Tuesday morning headlines

Air travel madness: Everybody said it was going to be bad this summer, but when they start comparing U.S. airline service with the Italian train system, you know you've got a problem. And they are. The number of flights canceled in the first 15 days of June was up 91 percent compared with the same period last year, and the number of flights that were more than 45 minutes late jumped 61 percent. In a nutshell, airlines are understaffed and over-scheduled. Add thunderstorms and labor shortages to the mix and things really get ugly. (The only saving grace is that many of the problems seem to be centered in the Northeast.) Carriers say they need to cram their planes in order to make a profit when oil prices are so high and ticket prices relatively low. From the WSJ:

The problem may get worse this weekend because crew shortages typically worsen at the end of the month. Some pilots called in to fly extra trips hit federal limits on monthly duty time and aren't available for trips. Thomas Adams was trying to get his family of four from Orange County, Calif., to Louisville, Ky., with a connection in Minneapolis last weekend when Northwest canceled their first flight. The family ended up driving about 90 miles to San Diego to catch flights on Delta Air Lines Inc. after a Northwest telephone operator told Mr. Adams that the flight crew was over its allowed flight hours and no other crew was available. A different operator told his wife that Northwest employees were calling in sick to protest a bonus for the chief executive after employees took pay cuts. "This is all very difficult on the traveler," Mr. Adams said.

Gas prices keep dropping: In L.A., the average gallon of self-serve regular was $3.153, down four pennies from a week earlier, according to the federal government's survey. As always with gasoline prices, explanations for what's going on have varied - and sometimes contradict each other. The LAT says the lower prices reflect improved gasoline output at U.S. refiners, but the WSJ says many of the nation's refineries have been idled by maintenance problems and that will keep prices high. (Chevron's El Segundo refinery will be closed for several weeks for maintenance.)

New worry - Chinese tires: The feds are asking a New Jersey importer to recall 450,000 radial tires for pickup trucks, sport utility vehicles and vans. Apparently, the Chinese manufacturer stopped including a safety feature that prevents the tires from separating (the same flaw that led to the recall of millions of Firestone tires in 2000). The defective tires are sold under the brand names Westlake, Compass, Telluride and YKS. It turns out that the importer waited more than two years to pass on their suspicions about the tires. From the NYT:

Lawrence N. Lavigne, a lawyer for Foreign Tire Sales, said the company did not alert the National Highway Traffic Safety Administration about the problems until June 11 because officials had no definitive proof of a manufacturing flaw until it was revealed by further testing in May. He said it made no sense to initiate a recall based on suspicions. Jeffrey B. Killino, a personal-injury lawyer from Philadelphia, said the company came forward only after it was named as a defendant in a lawsuit, filed in May, involving an accident in which two construction workers were killed and a third was severely injured when a van rolled over. The lawsuit contended that the accident was caused by tread separation in a Hangzhou Zhongce tire.

Buyout slowdown: Rising interest rates and tougher terms from investors are causing some pushback by the big private equity firms on several major transactions. Just look at yesterday's merger announcements - only seven deals, compared with 84 on Monday, June 4 (Monday is a big day for deal-making). "In the last couple of days, we've seen some cracks," Kingman Penniman, president of KDP Investment Advisors, a bond research firm, told the NYT. "Private equity people have for a long time now gotten funding at very low rates and very liberal terms. The market has known for a long time that this was ridiculous." One telltale sign: trading in Blackstone Group, the giant private equity firm that went public on Friday, has generated underwhelming interest. Yesterday, the stock was down.

New money for Hollywood: There's always enough dough for show biz, of course. A group led by venture capitalist Thomas Tull will be investing $1 billion in a portfolio of films co-produced by Warner Brothers Pictures. The new five-year agreement calls for Warner and Tull's group, called Legendary, to jointly finance up to 45 films. The group includes AIG Direct Investments, Banc of America Capital Investors and Falcon Investment Advisors. These out-of-town bucks are being relied on to finance increasingly expensive movies. From the NYT:

Many of those ventures have a mixed track record, and Hollywood has a long history of leaving outsiders with little to show for their investments but an empty wallet and a few star autographs. Last summer, the relationship between Legendary and Warner, owned by Time Warner, grew tense after two movies that they jointly financed, M. Night Shyamalan’s “Lady in the Water” and the animated “Ant Bully,” faltered at the box office. “You learn more about your partner when you go through a couple of movies that don’t work than you do when times are great,” said Mr. Tull in an interview. “This is a business that certainly has its challenges, but it’s one we believe in for the long term.”

Amgen's plea to Congress: The Thousand Oaks-based biotech company Inc. is urging lawmakers not to make "precipitous" changes to Medicare payments for anti-anemia drugs. In written testimony submitted this morning to the House Ways and Means Health Subcommittee, Amgen says significant changes in the payment systems aren't necessary because doctors and Medicare already have clamped down on use of the drugs. The company says that a significant change in reimbursement policy could result in a poorer quality of care leading to higher future health care costs. Recent studies have raised concerns about the aggressive use of the anti-anemia drugs. (AP)

Magazine deal announced: Jason Binn's Niche Media, Jerry Powers' Ocean Drive Media and Greenspun Media Group are forming a new magazine company with about 300 full-time employees and 16 titles, including LA Confidential, Gotham and Hamptons. To be called Niche Media, the combined business will have annual revenues of around $180 million. There's not much love lost between Binn and Powers, but the NY Post's Keith Kelly says the deal might have been motivated by a common enemy: Modern Luxury, another company that does those glossy, celebrity-friendly magazines, and which received an infusion of cash from Clarity Partners.

Legal showdown at ports: Trucking industry lawyers will try to block that sweeping program to eliminate polluting diesel trucks. Under the current deregulated system, more than 14,000 "owner-operator" drivers are granted access to marine terminals. The new plan would restrict access to truckers driving rigs owned and maintained by concessionaires with the most environmentally friendly fleets. Sources tell the Long Beach Press-Telegram that trucking interests will seek an injunction if and when the plan is adopted as proposed later this summer.

Trucking interests across the country are also concerned that the plan would be emulated in seaports elsewhere, leading to widespread driver unionization and increased business costs. However, it may be too late to completely rewrite the L.A.-L.B. plan at this point. Commissioners have set timetables - starting Jan. 1, 2008 - to begin addressing the toxic diesel smoke attributed to trucks entering and leaving the harbor. And elected leaders, under pressure from the community, are looking at the respective boards to deliver. Commissioners also need a clean-truck program before they move forward with a five-year backlog of terminal expansion projects held up because of community opposition to noise and pollution.

Lacter on radio: This morning's business chat with KPCC's Steve Julian covers the latest on the supermarket contract talks, the sale of OC sunglass maker Oakley, and preparations for this Friday's iPhone rollout.