Friday, September 18, 2009

Budget carrier, which flies to eastern Europe from Luton and Manchester, is the latest casualty of the airline industry downtur



The end for SkyEurope? The Slovakia-based low-cost airline has filed for bankruptcy. Photograph: Radim Beznoska/Isifa/Getty Images

Budget carrier SkyEurope, which flies to eastern Europe from Luton and Manchester, became the latest casualty of the airline industry downturn today as it filed for bankruptcy.

The Slovakia-based airline suspended all flights immediately, disrupting travel plans for thousands of British passengers. SkyEurope, whose main airports are at Bratislava, Vienna and Prague, warned that a refund "may not be possible" for customers who booked with the airline directly. Abta, the British travel agents' association, said the collapse underlined the need for a compensation system for airline passengers.

"This airline failure in a tough economic climate, along with several others last year, highlights the need for urgent action by the government and EU to plug this gaping hole in customer financial protection," said Mark Tanzer, Abta chief executive, whose members are required by law to pay into a compensation scheme.

SkyEurope's demise came amid news that the world's leading airlines have slumped to a $2bn (£1.2bn) loss in the industry's most profitable trading period, as falling fares and rising oil prices wreak further damage on carriers' bottom lines.

The International Air Transport Association (Iata) said 54 airlines, including British Airways, Cathay Pacific and American Airlines, reported combined losses of $2bn in the three months to 30 June. The loss is more than double the deficit last year, when the credit crunch was beginning to squeeze business class bookings – the financial lifeblood of long-haul carriers.

Brian Pearce, Iata's chief economist, said: "Traditionally airlines make 50% of their profits in the second quarter. This suggests that losses this year are going to be pretty large." Iata is predicting a $9bn loss for the industry this year, driven by falling fares and burgeoning oil prices.

Ireland's national carrier, Aer Lingus, last month illustrated the dangers ­ facing long-haul carriers from lower fares as it announced, first-half operating losses had widened from €23.4m (£20.6m) last year to €93m. And Australian carrier, Qantas, reported its worst performance in six years losing A$93m (£48m) in the second-half while BA lost £148m in the three months between April and June.

Pearce said tumbling yields, or the average revenue per passenger, had driven airlines into a deeper loss, exacerbated by an oil price that has risen from $45 a barrel in March to $70 now.

"Although there are some signs of passenger and freight numbers stabilising, if not picking up, average fares continue to plummet," said Pearce. Average yields fell 20% in the second quarter as Iata warned that capacity reductions were slowing down – signalling that competition will remain intense on some routes, holding down fares. "Elimination of excess capacity will be the key to stabilising revenues as well as volumes," said Iata. Passenger numbers are showing signs of a recovery, with traffic falling by just 2.9% in July compared with declines of 7.2% in June and 9.3% in May. Iata believes that more planes need to be grounded, which would lessens competition on some routes and therefore push up fares and revenues.

Boeing: China To Account For 40% Of Asia Orders In Next 20 Yrs



domestic passenger market would expand more rapidly than any other market, at 8.6% annually, between 2009 and 2028.

The Chicago-based company, by contrast, expects the North American market to increase by just 2.5% a year, and the intra-Europe market to rise 3.4% annually - as measured in revenue passenger kilometers, a major metric for gauging passenger revenue.

An annual growth of 6.9% was forecast for the Asia-Pacific region as a whole, by Boeing, which also specified that most probably the region will take-over North America as the world's largest air travel market in less than 10 years.

Due to the recent economic meltdown, some airlines have been forced to defer deliveries of new aircraft. Boeing recorded 100 deferrals, for the year 2008, mostly from North American customer

AMR bolsters cash position, to order planes



An American Airlines Boeing Super 80 (foreground) prepares to take off from Chicago's O'Hare International Airport January 9, 2006. REUTERS/John Gress

ATLANTA (Reuters) - American Airlines parent AMR Corp said on Thursday that it had bolstered its liquidity and planned to take steps that include buying new planes in a bid to return to profitability.

AMR said it had obtained $2.9 billion in additional liquidity and aircraft financing. That includes $1 billion from the advance sale of frequent flyer miles to Citigroup Inc and $280 million in cash under a loan accord from GE Capital Aviation Services secured by owned planes.

The company also said it got $1.6 billion in sale-leaseback financing commitments from GE for Boeing planes it had previously ordered.

The American Eagle division has signed a letter of intent with Bombardier Inc to exercise options to buy 22 additional aircraft for delivery beginning in the middle of 2010.

The company also said it planned to add flights at key U.S. hubs.

(Reporting by Karen Jacobs; Editing by Lisa Von Ahn)

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American Airlines raises $2.9bn



AMR, the parent of American Airlines, has raised $2.9bn (£1.8bn) of new financing to help it through the global downturn in air travel.

The group said $1bn of the total came from advanced sales of frequent flyer miles to Citigroup bank.

A further $1.6bn came from a sale and leaseback arrangement with General Electric's aviation division for planes it had already ordered.

The airline also said it would add capacity at key US airports.

"Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability," said AMR chairman Gerard Arpey.

Reports also suggest that American Airlines is in discussions with Japan Airlines about taking a stake in the troubled Japanese carrie

American Airlines parent gets $2.9B, shifts routes



By HARRY R. WEBER (AP
ATLANTA — American Airlines' parent company said Thursday it is taking on significant new debt at a time when revenues are being hammered, but the $2.9 billion in cash and fresh financing it raised should quiet concerns — for now — that it is in danger of a cash crunch and a bankruptcy filing.

Passengers will see big changes from the nation's second-largest airline, including increased flying in Chicago, New York, Los Angeles, Dallas-Fort Worth and Miami, but fewer flights in Raleigh/Durham, N.C. and St. Louis, where American is giving up major ground to Southwest Airlines.

AMR Corp. said the extra funding it has received includes $1 billion in cash from an advance sale of frequent flier miles to Citigroup. The company is treating that money as a loan.

Other major carriers, including Delta Air Lines Inc. and UAL Corp.'s United Airlines, also have done advance sales of frequent flier miles to raise cash. There is no impact on customers from such transactions. The airline gets cash up front for miles its credit card partner would provide to card holders as they make purchases. As a forward sale of the miles, the airline would pay interest.


The Fort Worth, Texas, company said it also has received $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation Services, a unit of General Electric Co., and $280 million in cash in a loan from GE Capital Aviation Services secured by aircraft.

Of the $1.3 billion in new liquidity, all but $55 million will be included in the third quarter 2009 cash and short-term investment balance.

The transactions will increase the company's cash balance to roughly $3.7 billion by the end of the third quarter, which is Sept. 30. AMR had $14 billion in total debt at the end of the second quarter. It's unclear how much that figure will increase at the end of the third quarter. And AMR has $1.3 billion in debt maturities in 2010.

"The announcement today from our perspective takes the liquidity question off the table," Virasb Vahidi, American Airlines' senior vice president of planning, said in an interview.

Analysts generally agreed.

"Whatever added risks they are taking on by increasing debt and increasing interest expense are more than offset by the near-term advantage of raising more cash to carry them through the weak winter season," said Standard & Poor's analyst Philip Baggaley.

S&P reiterated its "Hold" opinion on AMR shares.

The larger question that looms is what will happen in the future. Overall demand for air travel has shown some improvement in recent months, but yields are down because passengers are paying less for their tickets and are not flying as much in premium seats.

The ability to raise additional financing should AMR need it will be difficult.

