Business Today

LOW-FARE EXPLORATION ...: AMR Corp.'s American Airlines, the world's largest carrier, is studying whether to follow rivals and create a low-fare unit, chief financial officer Jeffrey Campbell said. Delta Air Lines Inc. plans a discount carrier and UAL Corp.'s United Airlines, operating under bankruptcy protection, also may start one. American, which had a 2002 net loss of $3.5-billion, is struggling to permanently cut $4-billion from yearly operating costs. A low-fare unit is "something we would say we're studying and I wouldn't rule out," Campbell said after a speech at a Deutsche Bank Global Transportation Conference.

... LOW-FARE EXPANSION: Southwest Airlines Co., the largest low-fare carrier, may resume adding cities to its route network as early as next year. Southwest, the only major U.S. carrier to remain profitable since the Sept. 11, 2001, terrorist attacks, last added Norfolk, Va., to its system in October 2001. The Dallas airline, which serves 58 cities, didn't add any last year and doesn't plan any additions this year, the first two-year gap since 1987. "We can get back to a one or two, maybe three, per year pace once we have a little more certainty about our revenue stream, perhaps in '04 or '05," Chief Financial Officer Gary Kelly said at a Deutsche Bank Global Transportation Conference in Naples. "We don't lack for cities, we just need the economy to be more stable and robust." At least 140 cities sought Southwest service in 2002, because the airline's presence reduces average fares and increases air travel.

GREENSPAN REPEATS OBJECTIONS: Federal Reserve Chairman Alan Greenspan, delivering the Fed's twice-a-year economic outlook to the House Financial Services Committee, was acclaimed by Democrats on the committee for his tough comments before a Senate panel on Tuesday. He told committee members that any future tax cuts should be paid for either by raising other taxes or trimming spending so that the nation's deficit situation would not be made worse. He said allowing the expiration of budget rules that require any future tax cuts or spending increases to be paid for by tax hikes or spending cuts elsewhere would be a "very bad mistake. . . . Before any actions are taken with respect to appropriations for next year, I certainly trust that these rules will be re-established." The White House, meanwhile, was pushing ahead with efforts to build support in Congress. "If the economy needs a little umph ... why wait?" President Bush said, touting his plan with a group of small investors in Virginia.

CRUDE OIL STOCKS LOW: U.S. crude oil stocks have fallen to the lowest level since 1975 -- below what the industry considers essential for smooth operation. But government and industry officials say refiners have enough oil, and that if war in Iraq should disrupt the supply, the United States and other industrial countries are ready to draw on government reserves. Stocks of heating oil are one-third below comfortable levels and gasoline inventories remain lower than they should be, according to the government. The Energy Department said crude stocks fell by 4.5-million barrels last week to 269.8-million barrels, just below the minimum to assure efficient refinery operation. That is the lowest level since October 1975, when refiners used about 20 percent less oil than today.

MORIN ABANDONS PROJECT: A Tampa developer is pulling out of plans to build a 600,000-square-foot shopping center in Raleigh, N.C., after two years of seeking city approvals and a national retailer to locate on the site. Morin Development was one of four companies with land near the Outer Loop and Capital Boulevard and ambitions to build shopping centers. Competing developers signed major tenants while Morin awaited city approval.

VERIZON INFRASTRUCTURE INQUIRY: A telecommunications watchdog group asked the Securities and Exchange Commission to investigate the accounting of Verizon Communications Inc., saying the nation's largest phone company has not resolved questions about how it determines the costs of its infrastructure. Verizon blasted the complaint and said it was dredging up long-dead issues. The organization behind the complaint, TeleTruth, cited Federal Communications Commission staff audits in the 1990s that determined phone companies couldn't account for $5-billion in assets they claimed to have in their complex networks. The phone companies disputed the probe's methods. Since then, Verizon has not shown that it has dealt with the problems raised by those audits, said Daniel Berninger, a board member of TeleTruth, whose chairman, Bruce Kushnick, has often accused the Bells of accounting missteps.

VIDEO GAME RIGHTS AGREEMENT: Electronic Arts Inc., the largest U.S. maker of video games, paid $9-million to buy a stake in Swedish game developer Digital Illusions AB, securing the right to sell future titles. Electronic Arts purchased a 19 percent stake in Digital Illusions and received warrants to buy up to 34 percent of the company, Electronic Arts spokesman Jeff Brown said. Under the agreement, the Redwood City, Calif., company received the right to publish games developed by Digital Illusions for the next 10 years. Electronic Arts now publishes "Battlefield 1942," a computer game in which multiple players replicate battles from the Pacific theater of the World War II.

TREASURY AUCTION: Yields fell on 10-year Treasury notes to the lowest ever on the second day of the government's quarterly sale of longer-term securities. The Treasury sold $18-billion of the notes at a yield of 3.96 percent, down from 4.095 percent at the previous auction Nov. 6. The government received bids equal to 1.85 times the amount of the notes sold. That compares with a bid-cover ratio of 1.90 at the August auction, suggesting weaker demand.

Earnings

Viacom Inc.: The media conglomerate exceeded Wall Street's expectations for the quarter ended Dec. 31 thanks to strong growth in its cable network and TV businesses.

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