02/02/2016 BBC Business Live


02/02/2016

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This is Business Live from BBC News with Alice Baxter and Sally Bundock.

:00:00.:00:08.

They may pump the black stuff, but they've now headed into the red.

:00:09.:00:12.

Oil giant BP reveals just how bad things are with their latest set

:00:13.:00:15.

of results as they grapples with falling revenues and further

:00:16.:00:18.

Live from London, that's our top story on Tuesday, 2nd February.

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Oil giant BP has reported an annual loss of $6.5 billion in 2015,

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its worst results in more than 20 years.

:00:45.:00:47.

The British company struggled with a sharp downturn

:00:48.:00:51.

Also in the programme, Alphabet, Google's parent company,

:00:52.:01:02.

has surpassed Apple as the world's most valuable company

:01:03.:01:06.

after its latest set of bumper earnings.

:01:07.:01:08.

We'll keep you up-to-date with all the latest from the markets.

:01:09.:01:13.

Asian shares slip on sliding crude oil prices and and downbeat

:01:14.:01:16.

And Europe follows suit, opening lower.

:01:17.:01:19.

And the boss of Icelandair will be with us in the studio to tell us

:01:20.:01:25.

about its attempts to mix it up with the big boys of global air

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travel and some try some unusual methods to win passengers.

:01:30.:01:34.

Whatsapp boasts it now has a billion users.

:01:35.:01:36.

Oil Giant BP has reported a headline loss of $6.5 billion for 2015 as it

:01:37.:01:58.

massively downgraded the value of its oil reserves

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Stripping out the effect of that adjustment, the company made profits

:02:03.:02:10.

of $5.9 billion for the year - a 51% fall since last year

:02:11.:02:13.

and the figures for the last quarter showed a 90% drop

:02:14.:02:17.

As you can see, the firms share price has had a rough ride over

:02:18.:02:25.

While dealing with the plummeting oil prices it has also been hit

:02:26.:02:31.

with billions of dollars of fines relating to the Deep Water Horizon

:02:32.:02:34.

Last month the company said it would cut 4,000 jobs globally

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while slashing billions of dollars from spending on new projects.

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Today the firm also announced that it would cut up to three

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news will be worrying for shareholders and in particular

:02:54.:02:59.

pension funds that rely on the large dividend which is currently worth

:03:00.:03:02.

This is how the shares are doing this morning as well

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BP currently down over 5.6%. Brent Crude hovering under $34, so that

:03:12.:03:29.

recent rally we saw, that's pairing back.

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I am joined now by Markets analyst, Jason Gammel from the investment

:03:37.:03:41.

Al Is outlined the grim numbers there? Yes, it was a disappointing

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number. That is a bit troubling. The cash generation was also relatively

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weak in the quarter. They did generate ?5 billion in cash but ?3

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billion was from changes in the balance sheet. Why do you think they

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are retaining the dividend? Well, I think the dividend is something that

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is fairly sacrosanct at BP and they want to be able to distribute cash

:04:18.:04:22.

to shareholders, the owners of their business. The dividend is in 2016

:04:23.:04:32.

going to be kind of a trade-off. There's about ?17 billion, they'll

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generate ?20 billion so there is about a $3 billion short fall that

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needs to come in through from incremental debt. You wonder going

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forward what will the balance be between debt and capital expenditure

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in the future and also where its investment is in the long-term

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because against its peers, BP has lowest production growth really at

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the moment? Yes. That's right. I think really most companies are

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expecting that we'll see an increase in oil price from where we are at

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today. So I think that really, the safety of the dividend is somewhat

:05:10.:05:19.

reliant on on improvement in price. BP will invest but their growth is

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limited than their peers so they'll have catching up to do. A new Depp

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tell Chief Executive was announced yesterday, Lemar McKay, who's been

:05:30.:05:34.

at BP for some time. Is this the beginning of a succession plan as

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far as Bob Dudley is concerned or is it about dealing with the

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challenging times? I would tend to lean towards the latter but we don't

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really know, this was only announced yesterday afternoon, I imagine

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they'll speak about it on today's conference call. He's been at BP for

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a long time, perhaps not the right age to be successor to Bob Dudley

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given that they are only about two years apart I believe but we'll hear

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more about that this afternoon. Thank you so much, Jason Gammel. BP

:06:05.:06:13.

very much in focus, a big player on the FTSE 100 and the shares down

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over 5%. So let's have a look at some of the stories on the BBC live

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page in a minute, but you have other stories to come first.