AMR has about $2 billion in unencumbered assets remaining, including slots, routes, spare parts and its Eagle operations. But accessing cash from those assets "will be more challenging," Chief Financial Officer Tom Horton said during a conference call with analysts and reporters.

AMR said it will strengthen its flight network by increasing capacity in four hub cities. Those cities, and Los Angeles, are key parts of the company's plan to benefit from closer cooperation with British Airways, Iberia and other partners.

The company said it will reduce operations at St. Louis and Raleigh/Durham, N.C.

American Eagle also announced plans to add a first class cabin to its fleet of 25 Bombardier CRJ700 regional jets and it signed a letter of intent with Bombardier Inc. for options to purchase 22 additional CRJ700 aircraft for delivery beginning in mid-2010.

The new CRJ700 aircraft will be fully financed.

AMR said its mainline capacity for 2010 is expected to increase by about 1 percent over this year, with domestic capacity flat and international capacity up about 2.5 percent.

Excluding the impact of cancellations this year from the swine flu virus and the launch of Chicago-Beijing service in 2010 that was delayed from this year, mainline capacity in 2010 is expected to be roughly flat compared with 2009, the company said.

Employees affected by cutbacks will be allowed to relocate, the company said, although it expects the impact on employees to be minimal.

AMR will add 57 daily flights at O'Hare International Airport in Chicago, six new destinations from JFK International Airport in New York, two new daily American and Eagle flights at Los Angeles and 19 daily departures added to the airline's largest hub at Dallas/Forth Worth.

American and Eagle also will add 23 flights at Miami.

In St. Louis, American and its regional affiliates will reduce daily departures by 46 and discontinue service to 20 destinations. After the reductions, American and Eagle will provide 36 departures per day to nine destinations. In Raleigh/Durham, service to three destinations will be discontinued and a total of nine departures will be eliminated. Raleigh/Durham will continue to provide service to eight destinations with 44 departures per day.

AMR shares rose $1.45, or 19.7 percent, to close at $8.80 in Thursday trading

Fargo to get new Chicago flights



FARGO, N.D. - Sen. Byron Dorgan says a regional carrier for American Airlines plans to start service between Fargo and Chicago.

The North Dakota Democrat says the American Eagle service will start in April, with daily roundtrip flights on three 50-seat regional jets.

Dorgan says more airline competition is good not only for the state's biggest city but for North Dakota as a whole.

For more information listen to 790AM or visi

Bombardier lands plane deal for $770-million



Ross MarowitsAmerican Airlines' American Eagle unit plans to exercise option for 22 CRJ 700 regional jets

Montreal — The Canadian Press Last updated on Thursday, Sep. 17, 2009 05:31PM EDT

Bombardier Inc. (BBD.B-T4.79-0.04-0.83%) is still hunting for commercial jet orders and won't say whether a 22-plane order from American Airlines valued at more than $770-million (U.S.) will help it to avert additional layoffs beyond what is already planned.

“We can't say at this point whether there will be an impact,” Bombardier spokesman John Arnone said in an interview. “The transaction is not yet finalized and we should know more in October.”

AMR Corp. (AMR-N8.801.4519.73%) announced Thursday that its American Eagle regional subsidiary has signed a letter of intent to exercise options for CRJ 700 regional jets as part of a $2.9-billion financing package.

“Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability,” said Gerard Arpey, AMR chairman and chief executive officer.

Deliveries of the aircraft are scheduled to begin in mid-2010. The value is estimated based on list prices, but the airline is believed to have received a healthy discount.

The airline also plans to add a first-class cabin to its existing fleet of 25 CRJ 700 aircraft.

This is the first of several orders that may materialize over the coming weeks following an intense campaign by the company to boost orders and avert being forced to reduce its production.

Bombardier Aerospace president Guy Hachey said this week that he hopes the efforts will materialize in orders by the end of October.

Analysts said the early signs of recovery in commercial orders will be welcomed, although there remains concern about the decline in demand for business jets.

Bombardier is in the process of laying off 4,360 employees as it reduces production of business and commercial aircraft. Regional jets, which are sold to airlines, are estimated to account for 1,200 of the layoffs.

The CRJ backlog at the end of July was 116 jets.

David Newman of National Bank Financial said the order should help to avert a further production cut for CRJs next year.

“Clearly this order, which management intimated was sorely needed to prevent further production cuts and layoffs beyond that currently planned, should provide some comfort,” Mr. Newman wrote in a report.

Chris Murray of CIBC World Markets said additional orders for new planes this year, including those for the C Series, will provide additional comfort to investors about earnings and margins in the aerospace sector, which has been a drag on share prices.

“We believe early signs of recovery in commercial orders will be greeted positively, particularly for CRJ aircraft where some concern about the depth of the backlog does exist.”

Obama scraps Bush missile-defense plan



By Ken Dilanian, USA TODAY
WASHINGTON — President Obama's foreign policy has employed a starkly different tone than George W. Bush's, emphasizing engagement and cooperation rather than go-it-alone confrontation. Even so, analysts of various political stripes hadn't seen many big differences on substance.


Until now.

Obama's decision Wednesday to scuttle a costly and technically challenged long-range missile-defense system in Europe marks his most significant reversal of a Bush foreign policy priority. It could change the dynamic of what has been an increasingly tense relationship between the U.S. and Russia, which viewed the Bush plans for missile defenses in Poland and the Czech Republic as a threat.

Bush's proposed missile shield, designed to counter intercontinental missiles from Iran, "was very much a signature initiative of theirs, both with respect to Central Europe and with respect to missile defense," says John Pike, director of GlobalSecurity.org, a defense think tank.

Speaking to reporters at the White House, Obama was careful to portray his decision as a revamping, not an abandonment, of European missile defense. He said he would replace the long-range system Bush envisioned — which had a spotty testing record — with a more reliable defense system aimed at countering what Obama called a more imminent threat from Iran's short-range missiles, which can travel up to 5,000 miles and potentially strike continental Europe.

Defense Secretary Robert Gates said the new plan still places systems in Poland, the Czech Republic and other countries in the region, though the details are still to be ironed out. The plan calls for a ship-based component and some ground-based interceptors designed to target shorter-range missiles that are less difficult to hit.

"Our new missile-defense architecture in Europe will provide stronger, smarter, and swifter defenses of American forces and America's allies," Obama said.

The move wasn't unexpected — Obama had ordered a review of the Bush program shortly after taking office, and outside experts had questioned its feasibility even before then. Even so, Obama's announcement drew heated criticism from Republicans, who accused the president of abandoning central European allies and caving in to Russia in a naive bid for diplomacy.

"Short-sighted and harmful to our long-term security interests," complained Senate Minority Leader Mitch McConnell, R-Ky.

Democrats praised the decision; Senate Armed Services Committee Chairman Carl Levin called it "a sound choice that will improve our security."

Central to the debate over Obama's decision on missile defense is how it will be greeted by Russia, which has been a patron and trading partner of Iran, the Islamic republic that has bedeviled U.S. foreign policy for the last 30 years.

The Iranian regime has an active nuclear energy program, and although U.S. intelligence reports say Iran is not developing an atomic weapon, a new report by the International Atomic Energy Agency concluded Thursday that Tehran has the ability to make a bomb. That news, reported by the Associated Press, also said Iran is on its way to developing a missile system able to carry a nuclear warhead.

Obama is trying to negotiate with Iran. But if those talks fail, his administration will seek to impose "crippling sanctions," in the words of Secretary of State Hillary Rodham Clinton.

