U.S. Economy Grew 0.6% in First Quarter

The U.S. Commerce Department said the economy grew at an annual rate of 0.6% in the first three months of the year, in an initial estimate of gross domestic product for the quarter. The growth matches that of 2007's final period. Rising inventories helped prevent a contraction in the first quarter.

Federal Reserve policy makers are set to wind up a two-day meeting this afternoon. They are widely expected to cut interest rates one more time amid concerns that the economy is slipping into a recession.

United, US Airways consider merger, reports say

United Airlines has restarted merger talks with US Airways, according to media reports. In 2001, the Justice Department rejected a proposed merger of the two carriers. Observers noted that both airlines made cuts while they operated under bankruptcy protection, which could make the deal easier to execute. United CEO Glenn Tilton recently told employees in a recorded message that he continues to support consolidation. He also noted that the airline has "a solid foundation to manage through the complexities of this current economic environment."

Continental says it will not merge with United

Continental Airlines said Sunday it plans to remain an independent carrier. The airline had conducted formal merger talks with United Airlines, which has been interested in merging with Continental for years. Continental CEO Larry Kellner said that although the airline had decided against merging with United at this time, it is open to discussing joining global alliances with other carriers. Meanwhile, United CEO Glenn Tilton, looking ahead to the possibility of other business deals, said his company "will pursue all options to ensure a strong, sustainable future for our airline and will not shy away from the tough choices necessary to create value for our shareholders and benefit our employees and customers."

Continental Airlines Decided Not to Merge

Continental Airlines said its board met earlier today and unanimously supported management's recommendation to not merge with another airline at this time.

Continental said its board very carefully considered all the risks and benefits of a merger and determined that the risks outweighed potential rewards compared to its prospects on a standalone basis.

Hang Up -- Congress Won't Allow In-Flight Cell Phone Calls

Some business travelers will be disappointed, but others prefer the current rules' peace and quiet.

The battle over in-flight cell phone use is heating up, but Congress is digging in its heels. The European Union recently announced it will allow cell phone use by air travelers, putting pressure on the Federal Aviation Administration (FAA) and the Federal Communications Commission (FCC) to lift their ban on cell phones calls. But even if the agencies do decide that the devices don't interfere with the plane's equipment after all, members of Congress have introduced legislation to make sure cell phones stay banned, though more to protect other travelers than for safety concerns.

"Now is not the time to consider making the airline passenger experience any worse, and using cell phones in-flight would do just that," says Jerry Costello (D-IL), chairman of the House Transportation and Infrastructure Subcommittee on Aviation. The bill, H.R. 5788, is called "Halting Airplane Noise to Give Us Peace Act" -- or HANG UP for short.

Foreign carriers, including British Midland Airways, Air France, Australia's Qantas Airways and the Irish airline Ryanair, are holding trials and making plans to allow cell phone service in the air. On March 20, Emirates became the first carrier in the world to allow passengers to use their cell phones during a flight.

Proponents say U.S. carriers will be at a competitive disadvantage if they do not offer the service. It would also increase productivity, allowing passengers to get work done while traveling, says Paul Domorski, CEO of EMS Technologies, which supplies equipment for the service to the airlines. The airlines, for their part, say that any decision should be made by the individual airline based on passenger needs and preferences, not by Congress. Providing the service could result in a new revenue source for the airlines.

Opponents contend the vast majority of business travelers recoil at the idea. Unlike on Amtrak, an airline passenger does not have the ability to change seats or go to a different car. Text messaging and Internet use is favored by most business travelers, and the House bill would not ban those services. Some U.S. carriers such as American, Southwest, Alaska, Virgin America and JetBlue are testing the use of Wi-Fi to connect laptops and other portable devices to the Internet.

United Airlines Nearing Decision on Potential Merger Partner

Less than two weeks after Delta Air Lines and Northwest Airlines unveiled their plan to merge, United Airlines parent UAL is nearing a decision about its potential merger partner. The deliberations come as talks are heating up among carriers worried about being marginalized if they don't combine in a deteriorating industry climate.

UAL, which already has had detailed merger talks for at least a month with US Airways Group, recently embarked on parallel discussions with Continental Airlines, according to people familiar with those situations. United wants to come to a decision about its preferred outcome in the next couple of weeks and a deal announcement by mid-May could be in the offing, said one person familiar with the matter.

Ford posts surprise 1Q profit, still expects full-year loss

DEARBORN, Mich. - Despite a surprise profit of $100 million for the first quarter, Ford Motor Co. said Thursday that it still expects to lose money this year as the U.S. auto market deteriorates.

But the company's stock surged nearly 12 percent as CEO Alan Mulally reiterated his promise that restructuring will return Ford to black ink for 2009.

