09/11/2012 World Business Report

through some challenging issues. Those are the latest headlines.

Now it is World Business Report. Shake-up at International Airlines

Group. It is the owner of British Airways and Iberia. It is expected

to announce thousands of job cuts at the loss-making Spanish carrier.

As China's Communist leaders meet to choose its next set of leaders,

inflation figures have eased, giving an additional room.

Joining the eurozone's bail out club.

In a few hours' time, International Airlines Group, known as IAG, is

expected to announce up to 7,000 job losses at the Spanish carrier

Iberia. The group, which also owns British Airways, knees to shed

hundreds of millions of dollars have costs at Iberia, to make it

profitable. But on top of this, IAG is offering money for the full

takeover of Spanish -- Spain's second largest carrier.

The two companies that IAG Owens, British Airways and Iberia, are the

odd couple. British Airways is profitable, Iberia is not. The pair

combined are expected to NBC $130 million in the red, which is why

IAG is determined to strip out Iberia's excess costs. Iberia faces

a very difficult external trading environment, rising airport charges

and a week's Spanish economy, but internally, it does not come into

the modern age. It has a large number of routes. IAG started a

budget carrier, Iberia Express, to take on Iberia's short routes, but

pilots are having to take pay cuts. Now the dispute has gone to

arbitration. While IAG battles with the problem of how to get Iberia

Express off the ground, there is already an existing career in Spain

which is both profitable and long run -- well run. IAG says it would

like to acquire the whole career. $144 million have been bid for the

remaining shares. Iberia express has got off to a promising start.

But IAG has not been able to build it up as fast as it would like,

because it has led into legal wrangles with the unions. The other

carrier offers a way of stepping around that. IAG's vision is for

Iberia to concentrate on higher- margin writs between Spain and

Latin America. But current prospects are bleak. There is a

slump in demand for air travel in Spain, a prolonged legal dispute

with the pilots, and strikes summer Iberia staff that will soon be

facing the sack. -- among. As the Communist Party meets to

choose its leaders for the next decade, there is growing evidence

in the turnaround in the economy after more than two years of

flagging growth. Things seem to be getting better we

had the inflation of up -- figure for October at a three-year low.

That is right. In the month of September, we saw some signs of

stabilising economic growth on the mainland. Fresh numbers revealed

that the consumer if inflation Easter to its lowest level in three

years in the month of October. -- East. It is policy makers some

further scope. Apart from inflation, the numbers to watch are the

industrial production and this access -- asset investments numbers,

which are forecast to come in at 9.4% and 25% respectively bus stop

they will be coming out any time now. If they do come out with these

kind of numbers, it will point to a recovery from its low as period of

growth since early 2009. -- from its lowest. Policy makers may have

done enough to kick-start the economy. If that is the case, they

did not expect any easing in monetary policy tool of the year's

end, because it will be are necessary as the economy is

There is still a bit? As we head into 2013, about the eurozone

crisis, and the so-called US fiscal cliff.

Good numbers from China is good news for the rest of us around the

world. Let's talk about the eurozone, and in particular Spain.

The club that had bailed out eurozone nations is about to get

beat, that is because officials from the EU and the IMF are on the

ground in Cyprus, for talks on a financial rescue deal for the

island. They applied for a bail out in June, after its biggest lenders

could not meet new capital requirements because of the huge

losses they had. Cyprus has also been unable to borrow for

international markets for more than a year. Before we talk about a bail

out, talk to us about the Cypriot economy. In the last year, its head

has been held above water by Russian money. But it is a mess.

Increasing unemployment, the service sector is taking a

battering, and Cypriot banks are highly approach -- exposed to greet

sovereign debt. They first -- they need a capital injection. They

cannot turn to the government because they had been on a spending

path for too long. That is why they had turned into the EU. It is a

similar story to the likes of Spain. The bank problem, that is the

result wise bus -- Cyprus needs a bail out. Any bail out from the EU

comes with very strict measures and conditions. If the government

accepts the money, they have to follow those. But the Cypriot

government and do not want to take on the terms. I guess the question

is, I can beggars be choosers? have been dragging their feet since

June. The main reason for that, the political reasons for avoiding a

bail out are strong. They do not have a parliamentary majority.

There are elections in February, the government is widely tipped to

lose. The incentive to avoid a bail out and pass it on to the

opposition are strong. But they could be forced to sign a now,

because fiscal revenues are very low. If they cannot ride it out

until February, they will be forced to. The people on the ground, we

are seeing austerity measures, can we expect similar pictures that we

have seen in Greece, industrial action, strikes? Definitely. In the

short-term, the events that have happened in Greece will be merit in

Cyprus. You have got strong unions, some of them up quite militant. In

the medium to long-term, Cyprus is a bit different. It has come across

natural gas deposits. We estimate it will be monetise between 2018,

and 2019. That is the big advantage that Cyprus has over Greece. In the

long-term, Cyprus has a natural gas bounty.