Indonesia’s Yogyakarta airport, which had been closed for about two weeks by the eruption of the Mount Merapi volcano, reopened for operations Saturday, officials said.
Merapi, which means “Mountain of Fire”, has killed 283 people since it began erupting last month and more than 270,000 are still living in temporary shelters.
Volcanic ash and clouds belched high into the sky threatened the safety of aircraft, causing dozens of international flights to and from the country to be cancelled.
But the mountain’s activity level has now decreased, although an alert remains in place.
Transportation Ministry director general of aviation Herry Bhakti told AFP: “The Yogyakarta airport has resumed operation at 12:00 pm (0500 GMT) today. The effect of volcanic ash has been insignificant.”
Flights resume from Yogyakarta, Mt. Merapi quiet
November 21, 2010What did Rolls Royce know and when?
November 20, 2010Rolls Royce have been conspicuously silent but it is now emerging from the airlines that Rolls Royce knew something was amiss with the older versions of the Trent 900 long before the engine failure on QF32 on November 4th. The indications are that they had serious doubts about the unmodified engines by May this year – and perhaps even earlier.
I posted my assessments about this on November 14th and 15th.
Did Rolls Royce know about the risk for a Trent 900 failure before the Qantas accident?
Problem with Trent 900 was known before accident and raises ethical questions
From an AP report via Yahoo Finance
Rolls-Royce modified a problematic section on new models of its engine for the world’s largest jetliner months before one caught fire and blew apart over Indonesia, a Lufthansa spokesman said Thursday.
The chief executive of Qantas, meanwhile, said Rolls-Royce had made modifications to the Trent 900 engine without telling the airline or Airbus, which makes the A380 superjumbo.
The officials’ remarks were the strongest indication yet that Rolls-Royce had addressed a defect in new models of the engine while allowing Airbus A380 superjumbos to continue flying with unmodified older models.
Lufthansa’s first A380, delivered by Airbus on May 19, had three newer versions of the Trent 900 engine and one older version, airline spokesman Thomas Jachnow said.
“When we got our first aircraft it was curious that one was from an older one and three were totally new from the production line,” Jachnow said. “I think this is more or less the cusp where the old to new happened.”
The Daily Telegraph carries a similar story:
The two airlines said Rolls had not informed them about the changes to the Trent 900, although sources close to the industry played down the modifications as “continuous improvements” and said reports that the changes related to the part that caused the oil leak on the Qantas A380 were “plain wrong”.
Rolls shares fell 11½, or 2pc, to 592p.
Investors are wary that the incident could cost Rolls customers. It is understood there are 22 A380s – bought by Qatar Airways, Kingfisher, Etihad and Air Austral – which are yet to decide whether to use the Trent 900 or a rival made by GE and Pratt & Whitney.
According to Alan Joyce, Qantas chief executive, up to 40 engines could be replaced. Mr Joyce also claimed that Rolls had already been changing the engine. “Rolls-Royce have gone and modified certain parts of this engine,” he stated. “If this was significant and was known to be significant, we would have liked to have known about that. We and Airbus weren’t aware of it. But it depends on what the purpose of modifications were for. It doesn’t look like it’s a significant modification, but it is a modification that has an impact on how the engines are performing.”
A Lufthansa spokesman said it had noticed differences in newer versions of the Trent 900 it had been sent.
In addition to all their technical and logistic issues, Rolls Royce now need to urgently address their loss of credibility and provide detailed answers to:
What did Rolls Royce know and when did they know it?
Haiti response inadequate and UN Head of Mission seems incompetent
November 20, 2010The UN after having introduced cholera to Haiti – which will now remain for many decades – is providing an “inadequate response” according to Medecins Sans Frontieres (MSF) says the BBC.
MSF said that despite the huge aid agency presence in Haiti, urgent needs were not being met. MSF’s chief in Haiti, Stefano Zannini, said the charity had treated more than 16,500 people but that there had been “no real and efficient response from other organisations. This is alarming in the sense that we haven’t reached the peak yet, that might take some time, and so the number of patients might still go up while we still don’t see actions on behalf of other people,” he said.
In a statement, Mr Zannini said more help was urgently needed to treat the sick and implement preventative measures. “There is no time left for meetings and debate – the time for action is now,” he said. Cholera was previously unknown in Haiti, so MSF said much work had to be done to reassure the population, particularly of the low risk and positive benefits of having treatment centres close to areas where people live.
