland are building new nuclear power plants; Italy which had shut down all its nuclear power plants after the Chernobyl accident is now considering the revival of nuclear power generation. Rising electricity prices and an enormous dependence on gas imports prompted this U-turn. 10% of Italy’s electricity is nuclear power which is imported. And luckily, the phaseout in Germany is under pressure now as electricity suppliers warn of blackouts, shortages and higher prices. And they’re at least partly right. The plan of the former government , on which the current government can’t agree to change it, to build numerous coal-burning power plants has come to a halt as there is heavy resistance against new power plants and especially against CO2 emitting coal-fired ones. Renewable energy has gained a considerable share of the German electricity supply, but they’re driving up prices as they’re subsidized by a surcharge on the electricity bill and even the extension of solar, wind and geothermal energy has slowed down as there are not many places remaining where e.g. a wind turbine could be set up and work efficiently. If the transition from nuclear energy is not halted, electricity prices will keep rising in Germany and it’ll be impossible to meet the CO2 reduction targets. The costs of production of nuclear power remain relatively stable whereas generating energy out of fossil fuels is becoming more and more expensive which might also be accelerated by the planned European emissions trading system.

Another critical issue is that there is little acceptance for nuclear energy in the population. But these people don’t consider that taking domestic power plants offline and eventually having to import (nuclear) power from neighboring countries does more harm than good. Countries in Eastern Europe are interested in further nuclear power plants and are already generating nuclear power. However, the old power plants in Eastern Europe are often less safe than the more modern ones which might face phasing out. The security of energy supplies is apparently no issue most Europeans worry about when protesting against nuclear power. But skyrocketing energy prices and expected power shortages are likely to change their minds. Hopefully, Germany’s next government realizes that nuclear energy is a powerful option for providing safe and affordable energy without emitting greenhouse gases.

Altogether, a broad palette of renewable, nuclear and fossil energies is the best mixture for a time in which the entire energy sector is in transition.

http://www.dw-world.de/dw/article/0,2144,3351691,00.html

Air Berlin reconsidering long-haul destinations – does low-cost not work for longer destinations?

Air Berlin is the second largest German airline after Lufthansa and operates semi low-cost flights mainly in Europe, and to some destinations in China and North America since last month. The acquisitions of German competitors and a long-haul operator of tourist destinations are part of the airline’s strategy of expanding its operations from holiday and business destinations throughout Europe to long-haul destinations in China, North America and – operated by its subsidiary LTU – in Thailand, the Maledives, Sri Lanka and the Caribbean.

Yet, as airlines around the world struggle with high fuel costs, environmental criticism and passengers unwilling to spend more on tickets, Air Berlin also suffers. Even the important business travelers cut on their travel spending and seat occupancy in first and business class has slumped.

Air Berlin launched its 5 times a week services from Germany to Shanghai and Beijing in China last month, but now they’re cutting 2 weekly flights to Shanghai and are reconsidering all long-haul destinations as well as unprofitable destinations in Europe.  The intercontinental flights consume most fuel and Air Berlin faces a fierce competition with the established airlines, particularly Lufthansa. It is obvious that Air Berlin has chosen the wrong point in time to launch an intercontinental service. OASIS Hongkonk airlines, the first intercontinental low-cost carrier, also failed and had to cease its operations in spring.

Despite increased revenues and a higher seat occupancy, Air Berlin had to announce the second profit warning this year which puts pressure on the executives to review its current strategy. One measure to reduce costs is the instruction to Air Berlin’s pilots to slow down a bit to save fuel. Whether the airline cancels some of the numerous firm orders which include 25 Boeing 787s and 34 A320 remains to be seen. The market value of the airline is down by 41% since the beginning of this year. This could make Air Berlin a take over candidate though Air Berlin itself still plans to take over yet another tourist airline.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aYEHZI88AwqU&refer=europe

Ties between China and Taiwan are warming

China and Taiwan are holding talks again about opening regular direct flights between mainland China and Taiwan. This is a major step out of the frosty relationship which derives from the Chinese Civil war in 1949 when the Chinese nationalists fled to the island of Taiwan when the communists took over power in Beijing. Since then, the two have been bitter rivals and their relationship was tense. China has claimed sovereignty over Taiwan which has been ruling itself with the support of the United States. Taiwan has been capitalist since then and rose to a wealthy high-tech country.