Russia, whose president, Dmitry Medvedev, will meet Obama at the United Nations next week, is key to any such effort. So far, it has resisted further sanctions on Iran, which it supplies with weapons and other technology.

If Obama's move was designed to nudge Russia, early signs Thursday weren't encouraging.

Russian Foreign Minister Sergey Lavrov said in a speech before Obama's missile-defense announcement that Moscow will continue to oppose any new sanctions over Iran's nuclear program.

Medvedev, however, said after the announcement that Obama's action was a "responsible move."

Policy reversal

Until now — leaving aside domestic issues with foreign policy implications, such as the treatment of terror detainees — Obama's foreign policy hasn't radically departed from that of his predecessor, though the rhetoric has been much different.

He has talked more about engaging adversaries, though no presidential summits have materialized. He has continued Bush's gradual withdrawal from Iraq and added troops to Afghanistan.

Pushing a so-called "reset" button in the USA's relationship with Russia has yielded little that is tangible. Polls in various countries show that Obama is far more popular abroad than Bush is, but that popularity has yet to translate into visibly better cooperation with U.S. policy goals.

Christian Brose, who was a speechwriter for Bush Secretary of State Condoleezza Rice, wrote recently on foreignpolicy.com: "Our NATO allies have passed on sending more troops to Afghanistan and on lifting restrictions on those already there ... India and China don't share any of Obama's enthusiasm for a climate change deal. ... Pakistan is still dysfunctional and supporting terrorism. Iran and North Korea are all middle fingers and no unclenched fists. ... Rarely has a U.S. administration been so well-liked, so eager to engage with others, and had so little to show for it."

Obama officials disagree, of course, but it's not just former Bush officials who hold that view: In July, Columbia University professor and liberal blogger Lincoln Mitchell wrote a post entitled, "Why Obama's Foreign Policy Looks So Much Like Bush's." He previously was a Democratic consultant.

Republicans, including Obama's 2008 opponent, Sen. John McCain of Arizona, have supported many, though not all, of the new president's foreign policy moves. On Thursday, though, they erupted in a chorus of criticism.

McCain called the decision "seriously misguided," while Florida's Ileana Ros-Lehtinen, ranking Republican on the House Foreign Affairs Committee, dubbed it "a policy of appeasement."

Marc Thiessen, a former Bush speechwriter now at the Hoover Institution, said the "disastrous decision" sends "a signal of weakness to Tehran ... and a terrible signal to Russia, that they can bully us into abandoning our friends in what they consider their sphere of influence."

The partisan uproar came despite the endorsement of the move by Gates, who was Bush's secretary of Defense when the deals with Poland and the Czech Republic were finished last year and who holds the same job for Obama.

"This new approach provides a better missile-defense capability for our forces in Europe, for our European allies and eventually for our homeland than the program I recommended almost three years ago," Gates told reporters at the Pentagon after Obama spoke.

A troubled program

The program Gates once supported has been controversial from the moment Bush proposed it in a speech on May 1, 2001, months before the 9/11 attacks and a year before revelations about Iran's nuclear program.

It called for putting 10 land-based interceptors in Poland and a ground-based radar in the Czech Republic.

The Europe system was never deployed, so it wasn't tested. But similar ground-based interceptors failed to hit targets in five of 13 tests, according to the Pentagon, and they have not demonstrated an ability to detect decoys, the Government Accountability Office says.

The Bush system would have cost $9 billion to $13 billion, according to the Congressional Budget Office, and still would have left parts of Europe unprotected from an Iranian missile. Instead of the long-range interceptors, the United States will put in place more seasoned technology that will focus on medium- and short-range missiles, of which Iran has hundreds, Gates said.

Critics of the Bush approach praised Obama's announcement.

"What the president is proposing here actually produces more defense sooner than the program it replaces," said former Pentagon testing chief Philip Coyle, a longtime skeptic of the Bush program.

"The canceled European deployment would have added only marginally and at high cost to the full coverage of the United States already afforded by the existing ground-based interceptors," physicist Richard Garwin, who helped design the hydrogen bomb and recently was on a commission to assess the ballistic missile threat, said in an e-mail.

In Central Europe, reactions to the news were mixed. Bush's plan had never been popular in the Czech Republic, where polls showed 70% opposed it. In a March, a Czech government fell in part because it supported the missile shield.

Still, it was seen in both countries as a bulwark against an aggressive and expansionist Russia.

"Much of Europe — especially the Central and Eastern regions — will now view the United States as unable to fulfill its promises to its allies in the face of a strengthening Russia," said an analysis by Stratfor, a Texas-based intelligence firm.

Obama's shift on missile defense may embolden the Russians and "encourage them to push other buttons," said Janusz Bugajski, director of the New European Democracies Project at the Center for Strategic and International Studies, a Washington think tank.

Bugajski said it did not go down well in Poland that Obama made the announcement on the 70th anniversary of the Soviet Union's invasion of Poland at the start of World War II.

He said the United States will need to take steps to reassure Central and Eastern European countries that they will be protected against Russia. For example, NATO could devise defense plans for the countries, he said, or station troops on their territories.

Obama and Medvedev plan to meet twice next week, once at the United Nations and again in Pittsburgh for the G-20 economic conference. Those meetings could show what dividends, if any, the president will reap from his first major foreign-policy shift from his predecessor.

Contributing: David Jackson and Tom Vanden Brook, wire reports.

Mazda confirms Mazda2 will be sold in U.S. and Canada: facts, pic and video



Mazda had already announced plans to sell the Mazda2 in Canada, but now Mazda's subcompact will be coming to America as well. Mazda North American Operation's president and CEO Jim O'Sullivan told top Mazda dealers that the Mazda Mazda2 subcompact will be sold in the U.S. beginning in late 2010, with Canadian sales beginning about the same time.

The Mazda2 has been sold in world markets but not thought appropriate for the U.S. With the Ford Fiesta, which shares a platform with the Mazda2, scheduled to arrive here in the summer of 2010, it must have made sense to bring Mazda's subcompact Stateside.

"As consumers' tastes and attitudes toward small vehicles have changed, we now believe strongly there is a place in our lineup for a car below our current least-expensive car, the Mazda3," O'Sullivan told the dealers.


Although the Mazda2 has been named Car of the Year in more than twenty countries as well as 2008 World Car of the Year (the year the latest generation was introduced), the Mazda Mazda2 is largely unknown in the United States. Mazda has not sold a car in this class since 1985, when it took the GLC, which it had been selling here since 1977, off the American market. The Mazda2 is a "B-segment" car, meaning it's about the same size as a Toyota Yaris. The Mazda2 five-door is almost a foot shorter, however, than the five-door Yaris, at 158 inches overall. Its wheelbase is 98 inches compared to the Yaris' 100.4. Both the Yaris and Mazda2 have three-door versions.

Right now Mazda isn't saying exactly what configuration of the Mazda2 will bring to the U.S. Internationally the Mazda2 is sold with everything from a 1.3-liter to 1.6-liter gas engines as well as a small diesel engine where local regulations and market allow.

Mazda announced its intention to unveil the North American-specification Mazda2 at the 2009 Los Angeles Auto Show this fall, but additional information on specifications, content, pricing and on-sale timing is deferred until closer to actual launch.

In Britain, Mazda is positioning the fun and funky aspects of the Mazda2 and, yes, zoom-zoom, as in this video advert on the telly for a two-door:




JAL turnaround plans under review



Japan's new government has said it will review restructuring plans announced by Japan Airlines' (JAL) this week, which included cutting 6,800 jobs.

