Aer Lingus announced today that it carried a total of 782,000 passengers in March - - a dip of 6.3% from the same time last year.

The former State airline's long-haul passenger numbers declined by 20.7% to 69,000 last month while its short-haul passenger numbers also dropped by 4.7% to 713,000. The airline said its load factor - - or how many seats it manages to fill on each flight - - rose 0.3 points higher to 75.9% as capacity dipped by 11.3%. The short-haul load factor fell by 2.7 points to 75.9% and capacity increased by 1.2%. The long-haul load factor rose by 4.2 points to 75.7% with capacity dropping 29%.

Aer Lingus also said that total passengers in March on its new Washington Dulles-Madrid codeshare flight with United Airlines were 1,669. This represented a load factor or 89.3%.

In other airline news, British Airways and Spanish carrier Iberia signed a merger agreement on a deal that is expected to be completed by the end of this year.

The merger will create one of the world's largest airline groups, with 408 aircraft carrying more than 58 million passengers a year.

It is planned that the merger will result in a holding company called International Airlines Group while the two airlines will retain their current operations and continue to use their individual brands.

Annual savings of around €400m by the end of the fifth year after the merger's completion, are targeted.

US Financial Crisis Inquiry: In testimony before the Financial Crisis Inquiry Commission in Washington DC on Wednesday, former Federal Reserve chairman, Alan Greenspan, said the recent financial meltdown was possibly "the most severe in history." He conceded that regulators failed to grasp the severity of the crisis, but he maintained that his policies and predictions were correct most of the time.

"When you've been in government for 21 years, as I have been, the issue of retrospect and what you should have done is a really futile activity," Greenspan said. "I was right 70% of the time. But I was wrong 30% of the time, and there were an awful lot of mistakes in 21 years," he added.

Greenspan was chairman from 1987 to 2006 and the 84-year old has been criticised for not raising the Fed's benchmark interest rate to restrain the housing boom.

The Commission also heard testimony on Citigroup's disastrous $50bn losses on collateralized debt obligations (CDOs); the bank which is 27% owned by the US government, moved into the business of CDOs on the recommendation of outside consultants and failed to see the risks, said the bank’s former trading chief, Thomas Maheras. The consultants were hired by “our senior-most management” and in 2005 conducted a “careful study,” Maheras said in prepared testimony.

Irish Bank Write-offs: The Irish Independent reports today that 11 banks and building societies operating in Ireland have written down almost €40bn of bad loans over the past two years of property and economic crisis, according to figures compiled by the newspaper.

The figure represents 7.5% of a Bloxham Stockbrokers estimate of a total of €533bn of lending outstanding by the six state-guaranteed banks and the country's five main foreign-owned lenders. It also equates to almost a quarter of the size of Ireland's economic output last year.

Nationalised Anglo Irish Bank tops the list, having written down €15.1bn of bad loans over the past two years; Allied Irish Banks comes in second at €7.2bn, while Bank of Ireland has set aside €5.5bn over the same period to cover mounting impaired loans on its balance sheet.

The newspaper said healthy levels of operating profitability among most of the banks have helped them absorb a large portion of the bad loan losses, before their capital reserves are eaten into.

For example, AIB turned in over €5bn of operating profits over the past two years. It reported a net profit of €729m for 2008 but swung into a €2.4bn net loss last year.

Economic View; Greek problems coming to the fore…again:Goodbody chief economist, Dermot O’Leary, comments  -- "The ECB Governing Council meet on monetary policy for the euro-area today but the truth is that there is only one game in town at the moment for European policymakers – Greece. Ten-year Greek yields closed last night another 20bps higher, putting the yield at 7.2%, more than 4% higher than the German equivalent. At this cost, and with debt/GDP well over 100%, the interest burden is getting increasingly harder to bear. There are also reports that the banking system is seeking support in light of a flight of deposits in recent months.

Significantly, the Greek problems have not spilled to other countries with large budget deficits in the euro-area. Given the announcements in Ireland in relation to potential cost of recapitalising the banking system (a further €22bn), the performance of Irish bonds recently has been impressive (10-year yield at 4.5% this morning). Trichet’s press conference later today is likely to be dominated by questions around the Greek issue and it will be interesting to see how he skirts around the issue of his about-turn in relation to his support for the IMF to be involved in any rescue solution for Greece, something he was firmly against just a few weeks ago.

This change of heart was probably triggered by a combination of political pressure from other parts of the EU and the recognition of the gravity of the problem – Greece needs to raise €10bn by the end of May. If it doesn’t, a default may have serious implications for the rest of the euro-area. The most visible fallout will, of course, be for the euro. There was a further fall in the euro yesterday, but the decline has been modest thus far. Its movement in the coming weeks will be dominated by the events in Greece and there are likely to be many twists in the story yet."