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In other news, it's reported Yahoo's boss Marissa Mayer is set to reveal

:06:29.:06:31.

cost-cutting plans that include slashing 15% of its workforce -

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that's roughly 1,600 jobs, and closing some business units.

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Plans could be announced after Yahoo's fourth-quarter

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WhatsApp has hit the billion user mark. The number of people using it

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has more than doubled since Facebook bought it in 2014.

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Russia is lining up major state companies including Aeroflot,

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diamond miner Alrosa and Rosneft, for potential privatisation

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as the country looks for options to recoup revenues lost

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The latest slide in crude prices is expected to drive Russia

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into a second year of recession and has ripped a gaping hole

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One story I would like to mention is national Australia Bank for some

:07:24.:07:41.

time's been talking about trying to change its business and part of that

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has been the demerger of Clydesdale bank. It would seem that that

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demerger is off or at least the floatation is delayed for now.

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Because of a credit rating query. That is the story that's broken in

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the last hour which would effect many, many of you who're customers

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with Clydesdale bank so keep an eye on that story. More on that on the

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business live page. Sainsbury's have made an offer for

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Home Retail Group who own Argos. A previous offer was rejected. We know

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a deal is now going through. The jury is still out as to whether this

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is a good deal. A lot more information on that as well on the

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business live, as well as BP, the news we have just had out later in

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the programme. We have Kamal Ahmed joining us shortly.

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Let's take a look round the world at what business stories

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And profits at games maker Nintendo have fallen 36% because of a lack

:08:52.:08:59.

What is the latest? If you love playing video games, Nintendo is

:09:00.:09:13.

famous for Super Mario and Splatoon and the like. The profits fell by

:09:14.:09:17.

36% in the most recent quarter, the three months to December. The figure

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came in at $241 million, below analyst estimates. The reason really

:09:24.:09:29.

is because they need more hit titles, more games, software that

:09:30.:09:34.

will sell their hardware, so we saw lower holiday sales of the Nintendo

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Wii and the 3DS because people are not snapping up titles like they

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used to. That said, it's a big year for the company. Nintendo is looking

:09:45.:09:49.

for a new growth driver so there'll be a big shake-up of the company,

:09:50.:09:53.

the biggest since 1970. So next month we are going to see the debut

:09:54.:10:03.

of its first smartphone game call. It's also developing a new console

:10:04.:10:10.

and there may be more on virtual reality. Investors were not

:10:11.:10:14.

expecting too much because the shares fell about 1.5% in Tokyo

:10:15.:10:17.

ahead of the afoundsment. Let's stay in the region

:10:18.:10:19.

because Asian shares fell on Tuesday as crude oil extended it's heavy

:10:20.:10:24.

losses from the previous session on continued oversupply fears,

:10:25.:10:26.

hitting Asia's beleaguered energy stocks as most regional markets

:10:27.:10:29.

retreated from a recent rally. Weak factory data from China

:10:30.:10:32.

to the United States also added to the selling pressure,

:10:33.:10:34.

although Shanghai and Hong Kong did Japan's Nikkei ended down 0.6%

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as investors locked in profits after two straight days of big gains

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following the Bank of Japan's surprise decision to introduce

:10:47.:10:51.

negative interest rates In Europe all the major indexes have

:10:52.:10:53.

followed Asia in opening lower. Alphabet, the company which owns

:10:54.:11:00.

the search engine Google, has now overtaken Apple

:11:01.:11:06.

to become the world's most Here's Nadia Tawfik to tell us more

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on this and what's making the business world in

:11:09.:11:13.

the United States today. Alphabet is $568 billion, so

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surpassing Apple. If you look at the report, it was very much in line

:11:24.:11:28.

with what investors expected. The revenue was up around 17% for the

:11:29.:11:33.

quarter, off the back of its core Google business really and the

:11:34.:11:37.

strength there with mobile ads and YouTube ads. So that was to be

:11:38.:11:41.

expected. What we were looking for in this report is how the other part

:11:42.:11:48.

of Alphabet, this new company with its other bets, other ventures which

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are more ambitious, how that was affecting the overall revenue and

:11:53.:11:54.

outlook of the company. Joining us at the markets

:11:55.:12:06.

and the stories in the news He's the Chief Executive

:12:07.:12:09.

for Nutmeg Investment Management. The first overnight results coming

:12:10.:12:19.

through from Iowa. Quite interesting wasn't it? Absolutely fascinating.