Edmond Mulet: image haitilibre.com
But the need for this reassurance to the local population is apparently not something understood by Edmond Mulet, the head of MINUSTAH (the United Nations Stabilization Mission in Haiti). He seems to be mainly engaged in justifying the UN deficiencies by blaming the lack of action on “the violent protests by people who blame peacekeepers for the spread of the disease (who) were wasting time and costing lives”.
But local Haitians are incensed by the alarmist posturing of the UN head of mission Edmond Mulet who is accused of not taking action. He is busy blaming everybody else and seems to be incompetent at basic public relations.
Judging by the response to his statements in haitilibre.com he is providing little reassurance and only succeeding to alienate the local population. They write
The alarmist statements of Edmond Mulet !
The perpetrators of these “criminals and irresponsible” acts said Mr. Mulet, “prevent the delivery of medical and sanitary assistance to the thousands of patients recently hit by the cholera epidemic, thus condemning to an unquestionable death.”
It is time to stop speaking and start acting Mr. Mulet before it is too late and that violence will spread throughout the country. 12,000 men strong, very well equipped and (with) armored vehicles, what awaits Minustah to release these roads and to restore the order in the zones concerned ? If Minustah’s mission is to maintain peace, she must first begin by eliminating the causes of these disorders, not with dramatic speeches.
If M. Mulet can only respond to the fear of people by blaming them instead of addressing their fear and anger then his competence is in question.
Now Wall Street to crack down on insider trading
November 20, 2010Two days after the Tokyo Stock Exchange attacked the “rampant” insider trading prevalent in Japan, US federal authorities after a three-year investigation, “are preparing insider-trading charges against consultants, investment bankers, hedge-fund and mutual-fund traders and analysts across the nation” according to the Wall Street Journal. Where Tokyo calls it “rampant” the US calls it “vast” and “pervasive”.
The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.
The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.
Among the expert networks whose consultants are being examined, the people say, is Primary Global Research LLC, a Mountain View, Calif., firm that connects experts with investors seeking information in the technology, health-care and other industries. “I have no comment on that,” said Phani Kumar Saripella, Primary Global’s chief operating officer. Primary’s chief executive and chief operating officers previously worked at Intel Corp., according to its website.
In another aspect of the probes, prosecutors and regulators are examining whether Goldman Sachs Group Inc. bankers leaked information about transactions, including health-care mergers, in ways that benefited certain investors, the people say. Goldman declined to comment.
Independent analysts and research boutiques also are being examined. John Kinnucan, a principal at Broadband Research LLC in Portland, Ore., sent an email on Oct. 26 to roughly 20 hedge-fund and mutual-fund clients telling of a visit by the Federal Bureau of Investigation.
“Today two fresh faced eager beavers from the FBI showed up unannounced (obviously) on my doorstep thoroughly convinced that my clients have been trading on copious inside information,” the email said. “(They obviously have been recording my cell phone conversations for quite some time, with what motivation I have no idea.) We obviously beg to differ, so have therefore declined the young gentleman’s gracious offer to wear a wire and therefore ensnare you in their devious web.”
The investigations have been conducted by federal prosecutors in New York, the FBI and the Securities and Exchange Commission. Representatives of the Manhattan U.S. Attorney’s office, the FBI and the SEC declined to comment.
Another aspect of the probe is an examination of whether traders at a number of hedge funds and trading firms, including First New York Securities LLC, improperly gained nonpublic information about pending health-care, technology and other merger deals, according to the people familiar with the matter.
Read the article:
Rolls Royce will face costs of over 300 million $ to fix the Trent 900 problems
November 19, 2010Rolls Royce now faces direct costs for replacement of 40 Trent 900 engines, compensation claims from Airbus and from the airlines involved and lost opportunity costs as the Trent 900 inevitably loses market share to the General Electric / Pratt & Whitney Alliance GP 7200 engine. These could add up to around 300 million $ for fixing the Trent 900 problems and that is a best case scenario which assumes that they have not been negligent in knowingly supplying unfit engines. The cost of the consequent loss of market share cannot be easily quantified.
Airbus has already signalled that it is preparing its compensation claims for the additional costs incurred by diverting new engines from the Airbus production line to the replacement of faulty engines for Qantas, Singapore Airlines and Lufthansa. Any consequent delays to the aircraft under production at Airbus will no doubt lead to further penalties for Rolls Royce. The airlines are also, I am sure, preparing their compensation claims. Qantas is said to be losing one million dollars for every day without its A380’s. The fleet has been grounded for 15 days so far and it seems likely that this may last another 2 or 3 weeks and maybe for the rest of the 2010 calendar year. Qantas has already prepared its summer schedules based on no A380’s being available. Singapore Airlines has restarted its A380 flights.
