The news at a glance
JAL: Big changes loom after bankruptcy; Drug safety: Johnson & Johnson chided over recall; Mobile phones: First salvos in a price war; Technology: Intel’s surging profit; Lodging: Starwood accuses rival of spying
JAL: Big changes loom after bankruptcy
Japan Airlines this week filed for bankruptcy protection, “setting the stage for a state-led bailout that could bring sweeping changes to this busy corner of the global aviation market,” said Hiroko Tabuchi in The New York Times. It’s the largest-ever bankruptcy filing by a non-financial Japanese company. The airline, staggered by years of mismanagement and by debts of $25 billion, will continue to operate with $11 billion in funding from the Japanese government, which is demanding that the airline cut 15,700 jobs—a third of its workforce—and eliminate 34 unprofitable domestic and international routes.
Despite its many problems, JAL is widely envied for its extensive route system in Asia, said Steven Rothwell in Bloomberg.com. That’s why two rival alliances of international airlines are wooing JAL. American Airlines and British Airways, two of JAL’s partners in the 11-member OneWorld alliance, pledged to support the Japanese carrier during its restructuring. OneWorld has offered a package of benefits worth $2 billion to keep JAL onboard. But Delta Air Lines, part of the rival SkyTeam alliance, wants greater access to the fast-growing Asian market and is “seeking to lure” JAL to its consortium.
Drug safety: Johnson & Johnson chided over recall
For the second time in less than a month, Johnson & Johnson has recalled over-the-counter drugs “because of a moldy smell that made people sick,” said Marley Seaman in the Associated Press. The pace of the recall of batches of Tylenol, Motrin, and St. Joseph’s aspirin drew a sharp rebuke from the U.S. Food and Drug Administration, which noted that consumers first complained about the nauseating smell in 2008. Similar complaints prompted a recall of Tylenol in mid-December. The company blamed chemical contamination of the drugs’ packaging materials.
Mobile phones: First salvos in a price war
AT&T and Verizon both cut prices for mobile-phone service last week, “reflecting the impact of an accelerating price war among U.S. mobile operators,” said Paul Taylor in the Financial Times. Both companies slashed the price of their unlimited monthly voice plans from about $100 to $70. At the same time, though, Verizon is raising charges on “heavy data users.” The rate change “is likely to lead to further restructuring of data plans and tiered pricing based on data consumption.”
Technology: Intel’s surging profit
“Intel last week kicked off the fourth-quarter earnings season with a sonic boom,” reporting an 875 percent jump in profits during the final quarter of 2009, said Eric Savitz in Barron’s. The chipmaking bellwether earned $2.3 billion on $10.6 billion in revenue, a big improvement over the $234 million profit Intel reported in the fourth quarter of 2008. Analysts said that Intel’s earnings report suggests that corporations have resumed investing in information technology.
Lodging: Starwood accuses rival of spying
A simmering corporate spying scandal widened last week when the hotel operator Starwood claimed that senior executives of Hilton Hotels condoned the theft of trade secrets, said Peter Lattman in The Wall Street Journal. Starwood, which last year alleged in court that two Hilton executives stole confidential data, amended its complaint, charging that “Hilton’s misconduct reached the highest levels” of management, including CEO Christopher Nassetta. Hilton denies the claim, but the Justice Department has opened an investigation.