:12:20.:12:23.

We had so much last night, the transfer deadline day in the

:12:24.:12:26.

football, the American election going on. And all this wonderful

:12:27.:12:31.

economic and markets news as well, so for nerd like me it was just a

:12:32.:12:37.

dream. You didn't sleep? Not at all. This story has three pillars to it.

:12:38.:12:42.

The first one is that Ted Cruz is a really serious candidate and he's

:12:43.:12:46.

come out having won the Iowa vote with a large share, about 28% of the

:12:47.:12:51.

voters. Everybody thought that Trump would be the man because so many

:12:52.:12:56.

first-time voters turned out. Not in Iowa though, because it's a kind of

:12:57.:12:59.

Ted Cruz battleground, he was expecting to do well in this one? He

:13:00.:13:05.

put so much effort into Iowa so if he hadn't won it would have been a

:13:06.:13:10.

disaster. We saw the rise of Marco Rubio and I learnt that Iowa's one

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of, if not the only state which has proportional voting, so the others

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are all absolute, but in Iowa, Ted Cruz will get six votes, Trump will

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get five and Rubio will as well, so they're almost tied.

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Interesting that Hillary Clinton and Bernie Sanders are neck and neck?

:13:32.:13:35.

Oh, and we don't know which way that is going to go. A couple of years

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ago Romney was declared the winner, then Rick Santorum turned out to be

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the winner. Amazingly close there. Really strong evangelical support.

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Let's look at the Financial Times because this story here about a

:13:58.:14:05.

spate of privatisations, a real reversal of what we have seen over

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the course of Putin's decade and a half of rule in Russia where we have

:14:10.:14:14.

seen a sort of maybe perhaps not straightforward nationalisation of a

:14:15.:14:17.

lot of businesses but we have seen a decline in the sell off of shares of

:14:18.:14:23.

a lot of the companies there? There's two reasons for that. One is

:14:24.:14:28.

the sales in the early '90s which created the oligarch culture or the

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few people, you know, the public have really rebelled against that,

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there's been a big push back from the Russian population and Putin

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recognises that. He doesn't want to make the same mistakes again. They

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have to do something because of the hit the Russian economy is taking

:14:47.:14:50.

with the oil prices? It's absolutely huge, the hole they have in their

:14:51.:14:53.

budget. They are going to cut 10% of Government spending this year and

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again, he's just asked his counterpart to say, please cut

:15:00.:15:05.

another 5% 2010% off, can you imagine cutting 20% off the national

:15:06.:15:08.

budget? ! The question is, could they sell anything in good value

:15:09.:15:12.

because lots of their assets are energy based and now would be the

:15:13.:15:14.

time to sell. Thank you very much.

:15:15.:15:20.

Putinisation is what some are calling it on social media, as

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opposed to privatisation. Icelandair looks

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to freeze out the competition by offering the company's staff

:15:26.:15:28.

including pilots and even the Chief Executive as personal tour

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guides during transatlantic You're with Business

:15:31.:15:32.

Live from BBC News. Sainsbury's has offered ?1.3 billion

:15:33.:15:43.

to win control of Argos He is up north. Ben, tell us more.

:15:44.:16:01.

Good morning girls. That's right, ?1.3 billion is what is on the

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table. The deal is not yet a done deal. It just simply buys

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Sainsbury's a little bit more time. They have agreed in principle this

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cash and shares offer for Home Retail Group which owns the

:16:15.:16:19.

retailer, Argos. They have got until 23rd February to finalise the deal.

:16:20.:16:23.

You will know today is what we call put up or shut up dayment they had

:16:24.:16:27.

to make a revised bid or walk away. The details of the revised bid is a

:16:28.:16:34.

63% premium on the closing price of those Home Retail shares in January.

:16:35.:16:38.

A deal they were holding out for, you will know they originally made

:16:39.:16:42.

an offer that valued the firm at ?1 billion, but it was rejected in

:16:43.:16:45.

November. Details of that only coming to light just recently. So

:16:46.:16:49.

this is a revised offer, a higher offer, one worth ?1.3 billion.

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Sainsbury's deciding to put up then. Are job cuts at Argos inevitable, do

:16:57.:17:03.

we think? What you look at in the detail is what it means for areas or

:17:04.:17:06.

towns or cities across the country that have both a Sainsbury's and an

:17:07.:17:11.

