International
Monday Newspaper Review - Irish Business News and International Stories
By Finfacts Team
Feb 19, 2007, 07:19

The Irish Independent also reports that Airtricity is to build a ground-breaking electricity transmission system in the Texas Panhandle Plains region of the US.

The Irish Times reports that DCC subsidiary Allied Foods is understood to have been awarded a major distribution contract with Dunnes Stores to deliver the retailer's frozen produce and some of the chilled.

Dublin-based logistics firm Sam Dennigan is believed to have won the contract from Dunnes to distribute the rest of its chilled and fresh produce. It already distributes potatoes for the multiple.

Revenue from the two deals is likely to be in the region of €200million, split equally between the two. The contracts will commence at the end of the month when the long-standing relationship between Dunnes Stores and its current distributor, Whelan Frozen Foods, ceases after a fractious legal battle that now threatens the future of almost 350 jobs.

Dunnes Stores was Whelan Frozen Foods's sole customer. The distributor reported turnover of almost €190 million in the 12 months to January 2005 and an operating profit of €1.8 million.

The company was also responsible for distributing drapery for Dunnes Stores, but these operations are understood to have been transferred to the Irish arm of UK-owned Wincanton.

Fyffes spin-off Total Produce could also be in line to pick up a milk distribution contract with Dunnes Stores.

While the food distribution contracts are likely to have been attractive, Dunnes Stores probably pushed for tight terms with Allied Foods and Sam Dennigan.

DCC declined to comment, while Sam Dennigan and Dunnes Stores did not return calls.

In 2005 Dunnes Stores sought to reduce the margins it was paying to Whelan Frozen Foods. In a subsequent affidavit, its managing director, Paddy Whelan, claimed that Dunnes Stores managing director Frank Dunne threatened to "halve" the supermarket chain's business with Whelan Frozen Foods unless the distributor cut operating costs.

DCC wholly acquired Allied Foods in 2004. At the time the distributor was generating operating profits of approximately €3.5 million. The last available accounts for Sam Dennigan, which is now an unlimited company, date from 2003. That year the State's largest potato wholesaler reported an operating profit of more than €3.7 million on turnover of almost €67 million. Directors' remuneration was more than €2.8 million.

Sam Dennigan had also invested almost €600,000 in Greenacre Foods, the Limerick-based food company that was established by food scientist Rita Ahern. It held a 39 per cent stake in the firm, but disposed of its holding in 2003.

The Irish Times also reports that the Jurys Montrose Hotel in Dublin is to be bought by the owners of the Superquinn chain.

A deal has been agreed for the Stillorgan hotel with the Jurys Doyle group, for a price understood to be in excess of €40 million. The hotel, which is believed to have been underperforming, was on the market for some time.

Select Retail Holdings, the owner of the Superquinn group, comprises property developers Jerry O'Reilly and Bernard McNamara, estate agents Bernard Doyle and David Courtney, hotelier Terry Sweeney, chartered accountant Kieran Ryan, financier Simon Cantrell, and retailer Simon Burke, chairman of Superquinn.

One of the most acquisitive investors in the commercial property market, Mr McNamara has built up a large hotel portfolio in recent years. However, the Montrose site may have been bought for its redevelopment value.

Mr McNamara co-owns the Shelbourne Hotel with four other investors and controls the Mercer Hotel in Dublin. He also bought out the Great Southern Parknasilla Hotel in Co Kerry last summer and co-owns the Radisson SAS Hotel in Galway.

He was recently involved in two of the most prominent property transactions in Dublin. He was the largest single shareholder in the consortium that bought the former Irish Glass Bottle site at Ringsend for €412 million, and is a member of the group that this month acquired the Allianz building on Burlington Road for €100 million.

The Allianz property is adjacent to the Burlington Hotel, which was put on the market last month by the Jurys Doyle group. Mr McNamara is considered a possible bidder for the hotel, which is likely to fetch at least €250 million.

Jurys Doyle is believed to be preparing to close the Berkeley Court and Jurys hotels in Ballsbridge later this year. The three hotels were sold last September to property developer Seán Dunne for €380 million.

The Irish Examiner reports that part Irish-owned property company, Oceanico, is on the verge of an €800 million deal for five top courses that will give it a stranglehold on the Algarve’s lucrative golf tourism market.

The Portuguese-based company is in advanced negotiations to buy the company that controls the five leading courses in the golf hot-spot of Vilamoura.

Lusotur Golfes, which owns Vilamoura’s five famed golf courses, is considering several proposals from outside investors to buy the business. And it is understood that Oceanico, owned by Drogheda man Gerry Fagan and his British partner, Simon Burgess, are leading the race to finalise an agreement with Lusotur.