The plans were drawn up under a committee appointed by the previous administration, which was defeated in a general election at the end of August.

The new government said it will appoint a new committee to oversee the plans.

JAL lost about $1bn (£605m) between April and June as ticket sales fell during the global downturn.

"Since it is a framework formed by the Liberal Democratic Party government, we want to go back to a clean slate and select new members," said Japan's new transport minister Seiji Maehara.

The airline said it had "no idea" about how the review would affect its plans.

Reports suggest that Delta Air Lines, American Airlines and Air France-KLM are in talks with JAL over taking a stake in the troubled airline.

Missing the Mark On Ratings-Agency Reform



By Steven Pearlstein
Friday, September 18, 2009

One thing you learn from booms and busts is the importance of gatekeepers -- those professionals who are supposed to safeguard the system and keep markets honest. When gatekeepers are compromised or fall down on the job, confidence evaporates and markets collapse.

That's what happened during the tech bubble of the 1990s, when the lawyers, auditors and equity analysts decided to hop on the gravy train and turn a blind eye to stupidity and corruption. And it happened during the more recent credit bubble, when the rating agencies were seduced by fat fees to assign triple-A ratings to stuff they barely understood. Even today, large parts of the shadow banking system are still not working because investors and lenders still don't know who -- or what information -- to trust.

The dominant agencies -- Standard & Poor's, Moody's and Fitch -- continue to claim that their mistakes were intellectual rather than venal, but an investigation last year by the Securities and Exchange Commission suggested otherwise. So the firms have now moved to try to restore their reputations by adopting new measures to improve the reliability of their ratings. They have also acquiesced to a number of other measures pushed by the SEC and the Obama administration to increase government oversight, prohibit ratings shopping and bring more transparency to the rating process.

These steps are useful and significant, but they don't go far enough. They would preserve a business model that leaves the agencies hopelessly conflicted between the interests of the banks and corporations that pay handsomely to have their securities rated and investors who rely on those ratings when buying securities. They would leave in place an oligopoly market characterized by "me-too" behavior and a lack of price competition. And they would preserve a legal shield that has made it all but impossible for investors to sue the agencies for negligence when they issue ratings that they know, or should know, are wrong.

Call me simple-minded, but it seems to me that people who use a good or service should also be the ones who pay for it. That's how it works in most markets. And when it doesn't -- health care is a good example -- things tend to go awry.
It used to work that way in the credit-rating business as well, with investors paying directly for ratings and analysis through some sort of subscription arrangement, or indirectly through their brokers. But starting in the mid-1970s, following a number of high-profile bankruptcies, people decided it was important to make credit ratings publicly available to all investors. Companies that issued bonds began paying for the ratings themselves, and it didn't take long before agencies figured out that it was better for business if their ratings were a bit higher and their analysts were a bit slower to issue downgrades. By the time collateralized-debt obligations came along, it was not uncommon for agencies to provide issuers with behind-the-scenes advice on how to structure their new products to get the highest rates. The interests of the ratings agencies came to be perfectly aligned with those issuing the securities rather than those buying them.

It's all well and good to put in rules designed to prevent this kind of race to the bottom, but history suggests that they tend to break down at precisely those moments when they are most needed -- when the bubble is at its height and there are ungodly amounts of money to be made. So the best way to avoid these inevitable conflicts of interest, it seems to me, is to return to the investor-pay model.

The administration's approach, by contrast, seems to be focused on weaning investors from their reliance on ratings so they are forced to do more of their own research. I think that is unrealistic. Investors want a common set of benchmarks that they can use to assess the risk of securities, just as they want a limited number of government-supervised agencies to rate them. That number, however, can surely be larger than three. And there should also be room for dozens of smaller players specializing in different types of securities that should be able to compete with the Big Three on the basis of both quality and price. Until recently, government regulation has been a barrier to that kind of upstart competition. Much more attention should be paid to encouraging it.

Rhode Island Sen. Jack Reed (D) is also right in pushing for more private regulation. Because of specific exemptions in federal law and a claim that ratings agencies are merely peddling opinions fully protected by the First Amendment, no ratings agency has ever been successfully sued for misleading investors. On Thursday, the SEC took a first step to use its existing powers to bring a bit of legal accountability to the ratings agencies, but a better approach would be new legislation that makes clear that the ratings agencies owe the fiduciary duty of care and loyalty to their investor clients. That doesn't mean they can be sued any time an investment goes sour. What it does mean is that they would be liable if they put out a rating they knew, or should have known, was misleading after taking reasonable steps to ascertain that the information provided to them was accurate.

Such a change, of course, would only apply to lapses in the future. For lapses just past, the SEC should join with state attorneys general in filing a civil suit against the Big Three to force disgorgement of all those profits they earned providing triple-A ratings to triple-C junk during the recent bubble. That's how misled investors recouped hundreds of millions of dollars from Wall Street firms whose analysts had helped to blow up the tech and telecom bubble. Misled investors in structured credit products deserve the same.

Steven Pearlstein can be reached at pearlsteins@washpost.com.

US net worth grows for first time since '07



By JEANNINE AVERSA
The Associated Press
Thursday, September 17, 2009; 5:16 PM

WASHINGTON -- For the first time in two years, Americans actually got a little wealthier.

Household wealth grew by $2 trillion, or about 4 percent, this spring, ending the longest stretch of quarterly declines on records dating back to 1952, the Federal Reserve reported Thursday.

Net worth - the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards - came to $53.1 trillion for the second quarter.

Stock portfolios came back to life this spring after the market hit its lows for the year in March, and home prices have stabilized. But the collective American wallet is still almost 20 percent thinner than it was when net worth peaked two years ago.

Some analysts say it could take as long as four years for households to recoup trillions in losses and get back to where they were before the downturn struck in December 2007.

"Households saw $14 trillion of wealth get blown away by the recession, and they recouped $2 trillion of that in the second quarter. That's good news," said Brian Bethune, economist at IHS Global Insight. "But they still have another $12 trillion to go to get back to where they were."

Many analysts expect the economic recovery to be lethargic, limiting further gains in the stock and housing markets. That's why Scott Hoyt, senior director of consumer economics at Moody's Economy.com, thinks household wealth won't rise back to pre-recession levels until 2012 or 2013.

"It is going to take a while for Americans to regain lost ground and become as comfortable as they were before all this started," Hoyt said.
Even if the economy continues to improve, analysts say the erosion of wealth will keep Americans thrifty for years. In fact, even as wealth grew, Americans trimmed their spending slightly in the spring.

The increase in wealth in the second quarter was led by stock portfolios, the Fed report said. The value of Americans' stock holdings rose almost 22 percent from the first quarter - the first increase in two years.

Higher home prices helped, too. The value of real-estate holdings rose 1.8 percent, the first gain since the end of 2006. Home prices are still about 30 percent below their 2006 peak.

Home equity, the market value of a home minus what's still owed on the mortgage, has been dropping in recent years - first because more Americans used their homes to get loans and now because of falling home prices.

US scraps plans for missile defence shield in central Europe

• Barack Obama abandons missile shield plans
• U-turn seen as overture to Moscow
• New system to target Iranian missiles


Barack Obama announces plans to scrap the US missile defence shield in central Europe. Photograph: Charles Dharapak/AP

Barack Obama today reversed almost a decade of Pentagon strategy in Europe, scrapping plans to deploy key elements of a US missile defence shield.