The political talks had been frozen since 1999 under the rule of a pro-independence party which lost the elections in spring. As Taiwan’s new president Ma Ying-jeou is convinced that better relations with mainland China and good economic ties are more important than formal independence, this is a chance for a more friendly future. Travelers between China and Taiwan have to change in Hongkong or Macau as almost no direct flights were permitted for more than 50 years. The resumed talks could lead to an opening of regular direct flights and Taiwan could allow up to 3,000 Chinese tourists to visit Taiwan each day. Until now, Taiwan has tightly controlled the number of Chinese visitors.

Despite China and Taiwan still being political foes, the business relations are extensive. About 300,000 Taiwanese live and work in mainland China, Taiwanese companies are investing in China and build up ever more factories. The bilateral trade has been rising for years.

However, China is unlikely to soften its aggressive claims of sovereignty over Taiwan which Beijing considers as a breakaway province. Another key issue is the Taiwan Strait where several military confrontations took place.

http://www.iht.com/articles/2008/05/29/asia/29taiwan.php

International Aerospace Exhibition ILA 2008 in Berlin

 

The ILA 2008 air show opened on Tuesday in Berlin. It is among the largest and most important airshows in the world and is held biannually. It takes place on the southern section of Berlin’s Schoenefeld Airport which is will be the future Berlin Brandenburg International airport and replace the two other airports of the German capital. The focus of interest is on efficiency and alternative fuels. Several planemakers from around the world present their latest and most prestigious planes. The world’s largest passenger plane, the Airbus A380 was on the show on Tuesday as well several demonstrator planes which use alternative fuels.

Airbus presented a version of its A320 plane which uses fuel cells to power some of its steering systems. Boeing brought along a one-seater which uses fuel cells and batteries to fly. Another concept presented at the show is to run aircraft with fuel made from algae. The Dutch airline KLM announced that it will run a pilot project with an aircraft burning algae kerosene mixed with conventional fuel.

 This years exhibition reached new heights with 1,127 exhibitors from 37 countries and more than 300 aircraft on the show. Among the airplanes presented are numerous historic planes, military planes, cargo and passenger planes, helicopters and many more. On the occasion of the 60th anniversary of the Berlin Airlift, German chancellor Angela Merkel met an American airlift veteran.

http://www.iht.com/articles/ap/2008/05/27/news/Germany-Berlin-Air-Show.php

EADS, Airbus’ parent company, begging for more state support

Yes of course, competition is fierce, the process of designing new aircraft and producing them carries along lots of risks, but does this justify even further state support?

EADS’ CEO Louis Gallois complains that Boeing received 800 million dollars of subsidies from the U.S. government while Airbus received only $94 million from the European governments in 2006.

Well, it is an established bad habit amongst governments from around the world to support ”their” aircraft manufacturer with extensive state subsidies. To some extent, this practice is justified as it takes a lot of effort and money to build up a new aircraft manufacturer.  Besides, the entrepreneurs would be overburdened with having to bear the entire risk in the beginning. Moreover, it would be unfair if one manufacturer would not receive state support and all competitors could rely on financial support by their governments. But the question arises whether state subsidies in this extent are still justified in the case of Boeing and Airbus which dominate the aircraft industry which anyway has full order books for years as a result of the aviation boom. Governments should consider whether they are planning to pay forever for their aircraft industry. If not, is there any better moment to cut subsidies than now? Furthermore, the U.S. and the EU could ultimately end their decades-old dispute over billions of subsidies to Airbus and Boeing. The companies would have to learn to stand on their own feet and less influence by the government would make it easier for the executives to make the processes efficient and economic. Anyway, I ask myself how Airbus can be efficient and competitive with producing the components of its planes all about Europe and then shipping them to Toulouse, France, for the final assembly. This structure of production is a waste of both, money and time and derives from the idea that Airbus is a European aircraft manufacturer with subsidiaries in all countries involved. The political influence at Airbus does by far more harm than good and hinders a real reorganization of the company.

Another issue is whether the taxpayers should spend billions of dollars to boost the profits of the companies or to reduce their debt if they screw up a major project.

South American nations launch a union modelled on the EU

There are several political and economic communities which have united to benefit from a single market and from the power of the community. Amongst the most important are the North American trade bloc NAFTA and the European Union. On May 23, the twelve South American countries signed the Constitutive Treaty of the UNASUR, the Union of South American Nations. The UNASUR  is aimed at uniting two existing custom unions in South America, creating a single market, infrastructure and energy cooperation as well as an improved extraction of raw materials and coordinated economic and defence policies. Another major project is the planned introduction of a single currency in the long term. The UNASUR has a population of 388 million and the annual GDP is close to $2 trillion.

If Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela manage to unite and work together, they’re likely to become a strong global power, but there are fundamental differences and tensions between the member states. The economically powerful Chile supports the idea of free trade and low customs while other countries like Venezuela are making moves of protectionism and nationalization. Then there are considerable tensions between states like Columbia which has a good relationship with the United States and Venezuela which has in contrast quite a tense relationship with the US. Another issue is the crisis between Colombia, Ecuador and Venezuela after the Ecuadorian cross-border raid on Ecuadorian territory in March. On the economic side, there are steep differences in wealth and the economic situation across the countries. The divergent growth and inflation rates are a major hindrance towards a single currency. Most South American countries still trade in dollars with each other.

On the other hand, the UNASUR states don’t face the challenge of extreme linguistic diversity as the EU does. The two major languages across the continent are Spanish and Portuguese. The European Union has to spend more than €1,100 million on translating annually.

http://in.news.yahoo.com/indiaabroad/20080524/r_t_ians_wl_us/twl-south-american-leaders-launch-new-al-903abaa.html

EU climate dictatorship will fail and isn’t of any help either

European climate policy is all about regulating and defining standards. The European Commission is going mad when climate issues are concerned and eagerly tries to force all Europeans to buy the one and only European standard green(washed) car in the future. The Commission regulates each component of a car – be it the air conditioning, the engine, the tires, the braking system, the safety system or any kind of on-board device. Their next step will be to dictate how auto manufacturers have to design their advertisements.

All this nonsense prevents any form of competition of ideas and innovation in auto manufacturing. The EU hinders the function of the free market. Ever more expensive gasoline inevitably forces auto manufacturers to produce cars which consume as less gasoline as possible as most people can’t afford driving gas-guzzling cars anymore. Besides, auto manufacturers are now forced to make their cars conform to the EU regimentation rather than to focus on coming up with fresh ideas and concepts of more efficient cars which don’t reduce the pleasure of driving. If an automanufacturer fails to reduce its fleet consumption, severe punishments will follow. Countries which host producers of smaller cars like France and Italy could use this tool to distort competition by harming competitors which traditionally produce larger vehicles like most German manufacturers. It’s not surprising that small cars need less gasoline than larger ones, but this unfair practice does not encourage innovation or the improvement of efficiency in the sector of small cars which are often less efficient than larger ones. The EU should set targets for efficiency and encourage the auto manufacturers to find ways to meet these targets in an adequate timeframe. Hasty greenwashing won’t help the climate nor the people – as it is the case with the EU’s ambitious but stupid biofuel plans. All auto manufacturers should have to increase the efficiency of their cars without considering the total consumption or the total emissions.

An amazing airline! – Air Asia, the Asian low cost pioneer

Air Asia has turned from a tiny budget start-up airline, which started out taking over a debt-torn Malaysian airline to a profitable, leading low-cost, no-frills airline in Asia. It is estimated that Air Asia has the lowest operating costs and highest profit margins in the industry. Air Asia operates about 400 flights a day to over 60 destinations in Malaysia, Thailand, Indonesia, Singapore, China, the Philippines, Brunei, Cambodia, Laos, Vietnam and Myanmar. The airlines’ fleet has grown from two to 49 today and 139 orders are to be delivered in the next years. More than 35 million people are carried annually.

The company’s founder and chief executive, Tony Fernandes who is as young as 43 made his money in the music business at Virgin Music and later at Time Warner. After he quit his job at Time Warner, he spent some time in London where he was fascinated by the business model of Easy Jet and the Greek businessman who founded the extremely successful budget airline, Stelios Ioannou. As his interest was sparked, he returned home to Malaysia with the intention to found an airline. Together with three friends he overtook the unprofitable Air Asia and its debt in 2001 and the airline broke even one year later and all debts were cleared. The airline expanded its operations to neighboring ASEAN states as well as to China and India. The low-cost concept of the company includes operating from low-cost airports, taking bookings only via the Internet, charging for services like food and drinks, using the crews to clean the aircraft to shorten turnaround times and flying economically to save fuel.

While the global airline industry is suffering from sky-high oil prices, Tony Fernandes considers this as just a minor challenge as the airline faced numerous challenges in the past. Establishing a low-cost carrier in the very regulated region and challenging national airlines was really hard work. The company started out just after the 9/11 terrorist attacks which caused the entire sector to suffer from decreasing passenger numbers. SARS was another challenge which didn’t keep Air Asia from thriving.

Tony Fernandes has recognized a new market, came up with a viable business model and tapped into an enormous market of half a billion people. Air Asia enabled many middle-class Asians to afford flying which accords with their slogan “Now everyone can fly”. Tony Fernandes’ airline contributes to the growing together of south-east Asian states. In many regions there, travelling by plane is the only way of getting to remote places, e.g. to islands, as infrastructure is poor or nonexistent.

