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Winter Forecast: Fewer Flights And Higher Fares

Thursday, October 15th, 2009

American airlines are taking a hint from European discount airlines: pack ‘em in and charge extra for everything.

  • Though the economy is picking up elsewhere, the airline industry is still struggling. And that means higher fares and more annoying fees for you, the traveler.
  • To save money, many airlines are paring back their schedules, which will decease the total number of  flights available. At the same time, business travel is expected to increase, which will limit supply even more.
  • Many airlines have already added a holiday travel surcharge, and are also considering additional fees for online booking, advance boarding, and infants.

Facts & Figures

  • According to Tom Parsons of BestFares.com, the cost of domestic flights has increased recently by more than 50%.
  • Delta, American, United, and US Airways will be charging an extra $10 per ticket on certain holiday travel dates this winter.

Best Quote

“Even with the new fees, airlines are losing billions. So it’s either fees, higher fares, or we’ll see some more airlines fall into the aviation ash heap along with TWA, Pan Am, Skybus and Independence Air.” – George Hobica,  Founder of AirfareWatchdog

Rainforest Action Network Targets Fashion Houses

Thursday, October 15th, 2009

Would you want a beautiful shopping bag if it meant clearcutting a section of rainforest in Indonesia?

  • Rainforest Action Network, an activist group (and TILE Cause) that focuses on corporate responsibility when it comes to rainforests, seems to have made a major victory in the fashion industry by targeting a supplier of high-end shopping bags.
  • In a letter to 100 fashion firms, RAN explained that paper goods supplier Pak 2000 had very close ties with Asia Pulp and Paper, a company notorious for damaging the environment in order to harvest wood pulp. (Pak 2000 has since indicated that it may soon cut ties with the company.)
  • Several large clients have since ended their relationships with Pak 2000, many citing normal business relations. But some companies, like H&M, credited the supplier shift to RAN’s letter specifically, and RAN says it is talking to 20 additional companies about switching to sustainable bag suppliers.

Facts & Figures

  • Some current and former clients of Pak 2000 include: Barney’s, Billabong, Cartier, Chanel, Coach, Estee Lauder, Gucci, J.Crew, Marc Jacobs, Montblanc, Movado, and Ralph Lauren.
  • Deforestation is responsible for a fifth of total greenhouse gas emissions.
  • The United States and China are the largest producers of greenhouse gases, followed by Indonesia, where Asia Pulp and Paper does much of its wood harvesting.

Best Quote

“Because Pak 2000 is selling to very high-profile companies, it’s a good place to start our work, to introduce this issue to a new sector, the fashion industry.” – Lafcadio Cortesi, RAN’s Forest Campaign Director

What do nonprofit boards do?

Wednesday, October 14th, 2009

The board of a nonprofit has many of the same responsibilities as the board of a corporation: they pick the chief executive, ensure that the organization is fulfilling its mission statement, and provide financial and legal oversight. They make sure the chief executive is doing his or her job running the charity’s programs, managing its money, and executing its stated purpose in its mission statement.

Nonprofit board members are often integrally involved in fundraising and raising awareness of the organization. Frequently they ask others to donate, appear at fundraising events, and donate themselves. In looking for more people to support their organization, they also find and recruit new board members.

Nonprofit boards, as you’d expect, are unpaid positions. Serving on these boards can be a gratifying and essential way to serve a cause that you care about deeply.

How much are you really worth?

Wednesday, October 14th, 2009

The obvious answer seems to be that a person or company is worth however much money they have, but that number isn’t always easy to figure out. It can be hard just to figure out how much money you have in the bank at any given time: you can print out an account statement, of course, but what about all the checks you’ve written and purchases you’ve charged to credit cards that have to be deducted from that number? How do you come up with a number that reflects what you’re really worth?

This number is called net worth. For both people and corporations, net worth is represented as total assets minus total liabilities. But even though the equation is simple, the calculations can be complicated. Anything of monetary value is considered an asset; any debts or payments you’re obligated to make constitute liabilities. So your house is an asset, but your mortgage is a liability. Your car is an asset, but your lease payments are a liability. Your salary is an asset, but your bills are all liabilities. You have to take all these little additions and subtractions into account in order to figure out your net worth.

Microfinance is…

Thursday, October 8th, 2009

Microfinance is a range of financial services targeted at people “at the bottom of the pyramid” who don’t have access to regular financial products like credit, savings and insurance. When people talk about microfinance, they are often referring to inreasingly popular “microloans.”

An Investment Bank is…

Thursday, October 8th, 2009

An investment bank is an institution that serves as an agent for corporations that are issuing securities. Investment banks do not accept deposits or offer loans like regular banks. Instead, they tend to help with mergers and acquisitions, corporate restructuring or companies that are going public.

Why does the NYSE opening bell ring at 9:30?

Thursday, October 8th, 2009

The opening bell for the New York Stock Exchange (NYSE) has rung at 9:30am since 1985 when it was changed from 10:00am. The bell starts the daily trading session, which is the time in which all stocks are bought and sold on the trading floor. Until relatively recently, the technology to trade stocks from outside the trading floor didn’t even exist, so the trading session was really the only time when trading took place.

Now trading can be done at all hours from anywhere on the planet – even from your cell phone. However, the majority of trading is still done during the trading session. The board of the NYSE has discussed several times making the bell earlier to extend normal trading hours, but the hours haven’t changed for over 20 years.

What do you do if someone gives you insider information?

Wednesday, October 7th, 2009

When someone has privileged or sensitive non-public information about a company that could affect its share price once the information becomes public, they can use that information to either buy or sell stock at the expense of the people they sell to or buy from who don’t have this information. This is called insider trading and it’s illegal. Let’s say you work at a company and know that the company just lost a ton of money, even though the public thinks the company is doing great. If you sell  your stock to the unwitting public, that’s insider trading.

But what if you are just given the information and aren’t actually an “insider” at the company? This is often called “tipping,” and it’s still illegal for you to trade based on that privileged information because the effect is the same – if people think that it’s not safe to invest because they are going to be taken advantage of by sneaky insiders and their friends, they won’t buy stock, and that’s bad for everyone.

A Trust is…

Wednesday, October 7th, 2009

A trust is a legal structure set up by one person (the trustor) for another person (the beneficiary) to use in the future. It is managed by a person or institution (the trustee). For example, a father might set aside money in a trust for his 16-year old son to inherit when he turns 18.

What and where is the black market?

Wednesday, October 7th, 2009

Drugs, guns, stolen goods, oh my! The buying and selling of these types of illegal products is the most infamous type of black market. In a more general sense, the black market is any marketplace that operates outside the law, or disregards trade or taxation regulations. It gets its name from the idea that business is done “in the dark,” out of sight.

As a trend, black markets tend to sprout up most in places with the least economic freedom. This means the countries with the most economic freedom tend to have the smallest black markets (proportionally). But countries with more corruption, regulation, and monopolies have fewer legitimate economic opportunities. For instance, North Korea has a robust black market for basic supplies like food.

In developed countries, black markets form in response to legal, regulatory, and taxation restrictions. One of the most famous examples comes from the 1920s. When prohibition made alcohol illegal in the U.S., it spawned an enormous black market where alcohol was smuggled into the country and sold at speakeasies and private bars. Spearheaded by the mafia, the black market sustained an era of organized crime and cost the U.S. an estimated $500 million in lost tax revenues every year. Economics teaches us about the laws of supply and demand; just because something becomes illegal, for instance, doesn’t mean everyone suddenly stops wanting it. Boom. Black market.

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