National Post from Toronto, Ontario, Canada • 29

Bearskin flies into airline turbulence. Page FP3 FINANCIAL POST FP1 TUESDAY, OCTOBER 9, 2001 THE MARKETS DOW JONES MARKETS CALM DESPITE STORM NASDAQ i I I DOW AND NASDAQ FLAT 0.65 1605.95 9067.94 'We had a muted response because we had priced most of the fallout in already' 1062.44 5032.7 Closed Closed Closed Closed -309-55 Closed Closed Closed TSE300 60 CDNX LONDON TOKYO HONGKONG EURO CANADIAN 9967-83 "A lot of banks will potentially have to make additions to their reserves or make announcements of defaulted loans. Clearly there is more negative than positive news out there," said Stephen Atkins, manager of Northern Trust Value Investors. Entertainment companies also fell. AOL Time Warner Inc.

lost to and theme-park owner Walt Disney Co. dropped US490 to See MARKETS on Page FP2 By Derek Df.Ci.of.t Stock markets in the United States remained calm even as the country rained bombs and missiles on Afghanistan for the second straight day. The Dow Jones industrial average fell 52 points, or 0.6, and closed at 9068. The Nasdaq composite index was basically unchanged. Canadian markets were closed for Thanksgiving.

USS0.06 OIL GOLD $1.00 TODAY'S BUSINESS DIANE FRANCIS We ve had 26 days to prepare for this so you're not seeing any knee-jerk reactions, said Art Hogan, chief market strategist at Jefferies Co. "We had a muted response because we had priced most of the fallout from the attacks in already." Kent Engelke, capital market strategist for Anderson and Strudwick a U.S. brokerage, said investors are simply waiting to find out whether the campaign Stocks decline to stage a rally PETER REDMAN NATIONAL POST Passengers in Toronto yesterday prepare to board the first Canada 3000 scheduled flight to Delhi, India. AIRLINES OIL Canada 3000 looks east for relief Dirty laundry Money laundering has been rampant in Canada but new legislation will force intermediaries to report suspicious transactions. Page FP5 NEWS Sour on banks Canadian banks may experience "a few bad quarters" due to the weakening economy, Moody Investors Service warns.

Page FP2 On the rise? Gold prices are expected to rise in the coming days, with small-cap gold companies likely the big winners in any uptick. Page FP2 Aid limits The European Commission will set curbs on state aid to airlines, limiting it to direct losses from Sept. 11. Page FP3 Incredible journey Tim Hor-tons co-founder Ron Joyce took the long road to becoming Entrepreneur of the Year. Page FP7 INVESTING CRUDE PRICES DODGE FALLOUT FROM U.S.

RETALIATION William Hanley Market Eye to uproot Osama bin Laden and his terrorist network is making progress. The subdued market was a contrast to 1991, when U.S. military strikes against Iraq brought a large and immediate rally to stocks. "We're fighting a non-governmental organization where there's not a defined border. It's not going to be sending 50 cruise missiles over," said Mr.

Engelke. "Everybody's nervous." Defence stocks were the big winners. Raytheon Lockheed Martin Corp. and other contractors gained on expectations their business will increase as the need grows for the United States to replenish its weapons arsenal. Raytheon rose to The company makes the Tomahawk cruise missiles used by U.S.

and U.K. forces in the strikes. Each missile costs about "The president has warned us that further terrorism is expected," said Kathy Cole Dodd, manager of the One Group Large Cap Value Fund in Columbus, Ohio. "The market is jittery about that." Ms. Dodd has been buying defence companies in the past month.

Financial stocks, on the other hand, continued their slide because investors are worried that increasing numbers of their customers will default on their loans. U.S. Bancorp, the eighth-largest U.S. bank, fell to On Friday, the company cut its third-quarter earnings estimate in anticipation that loans to airline customers would go bad. Market call Alcan hit by "sell" call as Prudential analyst worries 2002 profit could fall as much as 50 below target.

Page INI Strategy reality check Portfolio advice from analysts after Sept. 11 attacks could have made you rich. Page INI INTERNATIONAL ed Sept. 19, the airline posted a pre-tax loss of and its operating margin, at minus 8.4, was among the worst in the North American industry. Ben Cherniavsky, an analyst at Raymond James, noted the "very disappointing" results came despite a 42 increase in traffic and 72 increase in revenue.

"The airline is making significant market share gains in Canada, but they are coming in lieu of profits," he concluded. The weak quarter has left Canada 3000 vulnerable. It had only in cash as of July 31, no bank lines upon which to draw, and few unencumbered assets it can use to raise money. Most of its planes are leased under non-cancellable contracts and as of April 30 it had annual rental commitments of for fiscal 2002. In comparison, Air Canada, despite its well-publicized woes, had in cash and credit as of June 30 and another $4-billion in unencumbered assets.

