eyes on the U.S.

The German Car, Europe's Last Stand Against U.S. Corporate Hegemony

In 2015, Apple earned more than the five most profitable companies in Europe combined.

Apple Store, Regent Street, London
Apple Store, Regent Street, London
Stefan Beutelsbacher

BERLIN — Save any last-minute delays, Apple will open an outlet next month on Orchard Road, Singapore's glittering shopping mile. It will be the California company's first foray into the Asian city-state, which earns as much in annual tax revenue, $38 billion, as Apple did on sales — in just the past six months.

Apple, as the number suggests, is in a league of its own as far as global corporations are concerned. It's the yardstick of all things commercial. It's also a reminder that Europe is lagging well behind, and not just where smartphones or technology are concerned. In 2015, Apple earned more than the five most profitable companies in Europe combined.

Europe's 300 largest companies, from a broad range of sectors, saw revenue drop by 4.6% between January and July. Profits are down even further: by a staggering 9.6%. U.S. companies, in contrast, fared much better. Revenue fell 3.5% with profits slipping just 0.4%, according to a study by the consultancy EY (formerly Ernst & Young), exclusively available to Die Welt.

"European companies are suffering due to the strong euro," says Mathieu Meyer, a member of EY's management board. The economic situation continues to be difficult despite the decision by banks to offer low-cost credit, a policy that was supposed to provide impetus. In addition, companies on both sides of the Atlantic suffered from a drop in raw material prices. Oil, for example, sold for just half of its 2014 value.

Europe's most successful companies had a turnover of approximately 3.25 trillion euros while posting profits of 272 billion euros. Their U.S. counterparts, in the meantime, had a turnover of 4.15 trillion euros and profits of 438 billion euros. That's a major difference.

But there is a silver lining for Europe: Germany. While profits nosedived everywhere else, they increased (by 7% on average) for the 44 German companies EY researched for its study. Germany's owes its success, according to EY, to the strength of its auto manufacturers. Daimler and BMW performed extremely well and even VW, despite its emissions scandal, ranked among the top five car makers. In Europe, VW actually ranks first with regards to turnover.

Near the Porsche factory in Stuttgart — Photo: Andrew Davidoff

Those positive numbers, however, also point toward a structural problem, according to EY. "Europe is suffering from the severe predominance of its "old economy,"" says Meyer. In fact, the region's top 300 companies are all situated within traditional sectors such as mechanical engineering, electronics or car manufacturing. By contrast, the share of comparative U.S. companies in these sectors is only one-third. Sectors that will gain in importance in the future, such as IT and service providers, are twice as strong in the U.S.

Gloom and boom

Europe is especially lagging when it comes to technology companies. Apple is still the most valuable brand ($178 billion), according to the market research company Interbrand. Google ($133 billion) is in second place, followed by a more classic company, Coca-Cola ($73 billion).

And what about Germany? Mercedes-Benz ranks among the top 10 companies, with BMW not too far off. VW, on the other hand, slipped after the emission scandal, and currently ranks 40th among global corporations, with an estimated value of $11.4 billion. Facebook, now worth $32.6 billion, grew the fastest, soaring 48%. Amazon also saw its value climb significantly, up 33% to $50.3 billion, according to Interbrand.

"The U.S. is leading the pack where IT is concerned," says EY expert Meyer. "Companies such as Apple, Google and Microsoft are highly profitable and drive digitalization forward, not just economically, but in all areas of life. The European companies barely have any influence as designers of the technologically-led change."

Google, Apple, Facebook and Amazon, or GAFA, as they're sometimes called, have so much collective power that some observers are beginning to issue warnings. Of particular concern is the growing political influence of GAFA lobbyists. Keep in mind that the market value of these four companies now amounts to more than $1.5 trillion — nearly equivalent to Russia's GDP.

Things could become even more difficult for Europe in the second half of this year, with rather gloomy forecasts for the global economy. The U.S. presidential election and the possibility of a victory by Donald Trump, an adversary of free trade and advocate of protectionism, isn't helping matters. Nor does Brexit and the growing influence of populists in Eastern Europe, France and Germany, all of which could dampen enthusiasm for investing not just in Europe's old economy, but also America's new economy.

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport


Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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