The five golf courses — the Old Course, Victoria, Millennium, Laguna and Pinhal — attracted more than 200,000 players between January and November last year, becoming the first Portuguese golf company to record such a high number in less than one season. Unconfirmed end-of-year net profits were just under €6m.

The Vilamoura courses recorded a growth of 10.5% in the number of rounds played and 11.5% in the number of players.

Oceanico, already regarded as the market leader of four and five-star property development in Portugal, will open its €500m, five-star Amendoeira golf resort next year in Silves, about 32km from Vilamoura.

The two championship courses were designed by Nick Faldo and Christy O’Connor Jnr, and will be surrounded by prestige properties ranging from €500,000 to €2m.

The purchase of the Vilamoura courses will give Oceanico strategic control of seven of the leading golf courses on the Algarve.

Oceanico has also invested in Portugal’s Silver Coast, where it is building the Royal Obidos resort and golf club, and also in the Azores, where it is part of a consortium with the Siram group that plans to transform the Batalha and Furnas golf clubs on the island of São Miguel into luxury tourist resorts.

André Jordan, president of the board of directors of Planfipsa SGPS, which owns Lusotur Golfes, said three or four proposals from Portuguese and international groups were under consideration. But Algarve media reports have named Oceanico as the front-runner.

An Oceanico spokesperson declined to comment.

The Anglo-Irish company was only founded in 2000 but has already built up a considerable luxury property portfolio across the Algarve. Its Amendoeira golf resort will be built on a sprawling 640-acre site, and will be the jewel in a portfolio that features popular developments like Jardim de Meia Praia and Estrela da Luz near Lagos, and the recently finished Vila Baia project in Luz. A total of 80% of the properties at its most recent development at Belmar sold off-plans in the first week.

Mr Fagan worked for Campbell Bewley Catering for more than 25 years before moving into property development and relocating to Portugal in 1999.

The Financial Times reports that all the world’s extra oil supply is likely to come from expensive and environmentally damaging unconventional sources within 15 years, according to a detailed study.

This will mean increasing reliance on hard-to-develop sources of energy such as the Canadian oil sands and Venezuela’s Orinoco tar belt.

A report from Wood Mackenzie, the Edinburgh-based consultancy, calculates that the world holds 3,600bn barrels of unconventional oil and gas that need a lot of energy to extract.

So far only 8 per cent of that has begun to be developed, because the world has relied on easier sources of oil and gas.

Only 15 per cent of the 3,600bn is heavy and extra-heavy oil, with the rest being even more challenging.

The study makes clear the shift could come sooner than many people in the industry had expected, even though some major conventional oil fields will still be increasing their production in 2020. Those increases will not be enough to offset the decline at other fields.

“It becomes unclear beyond 2020 that conventional oil will be able to meet any of the demand growth,” Wood Mackenzie said. The report added that natural gas products such as liquids and condensate would also become important sources of growth.

The increasing reliance on unconventional oil will require a substantial reshaping of the energy industry.

Royal Dutch Shell and Total of Europe and ExxonMobil and Chevron, the US-based energy groups, have already begun to invest heavily in Canada and Venezuela.

Others – including Chinese energy groups – are looking at the possibility of extracting heavy oil from Madagascar.

On the gas front, Devon Energy last year spent $2.2bn (€1.7bn, £1.1bn) expanding its already sizeable position in Texas’s Barnett shale by acquiring Chief Oil and Gas. The development of such shale deposits is expected to help the US get 40 per cent of its production from unconventional sources by 2020.

But the challenge is huge, said Matthew Simmons, an industry banker who sent shock waves through the oil world when he questioned whether Saudi Arabia, the most important oil source, would be able to continue to expand production.

“The ability to extract this heavy oil in significant volumes is still non-existent,” he said in a recent speech.

“Worse, it takes vast quantities of scarce and valuable potable water and natural gas to turn unusable oil into heavy low-quality oil.”

“In a sense, this exercise is like turning gold into lead,” Mr Simmons said.

The FT also reports that Spain’s transformation from an impoverished southern European backwater into one of Europe’s most vibrant economies is confirmed by an opinion poll published on Monday that shows it is the most popular destination for Europeans thinking of working abroad.

The FT/Harris poll portrays Spain as a country at ease with itself: its citizens are relaxed about immigration and are the most optimistic citizens of any major European country that their lives are getting better.

The poll on attitudes to migration also confirms the gloom hanging over France, with 73 per cent of its people convinced life in their country is getting worse.

In spite of this Gallic grief, the survey suggests the French would rather wait at home for the mood to pass. Only 23 per cent of citizens would consider working in another European country, by the far the lowest.