Argos in close proximity. Sainsbury's says it expects to shut

:17:12.:17:15.

a third of stores if they are close together and that is part of its

:17:16.:17:18.

efforts to try and cut costs. It says it wants to save ?120 million

:17:19.:17:29.

by rationalising the business. It means putting concessions from Argos

:17:30.:17:36.

in a Sainsbury's store. That's inevitable and it is trying to

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remove the overlap. The big question of why Sainsbury's is interested in

:17:41.:17:44.

Argos. It comes down to the infrastructure that Argos has in

:17:45.:17:46.

place. It is known as a retailer where you can get this stuff. Argos

:17:47.:17:50.

spent a lot of money building the infrastructure to make sure people

:17:51.:17:53.

are able to get deliveries quickly and that's something that

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Sainsbury's wants. Ben, it is really good it check-in with you. Ben

:17:58.:18:02.

Thompson there. He will be back tomorrow. This is Stelios, he has

:18:03.:18:14.

launched an online grocery shop. You're watching Business Live.

:18:15.:18:23.

Our top story: Underlying fourth-quarter profits

:18:24.:18:34.

fell to $196 million, compared with $2.2 billion

:18:35.:18:45.

for the same period Despite the poor results

:18:46.:18:47.

the firm says its dividends Let's get the inside track

:18:48.:18:50.

on what it takes to make a breakthrough in the competitive

:18:51.:18:54.

world of Air travel. Icelandair is an Islandic airline

:18:55.:18:56.

which operated out of 39 cities In recent years the airline has

:18:57.:18:59.

grown considerably and this year they hope to transport 3.5 million

:19:00.:19:02.

passengers that's 500,000 more One of the reasons for that growth

:19:03.:19:05.

is Iceland's geographical location. Icelandair is able to offer low cost

:19:06.:19:13.

one-stop transatlantic flights to passengers from other

:19:14.:19:15.

countries in Europe The company now wants to build

:19:16.:19:17.

on this success and is offering passengers on transatlantic routes

:19:18.:19:22.

the option to stay in Iceland for up to seven nights at no

:19:23.:19:24.

additional airfare cost. As a bit of a sweetener the firm

:19:25.:19:32.

also says it will allow customers to use the company's staff including

:19:33.:19:36.

pilots and even the Chief Executive as a personal tour guide

:19:37.:19:39.

during their stopovers. With me is Birkir Holm Gounason,

:19:40.:19:41.

Chief Executive for Icelandair. Welcome. Thank you. Let's talk about

:19:42.:19:57.

this new buddy stop over idea that you're launching today. How will it

:19:58.:20:00.

work? Basically, we have been offering a

:20:01.:20:06.

stopover in Iceland since the 60s so people have the option to stay up to

:20:07.:20:10.

seven nights on the way to North America or on the way back. Today we

:20:11.:20:16.

are launching a service where staff will be a stopover buddy for one day

:20:17.:20:20.

and I will be one of the buddies and we're going to take the passengers

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around Iceland, show them our favourite places, locations and

:20:27.:20:29.

restaurants and activities. Why do you want to introduce this? Do you

:20:30.:20:33.

think Iceland is a country that's difficult to navigate as a tourist?

:20:34.:20:37.

The general travel trend is changing. We did a survey among

:20:38.:20:44.

11,000 tourists and people would like to spend more time with the

:20:45.:20:48.

locals and the local culture instead of going to big tourist attractions.

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So we believe the Airbnb and if you go to your friends you get to see

:20:59.:21:01.

more interesting places. You know where to stay, where to eat, so we

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want to be friendly. We are friendly, but we would like to show

:21:06.:21:07.

it! But for those who are trying to get

:21:08.:21:12.

from say London to a part of the United States, will look at going

:21:13.:21:17.

via Iceland or via somewhere else to really reduce their costs? Yeah,

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exactly. They are going to basically cut their air fare in half and go

:21:22.:21:28.

via another destination. They don't necessarily want to stay for seven

:21:29.:21:33.

days, they want to get on to cfl and crack on with their holiday there.

:21:34.:21:37.

What makes you think it will be successful? The stopover project

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increased 60% if recent years. A lot of people like to take a stopover in

:21:43.:21:47.