The profit, Ford's first since the second quarter of last year, came even during a time when concerns about the U.S. economy kept many car buyers away from showrooms. Ford sales were off about 9 percent for the quarter, and the trend away from trucks and sport utility vehicles accelerated, hurting its bottom line.

Existing-Home Sales Resumed Decline in March

Existing-home sales fell during March after making a surprise climb in February. Home resales fell to a 4.93 million annual rate, a 2.0% decrease from February's unrevised 5.03 million annual pace, the National Association of Realtors said. Sales were down 19% from the year-earlier month. The median home price was $200,700 in March, up from $195,600 in February but down from $217,400 in March 2007.

Southwest Cuts Back Growth

Southwest is again slowing its planned growth by deferring at least half its aircraft deliveries for next year, but also is reconsidering the planned retirement of as many as 16 aircraft this year to take advantage of potential opportunities created by the troubles, capacity cutbacks and potential consolidation of other carriers, the airline revealed yesterday.

CEO Gary Kelly also disclosed during the airline’s first quarter earnings call that the carrier is considering multiple domestic and international code-share partnerships — perhaps as many as six.

Kelly made the comments as the airline reported another profitable quarter, this time $34 million on a 15.1% increase in revenue to $2.5 billion, even as other carriers are slipping back into the red. But that’s down from its $93 million profit in the first quarter of 2007, and Kelly said rising fuel prices are taking a toll on Southwest, too, even though it’s far better off than competitors because it has hedged 70% of its fuel this year at $51 per barrel.

Southwest said it has decided to reduce its fleet growth by taking delivery on no more than 14 737-700 aircraft in 2009, which would be half its previous plan. Southwest deferred those 14 deliveries to 2015, and also deferred 12 deliveries scheduled for 2010 to 2013 to 2015. It still plans to accept 29 new 737s this year.

The changes cut Southwest’s planned capacity growth next year to 2% to 3% if it decides not to retire any aircraft next year, and Kelly said the airline remains “open” to reducing it further. At one time Southwest planned 8% growth in 2009, but its most recent guidance had been 4% to 5%.

Southwest will be eliminating 20 more routes in August and recently reduced its capacity growth plans for this year to 4% to 5%, but that will fall to 3% to 4% if it retires 22 of its aircraft as originally planned. Kelly, however, said Southwest might decide to keep as many as 16 of them. Kelly indicated the number remaining in operation is more likely to be in the single digits, but said Southwest wants the flexibility to respond to market opportunities.

Regarding the code-sharing, Kelly said Southwest is considering and discussing multiple partnerships for domestic and international service. Kelly said it is possible Southwest ultimately could end up with separate code-share partners for service to Hawaii, Canada, Mexico, the Caribbean, Europe and Asia.

The international code share, as Southwest as previously stated, would not begin until 2009. But Kelly said he hopes to have a replacement for ATA code-share service to Hawaii and the New York area within months. ATA flew to LaGuardia.

“How many airlines we will ultimately code share with we don’t really know yet,” he said. He said the airline would only start with a few, but “by the time we get to the end of 2009, it would be my goal that we have all of these bases covered.”

Preston Is Picked to Run HUD

WASHINGTON -- President Bush nominated Steven Preston as secretary of the Department of Housing and Urban Development, a move likely to set off a skirmish between the White House and Congress as both grapple with responses to rising foreclosures and souring mortgages.

Mr. Preston, who joined the Bush administration as head of the Small Business Administration in 2006, has won high marks from Republicans and some Democrats as an effective administrator. But he has little housing experience, an issue Democrats seized upon Friday.

Before entering government, Mr. Preston, 47 years old, was chief financial officer at ServiceMaster Co., which owns home-service companies such as Terminix and Merry Maids. Prior to that, he was a senior vice president and treasurer of First Data Corp. and an investment banker at Lehman Brothers Holdings Inc.

"Steve Preston is an experienced manager who knows what to do," Mr. Bush said. "He knows how to tackle a problem, devise a solution and get results. That's exactly the kind of leadership I was looking for."

Mr. Preston must be confirmed by Senate Democrats before he can take over at HUD, an agency at the center of the Bush administration's response to the housing turmoil.

If confirmed, Mr. Preston would leave behind an agency that spent $1.2 billion in fiscal 2007, and take over one of the government's larger bureaucracies, which spent roughly 40 times as much that year. Roy A. Bernardi, the second-in-command at HUD, will serve as acting secretary until Mr. Preston is confirmed. He succeeds Alphonso Jackson, whose rocky tenure at HUD ended Friday.

California unemployment rate hits 6.2% in March

SACRAMENTO -- California's unemployment rate hit 6.2% in March, the highest level in almost four years, spurred by a continuing downturn in construction and financial activities.

The Employment Development Department reported Friday that 1.13 million people were out of work last month, marking the state's weakest economic performance since July 2004, when the jobless rate also stood at 6.2%.

