Economist 12/17/15

  1. Ryanair, Europe’s second-biggest carrier, provoked such outrage when, in 2010, the no-frills airline contemplated installing coin-operated toilets on its planes and charging passengers £1 ($1.50) or €1 ($1.09) per visit. The incentive wasn’t so much to make a buck off the toilet fees as to get fliers to go before boarding the plane.As an airline spokesman told the Daily Mail at the time: “By charging for the toilets we are hoping to change passenger behaviour so that they use the bathroom before or after the flight. That will enable us to remove two out of three of the toilets and make way for at least six extra seats on board.”The plan fizzled amid a flurry of criticism, but it was still on the mind of Dan Lipinski, a Democratic congressman from Illinois, last week when he introduced the Comfortable and Fair Flights Act of 2015.Mr Lipinski’s bill would ban airlines from charging for lavatory use. It would also give passengers the ability to change flights without a fee if the bathrooms on the plane are not working prior to takeoff.
  2. European leaders gather today to discuss the migration crisis. It’s the fifth such meeting in Brussels this year, but at least the agenda features an ambitious new proposal. The European Commission, the EU’s executive arm, wants to create a European border guard empowered to intervene directly in troubled frontier regions, even against the wishes of governments (read: Greece). The plan is well crafted; whether ministers will accept such an erosion of sovereignty is another matter. Other matters are no easier: a plan to redistribute asylum-seekers around the EU is proving extremely hard to implement, and a German proposal for a pan-European scheme to resettle many more refugees directly from Turkey and elsewhere is struggling to gain support.
  3. How do modern airlines cut costs without cutting corners?They start by mimicking doughnut-dodging supermodels who watch their weight down to the second decimal place. Airlines bin bulky in-flight magazines, lay thinner carpets and serve food in light cardboard boxes. Some airlines have jettisoned safety equipment emergency water landings on those aircraft that do not fly above water. Seats have become lighter.Such parsimony pays off. Fuel accounts for a third of an airline’s cost and every kilo thus shed reduces $100 from an aircraft’s annual fuel bill.Small design tweaks on modern aircraft, that are not as thirsty as their previous avatars, also help. Southwest Airlines estimates that it burns “54m less gallons of fuel each year” after it installed winglets or upturned wingtips on its fleet to reduce drag. EasyJet, a budget carrier, uses ultra-thin paint that eliminates microscopic bumps on the aircraft’s body to help it cut through air more easily and hence, burn less fuel.
  4. On December 16th when the Federal Reserve, America’s central bank, raised its target band for interest rates by a quarter of a basis point, to 0.25-0.5%, after seven years of rock-bottom rates.But it was so widely expected that it had little impact on financial markets.For months, the Fed had stressed that rates would rise when two conditions were met: improvement in the labour market, and confidence among rate-setters that inflation would return to target. Both those hurdles have now been cleared, says Ms Yellen.While the change in rates is small, it may require a big push to implement. To get rates up, the Fed will increase the interest paid on its so-called “reverse repurchase agreements”. These involve selling securities to financial institutions along with an agreement to repurchase them the next day (in effect, borrowing money).
  5. IN RECENT years el cepo (or “the clamp”) has made life uncomfortable for Argentines. Introduced by Cristina Fernández de Kirchner’s government in November 2011, currency controls made it almost impossible for ordinary Argentines to purchase dollars, preferred by savers to the inflation-prone peso. The measure was designed to protect the government’s stock of foreign reserves. But it resulted in the creation of a parallel foreign-exchange market.On December 16th Alfonso Prat-Gay, the finance minister named by Argentina’s new centre-right president, Mauricio Macri, announced that he would lift el cepo immediately, allowing the peso to float freely. He had little choice. Exporters were hobbled by the overvalued peso. Importers could not obtain dollars, which starved factories of supplies.The new president has inherited inflation running at around 25% a year, a fiscal deficit forecast to reach 7% of GDP by the end of the year and depleted foreign-exchange reserves.
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