Tony Fernandes as well as the entire Air Asia staff convey a feeling of fun about flying. Their commercials establish the brand as “attractive” and charming. Their philosophy is making traveling fun for the passengers. Fernandes has ordered 25 Airbus A330 which are suitable for long-haul destinations. Whether he will manage to expand the network to Europe one day is to be seen. Such a step would be a real challenge as fuel would account for the most part of the operation costs and Air Asia would face fierce competition from global players like Singapore Airlines which has an excellent reputation and the power and money to battle rivals.

http://www.economist.com/research/backgrounders/displaystory.cfm?story_id=2502539

http://www.airasia.com

Airlines and passengers are paying the bill for sky-high oil prices

 Europe’s biggest airline, Air France-KLM, announced its first quarterly losses in five years and warned of an “awesome challenge” for the entire airline industry. Air France-KLM’sprofit collapse is in a row with the problems of numerous airlines in the US and around the world. The world’s largest airline American Airlines announced that it would cut jobs and flights, retire some 75 jets as well as to charge a fee for checking even one bag.  The Scandinavian airline Finnair also announced a profit collapse due to the high oil price. The budget airline Ryanair which does no fuel hedging to protect against rising prices is also being hurt by high oil prices.

Air France-KLM’s CEO Jean-Cyril Spinetta and many analysts expect that the upcoming shake-out will threaten budget airlines, which rely on low fares as their business model to attract passengers and are – as in the case of Ryanair  – not protected by fuel hedging, as well as national airlines with overage fuel-guzzling planes. The first intercontinental budget airline Oasis Hongkong had to cease its operations on April 9th – another victim of soaring oil prices. The humble Italian national airline Alitalia is also at risk. Its fleet is overage, its debt high and rising by one and a half million euros a day. The potential buyer Air France-KLM is not interested anymore as they anticipate that Alitalia won’t be profitable in the medium-term. The Italian governments’ new  €300 million loan to Alitalia might be denounced as illegal by the EU.

Air France-KLM now intends to pass on two thirds of the increased prices to passengers (the airline has already raised prices 17 times since 2004), to reduce its seating capacity and to operate long-haul routes by more fuel efficient aircraft like the A380. Another challenge is the allegation of price fixing in the airlines’ cargo business which is investigated by the EU and the US. Possible fines could cut profits even further.

However, Air France-KLM is very likely to survive the current crisis as well as most other major airlines which are expected to use consolidation for acquisitions. Europe’s second largest airline Lufthansa might take a share in troubled Austrian Airlines and eventually overtake it. Most budget airlines could disappear which would favor the big players Ryanair, Easyjet and AirBerlin that has taken over several smaller German competitors and is focusing more and more on intercontinental destinations. Easyjet and Ryanairare in a good position due to their very young fleet which they purchased at a sensationally low price during the aviation crisis in the aftermath of 9/11.

That demand will deteriorate is inevitable as passengers won’t accept ever rising prices. People will try to go by train rather than to fly, businesses will try to cut on their travel expenses and do more video conferencing. I doubt that the aviation boom of the last years will continue in the pace we got used to. While fares had been falling for a years due to increased efficiency and competition, airlines now struggle to remain profitable without risking to loose market share and loyal customers.

http://www.iht.com/articles/2008/05/22/business/carrier.php?page=1

 

 

 

 

 

 

 

 

Coal on the comeback trail?

Oil prices have finally crossed the $130 line and are heading for further records. And as OPEC ministers say they cannot halt the trend – they’d be stupid to keep prices down, wouldn’t they? – coal becomes more and more attractive again, even in countries where coal production has been declining for decades due to high extraction and labor costs. Japan now rediscovers its domestic coal reserves. Japanese mines are back in business again, they’re competitive and full of hope for a better future after going through a dry spell for a very long time. Although Japan’s domestic supplies are too tiny to have a considerable effect on the country’s reliance on imports, the business is profitable.

But gearing up prodution is not easy as Japan lacks of mining experts and miners today. Besides, environmental regulations hamper expansion.

Despite the revival of some mines, global coal reserves are limited and production will decrease after reaching its peak in 2030, according to the Energy Watch Group, a global coalition of scientists. The Group reports that global coal reserves are smaller than generally anticipated. The wrong estimates were based on outdated statistics and an  underestimated increase in global coal consumption.

http://edition.cnn.com/2008/WORLD/asiapcf/05/12/myth.coal/

http://www.iht.com/articles/2008/05/22/business/22mines.php?page=2