Instead, he said, a more flexible defence would be introduced, allowing for a more effective response to any threat from Iranian missiles.

The U-turn is arguably the most concrete shift in foreign policy from that of the Bush administration, which spent years negotiating to place silos and interceptor missiles in Poland, and a radar complex in the Czech Republic.

The shift is a triumph for the Kremlin, which has long and vehemently argued that the shield is aimed at neutralising its intercontinental missiles; Moscow had warned of a return to a cold war arms race, and threatened to deploy nuclear missiles in its Kaliningrad exclave, surrounded by EU states.

President Dmitry Medvedev described today's announcement as a "responsible move ... We value the US president's responsible approach towards implementing our agreements," he said. "I am ready to continue the dialogue."

However, the US decision now puts the onus on Moscow to respond in kind by cooperating with the White House on the Iranian nuclear programme, on Afghanistan, and on nuclear arms control.

At a hastily arranged press conference at the White House after news of the switch leaked overnight, Obama said the aim was to protect against the threat of an Iranian missile attack. He said the Bush plan had intended to intercept long-range Iranian missiles, but US intelligence now showed the danger was short and medium range.

The new system would be more flexible and spread across various countries, Obama said. "It deploys capabilities that are proven and cost effective, and it sustains and builds upon our commitment to protect the US homeland," he said.

The shift could potentially see a more aggressive approach to Iran, with US military deployment shifting from central Europe to right up to the Iranian border. The plan envisages sea-borne missiles in place close to Iran by 2011.

The decision was welcomed among Nato allies in western Europe, which had viewed the earlier project as an unnecessary provocation to the Russians. But some in Poland and the Czech Republic will view it as a betrayal of efforts over the years to accommodate US requests in the face of domestic opposition. Former Czech prime minister Mirek Topolanek, whose government signed the original deal, described Obama's decision as bad news. "This has two dimensions. The first is a certain softer position of the US in negotiating with Russia. And the second, that is bad news, they used the opportunity when this country is unstable, when it is behaving in a very untraditional and unstable way, and ended co-operation on a matter that the Obama administration considered unacceptable," he said.

The Iranian foreign ministry declined to comment on Obama's move, but senior Iranian figures rejected the idea that their country was a threat to the region.

Kazem Jalali, spokesman for the parliamentary committee on national security and foreign policy, said "considering Iran as a threat has been a wrong policy since the beginning".

In Washington, Republicans condemned the U-turn, which came at the end of a 60-day review. Republican Senate leader Mitch McConnell described it as "both shortsighted and harmful to our long-term security interests".

He added: "Further, the administration has secured no apparent commitment from the Russians to work with us to reduce either the missile or nuclear threat from Iran."

Robert Gates, the defence secretary, who served in the post under Bush and had previously been an advocate for the Poland and Czech deployment, denied that the move amounted to appeasement of Russia. The decision was taken on the grounds of new intelligence, cost and technical feasibility, he said.

The White House said that US intelligence on Iran indicated that "the threat from Iran's short- and medium-range ballistic missiles is developing more rapidly than previously projected, while the threat of potential Iranian intercontinental ballistic missile capabilities has been slower to develop than previously estimated".

In spite of Gates's denial that Moscow was a factor, there were indications Russian sensitivities played a part.

The new plan would see a fixed radar system in the Caucusus aimed at Iran, rather than an omni-directional one in the Czech Republic, according to a Pentagon general.

David Albright, a US expert on proliferation, described Obama's announcement as a good move, saying that the Bush plan had been "over the top" while the new one was more relevant to the perceived Iranian threat.

In Warsaw, Polish prime minister Donald Tusk said Obama had assured him in a phone call that the change would not hurt the security of Poland or Europe. "I would not describe what is going on today as a defeat for Poland," Tusk said.

Will missile defence shift benefit US?

By Kevin Connolly
BBC News, Washington

Barack Obama and Vladimir Putin
Mr Obama may be hoping to win concessions from Russia on Iran

It would be hard to invent a news story that tied together more strategic and political issues than the Obama administration's decision to change its stance on the deployment of a missile defence shield in Eastern Europe.

It touches on Washington's assessment of Iran's military capabilities.

There is an underlying assumption that Tehran's capacity for mounting warheads on long-range missiles does not pose an immediate strategic headache.

It also sends a signal to the peoples of Central Europe about how President Barack Obama proposes to manage the post Cold-War order in their neck of the woods in the next few years.

And it raises questions about the administration's much talked-about desire to "hit the re-set" button on its relationship with Russia.

Russian flexibility

American plans to put missiles in Poland and woo new allies from Estonia to Georgia and Ukraine left the Russians feeling humiliated, encircled - and angry.

Might the re-timetabling of that perceived threat make the Russians a little more flexible on possible UN sanctions aimed at Iranian nuclear ambitions down the road?

Will there be some sort of back-door deal [with Russia] on a tougher approach to Iran's nuclear ambitions at the UN?

Or does it risk creating the impression among American voters that Mr Obama finds it difficult to stand up to Russian bluster.

When then-President Bush proposed to base advanced radar systems in the Czech Republic and interceptor missiles in Poland, the move proclaimed that countries which had until recently been occupied satellites of the Soviet Union were being taken lock, stock and barrel into the Western camp.

That promise was extended not just to the old satellite states like Poland but to the Baltic Republics, which had been part of the Soviet Union itself.

However the Obama administration works to portray its new strategic thinking in the coming months, there will be a feeling in parts of Eastern Europe that his government is going to strike a different balance between the need to embrace all those new allies and the need to avoid alienating Russia.

The way the announcement of the shift in emphasis on the future of American missile defence was handled was a skilful muddying of the waters.

Gates on missile shield overhaul

Statements came first from the president himself and then from his Secretary of Defense Robert Gates, within a few moments of each other. The tone of both was simple.

This was not about leaving new allies in the lurch, or about kow-towing to the Russians, or even about rowing back from the concept of developing the capability of protecting America and its allies by shooting down enemy missiles.

This was about improvements in sensor and missile technology rendering obsolete the old plans to place fixed position radar in the Czech Republic and fixed batteries of missiles in Poland.

The new capabilities, we were assured, would be more flexible and more technologically advanced.

'Misinterpreting reality'

There was even a whiff of idealism in there - the hope that Russia might one day be persuaded into co-operating on creating some kind of defence.

And there was a reminder that America was continuing to talk to its allies about their readiness to host new-generation interceptors in the future.

Mr Gates, of course, is a useful ally for President Obama at these sticky moments.

He is a holdover from the Bush administration and, as such, once presided over the now-abandoned Czech/Polish plan himself.

Who better to deploy to make the case that this change of plan is based strictly on military and scientific considerations rather than diplomatic expedience?

As the Defence Secretary put it: "Those who say we are scrapping the Missile Defence Shield are either misinformed or are misinterpreting reality."

Mr Gates even said that talks were under way that might eventually result in Poland and the Czech Republic hosting new generation missiles - conveniently, though, that would be much further down the road, perhaps somewhere around 2015.

The first signs that not everyone was convinced by the administration's presentational skills were not long in coming.

Republican Senator John McCain called the decision "seriously misguided" and said that that it had "the potential to undermine perceived American leadership in Eastern Europe".

It will be some time before it is possible to work out precisely how to evaluate Washington's new posture on missile defence.

Judgement will be based in part on the detail of any new plans that are published.

Where and when will better sensors and interceptor batteries be deployed and what exactly will their capabilities be? Will they indeed really end up in Eastern Europe ?

