29/08/2014 World Business Report

Those are the latest headlines from BBC World News. Now for the latest

financial news with Alice Baxter and World Business Report. Malaysia

Airlines set to announce a major shake`up as it struggles for

survival. As many as 6000 jobs could go. Plus ` QE or not QE? The spectre

of deflation stalks the Eurozone ` will it mean more stimulus measures

from the European Central Bank? Welcome to World Business Report.

I'm Alice Baxter. In a moment, a raft of disappointing data from

Japan casts doubt on the country's economic recovery. But first: We are

awaiting news this Friday of a major shake`up at Malaysia Airlines. The

carrier has been struggling financially for some time amid

fierce competition. But this year of course it has been hit by twin

disasters ` the disappearance of flight MH370 over the Indian Ocean,

and the shooting down of flight MH17 over Ukraine. Losses are mounting,

and the company has warned of more to come. Since the second tragedy

bookings have plunged by a third, pushing the company to the brink of

collapse. So what are we expecting it to do? Malaysia Airlines employs

almost 20,000 staff. At least a quarter of those, as many as 6000,

could lose their jobs. Some international routes could be

abandoned, and new management brought in. Ashleigh Nghiem reports

from Singapore. Prayers for the victims of the two extraordinary

aviation disasters that happened to one airline. Like his company,

Malaysia Airlines Chief Executive Ahmad Jauhari Yahya is under

enormous pressure. The losses announced this week underline the

challenge the airline must meet. Mr Yahya says after MH370 disappeared,

the airline tried to rebuild but tragically, just as we were

beginning to see signs of recovery in all regions, we were dealt a blow

with MH17. The full financial impact of the tragedies will be seen in the

next set of results. They will need some fresh energy to come in and to

make some very tough decisions that will probably be unpopular at a

political level but they are things they will need to do in order for

the airline to survive. That serious work is now the task of the state

investment fund, Khazanah, which plans to take ownership of the

company and implement a radical restructure. For staff, it is an

anxious wait. TRANSLATION: I am anxious but I hope for success. The

other carrier has lost two passenger planes in the space of less than six

months. For the airline, fixing the finances is just beginning. The

restructure will only go some way towards gaining the confidence of

passengers. Now the queues at this check`in counter aren't exactly

long. And some planes are flying with rows of empty seats. But the

passengers aren't the only ones who are spooked. Nearly 200 cabin crew

have resigned in the past six months, much more than normal

turnover. So the real challenge for Malaysia Airlines and its owners

will be to get people flying again. From Malaysia to Europe now, and

growing concerns about the state of the region's economy. Later today we

get inflation data for the 18 countries that use the euro

currency. It is expected to show the area slipping further towards

deflation, or falling prices. That can lead to the sort of stagnation

Japan experienced for more than a decade, as people put off buying

things because they got cheaper every month. Let's take a quick look

at the numbers. The European Central Bank's target for healthy inflation

is around 2% a year. It sees anything below 1% as the danger

zone. In July the annual rate dropped to just 0.4%. Figures for

August could show a further fall, to 0.3%. That would put pressure on the

ECB to do more to stimulate the economy when it meets next week.

Christian Schulz of Berenberg Bank is here. We were just talking

through some of the numbers. What are you expecting to come out later

today? Will we see the eurozone slipping further into this danger

zone? Whether it does this time or maybe a month later doesn't really

matter. Today, actually, the risk or chance is that the inflation figure

might be slightly as or higher, if you like, than what markets expect.

We have already had German inflation yesterday that was stable, with some

slight tendency of actually inching up a little bit on temporary

factors. The Spanish inflation declined less than expected. So

there is a chance that the days are today may not be as headline making

or bad as expected. What if it doesn't this time, the crisis in the

Ukraine, the slowdown in the European economy, I think will

provoke further declines in inflation `` data. So we might inch

further towards deflation. What would you say the underlying factors

are, driving this downward movement we are seeing in terms of inflation,

across the eurozone? Well I think one important thing to note is that

this is different to 2012, when we were at the heyday of the eurozone

crisis. We had bond market pensions, the risk that countries would have

to default, leave the eurozone. And particularly countries like Spain,

Portugal, Greece, Ireland, which were in crisis. They were the ones

driving the economic decline. This time it is entirely different set

up. This time it is Germany, the core of the eurozone, which has

slowed significantly. So this has nothing to do with the good old Euro

crisis. It comes from abroad, it comes from Ukraine. It hits the

country most exposed to Russia and Ukraine, and that is Germany via

trade, energy links. Confidence is plunging. So the chorus affected

this time, which makes it easier, actually, for the ECB to stimulate

the economy, because it was the Germans who were so far against the

ECB doing more. So what happens next? What will be at ECB decide

when they meet on September four for their next policy meeting? Today's

figure really matters. If it is worse than expected it is possible

ECB will take immediate action. Maybe not outright QE like the

Americans did, but a smaller programme might be announced next

week. If the figures today do not disappoint or are better than

expected then they have a bit more time left for discussions. But there

will be all sorts of warnings next week about the ECB doing more

signalling to market that they are ready to fight this. OK, so we are

still in that wait and see mode. All eyes on the ECB. We mentioned

Japan's battle to escape the spiral of deflation. Some disappointing

news this morning on that economy. Rico Hizon is following this story

for us in Singapore. What do you have on this? Well, a lot of numbers

which came out from Japan today, and mostly they are disappointing

economic numbers. If household spending `` you have household

spending falling by almost 6%. Inflation is still well below that

2% inflation target of the government at 1.3%. Household

spending fell as the higher sales tax, which was raised on April the

1st from five to 8%, and the bad weather conditions, kept consumers

at home instead of going out to shop. As for factory output, week

exports left companies with a huge pile of infantry, forcing them

continue cutting back on production `` inventories. Overall the vital

signs remain weak for the Japanese economy, signalling continuing

weakness in the world's third`largest economy. And extra

stimulus spending is recommended to counter the effect of the tax hikes.

They want the government to push ahead with structural reforms to

help industries regain their competitiveness and counter the

effect of the rapid ageing and shrinking of the population. Not

great news coming out of Japan. Thank you for keeping us across

those numbers. In other news: Google says it is developing airborne

drones capable of flying on their own and delivering everything from

candy to medicine. The so called "Project Wing" is the latest move by

the web giant to expand its reach into the real world, with the likes

of self`driving cars and solar`powered balloons. Rival Amazon

announced its own plans last year for a delivery drone service called

"Prime Air." Europe's Energy Commissioner is in Moscow this

Friday for talks over securing gas supplies this winter. About a third

of Europe's gas for industry and domestic heating comes from Russia,

some of it via Ukraine. On Wednesday Ukraine warned Europe that Russia

could cut off gas to the continent this winter, but Moscow said the

supplies would continue regardless of the political situation. Budget

airline Germanwings has cancelled 116 flights planned for Friday

morning, equivalent to 70% of its flights, because of a six`hour

strike by pilots. They are in dispute with parent company

Lufthansa over plans to end an early retirement scheme. About 15,000

passengers, many of whom are travelling at the end of the summer

holiday period, will be affected. Asian shares slumped in early

trading on Friday, after flaring Ukraine tensions ruined investors'

appetite for risk and bolstered the safe`haven yen.

appetite for risk and bolstered the safe`haven We will of course keep a

close eye on those throughout the session, and if you would like to

get in touch with me or any of the team I am on Twitter. We always love

to hear from you. Stay with us at UBC World News. I will be back in

just a moment. `` BBC World News.