Rarely are things quite what they seem in the financial services industry, and Abbey National's fresh assault on the current account market is no exception. On the face of it, Abbey's offer of 3 per cent on in credit balances and 8.7 per cent APR on authorised overdrafts makes it the most competitive bank on the high street, but as ever the proposition is hedged about with ifs and buts.
For instance, you can only elect to have one or the other – either the advantageous credit rate or the advantageous overdraft rate but not both. If you inadvertently move from one position to the other, the corresponding rates are not nearly so good, and if you elect to change from one to the other, then there is a £10 charge, something of a first even for an industry shot through with rip-off, hidden charges.
Abbey is one of the worst offenders in leaving existing depositors stranded in low interest bearing savings accounts while attempting to attract in new savers with much more competitive rates, so it is no surprise to find out that the new deal isn't automatic to existing current account holders. You have to ask for it. The giveaway is that Abbey doesn't expect the initiative to cost it any more than £25m in the first year. HBOS's parallel initiative on current accounts, which is apparently not as generous at 2 percentage points below base rate but is being applied to existing account holders as well as new ones, is costing £65m in a full year.
Even so, it's something, and it's further evidence that reasonable levels of competition are at last beginning to arrive in the current account market, in the same way as they already have been in the mortgage market. According to market research conducted by HBOS, British current account holders are on average permanently in credit to the tune of £1,600 each. That's a huge amount of essentially free money that the dominant players in the current account market, the big four English clearers, have been able to rely on. Small wonder their profits are so big.
The big players have been better in recent years in offering a fair deal to account holders, particularly those with large credit balances, but none the less customer inertia remains their primary weapon. The cost to Barclays or any of the other big four of meeting the competitive challenge from HBOS and Abbey National head on would be prohibitive, so for the time being, they don't.
Since the last recession, banks have become better at controlling and defraying bad debt experience, allowing profits to boom even in a business downturn. Today, the threat to banking profits comes not so much from the possibility of another property collapse, or generalised business bust, but from higher levels of banking competition. For the established players, the competitive challenge in the current account market is destined to become ever more intense. More players are being licenced, and with the wearing away of old regulatory and industry divisions, there's likely to be ever greater encroachment on each other's previously protected fishing grounds.
The introduction in November of an automated current account switching system is a further step change, whose effect could be similar to number portability in the telecommunications industry. Yesterday's initiative from Abbey is a start, even if the bank has eventually to merge with Alliance and Leicester to gain sufficient bulk to mount a serious challenge.
Ever since Enterprise Oil unsuccessfully bid for Lasmo nearly eight years ago, it's looked a bit like a fish out of water. Too big to be a niche exploration play, it's also too small to play even in the big league of oil independents, let alone with the oil majors. Enterprise's fate was always likely to be bid or be bid for, and now it seems destined to be the latter. The new boss on the rig, Sam Laidlaw, is well thought of in the industry but hasn't been there long enough to gain much of a following in the City, and he'll struggle to defend the company at much above the present price.
Enterprise started life as the spun-off North Sea oil assets of British Gas, and there was understandable speculation in the City yesterday that the mystery bidder could be BG Group in an attempt to reunite businesses that were forced apart by the previous government's privatisation programme. Amerada Hess, which lost out to Eni in the bidding for Lasmo last year, is another obvious candidate, though it lacks both the size and the cash to mount a convincing knock-out blow.
Much more likely therefore is either Eni again, or one of the fast-growing US independents such as Anadarko Petroleum. Anadarko has the size, the ambition and the drive to do it. Despite now almost irrefutable evidence that global warming is man made, demand for oil is predicted to continue growing strongly for at least another 50 years, and there's little governments can do to stop it, even if they could agree to.
At the same time, new sources of supply are becoming ever more difficult to find and costly to develop. Anadarko and others figured out a long time ago that it's much easier to grow by acquisition than through exploration, which could mean Enterprise becomes the subject of quite an auction.
Those who fly closest to the sun are at greatest risk of crashing to earth. Some might detect hubris in the expansionist plans of Stelios Haji-Ioannou, who wants to buy 75 new planes to cope with the runaway success of his low-cost airline easyJet. His plans are reminiscent of Harry Goodman's Air Europe, which placed the biggest aircraft order in commercial aviation history a decade ago and then promptly went bust.
But then Ray Webster, who runs the show for Stelios, is no Harry Goodman, and easyJet is no Air Europe. For one thing, its ambitious fleet strategy is being matched by equally impressive traffic growth, judging by the 36 per cent rise in December passenger numbers easyJet reported yesterday. Exponential growth of this kind always carries some risk. Easyjet operates 27 Boeing 737 aircraft. In six years time it expects its fleet to have grown four-fold. Very few airlines have pulled off the trick of growing rapidly while keeping costs under control, and if easyJet lets rip on costs, it will certainly be fatal.
To fulfill its ambitions, EasyJet has opened negotiations with Boeing and Airbus – presumably to play one off against the other on price. But it has not ruled out operating a mixed fleet, which in itself would be a significant additional cost. There are any number of reasons why Stelios might fail in an industry as turbulent as air transport. But there is one precedent for success and it is called South West Airlines, the low-cost US carrier on which easyJet is modelled.
South West operates 2,700 daily flights to just 55 destinations, which works out at 50 services a day per route. No flight is longer than two hours and all 360 of South West's Boeing 737s provide the same single-class, open seating, no-meals, no-frills service. The philosophy has served South West well. The airline has achieved 28 consecutive years of profit growth and, even after 11 September, which it survived without cutting a single seat or a single job, South West is still worth four times more than British Airways.
So it is possible for easyJet to succeed. But the risks are great and the distractions are many.