Economist: What is this 'rational collapse' in Turkey?
Arda Tunca, Economist from Demos Consulting, joins CNBC's Dan Murphy on Access Middle East, to discuss Turkey's "rational collapse", the effects of one-man rule, and the growing uncertainty around the nation's economic direction.
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CNBC
5 hours ago
- CNBC
The global economy faces many headwinds, but the aviation industry is expected to defy them
The global economy may be facing an uncertain 2025 in light of trade tensions and geopolitical conflicts, but there's a bright spot that investors can take solace in: aviation. The profitability of the aviation industry is expected to improve in 2025, despite global gross domestic product growth being forecast to drop to 2.5% in 2025 from 3.3% in 2024, according to the International Air Transport Association. In a report released on Monday, the IATA said revenue, operating profits and net profits of the industry are expected to increase from 2024, although some of those were lower than projections made in December. For example, net profits for the industry are projected at $36 billion for 2025, up from the $32.4 billion earned in 2024, but slightly lower than the December projection of $36.6 billion. The aviation industry's net profit margin is also forecast to rise to 3.7% in 2025, from 3.4% the previous year. Total revenues are projected to hit a record high of $979 billion, 1.3% higher than the previous year, but down from the $1 trillion in its last forecast. The IATA attributed the better results mainly to two factors: lower jet fuel costs and greater efficiency. It expects passenger load factors will reach an all-time high in 2025 with a full-year average of 84%, "as fleet expansion and modernization remains challenging amid supply chain failures in the aerospace sector." PLF shows how efficiently an airline is filling its seats. Jet fuel costs are expected to average $86 per barrel in 2025, down from $99 in 2024, the IATA noted, saying it will translate into a total fuel bill of $236 billion, $25 billion lower than the $261 billion incurred in 2024. "Recent financial data show minimal fuel hedging activity over the past year, indicating that airlines will generally benefit from the reduced fuel cost. It is not expected that fuel will be impacted by trade tensions," IATA said. Airline CEOs told CNBC that airlines are holding up despite the uncertainty. Air India CEO Campbell Wilson told CNBC's Monica Pitrelli at the World Air Transport Summit over the weekend that 2025 has been "a year of surprises" for the airline, "whether it's politics, tariffs, geopolitics, [or] closer to home, some conflict issues."India and Pakistan recently closed their airspace to each other's aircraft after military strikes carried out by both sides in May. Pakistan planes are banned from Indian airspace till June 23, and Indian planes are barred from Pakistan till June 24. "Uncertainty is not helpful for business, but the underlying fundamentals of this market ... and the upside we see ahead of Air India is driving us forward, because we think there's massive opportunity to be realized," Wilson added. He said India is the third-largest air travel market in the world, and estimated that it's growing at an annual growth rate of 8% to 10%. "So if Indians start traveling... at the intensity of China, it's going to absolutely explode in volume internationally," he said. Adrian Neuhauser, president and CEO of Colombian flag carrier Avianca, said in an interview Sunday "When the world sneezes in any way ... Airlines just get sick very quickly."However, he said, Avianca's passenger load factors are still holding up and revenue has improved. "So the concern is there, but as of today, we're still seeing the numbers be there." North America is expected to generate the highest absolute profit among all regions in 2025, and the Asia-Pacific region is set to see the largest demand growth in 2025, with revenue per passenger kilometer projected to grow 9% year on year, the IATA said. Revenue passenger kilometers, or RPK, is a measure of the volume of passengers carried by an airline. The metric is used to assess airline performance and passenger demand. The IATA said that "if an airline sees a consistent increase in RPKs on a particular route over several months, this might prompt the carrier to increase flight frequency or deploy larger aircraft to meet growing demand — potentially boosting revenue and market share." It attributed strong passenger demand in the Asia-Pacific to the relaxation of visa requirements in several Asian countries, especially China, Vietnam, Malaysia and IATA did note, however, that the economic landscape poses some challenges, with the GDP forecast for the region, particularly China, having been lowered.
CNBC
11 hours ago
- CNBC
Oil giant BP seeks buyers for one of its crown jewels as it looks to stave off a takeover
Britain's BP appears to be attracting a number of possible buyers for its Castrol lubricants business as the struggling oil giant seeks to fend off a prospective takeover . Energy companies including India's Reliance Industries and Saudi Arabia's oil behemoth Aramco , as well as private equity firms Apollo Global Management and Lone Star Funds, have all been touted as suitors for BP's Castrol unit, according to Bloomberg , citing people familiar with the matter. It's thought the sale of Castrol could fetch between $8 billion to $10 billion. BP, which launched a strategic review of its Castrol unit in late February, declined to comment on the speculation. The reports come as BP remains firmly in the spotlight as a prime takeover target. The London-listed oil company recently sought to restore investor confidence by launching a fundamental strategic reset. BP's new direction included a green strategy U-turn and the divestment of $20 billion of assets by the end of 2027. Analysts described BP's Castrol unit as one of the "crown jewels" of its portfolio, noting that reports of interested buyers should be viewed positively as the firm's management look to deliver on the new strategy. Read more Oil giant BP is seen as a prime takeover target. Is a blockbuster mega-merger in the cards? BP to slash renewable spending and double down on fossil fuels BP profit falls sharply but CEO says oil major 'off to a great start' in strategy reset Maurizio Carulli, energy and materials analyst at wealth manager Quilter Cheviot, told CNBC that it remains unclear whether the divestment of Castrol would stave off a potential takeover, however. He cited three considerations an industrial buyer might look at. Firstly, Carulli said the level of BP's debt would decrease with the sale of its high-performance lubricants business, potentially making the firm more attractive to a prospective buyer. Ongoing macroeconomic uncertainty could also make it difficult for BP to sell Castrol at an attractive valuation, he added. This could subsequently have a negative effect on BP's valuation, making it a cheaper proposition for any possible suitor. Thirdly, Carulli cited the level of cost and revenues that another energy firm could extract from the purchase, adding that the sale of Castrol is unlikely to substantially affect BP given that it is a small part of its overall business. 