How will Russia respond to America's announcement? Moscow has already said it sees no need to make concessions, but will there be some sort of back-door deal on a tougher approach to Iran's nuclear ambitions at the UN?

There are plenty of threads brought together in this American announcement. Unpicking them will take time.

Carnage in Pakistan market attack

At least 25 people have been killed and many injured in a suicide car bomb attack at a village market in north-west Pakistan, police say.

The explosion is said to have taken place at a busy intersection close to the garrison town of Kohat.

Most of the dead are said to be members of the Shia Muslim minority. The area has a history of sectarian tension.

The village is also close to the Orakzai tribal region, a stronghold of the Taliban's present chief.

Hakimullah Mehsud took over as chief of the Pakistani Taliban - a Sunni group - after his predecessor, Baitullah Mehsud, was killed by a US missile strike.

But there has been no immediate claim of responsibility for the latest attack.

Shia village

Astarzai village, where the blast took place, is a Shia-majority area and many Shia Muslims run businesses there.

The car bomb was detonated close to a hotel owned by a Shia Muslim businessman.

ANALYSIS
aleem maqbool
BBC's Aleem Maqbool in Islamabad

The Taliban operate widely in Kohat and had at one point warned barber shops in the area to stop giving, what they described as, un-Islamic haircuts.

Pakistan's army has since carried out major operations against the Taliban in the North West of the country and last month a US drone strike killed the Pakistani Taliban chief Baitullah Mehsud.

But there are signs that the Taliban is trying to reassert itself under its new leader Hakimullah.

Police officials said that many people had been injured by the explosion and they expect casualty figures to rise considerably.

Witnesses told the BBC the blast was so powerful it nearly demolished one building in the area.

"Dozens of shops were destroyed. Their roofs caved in and many people were trapped under the debris," a local police official told the AFP news agency.

At the time of the explosion, the area was reported to be thronged with shoppers buying supplies for the weekend and the Muslim Eid festival, which is expected to start on Monday.

Astarzai lies 18km west of the town of Kohat, where a bomb was detonated on Thursday wounding at least six people.

The BBC's M Ilyas Khan in Islamabad says that Sunni Taliban militants in the area have carried out frequent attacks on minority Shias.

Sunni Muslims account for around 80% of Pakistan's population and are the dominant group in the tribal areas, although Orakzai has significant Shia numbers.

Pakistan's army has been bombing Taliban hideouts in Orakzai for the past month, correspondents say.

There were reports of more aerial bombings in the area on Friday morning, shortly before the bomb attack.

The last month has seen a series of major attacks on targets across the NWFP.

On 30 August a suspected suicide bomb attack in Pakistan's north-western Swat valley killed at least 14 police recruits and injured others.

As staffs shrink, business owners are taking on support duties they haven't had to handle in years.


skirtsports_2.jpg
SkirtSports' first employee shipping out piles of orders -- a task that the CEO helped out with in rough times.
skirtsports_1.jpg
SkirtSports owner Nicole DeBoom and one of her sales reps, on a trail run sporting their signature gear.
diego_son_printing.03.jpg
Rebecca and Nicholas Aguilera have had to lay off half of their staff, leaving Nicholas to pick up the production manager duties.
Going solo in the Motor City
With job prospects bleak, many people in Detroit are deciding to start their own business.
Seven deadly sins
From sloppy accounting to poor hiring, here are the business-killing traps that every entrepreneur must avoid.
How have your health care costs changed in the past few years?
  • They've risen a lot
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NEW YORK (CNNMoney.com) -- Small businesses have shed an estimated 1.6 million jobs this year. That leaves the remaining staffers to pick up the workload left behind -- and even bosses are pitching in. With their employee rosters cut to the bone, business owners are going back to the basics, re-learning to do tasks they may not have handled in years.

For Nicole DeBoom, founder of athletic clothing company SkirtSports in Boulder, Colo., that meant rolling up her sleeves to pack and ship customer orders. The last time she did that, shippers hauled packages to the post office. But her company had upgraded since then to a more automated system with UPS (UPS, Fortune 500), and the CEO didn't know how to print out the labels any more. CEOs don't normally have to work in the stockroom, after all.

"They claimed that I mis-shipped more than anyone else and created more returns and exchanges," DeBoom says. "It's kind of fun when your employees can turn the tables on you and help teach you something."

'Hang in there': SkirtSports launched in 2005 and grew to 8 employees, but by October 2008, DeBoom had scaled the company back to five core employees, leaving her and another staffer juggling the work of a sales specialist on top of their normal gigs.

The downturn in the economy and corresponding pullback in consumer spending stretched the apparel company and its employees to almost to the breaking point. "People were starting to get burned out," says DeBoom. "At this time last year, we instituted a no-raise, no-bonus policy until things cleared up a bit. We told everyone 'hang in there -- we are lucky to have jobs.'"

Marketing took a back seat as DeBoom stepped up to help cover other parts of the business. "Going in and doing sales calls is a fairly natural skill for me, but I was rusty," DeBoom says. At trade-show expos, where SkirtSports set up booths showing off its products, DeBoom ran credit-card machines and rang up sales.

SkirtSports has since regained some momentum, and DeBoom has been able to beef up her staff again so that she can refocus on the marketing strategy for her company. But not all small business owners are lucky enough to be able to hire again.

'We want this thing to work': Nicholas Aguilera, a co-owner of Diego & Son Printing in San Diego, Calif., has reduced his staff by half.

With 11 employees left, the print-shop owner doesn't envision being able to boost his payroll anytime soon. His industry has been squeezed by the recession as corporations shrink their marketing budgets and move their remaining advertising dollars into online ads, cutting demand for the printed reports and brochures that his company creates, Aguilera says.

Layoffs are never easy, but in a family-run business, it can be especially painful to let someone go. Aguilera was forced to lay off his 82-year-old aunt, who had worked for the company for 25 years. Aguilera himself has been working at the printing company since his dad opened the shop in 1972, when Aguilera was in junior high school.

Employees who hung onto their spots have been expected to cross-train on other positions and take a 10% pay cut. The bosses slashed their own paychecks even more.

"My sister and myself -- the owners of the company -- have cut our pay by 20% to let the employees know that we want this thing to work, and we will cut as much as possible," Aguilera says.

In the name of saving pennies as employees watch their paychecks shrink, Aguilera got rid of the front-office aquarium because maintaining it cost $60-$70 each month. And the company's office space is being moved to the back portion of its production space, so they can rent out the office for additional income.

While he has held every rank and position in the company in the 37 years he's been working there, it's been a while since Aguilera has had to order paper. But when the printing press had to let go its production manager, Aguilera picked up the duty -- and the phone -- again.

"When I first started, I was sweeping the floor and emptying the trash," Aguilera says. "I know how each department works. Being the owner, I kind of know a little bit of everything."

That's the right approach: Small business owners should always be able to step in for any position, according to Jim King, state director for the New York Small Business Development Center, which coordinates a network of regional training centers.

"In a small business -- if the business is a successful business -- you probably always have the manager rolling up their sleeves," King says.

Funded in part by the Small Business Administration, development centers throughout the U.S. offer free counseling to aspiring entrepreneurs and established business owners. Those on the front lines say they're seeing a growing number of business owners seeking guidance on how to get by with shrunken staffs.

"We have seen the layoffs already, and now it is trying to survive with what is left," said Ken Freeman, director of the Yuba Community College Small Business Development Center in Yuba City, Calif.