Unemployment is up 1.2 percentage points from a year earlier, with 229,000 more Californians looking for work than in March 2007.

Since then, the job outlook has darkened as a largely housing-related slowdown has cut into the net worth of consumers, forcing them to cut back spending, economists said.

Gas prices push closer to $3.50 a gallon, oil hits $117

NEW YORK - Retail gas prices set new records Friday on their seemingly relentless march toward $3.50 a gallon, and diesel prices pushed further above $4 a gallon. Crude futures, meanwhile, surged to a new record of $117 a barrel.

The price of crude oil was pushed higher after a militant group in Nigeria said it had sabotaged a major oil pipeline operated by a Royal Dutch Shell PLC joint venture and promised further attacks on the country's petroleum industry.

A spokeswoman for Shell confirmed that the pipeline was leaking, and said the damage appeared to have been caused by explosives. Nigeria is a major supplier of oil to the U.S.

The escalation in crude prices threatened to further boost gasoline costs.

Airline executives will consider mergers

US Airways CEO Doug Parker said mergers would be good for airline employees, customers, and communities served by carriers. He did not refute reports that the airline has discussed a merger with United Airlines, and he has repeatedly said that US Airways will remain active in the merger front. Executives at Continental Airlines and United Airlines also said they will consider merging with other airlines. Meanwhile, American Airlines CEO Gerard Arpey said his carrier will remain competitive even if it does not merge with another airline.

Delta, Northwest Boards Approve Merger

Delta Air Lines and Northwest Airlines received approval from their boards to merge in a deal that would create the world's largest airline by traffic -- if the agreement can pass regulatory muster and overcome potentially serious employee resistance.

The merger would be all stock transaction in which Northwest shareholder will receive 1.25 shares in the new company for each Northwest share they own. This is a 17% premium to Northwest holders based on Monday's closing share prices.

If the deal goes ahead, the combined airline will keep the Delta name, be based at Delta's Atlanta headquarters and be run by Delta CEO Richard Anderson.

In Surprise, Retail Sales Edged Higher in March

U.S. retail sales took a surprising turn upward during March, a promising sign for the economy given the punishment consumers have absorbed. Retail sales increased by 0.2%, the Commerce Department said.

Retail sales increased by 0.2%, the Commerce Department said Monday. Sales went down a revised 0.4% in February. Sales that month were originally seen 0.6% lower.

Excluding sales of gasoline stations, which were helped by high energy prices, retail sales didn't budge in March.

Economists surveyed by Dow Jones Newswires estimated a 0.1% decrease in overall March retail sales. The actual, 0.2% increase could be seen as bright news, considering many analysts argue the U.S. has gone into recession, which is defined as two straight quarters of economic decline. The sales report is a key indicator of U.S. consumer spending. Consumer spending makes up about 70% of gross domestic product, the broad measure of economic activity in the U.S. The Commerce Department next week releases its first estimate of first-quarter GDP, which will confirm whether the economy fell and began what could turn into recession.

GDP rose in the fourth quarter of 2007, but the crawling 0.6% increase was far below the galloping 4.9% pace in the third quarter. The economy is fighting higher food prices, surging energy costs, job losses, and a credit crunch. Financial market turmoil has sent stock prices down and the housing slump lowered the values of homes.

The retail sector data Monday showed U.S. sales of automobiles and parts rose by 0.2% in March. February sales had fallen 1.2%. Sales of all other retailers excluding auto and parts dealers increased in March by 0.1%; economists expected a 0.1% increase. Ex-auto sales in February had gone 0.1% lower, revised from a previously estimated 0.2% decrease.

March gasoline station sales increased by 1.1%. Gas sales fell 0.5% in February. Stripping away sales at gas stations, demand at all other retailers was flat in March.

Excluding gas and auto sectors, demand at other retailers last month was flat. Sales decreased 1.6% at building material and garden supplies dealers; 0.3% at furniture store sales; 0.4% at electronics and appliance stores; 0.5% at clothing stores; 0.1% at health and personal care stores; and 0.6% at general merchandise stores. Sales increased 0.4% at food and beverage stores; 0.3% at eating and drinking places; 2.1% at mail order and Internet retailers; and 1.4% at sporting goods, hobby and book stores.

Business Inventories Rise

In a separate reading Monday, U.S. business inventories grew again in February, while demand plunged -- a sign companies are getting stuck with unsold goods on their shelves as the economy sours.

Inventories increased by 0.6% to a seasonally adjusted $1.468 trillion, the Commerce Department said Monday. Inventories in January rose a revised 0.9%; originally, January stocks were seen up 0.8%.

Wall Street was looking for stockpiles to move 0.6% higher during February.

Business sales decreased by 1.1% to $1.143 trillion in February. Sales rose 1.3% in January; originally, January sales were seen 1.5% higher. The 1.1% drop was the largest since a matching decline in January 2007.

