Tuesday AM March 25th, 2008

Regional banks can increase securities purchases…Supreme Court upholds employers reducing health insurance expenses for retirees who qualify for Medicare…Delta Air Lines joins others in charging $25 for second checked bag…

Help is on the way for the devastated market for mortgage-backed assets. The Federal Home Loan Bank can increase purchases of Fannie Mae and Freddie Mac securities by $100 billion over two years. As part of the latest government effort to stabilize the market, the 12 regional banks in the system can raise purchases of securities issued by the two government-sponsored companies to 600 percent of capital from 300 percent. The aim is to inject liquidity into a market that has seized up amid a global credit crunch sparked by the U.S. housing market downturn.

The Supreme Court has upheld a federal policy that allows employers to reduce their health insurance expenses for retired workers once they turn 65 and qualify for Medicare. The justices turned down an appeal by the 35 million-member AARP to undo a rule that essentially allows employers to treat retirees differently depending on their age. The 39-million-member AARP says the rule creates a double standard, allowing companies to treat retirees differently depending on age. The group’s legislative policy director, David Certner, calls it “blatant age discrimination” and “an ineffective band-aid” for the skyrocketing cost of health care. The rules were put into place by the Equal Employment Opportunity Commission, with the support of labor unions and other groups. They worried that employers would greatly reduce or eliminate health benefits for all retirees if they could not take Medicare into account when structuring the health benefit packages they voluntarily provide their retired workers.

Surging oil prices could leave American Airlines parent AMR with a much fatter fuel bill than it anticipated just two months ago. Details are in a filing with the Securities and Exchange Commission. The Fort Worth-based company says it now expects to spend $2.98 per gallon on fuel this year, about 12 percent more than its mid-January prediction of $2.65 per gallon. The nation’s largest carrier says the revised forecast will leave American with a 2008 fuel bill of $9.29 billion. It’s more than $1 billion dollars more than American was expecting earlier in the year. That’s assuming prices don’t rise even further than planned. Spokesman Tim Wagner says American last year spent $6.67 billion on fuel. AMR’s forecast was based on assumptions as of March 14th, when crude prices closed within a few cents of a record above $110 per barrel. Prices have since fallen.

Delta Air Lines is following United Airlines and US Airways in charging $25 for a second checked bag. The fee, starting in May, is to help offset increasing fuel costs that have jumped 68 percent in the past year. Frequent fliers and first class passengers won’t be charged. Last week, Delta said it plans to reduce domestic capacity by ten percent and cut some 2,000 jobs.

Houston Mayor Bill White says the city will use about $3.5 million to build ten wifi network “bubbles” in low-income part of Houston, according to the Houston Chronicle. The money comes from funds paid by Earthlink when it defaulted on its citywide wireless contract last year. The first coverage area will include the Gulfton area of southwest Houston. The city is establishing a committee to determine where future networks will be located.

Another Houston company will benefit from the Texas Emerging Technology Fund. Halsa Pharmaceuticals could receive up to $1 million if it meets certain performance benchmarks in the development and pilot manufacturing of a therapeutic drug treatment for obesity. The Governor’s Office says 10.1 million, or 62 percent of adults in Texas are overweight or obese, costing the state $10.5 billion in 2001. Halsa says it has exclusive patent rights to a natural material that depletes body fat when injected, without causing gastrointestinal distress, blood pressure changes or mood depression.

Iraq’s oil ministry says it has invited local and international oil companies to bid for contracts including one to develop a natural gas field in a Sunni area in the western part of the country. The ministry has set a deadline of April 24th for companies to submit detailed plans to help develop the Akkas Gas Field, located in the former Sunni insurgent stronghold of Anbar Province. Yhe Akkas Field has estimated reserves of more than 2.15 trillion cubic feet. Most of the country’s vast petroleum wealth is located in the Kurdish north and the Shiite south. Development of the Akkas Field could boost the economy in Sunni areas, where support for the government remains tenuous. Early this year, the ministry said it was negotiating with Royal Dutch Shell to conduct output tests for the field, which has five wells that are ready to be interconnected. It could produce up to 50 million cubic feet a day as a first stage. That could be increased to 500 million cubic feet a day, which could be pumped through Syria to consumers in Europe. In a separate tender, the ministry has also invited companies to submit proposals for two oil pipelines linking the Basra oil fields in southern Iraq with Iran’s Abadan refinery.

Houston-based Synthesis Energy Systems and China’s YIMA Coal Industry Group plan to establish a joint project office in Henan Province, according to the Houston Business Journal. The office will develop integrated coal gasification to transportation fuels and chemicals, utilizing the Houston company’s technology to convert low-quality, high-ash coals into synthesis gas and downstream products.

With fuel prices at record highs, you may be seeing more of the old-fashioned propeller-driven planes replacing jets on short-haul regional flights. The turboprops typically use a-quarter to a-third less fuel than jets. And even though passengers prefer the comfort of jets, analysts say the bottom-line may outweigh passenger preferences. Until recently, a lot of commuter airlines had been determined to do away with the propeller planes, and convert to all-jet fleets. But one aviation analyst says with jet fuel prices 60 to 70-percent higher than a year ago, regional jets no longer make economic sense for short-haul flights. The world’s two remaining manufacturers of turboprops for commuter airlines have ramped-up production this year. They’re making 140 of the planes, after delivering 100 last year. Just six years ago, they made just 26 aircraft.

A subsidiary of Houston-based Veolia Water North America has been awarded a $59 million contract to manage New London, Connecticut’s water and wastewater systems. The company will handle billing and collections services, as well as manage a wastewater treatment plant, nine pump stations and 80 miles of sewer lines. Veolia Water will also manage the city’s water filtration plant, storage tanks and 120 miles of water mains.

A 99-year-old state prison in Sugar Land may be shut down so that city leaders can use the land to expand an adjacent airport. The Central Unit prison opened in April 1909. It now holds 975 inmates. Dave Wallace is the mayor of the Houston suburb. He says Sugar Land and the state are conducting a joint study of whether the state prison system should close the 325-acre facility and sell the land to the city. He says a prison is not the highest and best use for that land. The prison adjoins the Sugar Land Regional Airport, one of the busiest airports in the Houston area. The airport is confined on three sides with little room for expansion. Prison inmates grow crops just a few dozen yards from a busy runway used by everyone from corporate jets to weekend pilots. The inmates would be moved to other facilities if the prison is closed. State officials could possibly use the money from the sale of the land to expand existing facilities or build new ones.

Vollmer Public Relations has been recognized for its work on Travelocity’s “Be a Hero—Go Zero” campaign. The PR firm, with an office in Houston, was given the top prize in Media Relations at the PR News Corporate Social Responsibility Awards at the National Press Club in Washington, D.C. last week. The awards are presented by the trade publication PR News.


Ed Mayberry

Ed Mayberry

News Anchor

Ed Mayberry has worked in radio since 1971, with much of his early career as a rock’n’roll disc jockey. He worked as part of a morning show team on album rock station KLBJ-FM, and later co-hosted a morning show at adult rock station KGSR, both in Austin. Ed also conducted...

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