The poll of 6,561 adults in the UK, France, Germany, Italy, Spain and the US offers an insight into the factors pushing and pulling migration in Europe, and the extent to which it is seen as a political problem.

The survey found that while the UK is second only to Spain as a preferred work destination, British citizens have become more hostile than anyone else in western Europe to immigration from the EU. Almost half – 47 per cent – of Britons said immigration was having a “negative impact”

Britain was one of three western European countries fully to open its doors to migrant workers from eight new EU members in 2004, a policy business leaders claim boosted the economy and filled skills shortages.

But negative media coverage of the issue has helped create a climate where two-thirds of ÙK citizens say there are “too many foreigners” in the country, the highest ratio of any major European nation.

Perhaps the most striking finding is the extent to which Spain has emerged as an inwardly confident and outwardly attractive country, 21 years after joining the EU as one of its poorest member states.

It found 17 per cent of those polled put Spain as the country in which they would most like to work, ahead of Britain on 15 per cent and France on 11 per cent. French and Italian citizens were the most likely to want to emigrate there. Spain had the lowest number of people who considered life was getting worse (50 per cent) and its citizens were by far the most positive about the economic benefits of immigration.

A total of 42 per cent of Spaniards believed immigration was good for the economy, compared with 19 per cent in Britain and France. However, a large majority of Spanish respondents (71 per cent) still wanted tighter border controls, a reflection of illegal immigration from Africa.

Last Friday Joaquín Almunia, the EU monetary affairs commissioner, upgraded his growth forecasts for Spain in 2007 from 3.4 per cent to 3.7 per cent, making it one of

The New York Times reports that the online version of VG, the biggest-selling tabloid newspaper in Norway, had the latest news flashes on the death of Anna Nicole Smith, of course. But a little down the page was something else — oil company earnings reports.

The financial headlines link readers to E24, an online business “newspaper.” Not many tabloids feature business fare on their front pages, and perhaps even fewer papers willingly direct readers to other publications. But E24 and VG (or Verdens Gang, which means “the way of the world”) are both owned by Schibsted, an Oslo newspaper publisher that does things differently on the Internet.

For starters, it makes lots of money.

At a time when other newspaper companies lament a loss of readers and advertisers, Schibsted is thriving. Its earnings rose 28 percent in the fourth quarter. Online operations will generate about 20 percent of the company’s revenue this year, according to analysts at Kaupthing, a bank based in Reykjavik, Iceland, even as many other big newspaper publishers struggle to reach the 10 percent mark.

Perhaps more important, at least for investors, online businesses will provide nearly 60 percent of the company’s operating earnings by next year, the Kaupthing analysts predict. Schibsted has become so emblematic of online success that Bharat N. Anand, a professor at Harvard Business School, is writing one of the institution’s well-known case studies on the company.

“There’s clearly something quite special here,” Professor Anand said. “There’s no question they managed this transition earlier than a lot of newspaper companies, and they’re in a better position as a result.”

In 1995, Schibsted started investing heavily in new media, and it stuck with those commitments in 2000 and 2001, when some other publishers turned skeptical. In recent years, the investments have started to pay off, and Schibsted is now the biggest player on the Internet in Norway and neighboring Sweden. It has also expanded aggressively into new markets like France and Spain, starting free newspapers under the name 20 Minutes and acquiring classified advertising businesses that it is moving onto the Internet.

Kjell Aamot, chief executive of Schibsted, said the company recognized more than a decade ago that “being a traditional Norwegian newspaper company would not be sustainable over time.”

While other newspaper companies tried to cling to their existing business models, he said in a telephone interview from Oslo, “we changed from a defensive stance at the beginning of the Internet age to a very offensive one.”

Professor Anand said one reason Schib- sted might have been able to shift gears so quickly was that some of its top managers were from outside the newspaper business, including several executives hired from McKinsey, the consulting firm. Instead of being wedded to print, analysts said, they were willing to cannibalize existing businesses to develop new ones on the Internet.

Circulation and ad sales have fallen at some of the print titles. VG sold an average of 316,000 weekday copies in the fourth quarter, down from 344,000 a year earlier.

But a specialized classified advertising Web site owned by Schibsted, www.finn.no, has become one of the 10 most popular sites in Norway, and the company has replicated it in Sweden under the name Blocket. Revenue from the classified sites has helped to offset declines at the newspapers, in effect subsidizing the cost of the papers’ journalism.

“If it’s a new channel, they are willing to try it and let the market decide,” said Tor Jakob Ramsoy, a consultant at McKinsey. “The main thing they have done is to recognize that the consumer is king.”

