The news at a glance
American-US Airways merger cleared; Kraft rift costs Starbucks; Yellen faces confirmation hearing; Office Depot names new CEO; Bank of England raises forecast
Airlines: American-US Airways merger cleared
The merger between American Airlines and US Airways is set for liftoff, said Jad Mouawad and Christopher Drew in NYTimes.com. The airlines this week reached a last-minute settlement with the Justice Department, clearing the way “for the creation of a third major global airline.” Regulators’ threats to block the merger on antitrust grounds were controversial in view of previous approvals of the Delta-Northwest and United-Continental mergers. “Airline executives have argued over the years that consolidation and pruning of unprofitable routes” were necessary to restore the industry, but critics worry that reduced competition could mean higher fares and fewer flights.
The carriers have made a few concessions, said Jack Nicas and Brent Kendall in The Wall Street Journal. The merged airline will have to “give up space at several major airports across the U.S.,” maintain existing hubs, and “continue service to certain smaller cities.” But the airlines say the settlement “would affect just 112 of the new carrier’s planned 6,500 daily flights.” With the Justice Department suit behind them, American and US Airways said they hope to finalize the merger transaction by December, although the federal judge presiding over American’s bankruptcy proceeding still needs to approve the deal.
Lawsuits: Kraft rift costs Starbucks
“Starbucks owes Kraft Foods big time,” said Bruce Horovitz in USA Today. An arbitrator ordered the coffee chain to pay $2.76 billion in damages, interest, and attorney fees to Kraft. The decision comes after a dispute that began in March 2011, “when Starbucks prematurely scrapped a contract with Kraft that permitted Kraft to sell bagged Starbucks coffee in grocery stores.” Starbucks chief executive Howard Schultz downplayed the ruling, saying, “It is a one-time charge in a single moment in time, and now it’s behind us.”
Fed: Yellen faces confirmation hearing
Janet Yellen was expected to take on “hostile questioning at a high-stakes confirmation hearing” this week, said Robin Harding and Gina Chon in the Financial Times. The nominee for chairwoman of the U.S. Federal Reserve was scheduled to face questions on Capitol Hill about bank regulation and the Fed’s bond-buying program, which Republicans on the Senate Banking Committee oppose. While the Democratic majority on that committee is expected to approve Yellen, in the full Senate “she will need the support of every Democrat plus a few Republicans to garner the necessary 60 votes.”
Retail: Office Depot names new CEO
Office Depot has named a new chairman and CEO, a week after closing its $1.2 billion merger with OfficeMax, said Brigid Sweeney in ChicagoBusiness.com. The new chief executive, Roland Smith, “has acquired a reputation as a Mr. Fixit” during a long career in the fast food and grocery sectors. “One of his first jobs will be deciding where the office-supply retailer will be based”—either in OfficeMax’s location in Naperville, Ill., or in Boca Raton, Fla., where Office Depot is headquartered. The company is seeking “tax breaks from both states.”
Europe: Bank of England raises forecast
Prospects are looking up for the U.K., said Robert Peston in BBC.com. Bank of England Governor Mark Carney this week lifted the bank’s forecast for 2013 economic growth to 1.6 percent from 1.4, saying the country’s recovery has “taken hold.” Carney’s remarks came as unemployment dipped from 7.8 percent to 7.6, but he has said the bank won’t raise interest rates until it drops below 7 percent. “There are still hurdles to overcome before growth gets back to a sustainable level,” said finance minister George Osborne.