In most supply contracts the consequential business losses at the airlines would not normally accrue to Rolls Royce but if it can be shown that the faulty engines delivered by Rolls Royce were “not fit for service” or – even more damagingly – that Rolls Royce were aware of the faults when the engines were delivered then Rolls Royce could be liable for massive damages and even for criminal negligence. In fact it would be comparable to issuing a cheque with no money in a bank account which could be construed as criminal negligence and fraud. Certainly it seems that Rolls Royce has known for some time that some of the engines delivered were “not fit for service” and it is highly unlikely that they could completely escape paying some compensation to the airlines. If the method of operation or maintenance by Qantas could be shown to be a contributory factor then Rolls Royce would have had some possibility of resisting the claim and of mitigating the penalties. But if the engines were “unfit for service” to begin with, then it even becomes possible for Airbus and the airlines to make claims for “loss of reputation” in addition to claims for loss of business. There is no viable defence at all if Rolls Royce knowingly supplied unfit engines.
A Trent 900 engine has a price of about 30 million $ and a complete A380 sells for about 320 million $. The direct cost for the engine rectifications for 40 engines is likely to be around 100 million dollars and this could easily increase to 300 or 400 million dollars with the compensation claims mainly from Airbus and Qantas. The Singapore Airlines and Lufthansa claims for compensation will not be small but will be significantly lower than the claims from Qantas. But if Rolls Royce has been negligent- whether criminally or not – then all bets are off and I think costs could escalate to be of the order of one billion dollars.
While the direct costs and compensation – once settled – can be quantified, the effects of loss of market share is potentially even more damaging but much more difficult to quantify. Since there are only 2 engine suppliers I would estimate that Rolls Royce will lose at least 5% market share to its rival as a consequence of this incident.
From my previous knowledge of the costs of fixing problems with land based gas turbines (more than 1 billion $ each for General Electric with their F-class Frame 7 and Frame 9 machines and for Alstom and Siemens with their versions of F-class machines), I would be looking for Rolls Royce to provide – as a matter of prudence – for at least 200 million £ (300 million $) during this quarter. Rolls Royce will need to sell around 100 new engines just to recover this cost.
From an investor perspective I find the lack of communication from Rolls Royce inexplicable and suggestive that there has in fact been some negligence.
Mount Merapi winds down and Indonesia plans ending of Emergency period
November 19, 2010The Indonesian news agency ANTARA reports that:
The government is to end the emergency response period for the Mount Merapi eruption disaster on November 24, a cabinet member said.
“We will maintain the emergency response period until November 24. Whether the period will be extended or not will depend on the situation,” Social Welfare Minister Salim Segaf Al-Jufri said.Speaking to newsmen on when visiting Magelang district on Thursday, he said Mt Merapi evacuees could return home after the volcano`s “beware” status had been lowered.After the end of the emergency response period, the National Disaster Management Agency (BNPB) would begin implementing the reconstruction and rehabilitation programs for Mt Merapi victims, he said. “Houses that have been damaged or destroyed will be rebuilt and people who have lost cattle will be financially compensated. The funds to pay for people`s dead cows would be taken from the state and regional government budgets”, he said.Salim Segaf Al-Jufri further said his ministry had at its disposal Rp397 billion in funds to help disaster victims. Eighty percent of the amount was to meet the victims` physical needs and the rest for operational expenses. But there also was more than Rp3 trillion in stand-by funds to respond to the needs of reconstruction and rehabilitation, he added.Mount Merapi had erupted repeatedly in the past two or three weeks but its most fatal eruptions occurred on October 26 and November 5. As a result of the eruptions, at least 259 people had perished and many others sustained burns and became displaced.
Rampant insider trading at Tokyo Stock Exchange
November 19, 2010
Tokyo Stock Exchange: image via Wikipedia
That insider training is endemic at all major stock exchanges is a modern-day legend. Evidential proof of insider trading is also notoriously difficult. Regulators are usually more concerned about the more “sexy” malfeasance a la Enron or a Madoff but usually long after the event and where recovery of losses is insignificant (Madoff caused 65 billion of losses and auction of his personal possessions by US Marshalls raised just 2 million dollars). If I am a little cynical it is because the actual creation and growth of real wealth (by actually making things that are wanted or providing real services that are needed) seems to be less important and less appreciated than the inflating of values (by creation of bubbles) and redistributing the artificially created “wealth” by “smart” methods.
