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Mark Gongloff is off the newsletter this week, so today's 7.5 Things are brought to you by Jillian Berman.
Thing One: The Deal's Real Winner: American Airlines and U.S. Airways announced today that they’re merging and the deal’s real winner is clear: U.S. Airways CEO Doug Parker. Parker, who is poised to become the CEO of the world’s largest airline, has been lobbying American’s creditors for more than year to convince them that the move was the best route for the bankrupt company, according to the Wall Street Journal.
Parker’s success comes at the expense of his long-time rival, American Airlines’ CEO Tom Horton. Horton opposed the merger and hoped he would be the one to turn American around when he took over last year as the company went into bankruptcy. But now, thanks in part to pressure from Americans’ creditors and unions -- who believed they’d get a better deal with the merger -- Horton will do the honors, according to the Financial Times.
Though the boards of the two companies have agreed to the deal, the airlines still have to jump through a few hoops before the agreement is set in stone. The merger will need to be approved by the judge overseeing American’s bankruptcy and the Justice Department, according to The New York Times. What will a new world’s most giant airline mean for fliers? Possible higher fares and more fees, but also nicer planes with amenities like Wi-Fi and personal entertainment systems.
Thing Two: ICYMI, Europe's In Trouble: In case you missed it, Europe is still in trouble. The eurozone economy shrank 0.6 percent last quarter, the fastest rate in four years, according to the Financial Times. The number is likely the result of a combination of concerns over the ongoing debt crisis, high unemployment and austerity, which hurt output in eurozone countries. The bloc’s two biggest economies, Germany and France, set the trend, shrinking 0.6 percent and 0.3 percent respectively, according to Reuters. Last year marks the first time since the eurozone was created in 1995 in which no quarter produced growth -- and it’s possible the trend could continue into the first quarter of 2013.
Thing Three: U.S. And EU Cozy Up: Speaking of Europe, the U.S. is trying to align itself more with the continent's terrible economy. Officials from the European Union and the U.S. promised yesterday that they would complete a wide-ranging free-trade pact within two years, the Financial Times writes. The deal, which would encompass half of the world’s economic output, would help both parties boost economic growth and create jobs, according to its supporters. But there’s a lot standing in the way of a deal, like differences on non-tariff barriers and regulations.
If an agreement is finalized though, officials say it could offer more than just economic benefits. U.S. officials believe that getting closer to Europe economically would also help the country bolster defense, according to the Wall Street Journal.
Meanwhile, U.S. officials are opposing another economic proposal from the EU: Taxing trades on shares, bonds and derivatives. Treasury officials say the “financial transaction tax” would hurt U.S. investors who have bought securities that would be affected, according to the WSJ. The aim of the tax would be to get back some of the billions of euros European governments lost bailing out big banks during the financial crisis.
Thing Four: This Corona Is For You: Budweiser and Corona won’t be joining forces. Anheiser-Busch InBev, the company that owns Budweiser, agreed to give a different beer company control over Corona so that it could acquire its parent company, Modelo, according to Bloomberg. The U.S. Justice Department sued to block AB InBev from acquiring Modelo for $20.1 billion. The agency argued that the merger would lead to higher beer prices because it would remove a major competitor to AB InBev from the market, according to Reuters. Currently AB InBev and MillerCoors control a 30 percent share of the U.S. beer market. By selling Piedras Negras, the brewery that makes Corona, as well as Modelo’s stake in Crown Beers to Constellation Brands, AB InBev is hoping to address the Justice Department’s concerns and move forward with the deal, according to the Financial Times.
Thing Five: Magazines Still Not A Good Business: In a sign of the times, the biggest U.S. magazine publisher may soon be no longer. Time Warner, which owns Time Inc., is in talks to spin off many of the company’s titles, and combine them with magazines owned by the Meredith company to create a new company that would be publicly held, according to the Wall Street Journal. Time would retain its flagship title and a few others. The new company would cater to a female audience, combining Time’s titles like People, InStyle and Real Simple with some of Meredith’s magazines, including Ladies Home Journal and Better Home and Gardens, according to The New York Times. The move would help the two companies protect themselves from some of the risks in the magazine business.
Thing Six: Jack Lew Bores Everyone Into Liking Him: Treasury Secretary nominee Jack Lew bored Senators into liking him yesterday, calmly answering questions on his time at Citigroup as well as an investment fund in the Cayman Islands. Most of the questions from Republican senators were aimed at either trying to rile Lew up -- apparently a difficult task -- or give themselves an opportunity to score politically, The New York Times writes. Still, those following the hearings did get a small sense of what a Lew-run Treasury would look like. He criticized lawmakers for hurting the economy with their “short-term crisis, deadline-driven practices.” He also said that fixing the corporate tax code would be a top priority, according to the Financial Times.
Thing Seven: Regulators Trying To Save Libor: British regulators are trying to save the scandal-plagued Libor interest rate. The Financial Services Authority sent letters to some major banks encouraging them not to leave the panel that sets the Libor rate, the Wall Street Journal reports. The banks had indicated earlier that they wanted to pull out of the panel. Banks are growing more concerned about being involved with setting Libor because they feel it’s difficult to come up with an accurate rate. In addition, by being involved in setting Libor, the banks are at risk that their traders might manipulate the rate. Regulators are trying to discourage banks from leaving Libor though, because they’re concerned that if a group of banks pulls out it will only make the rate look worse.
Thing Seven And One Half: Valentine's Day Is Big Business: Happy Valentine’s Day! How much is the average American planning to blow on using consumerism to show how much they love their partner? $130.97, according to the National Retail Federation. Many will spend on traditional items like candy, flowers and a romantic night out. Gift cards are also a popular Valentine’s Day item, the NRF says, because nothing says love like go to the mall and pick something out yourself for yourself.
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Calendar Du Jour:
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Corporate Earnings:
PepsiCo
MolsonCoors
Heard On The Tweets:
@morningmoneyben: Jealous of Obama's wknd plans
@moorehn: Is it possible to have any faith in athletic heroes any more? After Lance Armstrong, Pistorius’s fall seems even worse. Out of nowhere.
@kevinroose: As Jeopardy heroes go, Ken Jennings < LEONARD. http://ow.ly/hGU9V
@ReformedBroker: Too Big To Fly. “@AliVelshi: BREAKING: US Airways & American have agreed to merger that would create the world's largest airline”
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