US Grounds All Boeing 737 MAX Models, Embassy Group to Launch India's First REIT, UK Votes to Delay Brexit, Qualcomm Wins Patent Infringement Case Against Apple et al.

US grounds all Boeing 737 MAX models. Boeing at risk of losing orders worth $600bn. China’s industrial output drops to 17-year low. UK votes 413-202 to delay Brexit. Embassy Group to launch REIT to raise INR4,750cr. Tesla may come to India soon. Apple to pay Qualcomm c. $31m for patent infringement. Spotify files antitrust complaint against Apple.

 

Moving on to the top Business stories of the week. 

 

BOEING

US grounds all Boeing 737 MAX models. Boeing at risk of losing orders worth $600bn; plans to release upgraded software for its 737 MAX in the next 10 days. 737 Max revamp could cost Boeing over $2.5bn.

Last Man Down: President Trump has announced that the Federal Aviation Administration would ground Boeing’s fleet of 737 MAX airliners after new data indicated that last weekend’s deadly crash in Ethiopia resembled the Lion Air crash in October last year.

All Right: Boeing said it maintained full confidence in the MAX plane but decided to recommend a temporary grounding to reassure the flying public.

Since the crash on Sunday, regulators in dozens of countries have suspended flights by the single-aisle airliners, including the UK, Australia, and Canada. The US was the last significant aviation market still allowing the 737 MAX to operate.

Buyers Beware: Boeing’s more than $600bn worth orders for its 737 MAX models hang in balance as customers threaten to reconsider their purchases in light of the recent Ethiopian Airlines crash.

These Include:

 

  • VietJet Aviation, which doubled its order to about $25bn only last month
  • Kenya Airways, which is reviewing proposals to buy the Max and could switch to Airbus A320
  • Utair Aviation, which is seeking guarantees before taking delivery of the first of 30 planes
  • Lion Air, which decided to drop a $22bn order for the 737 in favor of the Airbus jet

 

Damage Control: Boeing plans to release upgraded software for its 737 MAX within the next 10 days. 
 

This is Why: Boeing has been working on a software upgrade for an anti-stall system and pilot displays on 737 MAX aircrafts in the wake of the deadly Lion Air crash in Indonesia in October. Read more on the matter here.
 

Costing Dearly: The software fixes on Boeing 737 MAX models is likely to cost the Chicago-based aircraft over $2.5bn as it redesigns a computerised flight-control system on hundreds of jets. 
 

Boeing could end up spending $500m on software rejig alone. Another $2bn could go towards delivery delays and reimbursements to airlines for flight disruptions.

 

GLOBAL

China’s industrial output drops to 17-year low. Unemployment rate also on the rise. UK votes 413-202 to delay Brexit.

Long Time Coming: China’s industrial output growth fell to a 17-year low in the first two months of the year. The industrial output rose 5.3% in January-February vs 5.7% in December, lower than the expected 5.5% growth.

Silver Lining: Growth in fixed-asset investment, a major growth driver in the past, increased to 6.1% in the first two months of this year, up marginally from 5.9% in 2018.

Retail sales were also marginally better than expected, with the headline figure rising 8.2% in January-February from a year earlier.

More Help: In addition to a fiscal stimulus such as higher local government spending and tax cuts, more monetary policy support is also expected this year.

No Jobs: China’s unemployment rate jumped to 5.3% in February from 4.9% in December on the back of low industrial output and slow retail sales expansion.

Perfect Timing: The jump in joblessness comes just days after Premier Li Keqiang announced an employment first strategy as a key part of the economic policy for the coming year.

Side Effect: The increase of the unemployment rate shows rising pressure from the US-China trade war on China’s job stability. 

Fun Fact: China combines January and February activity data in an attempt to smooth distortions created by the long Lunar New Year holidays early each year, but some analysts say a clearer picture of the economy’s health may not emerge until first-quarter data is released in April.

  

Wait: UK lawmakers have voted 413-202 in favour of delaying the Brexit process, acknowledging that more time is needed to break the deadlock over Britain’s departure from the European Union (EU).

All For: This allows Prime Minister Theresa May to approach the EU for an extension to Article 50, the legal process under which Britain is leaving the EU.
 

May had been forced to offer MPs a vote on delaying Brexit after they rejected her withdrawal agreement by a large margin, for a second time, and then voted to reject a no-deal Brexit.
 

Ask Again: A request for an extension of Article 50 will require the unanimous agreement of all 27 EU Member States.
 

Opinion: With Brexit now on hold, there’s only one option left - compromise.

 

COMPANIES


Brookfield to acquire RIL’s East-West pipeline. Tesla may come to India soon. OYO acquires Innov8 in a INR220cr deal. Google launches YouTube Music, YouTube Music Premium, and YouTube Premium in India.