To be sure, Schibsted has some advantages over newspaper companies in larger markets, where the media landscape is more diversified and competitive. Norway has the highest newspaper readership in the world, according to the World Association of Newspapers, making its newspapers trusted brand names for consumers online.

“It’s much better to be a big fish in a small pond than a small fish in an enormous pond,” said Dag Sletmo, an analyst at Kaupthing who is based in Oslo.

While Yahoo and Google dominate most markets, Schibsted was able to build www.vg.no into the most popular site in Norway, attracting more than two million unique visitors a week. Four other Schibsted-owned sites are in the top 20, and the company has a comparable presence in the Swedish Web rankings.

By dominating so much traffic in each market, Schibsted has managed to avoid one of the biggest problems plaguing print publications elsewhere: Because many visitors to newspaper Web sites are simply following links from search engines, they depart as quickly as they arrive. So advertisers choose instead to spend their money with Google, where consumers linger.

The growth of the company’s Web sites shows the benefits of bringing visitors in through the front door and then keeping them in the Schibsted house. At vg.no, occupying the prime banner space for 24 hours costs an advertiser 210,000 kroner, or about $34,000 — more than a full-page, full-color ad in the paper — and the next available slot is in June, Mr. Aamot said.

Schibsted even started a Norwegian search engine, Sesam, in competition with Google.

The strong position of VG and Aftenposten, a more highbrow paper that runs another site in the Norwegian top 10, has helped Schibsted build up new Internet brands like E24, which has Norwegian and Swedish sites. A link from Aftenposten or VG, with which E24 shares some resources, immediately brings thousands of readers, said Hans-Christian Vadseth, publisher of the Norwegian E24.

Though the Norwegian E24 was started less than a year ago, it already attracts more than 450,000 unique visitors a week, far more than the Web sites of the country’s two established financial newspapers, Finansavisen and Dagens Naeringsliv, he added.

E24.no was profitable by its fifth month, and it expects to generate a profit margin of 8 percent in 2007, Mr. Vadseth said. An E24 site in Sweden, which was started in 2005, has also turned profitable, he added.

Mr. Vadseth said the Norwegian site expected to sell $4.6 million in advertising this year — a modest amount, perhaps, but Norway is a small market. And E24’s costs are also low compared with those of a traditional newspaper. A staff of only four editors handles the output of eight reporters and a handful of international correspondents, as well as articles from the parent newspapers and wire services.

Schibsted can afford to lose some advertising from the print newspapers and still make more money, Mr. Sletmo said, simply because profit margins are much higher on the Internet. An online classified generates only about 30 percent as much revenue for Schibsted as the equivalent print ad, he estimated, but earns 65 percent higher profit.

So attractive are Internet-only publications like E24 that a rival Norwegian business publication, called NA24, is pursuing a similar strategy, making the country one of the most fiercely fought-over markets for business news in the world, analysts say. So far, NA24 is profitable because enough banks, telecommunications companies and other advertisers are buying ads, said Inge Berge, the editor. Like E24, NA24 benefits heavily from links to other media partners, which provide half of its traffic, Mr. Berge said. NA24 is owned by TV2, a broadcaster that also owns four regional newspapers, and Carl Allers Etablissement, a magazine publisher. NA24 also has something to offer its partners: It provides video business news segments for a 24-hour television news channel recently started by TV2.

Now that Schibsted has established its online credentials, “The big question is, ‘Is this a repeatable success, or is it a very good 10-year run?’ ” said Professor Anand at Harvard Business School. “And how far can it travel outside Scandinavia?”

The NYT also reports that the founder and chief executive of JetBlue Airways, his voice cracking at times, called himself “humiliated and mortified” by a huge breakdown in the airline’s operations that has dragged on for nearly a week, and promised that in the future JetBlue would pay penalties to customers if they were stranded on a plane for too long.

David G. Neeleman said in a telephone interview yesterday that his company’s management was not strong enough. And he said the current crisis, which has led to about 1,000 canceled flights in five days, was the result of a shoestring communications system that left pilots and flight attendants in the dark, and an undersize reservation system. Until now, JetBlue and its low fares have enjoyed overwhelming popularity and customer satisfaction ratings.

The crisis began Wednesday when an ice storm hit the Eastern United States. Most airlines responded by canceling more flights earlier, sending passengers home and resuming their schedules within a day or two. But JetBlue thought the weather would break and it would be able to fly, keeping its revenue flowing and its customers happy.

On the contrary, JetBlue’s woes dragged on day after day. On Saturday night, for instance, the airline said that the 23 percent of flights it had canceled on Saturday and Sunday would also be canceled Monday. The confusion led to angry exchanges between customers and employees, prompting the airline to call out security personnel.