Many of the statements and actions of the regulators are mainly for public relations purposes and sometimes lead to a few high-profile prosecutions. It is very rare for any small investors to recover what they may have lost as a consequence of fraud. Nevertheless it is always good to see the regulators have some success. Asahi News reports that
Financial authorities are taking action to prevent what has been embarrassingly described as “rampant” insider trading through short selling on the Tokyo Stock Exchange. The Securities and Exchange Surveillance Commission (SESC) is looking into allegations of insider trading of certain stocks on the TSE, but declined to disclose the issues or amount traded. The Financial Services Agency (FSA) and the TSE, meanwhile, are considering tighter rules on short selling.
“We hear from overseas investors that insider trading is rampant in Japan. It’s a grave issue,” a senior TSE official said. In short selling, investors borrow shares from brokerages or stockholders under expectations the price will drop. They sell them and buy them back for a profit after the price drops, returning the same number of shares to the lender.
Insider trading suspicions have been raised over the public stock offerings by Tokyo Electric Power Co. (TEPCO), Nippon Sheet Glass Co. and INPEX Corp., which were announced between July and September. The stock prices of all three firms plunged before the announcements of their public stock offerings.
TEPCO, for example, made public it would raise 550 billion yen ($6.6 billion) on Sept. 29 at 4:30 p.m.–after the close of trading. Earlier in the day, however, large volumes of TEPCO stock, six to 10 times more than usual, were traded mainly through short selling, with the issue closing 7.8 percent lower than the previous day. Likewise, there was a surge in short sales of Nippon Sheet Glass Co. and INPEX Corp. shares, causing the prices of both stocks to fall just before the companies announced their capital increase plans.
Companies issue public stock offerings to secure funds from a large number of unspecified investors by issuing new shares. Because it increases the total number of the company’s shares, the value per share drops, leading to lower stock prices in the short run. “I’m sure information got out beforehand,” a market source said about the recent cases. “Foreign hedge funds sold in large volumes.” These suspicions are nothing new. “Often, after receiving many inquiries in the morning from foreign investment banks on how many shares of a particular stock we have, we find a capital increase announcement by the company. There was such an incident just recently,” said a senior official at a securities company. An SESC official said: “If we do nothing about such practices, we could lose credibility of Japanese markets. If there are allegations, we intend to investigate and crack down on them.” One apparent source of inside information is a “demand survey” on institutional investors conducted in advance by brokerages that handle public stock offerings. The survey is intended to gauge the enthusiasm of institutional investors to see if the capital increase plan would go well. But an SESC official said, “People who got the information beforehand could abuse it.”
The SESC has already taken action. Following the Sumitomo Mitsui Financial Group’s issue of about 300 billion yen worth of preferred stock in 2003, the SESC revealed in 2004 and 2006 that employees of investment corporations in Singapore and Britain had been involved in illegal trading of the shares, using information they obtained beforehand. But such investigations take time because the SESC needs to exchange information with overseas regulatory authorities. The investigation involving Singapore spanned a year and a half. The one concerning the British investment corporation required three and a half years.
Both the FSA and the TSE are considering limiting short selling for a defined period after an announcement of a capital increase–until the issue price of the new stock is determined. Under a U.S. regulation introduced in the late 1990s, investors who conducted short selling within five business days before the issue price is set are prohibited from buying new shares issued through a capital increase.
“A (regulation) system has been established in the Untied States, but apparently not in Europe. We need to look into the background, and it will take some time before we reach a conclusion,” a senior FSA official said.
Former head of Chinese Nuclear corporation sentenced to life for corruption
November 19, 2010
Kang Rixin: photo china-defense-mashup.com
In August 2009 China National Nuclear Corporation’s head Kang Rixin (born 1953), was suspended and put under investigation for misusing $260 million that was earmarked for the construction of three nuclear plants and allegedly used for playing the stock market sustaining heavy losses. Kang Rixin was also accused of accepting bribes of several million dollars of corrupt payments from Areva, a leading French nuclear engineering company.
Sun Qin was appointed President to replace the suspended Kang Rixin.
Today Xinhua reports
that a Chinese court sentenced Kang Rixin, a former head of Chinese nuclear giant China National Nuclear Corporation (CNNC), to life imprisonment Friday for corruption and accepting almost one million U.S. dollars in bribes. Kang, CNNC’s former general manager, was also deprived of his political rights for life and had his personal assets confiscated, a statement from the Beijing No.1 intermediary court said.
Kang, 57, was convicted of having abused his power to enable others to profit. He accepted bribes totaling 6.6 million yuan (970,000 U.S. dollars) between 2004 and 2009. The sentence was lighter because Kang cooperated with investigators and returned all his ill-gotten gains.
