Olaf's Feed
Feb 24, 2015
via Breakingviews

Lavish German pay hike helps entire euro zone

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The change in Germany’s growth model has been ratified by 3.7 million people. All of Europe can rejoice.

Jan 26, 2015

Breakingviews: BA owner’s new pitch to Aer Lingus is nearly there

By Olaf Storbeck

LONDON (Reuters Breakingviews) – Cabin crew, prepare for
landing. The third overture by British Airways owner
International Consolidated Airlines Group (IAG) to Aer
Lingus is still not overly generous, with IAG Chief
Executive Willie Walsh moving just 11 percent from his original
position. But given the conditions Ireland is likely to impose,
this 1.36 billion euro proposal might be enough for the Irish
carrier’s board to start serious talks.

The new pitch is 2.55 euros per share, including a dividend.
On first blush, that doesn’t look too helpful. It’s some way
below the 3.10 euros Citigroup analysts reckon IAG could afford
to pay, or the 2.80 euros HSBC’s team has as its price target.
The total equity value is only 300 million euros more than the
book value of Aer Lingus’ fleet and its 400 million euros of net
cash. The combined group could also benefit from increased sales
and lower costs: Citi thinks synergies could hit 50 to 100
million euros a year.

Jan 19, 2015
via Breakingviews

Cheap oil comes with hidden risks for airlines

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The falling oil price is a short-term blessing for airlines. In Europe, it might turn into a long-term curse. The real test for the industry is not whether profits increase in 2015, but whether it can limit the negative side effects of cheap fuel.

Jan 8, 2015
via Breakingviews

Merkel subjects Greece to risky tough love

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

There should be no doubt that Angela Merkel wants to keep the euro zone intact. Her played-up indifference to the possibility that Greece might leave if it doesn’t find a deal with its creditor partners is part of that long game. The German chancellor just wants to send an advance warning to Alexis Tsipras, the leader of the left-wing Syriza party who may emerge as the winner of the Greek parliamentary election on Jan. 25. Investors should see through the bargaining hubbub. The next Greek crisis will have its cliffhangers – but Berlin will ensure it ends in compromise.

Dec 30, 2014
via Breakingviews

UK faces risk of cold-weather blackouts

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Britain is dicing with darkness. The electricity system is ageing and the mix of generating technology – including renewable sources like wind power – is changing. Both factors increase the danger of power cuts at peak times. New capacity can’t come soon enough.

Dec 18, 2014

Breakingviews: Aer Lingus attractive yet tricky target for IAG

By Olaf Storbeck

LONDON (Reuters Breakingviews) – Aer Lingus is an
attractive but tricky target for British Airways-owner
International Consolidated Airlines Group (IAG). The
Dublin-based airline is operationally strong, holds coveted
usage rights at BA’s Heathrow base and is growing on lucrative
routes in between the British Isles and North America. Nailing a
deal will mean overcoming an unwieldy shareholder structure and
multiple anti-trust concerns.

IAG Chief Executive Willie Walsh knows what he would be
getting. He used to be chief executive of Ireland’s
flag-carrier. Aer Lingus has made an operating profit since
2010. At 8.4 percent, its margin was twice that of Germany’s
Lufthansa in the first nine months of 2014. Long-haul
passengers on routes between Europe and North America rose by a
quarter in the same period. It has 572 million euros of net
cash. This does not look a risky deal.

Dec 11, 2014
via Breakingviews

More Porsche than Prada: Why Ferrari’s worth $7bln

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Ferrari is more Porsche than Prada. Fiat Chrysler Chief Executive Sergio Marchionne aims to spin-off the Italian sports carmaker in 2015, and wants it to be valued like a luxury goods company, with an enterprise value of up to 10 billion euros ($12.4 billion). Fast cars, however, are harder to craft than handbags or high heels. A more reasonable price tag would not be much more than half that.

Dec 1, 2014
via Breakingviews

E.ON’s “bad power” spinoff promises little upside

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

E.ON is coming clean on dirty energy. In a historic move, Germany’s largest utility is exiting conventional generation and bundling unwanted risky assets into a new company to be spun off. The remaining E.ON will concentrate on distribution and green electricity. While both management teams will benefit from focus, this “bad power” spinoff will struggle to offer a tempting investment case.

Nov 7, 2014

Allianz divi hike is bold bet on life after Gross

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)

By Olaf Storbeck

LONDON, Nov 7 (Reuters Breakingviews) – Allianz’s
commitment to pay a higher dividend is an expensive piece of
investor relations by Europe’s largest insurer. The move is a
strong signal to sceptics that Allianz’s Pimco fund unit can
thrive in spite of the recent departure of founder Bill Gross.
For now, Allianz can afford the gesture. But the new policy will
be a challenge for the incoming Chief Executive Oliver Baete,
who replaces Michael Diekmann in May.

Nov 5, 2014
via Breakingviews

German carmakers tune up the basics of banking

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

The in-house finance operations of Volkswagen, Daimler and BMW are among Germany’s most prosperous financial institutions. Some rivals in auto finance, and some much larger banks, could learn from their example.