The inventory-to-sales ratio increased to 1.28 in February from 1.26 in January, Commerce said. The gauge indicates how well firms are matching supply with demand. It measures how long in months a firm could sell all current inventory. The 1.28 ratio was the largest since 1.30 in February 2007.

Year over year, inventories grew by 5.2% since February 2007; sales climbed 6.7%.

February manufacturing sector stockpiles of goods increased 0.5% after rising 1.3% in January. U.S. wholesalers' inventories rose 1.1% after increasing 1.3% in January.

Retailers' stocks of goods increased by 0.2% after rising 0.3% in January. Auto dealer inventories climbed 0.4% after increasing in January at the same rate. Excluding the auto component, other retail stocks inched 0.1% higher in February after rising 0.2% in January. February inventories rose by 0.2% at food and beverage stores; 0.4% at building materials, garden equipment and supplies stores; and 0.2% at general merchandise stores. Inventories fell 0.3% at furniture outlets and 0.4% at clothing stores.

Blockbuster Targets Circuit City

Blockbuster said it offered in February to acquire Circuit City for at least $6 a share in cash, in a deal that would create an $18 billion company, but that the electronics retailer has failed to give the "due diligence necessary to allow Blockbuster to make a definitive proposal."

The entertainment firm said it is now making the proposal public to give shareholders "the opportunity to participate in determining the destiny of the company."

Delta, Northwest return to merger talks, reports say

Northwest Airlines and Delta Air Lines have returned to merger negotiations, according to media reports. Executives from the two carriers will meet this week, say news reports.

Skybus stops operating, citing slower economy, high fuel costs

Discounter Skybus Airlines shut down over the weekend, and a spokesman said the carrier plans to file for Chapter 11 bankruptcy protection on Monday. "Skybus struggled to overcome the combination of rising jet-fuel costs and a slowing economic environment," the company said in a statement. "These two issues proved insurmountable for a new carrier."

WaMu to Get $5 Billion Infusion

Private-equity firm TPG and other investors are near a deal to invest $5 billion in WaMu in return for stock. That could allow the U.S.'s largest thrift to meet all its capital requirements amid deep losses from the mortgage crisis, but would dilute current holders' stakes.

Local gas prices reach record highs

Gasoline prices jumped to record levels this week as supply problems at refineries ended a couple of weeks of small drops in prices, according to the Automobile Club of Southern California.

The average price of a gallon of regular gasoline in San Bernardino and Riverside counties reached $3.625 this week, up 3.6 cents from the previous Friday and the highest ever.

In Los Angeles County, the average price was even higher, at $3.639, also 3.6 cents higher than a week ago.

Orange County prices rose 4.5 cents last week to a record of $3.593 per gallon.

Jobs Slashed, Pointing to Recession

WASHINGTON - Employers buffeted by talk of recession slashed 80,000 jobs in March, the most in five years and the third straight month of losses.

At the same time, the national unemployment rate rose from 4.8 percent to 5.1 percent, the clearest signal yet that the economy might already be shrinking.

The new snapshot of the job market, released by the Labor Department Friday, underscored the damage that a trio of crises _in the housing, credit and financial sectors -- has inflicted on companies, jobseekers and the economy as a whole.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday that the country could be heading toward a recession, saying federal policymakers are "fighting against the wind" in combating it. Many other economists and the public believe the recession already has arrived.

ATA Airlines stops operating, files for bankruptcy protection

After 35 years in operation, ATA Airlines discontinued all flights and filed for bankruptcy Thursday, stranding thousands of travelers in the United States and Mexico, including some at Chicago's Midway Airport.

Once the nation's 10th-largest air carrier, Indianapolis-based ATA entered bankruptcy for the second time in just over three years. The company had more than 2,200 employees, and "virtually all" were told that their jobs were gone, company spokesman Michael Freitag said.

Bernanke to Tell Lawmakers Economic Contraction Possible in First Half

Fed Chairman Bernanke plans to tell a congressional committee that the U.S. economy is unlikely to grow "much, if at, all, over the first half of the 2008 and could even contract slightly," but he anticipates strengthening in second half. He cautions, though, that uncertainty is "quite high" and "risks remain to the downside."

Region Getting Huge Solar Panel Project

Governor Schwarzenegger and officials from Southern California Edison will announce plans for a five-year, $875 million solar rooftop project, an undertaking that's being called the largest rooftop solar installation project ever proposed by an utility company. Photovoltaic cells will be placed on 65 million square feet of commercial building roofs in Southern California (because their populations are growing so quickly, the Inland Empire/San Bernardino/Riverside counties are getting the solar power first), and according to the Los Angeles Times, the "cells will generate as much as 250 megawatts of electricity -- enough to power about 162,500 average homes, based on the utility's estimate that one megawatt would serve about 650 average homes."