Iceland because you don't have to pay anything additional in the air

:21:48.:21:53.

fare. People go to the Will you Lagoon and all that. In our survey

:21:54.:21:58.

and for the UK market, almost 70% of the people said they were

:21:59.:22:01.

embarrassed they look liked a tourist. 23% said... No one wants to

:22:02.:22:06.

look like a tourist, do they? 23% said they would rather like to

:22:07.:22:10.

experience the local cultures, instead of going to the big tourist

:22:11.:22:15.

attractions and 46% said that they would like to mix with the locals.

:22:16.:22:20.

So I think this is something the travel trends are changing and

:22:21.:22:25.

people if you look at Airbnb, house exchanges, people like to be around

:22:26.:22:27.

the locals. A really interesting idea. It is. We shall watch to see

:22:28.:22:32.

if it is successful or not. Thank you for coming. Thank you. And

:22:33.:22:34.

telling us all about that. Let's take a closer look at a couple

:22:35.:22:38.

of the bigger stories we have been Russian is lining up several

:22:39.:22:53.

companies for potential privatisation as the Government

:22:54.:22:56.

looks to compensate for the low price of oil. The New York Times is

:22:57.:23:08.

reporting that Ted Cruz won the Iowa caucuses.

:23:09.:23:15.

EasyJet airline founder Stelios has opened a trial Easyfood shop with

:23:16.:23:20.

groceries sold at the knockdown price for 25 pence. I'm sure I can

:23:21.:23:26.

pick up veg for 25 pence already. It is all orange inside as well!

:23:27.:23:31.

Both BP and Alphabet have their results out and it's fair

:23:32.:23:34.

to say they are at opposite ends on the spectrum.

:23:35.:23:40.

Nice to see you, Kamal. It is such a busy day. I feel like I'm having to

:23:41.:23:46.

catch my breath here. Do you want to start with BP and give us your

:23:47.:23:51.

thoughts on that? BP, a really interesting business, clearly hugely

:23:52.:23:54.

affected by the oil price. It has fallen 40% in the last year. If you

:23:55.:23:59.

imagine an oil company, it is made out of two big drivers, oil

:24:00.:24:04.

production, North Sea, Gulf of Mexico, exploration, that's

:24:05.:24:07.

obviously been hit by the oil price drop. And it means that that is

:24:08.:24:12.

really struggling now and fell to a loss in the final three months of

:24:13.:24:16.

2015, compared to 2014, the second part of the business is downstream,

:24:17.:24:21.

that's the refining, the selling of fuel to retail customers, that is

:24:22.:24:25.

also struggling because the global slowdown has meant there is less

:24:26.:24:28.

demand for refined products, it is losing more jobs in the downstream,

:24:29.:24:32.

so these two engines are both spluttering and that's the problem.

:24:33.:24:36.

The big message from Bob Dudley the Chief Executive has been this

:24:37.:24:38.

morning, we will commit to the dividend. So at least investors and

:24:39.:24:43.

savers and pension funds from around the world will be heaving a sigh of

:24:44.:24:48.

relief. I was going to ask you about that. Many people are asking the

:24:49.:24:51.

question, about the dividend can they really continue with that given

:24:52.:24:54.

their financial situation? Well, obviously making a loss in parts of

:24:55.:24:58.

your business is unsustainable. When I spoke to Bob Dudley two weeks ago,

:24:59.:25:02.

he said that the oil price he thought would rise towards the end

:25:03.:25:06.

of the year. He made a big bet that that would be the case, because cost

:25:07.:25:10.

efficiencies, job cuts, taking on new debt, can only last for so long.

:25:11.:25:15.

Otherwise, there will have to be another radical slimming of the

:25:16.:25:21.

business. Quickly, Kamal, Alphabet, Google's parent company surpassing

:25:22.:25:24.

Google as the world's most valuable company? Spectacular. A company that

:25:25.:25:30.

has diversified in sharp contrast to Apple. Apple focussed on two or

:25:31.:25:39.

three well done products. Google, android mobile, research, people are

:25:40.:25:42.

using those things and they are highly, highly profitable. Thank

:25:43.:25:46.

you, Kamal. So much more analysis online.

:25:47.:25:56.

Thanks for your company. More Business Live tomorrow. Bye-bye.

:25:57.:26:13.

Hello there. Storm Henry it starting to pull away from the UK now. This

:26:14.:26:18.

wet weather front will bring

:26:19.:26:19.

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