Transat AT parent of Air Transat, had $115-million at July 31 and analysts expect it to generate free cash flow. WestJet Airlines financial position is regarded as solid and it is seen remaining profitable. See AIRLINES on Page FP3 Carrier hopes India launch will boost passenger numbers By Peter Fn Canada 3000 Inc. launched its inaugural India flight yesterday, only a day after the United States began attacking Afghanistan, but the timing could not be better for the airline. The seemingly full plane heading off to Delhi was a much-needed tonic for the airline, which admits it is under financial pressure and is widely viewed as the weak sister of the Canadian airline industry.

"Like everybody, we've had some pretty tough times over the last 10 days or so, purely and simply because of the load factors on board the airplanes," said Angus Kinn-ear, president of the Toronto-based airline, the second-largest in Canada by capacity. Even prior to the Sept. 11 attacks, Canada 3000's shares were sliding as it struggled to swallow Royal Aviation Inc. and CanJet Airlines against the backdrop of a deteriorating economy. Its stock closed up 80 at $4.20 Friday, off the 52-week high of $10.75.

For its fiscal first quarter report Wireless deal Newly independent firm pays for the 77 of Telecorp PCS it doesn't already own. Page FP8 What, me worry? Dell Computer CEO Michael Dell is not concerned about the proposed merger of HP and Compaq. Page FP9 By Claudia Cattaneo Calgary Bureau Chief CALGARY Crude oil was little changed yesterday on expectations that U.S. military strikes against Afghanistan would not disrupt supplies from producing countries in the Middle East. "As long as there is no disruption, crude oil is going to trade in a very narrow band," said Peter Linder, energy analyst at Research Capital Corp.

However, U.S. retaliation for last month's terrorist attacks in New York and Washington, D.C., has likely set a floor for oil that is above a barrel, Mr. Linder said. Prolonged military action will almost certainly cause crude prices to rise on concern other Middle East countries will get involved, he said. After declining early in the day, West Texas crude oil was up US60 in New York, to close at as the United States and Britain bombed Afghanistan for the second day.

Canadian energy companies moved modestly higher in New York. PanCanadian Energy Corp. rose US380 to Suncor Energy Inc. was up US440 to and Alberta Energy Co. rose US490 to close at The Toronto Stock Exchange was closed yesterday for the Thanksgiving holiday.

"I wouldn't expect to see a lot of change in the oil stocks because I don't think the market is going to react dramatically to the military action we have seen so far," said Kate Warne, senior energy analyst at Edward Jones. See OIL on Page FP3 The consensus view on Wall Street before the military retaliation on Sunday was that the equity market would probably rally on such news because investors would be relieved the United States and its allies had finally taken action, that the "phony war" had turned into a real one against terrorism, that American might and right would ultimately prevail. In the event, there was little tri-umphalism abroad in the Street yesterday as the popular stock measures ended mixed to lower on the second day of the Afghanistan campaign. Traders understand this probably will be a drawn-out campaign with few tangible results or "victories" and with the very real possibility it is the start of something resembling the Cold War, a long, edgy battle of nerves. Certainly, this past week walking around New York and talking to dozens of people convinced us that the overwhelming majority of market professionals are on the same patriotic page: The United States is the world's greatest power with the world's greatest economy; it has been through such tests before and will prevail, stocks rebounding ahead of the improvement in the economy and corporate profits next year as the massive monetary and fiscal stimulus kicks in to end the recession and begin the recovery.

Indeed, stocks have been rebounding since that Sept. 21 in-traday low of 944 on the 500 index and the damage done to the market by the Sept. 11 attacks appears to have mostly been repaired. See HANLEY on Page FP2 FP EDITORIAL EC set to fine automaker USS75M War profiteers In calling for a new agriculture policy, U.S. farmers are just concerned with lining their own pockets.

Page FP11 Wrong route Bailouts and increased government spending will not solve the United States' economic woes. Page FPU INDEX DAIMLERCHRYSLER ment at the alleged abuse of the "block exemption" rules governing new car sales in Europe. Those rules, due to expire next September, are likely to be replaced by a much more liberal regime. The commission claimed DaimlerChrysler tried to prevent dealers in Germany, Belgium, the Netherlands and Spain from selling cars to consumers from other member states between 1985 and 1996. That allegedly breached European rules on the single market.

See PENALTY on Page FP6 Brussels regulator for breaching European Union competition laws. The likely fine follows a five-year investigation by the commission into alleged attempts by DaimlerChrysler to control prices and restrict supplies of Mercedes-Benz cars in several European countries. The scale of the fine reflects the commission's growing disenchant By Francesco Guekkeka and Tim Bu in BRUSSELS The European Commission is tomorrow expected to fine DaimlcrChrysler AG, the automaker, about one of the largest penalties levied by the HANI.EY FP1 INT. STOCKS IN2 MARKET CALL INI MEETINGS IN10 STOCK LISTS IN6 STOCK MKTS. IN2 WORLD FP8-9 CHKVKEAU INI CRITCHIJiY IN1 CURRENCY IN2 FP EDITORIAL FM1 FPX INDEXES IN2 FRANCIS FP5 FUTURES INTI Wants to put more money here )'X i Free Banking.

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