Economy News: Iceland's volcano ashes darkens European airlines profit

Eyjafjallajökull, Iceland's 5,466-foot volcano (1466 meters), days ago erupted. Besides the spectacular views, 700 evacuated and a giant cloud of ashes and dust covering almost all Europe, the volcano's eruption
is harming Airlines economy.

In fact, the European Commission announced that the economic impact of volcanic cloud will be greater than 9/11. Siim Kallas, the European Commissioner for Transport, at a press conference said that European Commission will bailout airlines of the states ask for it.

And he's right. If not as bad as 9/11, this (new) crisis gives more trouble to airlines, specially the European ones. Let's check the numbers:

- Airlines worldwide will lose $2,8 billion in 2010 after an estimated $9,4 billion cumulative loss last year, as the International Air Transport Association predicted last month

- European airlines will lose $1 billion, at a rate of $200 MM (185€ millions) daily

- At the stock market, Lufthansa dropped a 4'5%, Vueling 6'8%, British Airways 3'6% (worst of all British market), Air France 4'7% (worst rates of French market). Low cost companies as Easyjet and Ryanair, dropped a 3'8% and 4'8% respectively

- Six millions passengers affected (April, 19th), who losed their flight

How much this will last? Will the companies recovery from the crisis or they'll need the rescue of the European Union states? These are the questions over every the airline owner.

While this solves, enjoy the spectacle of the volcano

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Economy News: Youtube: Is google making a profit?

Let's analyse if youtube was a worth purchase

Who doesn't know youtube? TV, our friends, colleagues, everyone is broadcasting and sending us their videos. But that was a good business for Google? Let's analyse the numers.

Google bought youtube for $1.65 billion at the second half of year 2006. At 2005 spent $130.5 milion buying other 15 small companies. Reading news of 4 and 5 years ago, people questioned Google decisions, stating that the company is 'betting' in youtube, more investing on it with this purchase. Google Chief Executive Officer Eric Schmidt said that 'This is (was) the next step in the evolution of the Internet'.

And time proved they were right. Youtube total net revenue at 2008 was $244 MMs, and the last year was 2009 $472 MMs. In 2 years they're halfway to pay what Youtube rights cost them.

Estimations for 2010 points to a Total Net Revenue of $614 MMs and a growth of 30%. 2011 will increase a 20% and Google will earn $737 MMs if all expectations are right.

Click the image to enlarge it

What we know for true, is that the first quarter of 2010 earnings was beat Wall Street expectations. But time will told us, again, if we're right or not.

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Economy Lesson: Disbanding Troops and Bureaucrats, by Henry Hazlitt

When, after every great war, it is proposed to demobilize the armed forces, there is always a great fear that there will not be enough jobs for these forces and that in consequence they will be unemployed. It is true that, when millions of men are suddenly released, it may require time for private industry to reabsorb them—though what has been chiefly remarkable in the past has been the speed, rather than the slowness, with which this was accomplished. The fears of unemployment arise because people look at only one side of the process.

They see soldiers being turned loose on the labor market. Where is the “purchasing power” going to come from to employ them? If we assume that the public budget is being balanced, the answer is simple. The government will cease to support the soldiers. But the taxpayers will be allowed to retain the funds that were previously taken from them in order to support the soldiers. And the taxpayers will then have additional funds to buy additional goods. Civilian demand, in other words, will be increased, and will give employment to the added labor force represented by the former soldiers.

If the soldiers have been supported by an unbalanced budget— that is, by government borrowing and other forms of deficit financing—the case is somewhat different. But that raises a different question: we shall consider the effects of deficit financing in a later chapter. It is enough to recognize that deficit financing is irrelevant to the point that has just been made; for if we assume that there is any advantage in a budget deficit, then precisely the same budget deficit could be maintained as before by simply reducing taxes by the amount previously spent in supporting the wartime army.

But the demobilization will not leave us economically just where we were before it started. The soldiers previously supported by civilians will not become merely civilians supported by other civilians. They will become self-supporting civilians. If we assume that the men who would otherwise have been retained in the armed forces are no longer needed for defense, then their retention would have been sheer waste. They would have been unproductive. The taxpayers, in return for supporting them, would have got nothing. But now the taxpayers turn over this part of their funds to them as fellow civilians in return for equivalent goods or services. Total national production, the wealth of everybody, is higher.

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