But the owner can't do it alone. Small businesses ought to be constantly looking for ways to leverage the abilities of all of their employees, not just the manager, in tight times. Ideally, when job scopes expand, you want to match staffers up with additional duties that mesh well with their existing skills -- or the ones they want to learn.

"Not only are they doing their job, but they are also doing another thing that they have a personal liking to," King says, "so you end up building on the strengths of the people you have."

'Nobody was buying anything': For some business owners, getting back to basics means taking a "regular job" for a while.

"When gas went up to $4 a gallon, it was like they turned a switch," says Tom LaConte, the former owner of printer-fixing company Laser Tech of Pensacola Inc., in Pensacola, Fla. "Nobody was buying anything, nobody was getting anything fixed, nobody was copying anything anymore."

The printer company was the family's livelihood for 19 years, but as the economy deteriorated and customers stopped coming in the door, Tom had to find another source of income.

"This last year, year-and-a-half, sales went down tremendously, to the point where we were getting behind on our mortgage. Our credit scores were going down. We couldn't handle both sets of bills," says Ginger LaConte, Tom's wife.

Tom got a job working as a computer support specialist at the Department of Veterans Affairs and left the company to Ginger, who became the official owner of the store -- which she renamed Mr. Ink Refills.

Ginger was originally the customer service representative for her husband's company, but she has since had to master aspects of running the business on her own, including fixing the computers herself.

Looking ahead: Running on a shoestring can be the only option when money gets tight, but it's hard to sustain over the long haul. When business owners come to him for help, Freeman recommends that they create a long-term plan to get the business back on track -- taking into account the new economic realities. Then, he advises setting aside 15 to 30 minutes a day to work toward the goals mapped out in the plan.

Proud business owners have a hard time asking for help even in tough times, and so when small businesses shed staffers, owners often take all the extra responsibility on their own shoulders. But sharing the load with others can be the best thing for all involved -- and for the business.

"There are only so many hours, and so many things you have to do," Freeman says. To top of page

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Thursday, September 17, 2009

Duch testimony ends at trial


Duch, whose actual name is Kaing Guek Eav, has during the trial repeatedly accepted responsibility for his role in governing the jail and begged for forgiveness from the families of the victims. -- PHOTO: AFP

Sep 17, 2009

PHNOM PENH -CAMBODIA'S UN-backed Khmer Rouge tribunal on Thursday wrapped up the presentation of evidence in the trial of the man accused of running the regime's most notorious prison.

Closing arguments in the trial of Duch, the first to be held at the special war crimes court, are scheduled to take place in November and the verdict is expected early next year.

The court has been hearing evidence since late March about Duch's role in overseeing the torture and execution of over 15,000 people at Tuol Sleng detention centre in the late 1970s.

'I would like to declare the adjournment to this morning's proceedings now,' chief judge Nil Nonn told the court, officially ending testimony.

Duch, whose actual name is Kaing Guek Eav, has during the trial repeatedly accepted responsibility for his role in governing the jail and begged for forgiveness from the families of the victims.

In his final testimony on Wednesday, he invited victims of the regime to visit him in detention. He is being held on the premises of the purpose-built court on the outskirts of Phnom Penh.

But the 66-year-old denies several allegations that he personally tortured or killed inmates and denies being a key figure in the hardline communist movement, in government from 1975 to 1979.

Led by Pol Pot, who died in 1998, the Khmer Rouge emptied Cambodia's cities in a bid to forge an agrarian utopia, resulting in the deaths of up to two million people from starvation, overwork and torture.

Four senior Khmer Rouge leaders are currently in detention awaiting the next trial at the court, and judges recently ruled five more cadres should be investigated for possible prosecution. -- AFP

Cambodia deploys police for Thai border protest

The view of the Preah Vihear temple in Preah Vihear province

(AFP)

PHNOM PENH — Cambodia deployed riot police Thursday at an ancient temple on the disputed border with Thailand where Thai protesters are due to hold a protest at the weekend, the defence ministry said.

Thailand's royalist "Yellow Shirt" movement says it will rally on Saturday near the 11th century Preah Vihear temple to demand that the government push Cambodian forces out of the area.

The disputed frontier around the temple has been the scene of several deadly clashes between Thai and Cambodian forces since the ruins were granted UN World Heritage status in July 2008.

Cambodian defence ministry spokesman Chhum Socheat said at least 50 police with dogs, batons, and tear gas have been deployed at the temple ahead of the demonstration.

"Our anti-riot police have been deployed to the border Preah Vihear temple in case the Thai Yellow Shirt protesters illegally cross the border to cause problems," Chhum Socheat told AFP.

"We will order our forces to prevent them from entering. We don't want bloodshed to happen, but if they don't listen to us, we will use our self-defence measures," he said.

The Yellow Shirts helped the current Thai government come to power with a blockade of Bangkok's airports in December, but have since turned their fire on the administration over its handling of the temple issue.

Their protest is scheduled on the same day as the rival "Red Shirt" movement is due to rally in Bangkok to mark the third anniversary of a coup that toppled former prime minister Thaksin Shinawatra.

Cambodia halved the number of troops around the temple at the end of August after tensions eased in the area.

The two countries have been at loggerheads for decades over Preah Vihear.

The World Court ruled in 1962 that it belonged to Cambodia, but the most accessible entrance to the ancient Khmer temple with its crumbling stone staircases and elegant carvings is in northeastern Thailand.

The last gunbattle in the temple area in April left three people dead while clashes there in 2008 killed another four people.

The border between the two countries has never been fully demarcated, in part because it is littered with landmines left over from decades of war in Cambodia.

French military aid

Photo by: Heng Chivoan

Thursday, 17 September 2009 15:02 Heng Chivoan

Deputy Commander in Chief Hing Bunheang (centre) and French Ambassador to Cambodia Jean Francois Desmazieres greet Cambodian military commanders Wednesday during the inauguration of new French-funded facilities at the Active Military School outside Phnom Penh. The new facilities, built at a cost of nearly US$200,000, feature a military tactics training centre, a shooting range and a French-language training centre. The French organisation Mission for Military Cooperation, which has aided the school since 1994, helped coordinate construction of the new facilities.

US folk singer Mary Travers dies

Mary Travers. Photo: June 2006
Travers remained politically active after the band split in the 1970s

Mary Travers, one third of the hugely popular 1960s US folk group Peter, Paul and Mary, has died after a battle with leukaemia aged 72.

A statement on the group's website said the singer succumbed "to the side effects of one of the chemotherapy treatments" she was undergoing.

She had been suffering from leukaemia for several years.

Peter, Paul and Mary had hits including If I Had a Hammer, Lemon Tree and Puff, The Magic Dragon.

They became known for their mixture of liberal politics with folk music that won them a loyal following of fans and also five Grammy Awards.

Outspoken supporter

Bandmate Peter Yarrow said that in her last months, Travers handled her declining health "in the bravest, most generous way imaginable".

He added that throughout her long career, Travers sang with honesty and complete authenticity.

"I believe that, in the most profound of ways, Mary was incapable of lying, as a person, and as an artist - that took great courage, and Mary was always equal to the task."

Peter, Paul and Mary
The group released their debut album in 1962

Noel "Paul" Stookey, the trio's other member, praised the singer for her inspiring activism, "especially in her defence of the defenceless."

"I am deadened and heartsick beyond words to consider a life without Mary Travers and honoured beyond my wildest dreams to have shared her spirit and her career," he said.

Travers was an outspoken supporter of the civil rights and anti-war movements.