The breadth of the euro area improvement is encouraging. German services activity nudged up to 54.9 from 54.7 (the growth/recession divide is 50). Readings a few points closer to 60 have tallied with around 2% GDP growth in the past. That is the direction in which the index is headed later this year. France's equivalent index rose to 53.8 from 53.0. Italy enjoyed a surge in services activity: its PMI printed 55.3, up more than three points from 52.0. But the most eye-catching jump was in the common currency zone's fourth biggest economy, Spain. Its PMI hit 51.3, up from 47.1, signalling the end of the service sector recession.

This all means that we can expect some decent GDP growth for Q1 as a whole, when the first estimate is released in five weeks time. The services readings followed healthy numbers from manufacturing. The composite PMI, which is a proxy for the economy overall, rose to 55.9 — the best since August 2007. The euro's weakness during the quarter was an unexpected boon to the region's"

The MSCI Asia Pacific declined 0.6% Thursday.

The Nikkei 225 dipped 1.10%; the Shanghai Composite slid 0.94%; Australia’s S&P/ASX 200 Index slipped 0.46% and India's Sensex Index declined 1.12%.

US Treasury Secretary Timothy Geithner arrived in China on Thursday from India for an unscheduled visit at a time of tensions about the fixed value of the yuan to the US dollar.

Geithner is due to have a meeting with Chinese Vice Premier Wang Qishan in Beijing today.

Geithner's predecessor Hank Paulson is also in Beijing.

Bilateral relations between China and the United States continue to remain strong despite the recent tensions on the yuan issue, the former US Treasury Secretary and Goldman Sachs chairman, said on Wednesday.

Paulson said the US is grateful for China's responsible behavior during the crisis and its contribution to the anchoring of the US and world economy.

"I frankly believe the relationship between the two countries is strong,"he told China Daily after a speech at Tsinghua University. "I see glasses half-full, not half-empty."

Paulson has a book to promote.

Asia benchmarks

Finfacts Reports

European Central Bank and Bank of England expected to keep rates on hold; Greek banks hit by capital outflows

US economic growth in 2010-11 is forecast to be moderate but sustainable; Optimism among CEOs of big companies is rising

Weak domestic demand to undermine Eurozone growth potential in next six months

Global economy expanded in March at fastest pace since July 2007 - - just before the onset of the international credit crunch

Gulf states face crippling shortages of energy, water and food unless resource management is overhauled now

Markets News Afternoon: The Irish economy contracted by 7.1% in 2009; Shares fall in Europe and US

Quinn Group issues statement on its financial position

Eurozone growth in the fourth quarter of 2009 revised down to zero; Industrial prices rose 0.1% in February

OECD says economic growth pick-up from late 2009 will ease slightly in US, Europe and Japan in first half of 2010

In Europe, the Dow Jones Stoxx 600 has fallen 1.09% Thursday.

The ISEQ has dipped 0.57% in Dublin.

AIB has fallen 2.94% after its double-digit rise on Wednesday; Bank of Ireland has gained 0.63%.

Aer Lingus dipped 1.95%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

Finfacts Gold Page

Bank of Ireland (Reduce, Closing Price €1.74); Agreement on Pension Review: Goodbody's Eamonn Hughes comments  - -" BOI yesterday announced that after reviewing its Defined Benefits Schemes, it has come to a shared solution with its members to cut its €1.6bn deficit. The proposals involve members agreeing to some changes to the scheme involving future pension increases and how future salary increases qualify for pension, which together will cut the deficit in half (c€800m). If this proposal is agreed, the bank commits to make additional cash contributions over the next six years above existing cash commitments to cut the other half of the deficit.

Presently, pension deficits are added back to reported equity in determining equity tier 1 capital. However, under Basel III, there wouldn’t be such an addback, so the move yesterday is an important step in addressing a key factor impacting capital ratios for the bank under the proposed new capital regime, which is anticipated to be implemented from 2012. However, we would note that last week’s capital targets for the domestic banks - €2.66bn in the case of BOI – reflects capital requirements under the existing regime and is likely to be the main focus for investors in the months ahead.

On the balance sheet, the agreement with the members will increase the reported NAV of the bank going forward since the bank is likely to take a one-off gain through the P&L from that arrangement. Closing of the other half of the deficit by the company will see an annual credit (possibly uneven) over the next 6 years to the pension deficit account. However, the transaction won’t impact the Equity Tier 1 NAV under the existing capital regime, from which our valuations are based, since the full deficit is already added back. In the P&L, in the 9 months to December, BOI booked €147m of pension costs, so this figure is closer to €200m on a full year basis. We understand the arrangement will reduce the pension costs by c20% p.a. initially.