 

Costly Deal: Canada-based Brookfield Asset Management’s India Infrastructure Trust, an InvIT is set to acquire RIL’s East-West Pipeline (EWPL) in an INR13,000cr deal. Brookfield has filed a preliminary placement memorandum, through which its InvIT will invest INR13,000cr to acquire EWPL.

As part of the transaction, the InvIT will acquire 100% equity in Pipeline Infrastructure Private Ltd (PIPL), which currently owns and operates the pipeline.

RIL will get the right to acquire equity shares of PIPL, held by the InvIT at an equity value of INR50cr, at the end of 20 years.

 

Tesla in India: Replying to a query on Twitter, Elon Musk replied that the company would love to be in India this year. If not, definitely next. 
 

Interestingly, the comment comes months after he blamed restrictive policy for delaying the carmaker’s entry into the world’s fourth largest automobile market – India. 
 

The Deal: Hospitality chain OYO has acquired Gurugram-based coworking startup Innov8 in an all-cash deal worth about INR220cr.
 

Under OYO, Innov8 will be working towards creating a capacity of 10,000 seats across India.
 

Founded in 2015, Innov8 currently hosts over 350 companies as members and claims to have a 95% occupancy across all its 15 coworking spaces with combined seating of approximately 5,500.
 

Besides, OYO itself has also started two new co-working brands—PowerStation and WorkFlo, which will cater to a variety of start-ups and companies.

 

Another One: Google launched its YouTube Music, YouTube Music Premium, and YouTube Premium in India.

 

Following Suit: The news comes shortly after the launch of Spotify in India.

The ad-supported version of YouTube Music will be free, YouTube Music Premium will cost users INR99 per month, and YouTube Premium will cost INR129 per month. Subscription to YouTube Premium also unlocks features like the ability to play videos in the background while running other apps, offline downloads, access to YouTube Originals, and YouTube Music Premium.

Long Road: In India, the YouTube services will compete against other streaming platforms including Amazon Music, Apple Music, JioSaavn, Gaana and Spotify.

 

TECH

Apple to pay Qualcomm c. $31m for patent infringement. Spotify files antitrust complaint against Apple. Google is likely to be hit with a third EU antitrust fine next week. Softbank to start a new fund for early-stage investments.

 

No Escape: Following a two-week trial, a jury in federal court in San Diego determined that Apple had violated three Qualcomm patents in some iPhones.
 

What You Need to Know: Qualcomm had last year sued Apple alleging it had violated patents related to allowing phones to quickly connect to the internet after they're switched on; battery efficiency and graphics processing; and a traffic management function that allows apps to download data faster. Qualcomm asked the jury to award it unpaid patent royalties of up to $1.41 per iPhone that violated the patents.
 

Unfair: Spotify has filed an antitrust complaint in the EU against Apple

What’s the Case?: Spotify alleges that Apple in recent years has abused its control over which apps appear in its App Store with the aim of limiting competition with its streaming service Apple Music.

Spotify claims that Apple made it difficult for rival subscription services to market themselves to users without using Apple’s payment system, which generally takes a 30% cut of transactions.

Threats: The European company also said Apple at times rejected security updates of its app and threatened to kick it out of the App Store for allegedly anticompetitive reasons.

 

Not the First: Google is likely to be hit with a third EU antitrust fine next week related to its AdSense advertising service.
 

However, the sanction expected to be much smaller than previous fines.
 

Backstory: The European Commission had in 2016 opened a third case against the world’s most popular internet search engine by accusing Google of preventing third parties using its AdSense product from displaying search advertisements from Google’s competitors.
 

It said that Google, which at that time had held 80% of the European market for search advertising intermediation over the previous ten years, had kept its anti-competitive practices for a decade.

 

SoftBank: Is set to launch a new global investment fund for early-stage investments.


The fund, to be run by Seoul-based SoftBank Ventures Asia, will be worth $500m. SoftBank, South Korea’s National Pension Service as well as other companies and asset management firms will invest in the fund. Brookfield to acquire RIL’s East-West pipeline. Tesla may come to India soon.

 

INVESTMENTS

OYO invests INR1,400cr in India and South Asia businesses, launches millennial-focused new brand, Collection O. Embassy Group to launch REIT to raise INR4,750cr.

Hospitality firm OYO has committed over INR1,400cr for its India and South Asia businesses.
 

Need to Grow: The infusion would be used to facilitate expansion plans, improve customer experience and ensure increase in continued asset owner success.

yOung Ones: OYO also announced a new category called Collection O, which will focus on millennials and young travelers and will be added to its existing portfolio of budget and mid-segment hotels.

Going Desi: Global investment giant Blackstone and Bangalore-based real estate developer Embassy to launch India’s first real estate investment trust (REIT) next week to raise about INR4,750cr

The REIT, which includes Embassy Group properties, will offer as many as 158.6 million units at c. INR300 apiece.

Bonus: REITs offer a unique 'financial markets' avenue to gain exposure to real estate rather than requiring investors to buy physical assets. Click here to understand all about the new way to invest in real estate in India. 

 

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