'Point of maximum weakness' BP, which reported weaker-than-expected first-quarter profit, has faced renewed pressure from activist investors in recent months. In late April, for instance, U.S. hedge fund Elliott Management went public with a stake of more than 5% in the company. Elliott was first reported to have assumed a position in BP back in February, driving a share price rally amid expectations that its involvement could pressure the firm to shift gears back toward its oil and gas businesses. BP CEO Murray Auchincloss told CNBC's " Squawk Box Europe " on April 29 that the company was "off to a great start" in delivering on its strategic reset. He cited the firm's "highest upstream operating efficiency in history" and six recent oil and gas exploration discoveries. Lydia Rainforth, head of European energy, equity research at Barclays, said BP's future appears to be "really bright" — if the company can get through the next six months. "The sum of the parts is, I think, much greater than where the current share price is, but if I think about when that point of maximum weakness is for BP, it is over the next six months," Rainforth told CNBC's Steve Sedgwick on May 22. "As I get towards the end of the year, hopefully we will see some divestments taking down debt. Things like, they've talked about selling their lubricants business — that could raise $12 to $15 billion," she added. On the right track? Shares of BP, which have underperformed industry peers, are more than 20% lower over the last 12 months. The ongoing weakness has stoked speculation of a prospective tie-up with domestic rival Shell . U.S. oil giants Exxon Mobil and Chevron have also been touted as possible suitors. Shell has declined to comment on the speculation, while spokespersons for Exxon Mobil and Chevron have not previously responded to a request for comment. Russ Mould, investment director at AJ Bell, said shareholders are looking for BP to provide evidence that it can generate more cash to ensure net debt doesn't keep rising and buybacks and dividends can continue at current levels at the very least. Plans for $3 billion to $4 billion in asset sales and lower capital investment in 2025 are clearly part of BP's push to bring down net debt to between $14 billion and $18 billion by the end of 2027, Mould said. "Delivery here, perhaps via a successful disposal of Castrol, would help convince shareholders that BP is on the right track," Mould told CNBC via email. "But too many more quarters of weak cash flow and lower share buybacks may not help management's cause and lead to further engagement by the usually indefatigable Elliott."
Yahoo
14 hours ago
- Yahoo
Forget tacos, can Trump have his tariff cake and eat it too? Wall Street's biggest bull thinks so
If President Donald Trump's tariffs settle around 10%, that could still allow the Federal Reserve to cut rates later this year while they generate revenue that helps with the massive budget deficit, according to Wells Fargo's Christopher Harvey, who thinks a levy at that level could be split between importers, corporations, and consumers. There has been much talk lately about President Donald Trump and tacos, but another food entering the tariff conversation could be cake. While his 'Liberation Day' announcement roiled markets, he has largely pulled back from his most aggressive stance since then, though on Friday night he said he will double steel tariffs to 50%. The overall direction of travel remains positive for Chris Harvey, Wells Fargo Securities' head of equity strategy, whose S&P 500 price target of 7,007 makes him Wall Street's biggest bull. 'The Trump administration does want to move things forward,' he told CNBC on Friday, hours before the steel announcement. 'They appear to want to push the ball forward, and I think that's a positive. We're now at the point where I think we're going to start to hear some real tangible results over the next couple of weeks.' Harvey added that he thinks stocks could jump by double digits in the second half of the year. His S&P 500 forecast implies an 18.5% surge from Friday's close. A key piece to his thesis is Fed Governor Christopher Waller's recent statement that if tariffs end up around 10%, then the central bank could be in a position to cut rates in the second half of the year. Tariffs are generally seen as inflationary and could force the Fed to hold off on monetary easing. But if consumers treat them as one-off price hikes and keep their longer-term inflation expectations anchored, then there could still be leeway to lower rates. For now, the effective tariff rate remains above 10%, though estimates differ. The Budget Lab at Yale put it at 17.8% last month, while Fitch put it at 13%. Harvey expects tariffs to settle in the 10%-12% range and said that even as clients express anxiety about all the uncertainty, they are still comfortable with the economy's fundamentals. That prompted CNBC's Scott Wapner to ask if Trump can have his cake and eat it too, namely, moving ahead with his tariff agenda and getting the Fed rate cuts that he's been demanding. 'I think so,' Harvey replied. 'So the reason why we said 10% is with 10% we think a third will be eaten by the importer, a third eaten by the corporation, and a third will be eaten by the consumer. That's not a big impact.' At the same time, he added that the tariffs will generate revenue that can help with the federal budget, which has seen massive deficits in recent years. Fears that deficits will worsen under Trump's proposed budget working its way through Congress have led to volatility in borrowing costs as bond market jitters have jolted Treasury yields. Meanwhile, as trade talks continue, it's more important for the Trump administration to reach deals with India, Japan and the European Union, Harvey said, adding that China is less critical since the U.S. is in the process of disintermediation from it anyway. But if tariff uncertainty stretches into June and July, then companies may start resizing their payrolls and then 'things start to fall apart,' he warned. That's why it's necessary to make progress on trade and reach deals with big economies like India, Japan and the EU, Harvey said. That way, markets can focus on next year, rather near-term tariff impacts. 'Then you can start to extrapolate out,' he explained. 'Then the market starts looking through things. They start looking through any sort of economic slowdown or weakness, and then we start looking to '26 not at '25.' This story was originally featured on
