American Airlines increases baggage fees and restricts mileage earnings for certain travel agency bookings

American Airlines has increased the fee for checking a bag for the first time in over five years and announced restrictions on which travel agency bookings qualify for frequent flyer miles. Passengers will now pay $35 to check a first bag for domestic flights if booked online in advance, or $40 at the airport, up from the previous $30. The cost for a second checked bag has risen to $45 from $40, whether purchased in advance or at the airport.

For flights between the U.S. and Canada, the Caribbean, or Mexico, the fee for the first checked bag will be $35, regardless of the booking method. The airline’s decision to raise bag fees aligns with a broader industry trend of seeking additional revenue streams amid declining airfare prices.

Elite frequent flyer members and select American Airlines credit card holders will still enjoy a complimentary checked bag. Additionally, the airline is adjusting fees for slightly overweight bags, reducing the penalty for bags up to three pounds over the 50-pound limit from $100 to $30.

Furthermore, American Airlines is implementing changes to limit the eligibility of tickets purchased through third-party vendors to earn AAdvantage frequent flyer miles. This strategy aims to drive traffic to the airline’s website. Basic economy ticket holders will only accrue frequent flyer miles if they make their purchase directly through the American Airlines website. The airline plans to release a list in April of preferred travel agencies whose bookings will remain eligible for rewards credits.

Israel’s Economy Faces Severe Contraction: Nearly 20% GDP Drop in Q4 2023 Amid Ongoing Gaza Conflict

Official data reveals that Israel’s gross domestic product (GDP) contracted by nearly 20% in the fourth quarter of 2023, a significantly larger decline than the anticipated 10%. This economic downturn is attributed to the ongoing conflict with Hamas in Gaza, now entering its fifth month. Analysts from Goldman Sachs noted that the contraction was primarily due to a decline in private sector consumption and a substantial reduction in investment, particularly in real estate. Despite a surge in public sector consumption and a positive net trade contribution, with a greater decline in imports compared to exports, the GDP contraction was profound.

The data showed a 26.9% quarter-on-quarter annualized decrease in private consumption and a nearly 68% plunge in fixed investment. Residential construction came to a halt due to a shortage of both Israeli and Palestinian workers, the latter facing restrictions since October 7. Before the restrictions, over 150,000 Palestinian workers from the occupied West Bank daily entered Israel for employment, mainly in construction and agriculture.

The impact of the conflict has led to a challenging economic situation, with analysts expressing concern about the extent of the hit from Hamas attacks and the war in Gaza. While a recovery is expected in the first quarter of the following year, the overall GDP growth for 2024 is anticipated to be one of the weakest on record.

Israel’s high-tech economy, heavily reliant on human resources, has been significantly affected by the mobilization of 300,000 military reservists for deployment in both Gaza and the northern border with Hezbollah in Lebanon. This mobilization was triggered by a terror attack on October 7 by the Palestinian militant group Hamas, resulting in about 1,200 casualties in Israel. The subsequent offensive against the Gaza Strip and relentless bombing campaign has led to over 28,000 casualties, according to Gaza’s Hamas-run health ministry.

Goldman Sachs Forecasts Accelerated Bank of England Rate Cuts in 2024 Amid Economic Indicators and Inflation Trends

The Bank of England is likely to hold interest rates higher for longer before slashing them sharply more than expected in the second half of the year, new forecasts from Goldman Sachs show.

In a research note released Tuesday, the Wall Street bank pushed back its expectations for rate cuts by one month, from May to June, citing several key inflation indicators “on the firmer side.”

But it said the central bank was then likely to cut rates more quickly than previously anticipated as inflation shows signs of cooling.

Goldman now sees five consecutive 25 basis point interest rate cuts this year, lowering rates from their current 5.25% to 4%. It then sees the Bank settling at a terminal rate of 3% in June 2025.

That compares to more moderate market expectations of three cuts by December 2024.

“We continue to think that the BoE will ultimately loosen policy significantly faster than the market expects,” the note said.

Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.

“The market is essentially embodying in the curve that we will reduce interest rates during the course of this year,” Bailey told U.K. lawmakers at the Treasury Select Committee.

“We are not making a prediction of when or by how much [we will cut rates],” he continued. “But I think you can tell from that, that profile of the forecast … that it’s not unreasonable for the market to think about.”

The Bank’s Chief Economist Huw Pill also said last week that the first rate cut is still “several” months away.

Cooling underway

Goldman analysts put their delay down to the persistent strength of the British labor market and continued wage growth. However, it noted than those pressures were likely to subside in the second half of the year, with lower inflation suggesting a “cooling is underway.”

U.K. inflation held steady at 4% year-on-year in January, though price pressures in the services industry remained hot. Meanwhile, the month-on-month headline consumer price index fell to -0.6% after recording a surprise uptick in December.

Goldman said there was a 25% chance the BOE would delay rate cuts beyond June if wage growth and services inflation remained sticky. However, it also said there was an equal chance of the Bank cutting rates by a more aggressive 50 basis points if the economy slips into a “proper” recession.

The U.K. economy slipped into a technical recession in the final quarter of last year, with gross domestic product shrinking 0.3%, preliminary figures showed Thursday.

Bailey said Tuesday, however, that the economy had already shown signs of an upturn.

“There was a lot of emphasis again on this point about the recession, and not as much emphasis on … the fact that there is a strong story, particularly on the labor market, actually also on household incomes,” he said.

Still, he noted that the Bank did not need to see inflation fall to its 2% target before it begins cutting rates.

U.K. government bond yields fell as Bailey spoke, suggesting increased investor expectations of rate cuts.

Walmart surpasses holiday expectations on Wall Street with a significant surge in e-commerce sales.

On Tuesday, Walmart reported a 6% increase in quarterly revenue, fueled by robust holiday season sales and a double-digit growth in global e-commerce sales. The retail giant also disclosed its acquisition of smart TV manufacturer Vizio for $2.3 billion, aiming to boost its advertising business. Despite a more cautious approach from customers, with fewer items in their baskets but more frequent shopping, Walmart noted continued sales strength post-holiday.

Key financial figures for the quarter exceeded Wall Street expectations:

  • Earnings per share: $1.80 adjusted (vs. $1.65 expected)
  • Revenue: $173.39 billion (vs. $170.71 billion expected)

Walmart’s net income for the period ending January 31 was $5.49 billion, or $2.03 per share, compared to $6.28 billion, or $2.32 per share, in the same period the previous year. The company expects consolidated net sales to rise 4-5% in the fiscal first quarter and adjusted earnings of $1.48 to $1.56 per share. For fiscal 2025, Walmart anticipates consolidated net sales to climb 3-4% and adjusted earnings of $6.70 to $7.12 per share.

Despite economic challenges, Walmart has performed well, leveraging its value proposition, expanding revenue streams through advertising and third-party marketplaces, and introducing services like Walmart+. Comparable sales for Walmart U.S. increased by 4%, while global e-commerce sales surged 23%, exceeding $100 billion. Advertising revenue also grew globally by 33% and 22% in the U.S. year over year.

Walmart’s recent acquisition of Vizio is seen as an opportunity to accelerate growth in its high-margin, fast-growing business segments. In the U.S., customer transactions rose by 4.3%, although average spending per customer slightly declined. Walmart, in contrast to other companies, has announced plans to open or expand more than 150 stores over the next five years and has increased store manager wages. The company’s stock closed at $170.36, showing an 8% increase year-to-date, outperforming the S&P 500.