Founded in 1999 as a low-fare airline, JetBlue was often cited as a favorite among passengers and expanded rapidly, but its systems to deal with the consequences of bad weather did not keep up with the growth, Mr. Neeleman said. The company’s low-cost operating structure may have been a contributing factor.

“We had so many people in the company who wanted to help who weren’t trained to help,” he said. “We had an emergency control center full of people who didn’t know what to do. I had flight attendants sitting in hotel rooms for three days who couldn’t get a hold of us. I had pilots e-mailing me saying, ‘I’m available, what do I do?’ ”

The part of the company that locates pilots and flight attendants and directs them to their next flight assignment is far too small for an airline JetBlue’s size, Mr. Neeleman said. He vowed to train 100 existing corporate office employees to work in that area when needed. Within two weeks, the area can be better backstopped, he said, and within 30 days, “flawless.”

Then again, Mr. Neeleman has been wrong before. On Friday, he told The New York Times that operations would be mostly back to normal on Saturday. That morning the company canceled 23 percent of its flights and shut service to 11 cities entirely.

Yesterday Mr. Neeleman said that throughout the chain of events, he had overestimated JetBlue’s ability to find people and get them into position.

The basic problem, he said, was JetBlue’s communication system: the ice storm had left a large portion of the airline’s 11,000 pilots and flight attendants far from where they needed to be to operate the planes, and JetBlue lacked the trained staff to find them and tell them where to go. Prior to last week, JetBlue had never had so many people out of position.

The reservation system was also overwhelmed, with customers unable to get through to human agents to check on a flight. In an unusual arrangement, the company employs nearly 2,000 reservation agents in the Salt Lake City area, many of them women who work at home. Mr. Neeleman said he would adjust their work agreement to require them to work longer hours during difficult periods.

Mr. Neeleman said he would announce a compensation system for passengers tomorrow. He is hoping to win quick forgiveness from customers and to demonstrate that he takes the airline’s failings seriously.

“This is going to be a different company because of this,” Mr. Neeleman said. “It’s going to be expensive. But what’s more important is to win back people’s confidence.” He did not say if higher fares might be in the offing.

At the peak of the JetBlue problem, nine airplanes full of angry passengers sat for six hours or more on the tarmac at John F. Kennedy International Airport in New York.

Other airlines have suffered big breakdowns. American Airlines stranded passengers on a plane in Austin, Tex., for about eight hours last Dec. 29. And in January 1999, a Northwest Airlines flight from the Caribbean arrived in Detroit 22 hours late and then was kept on the snowy tarmac for seven hours.

Last week at J.F.K., Delta Air Lines had at least one outbound flight that pulled away from the gate and then sat for two hours or more on the tarmac before returning to the gate, Betsy Talton, a Delta spokeswoman said. But Delta’s operations, smaller at J.F.K. than JetBlue’s, ran more smoothly. It canceled 20 to 25 of its roughly 80 flights on Wednesday, Ms. Talton said, and had some delays on Thursday.

Up and down the East Coast, Southwest avoided many of the problems JetBlue confronted by canceling more flights earlier. American Airlines also canceled flights earlier at J.F.K.

Throughout the airline industry, the move to lower costs has led to a thinning of staff. When things are running smoothly, the fewer number of people is usually adequate. When bad weather and other problems develop, however, it often becomes clear that airlines do not have enough people to manually rebook passengers on other flights, to handle misplaced bags and to take care of other problems.

Mr. Neeleman said JetBlue certainly erred in not canceling more flights and in not doing so earlier on Wednesday, and added that his company’s management lacked depth in operations. “We need to beef it up,” he said. “I’ll address that as well.”

Mr. Neeleman said he would enact what he called a customer bill of rights that would financially penalize JetBlue — and reward passengers — for any repeat of the current upheaval. He said he would propose a plan to pay customers, after some amount of time, by the hour for being stranded on a plane.

He says knows he has to deliver. “I can flap my lips all I want,” he said. “Talk is cheap. Watch us.”

There is growing sentiment in Congress to pass legislation that would mandate limits on the time passengers can be kept in a plane on the ground and also set compensation standards for stranded passengers. The airline industry hopes to fend off such a measure. Mr. Neeleman said he wanted to make the penalties to JetBlue “more aggressive than any airline lobbyist would let Congress do.”

Gordon M. Bethune, the former chief executive of Continental Airlines, said that little other than low fares would do much to win back customers, but if an airline makes a bad judgment call, “you better be good at recovery no matter what.” He called last week’s JetBlue meltdown “a byproduct of their past and their growth.”