The group travelled the world and frequently appeared at political rallies and demonstrations, including the March on Washington in 1963.

Travers kept up her activism after Peter, Paul and Mary broke up in the early 1970s. She performed as a solo artist before the trio later reunited for benefits and other concerts.

She underwent a successful bone marrow transplant to treat her leukaemia and told The Associated Press in 2006 she was "feeling fabulous".

But by mid-2009, Yarrow told a Washington radio station that the singer's condition had worsened again and thought she would no longer be able to perform.

Travers is survived by her husband, Ethan Robbins and daughters, Alicia and Erika.


In 1983, Peter, Paul, & Mary performed at Pier Six in downtown Baltimore. Following a wonderful concert, my wife Betsy and I were walking back to our car and singing "The Times They Are A-Changin'" to ourselves. All of a sudden, we hear a familiar voice singing beautiful harmony in the background. We stop and look around, and coming up quickly from behind us was Mary with a big smile on her face. Betsy and I were in total disbelief that this was actually happening to us. It was kind of like winning the music lottery!
Wes Herrmann, White Hall, Maryland, USA

I am one of the three members of Portland, Oregon based folk group 'Rite of Spring'. Certainly inspired by the music of PP&M, we recently shared the stage with Peter Yarrow. Truly the end of an era for us - so sad. Pater had told us she was holding her own earlier this year, and we hoped she had some more quality time left. Our sincere condolences to her family and Paul and Peter of course.
Michael Attwood, Portland, Oregon, USA

I attended numerous PP&M concerts, but when I was in my 3rd year at university (1969), I met briefly all three members of the group. I was in awe at how friendly all three were. Peter and Paul were funny and extremely intelligent. Mary was incredibly beautiful, and immensely friendly. I am a folk singer like PP&M, so meeting all of them was a dream come true! Never in my wildest dreams did I believe that I would ever meet even one of the three in person! But, on that concert night I did meet all three of these amazing people / musicians!
M. Randolph Hunter, IV, Fremont, CA, USA

I was in America on a four month 'gap' in 1963 and managed to catch PP&M in concert at the Watergate Theatre in D.C. very close to the building of later notoriety. And the music was uplifting, all the hits and more. Some of Mary's comments, mild today but wildly radical in the context of time and place, caused rumblings among a few of the sell-out crowd but the scent of freedom, whatever that illusory beast is, was in the air, a scent that grew stronger a week or so later when I saw her again in D.C.

This time the venue was a bit more expansive - the Freedom March on August 28 when Martin Luther King revealed to us his great dream. What more fitting setting could there have been for PP&M and their songs of protest and hope? Mary Travers was a lovely woman with a voice to match her stunning looks, a voice like that bell she sang about in 'If I Had A Hammer'. I hope she rests easy.
Ed Dixon, Clackmannan, UK

Met P,P&M at stage door of Colston Hall, Bristol 1964. for autographs. They have been the biggest musical influence of my life. Immensely talented and professional group whose influence goes much further than is recognised.
Peter Nott, Taunton UK

I did not meet her face to face but on a trip to Las Vegas three or four years ago Peter, Paul & Mary reformed for a re-union concert and I was lucky enough to be in the right town at the right time to see it. Not the same tall woman of early years with the long swishing blonde hair, and she was suffering a bad hip but the sound, magic, and for me the adrenaline, was still there. Something that should not be over-looked is that without PP&M there would have been no Bob Dylan. It was PP&M that took the unmusical gravel of Dylan, found the music in it and expounded the rhetoric and magnitude of his early work.
Alan Greenwood, Epsom, Surrey

I was singing along with their songs even before I could read, this was in Berkeley, California in the early 1960s. Their simplistic music (two guitars, three brilliant singers) permanently influenced my taste in music, later Mary's political activism impressed me. This is like losing a favourite aunt.
Sara Whitney, Munich, Germany

So, another icon of my youth has passed on. I still have all my Peter, Paul and Mary albums and play them often, along with Joan Baez, Judy Collins, Bob Dylan, Carole King and James Taylor. The music of the sixties was so real and relevant. It changed the world and it changed us. Good bye Mary and thank you!
Susan McMillan, Harare, Zimbabwe

US 'shelves Europe missile plan'

Iranian test of Shahab-2 missile, November 2006
Iran has held regular tests of its long-range missiles

The US is to abandon its plan to develop a missile defence system in Poland and the Czech Republic, the Czech prime minister has announced.

Earlier reports from the US said it would be dropped because Iran's long-range missile plans were less advanced than predicted.

Czech Prime Minister Jan Fischer said US President Barack Obama had notified him of the change of plan.

The plan had antagonised Russia, which saw it as a direct threat.

President Obama earlier this year ordered a review of the defence system, introduced by his predecessor George W Bush.

European protection

From different sources we hear there are serious chances the shield won't be deployed here
Czech Deputy Foreign Minister Andrzej Kremer

In August 2008, the US signed a deal with Poland to site interceptors at a base near the Baltic Sea, and with the Czech Republic to build a radar station on its territory.

Mr Fischer said Mr Obama had confirmed that this would no longer happen.

The missile shield was expected to be fully operational by 2012.

Washington said the European sites were needed to protect European allies and US forces in Europe from Iran or another country.

However, the Wall Street Journal reported: "The US will base its decision on a determination that Iran's long-range missile program has not progressed as rapidly as previously estimated, reducing the threat to the continental US and major European capitals, according to current and former US officials."

Short-range threat

The newspaper, quoting unnamed sources, said the White House would order "a shift towards the development of regional missile defences for the Continent" to combat the threat from Iran's short- and medium-range missiles.

Mr Fischer said a US delegation would make an announcement later on Thursday.

ANALYSIS
Paul Reynolds
BBC World Affairs correspondent Paul Reynolds

The decision would be a huge shift in American foreign and defence policy by the Obama administration. It is a major signal that the US is adopting a far more cautious foreign policy under President Obama.

The Russians will be pleased by the news and therefore relations will be eased. But they might also feel triumphant and conclude that their tough approach is one that brings respect and results.

The move might also indicate that the Obama team will be looking sceptically at claims Iran is developing an actual nuclear weapon. There will also be debates about the long-term US commitment to Europe. Meanwhile, on the military side, this decision would herald a shift of emphasis in the whole US anti-missile defence strategy.

Iran says its missile development programme is solely for scientific, surveillance or defensive purposes, but there are concerns in the West and among Iran's neighbours that the rockets could be used to carry nuclear weapons.

As part of long-running efforts to tackle the issue, Iran will hold talks on its nuclear programme on 1 October with the UK, China, France, Russia and the US - the five permanent UN Security Council members - and Germany.

'Rogue' states

The Wall Street Journal said the Obama administration "was expected to leave open the option of restarting the Polish and Czech system if Iran makes advances in its long-range missiles in the future."

Russia saw the US missile plan as a direct threat to itself, despite US assurances that it was aimed at "rogue" states, such as Iran.

A Russian foreign minister spokesman was quoted by Interfax news agency as saying Russia was awaiting confirmation of the reports.

"In principle, such a development of the situation would correspond to the interests of the development of our bilateral relations with the USA," the spokesman said.

In November, Russia moved its own ballistic missiles to Kaliningrad, between Nato member states Lithuania and Poland to "neutralise - if necessary - the [US] anti-missile system", President Dmitry Medvedev said at the time.

Mr Medvedev also said Russia would jam the US anti-missile system electronically.

US missile defences


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