Kang became a member of the Communist Party of China (CPC) Central Committee in October 2007. He was stripped of his post in and membership of the CPC for “serious violations of the law and discipline breaches” in December 2009.
UN cholera and protests against UN reach Port-au-Prince
November 19, 2010
Haiti: image via Wikipedia
With its official population of 1 million and its estimated population of perhaps 3.5 million with many in refugee camps, Port-au-Prince is particularly susceptible to a cholera epidemic. The hope of containing the outbreak of UN cholera and preventing it from getting established in the capital are fading as more cases appear. Yesterday the protests against the UN also spread to the capital. So far 3 protesters and over 1100 cholera victims have been killed, directly or indirectly, by the UN. The number of infected is officially said to be over 18,000 but in reality may be as many as 100,000.
Protests linked to the outbreak of cholera in Haiti have spread to parts of the capital, Port-au-Prince.
Police fired tear gas as demonstrators set up barricades and threw rocks at United Nations vehicles. On Monday, clashes between residents and UN troops in the north had left two people dead. Some Haitians blame UN peacekeepers from Nepal for bringing cholera to the country – a claim denied by the UN. Sporadic gunfire could be heard on Thursday as protesters took to the streets of Port-au-Prince, which was devastated by a massive earthquake in January.
In its latest update, the Atlanta-based Centers for Disease Control (CDC) said the course of the disease was “difficult to predict” as it was the first cholera outbreak in Haiti for more than a century. “The Haitian population has no pre-existing immunity to cholera, and environmental conditions in Haiti are favourable for its continued spread,” it said. The CDC said about 1.3m Haitians remained in camps following the earthquake and the camps’ “ability to provide centrally treated drinking water, adequate sanitation, handwashing facilities, and health care varies”. Just 17% of Haitians had access to adequate sanitation before the quake, the CDC said, adding that the situation had considerably worsened since then. US health experts say Haiti is vulnerable to further outbreaks.
It is thought that the cholera originated from septic tanks at a base for UN peacekeepers from Nepal. While the UN denies this and undercounts the number of cases in a totally misguided public relations exercise, the Swedish sources (Ambassador Claes Hammar and Svenska Dagbladet) are adamant about the UN being the source. Over 80% of people who carry the bacteria show no symptoms and since cholera is endemic in Nepal it is very likely that the troops from Nepal exhibited no symptoms but it is apparent that the UN did not test them to ensure that they were not carriers.
Elections in Haiti are due on November 28th and the UN’s communications “experts” seem to be incompetent. Spinning the truth to under-play the extent of the disease and and to deny responsibility is a fundamental PR mistake.
Rolls Royce kept Airbus and Qantas in the dark about two key engine modifications
November 18, 2010The CEO of Qantas has revealed that when the Trent 900 engine failed on QF32, shrapnel from the exploding engine narrowly missed the wing fuel tank which could have caused the plane to explode. The Sydney Morning Herald:
SHRAPNEL from the engine explosion on Qantas QF32 severed a fuel pipe and narrowly missed the wing’s fuel tank, according to official preliminary reports. The chief executive, Alan Joyce, also confirmed yesterday that as many as 40 Rolls-Royce Trent 900 engines fitted to A380 superjumbos worldwide might have to be replaced.
The reports, seen by the Herald, of the damage incurred on November 4 reveal the extent to which metal components tore through the wing. The debris severed wiring looms, chopping a main fuel pipe, puncturing structural spars and ribs and punching through wing surface panels.
Qantas was ”very, very lucky” that thousands of litres of highly flammable jet fuel in the wings did not ignite from the ruptured fuel pipe or from a spark from severed wiring, said Adrian Mouritz, the head of aerospace and aviation engineering at RMIT University. ”If that fuel ignited, that aircraft would have exploded,” he said.
Qantas and Rolls-Royce are still ”days away” from identifying which engines might have to be replaced. The engine maker had kept the airline and Airbus in the dark about two series of production changes to the engine’s internals.
”What Rolls-Royce have done is that they have modified certain parts of this engine. We and Airbus were not aware of it,” Mr Joyce said.
Further extracts from the official reports and pictures of the damage from
Damage to the wing of QF32
Severed fuel pipe on QF32: http://blogs.crikey.com.au/planetalking/2010/11/17
The questions for Rolls Royce are multiplying and their lack of communications is astounding. Not only, it seems, did Rolls Royce know about the risks of engine failure before the Trent 900 exploded on QF32, but they have also modified the engine and quietly started introducing the modifications without Qantas and Airbus being aware of the significance or the risks with the unmodified engines!!!!!
