Isn't it good to know you've got a friend?

City & Business

My Campaign to ensure Eddie George is reappointed as Governor of the Bank of England should have won another convert to the cause. I am thinking here of Gordon Brown, the Chancellor of the Exchequer. When Mr Brown was criticised last week for softening his stance on inflation, who was it that raced to his rescue? None other than Mr George.

A less professional and less committed Governor would have chosen to exploit the Chancellor's discomfort following his decision to make an inflation rate of 2.5 per cent a central rather than ceiling target. That immediately led to accusations that a target band of 1.5 per cent to 3.5 per cent was much softer than the original 2.5 per cent target. Not so Mr George. He chose the setting of the Mansion House, where he was clearly among friends, to roundly endorse the Chancellor's reformulation of the target, arguing it "acknowledges the volatility of the real world".

What Mr Brown will have immediately realised is that such an endorsement is only of value if it comes from somebody who commands the respect of the financial markets. Clearly Mr George does, hence my belief that the Chancellor will have become a convert to my reappointment campaign.

Those who have chosen to attack Mr Brown for going soft on inflation have underestimated both the volatility of the markets and the determination of Mr George to keep extremely close to the 2.5 per cent central target. It would be bordering on the incredible if each month the inflation figure came in at exactly 2.5 per cent. As Mr George rightly pointed out "the measure of our success will be how close we come to 2.5 per cent on average over time".

By setting a band with a lower as well as an upper limit the Chancellor has also warned the Governor not to be overly cautious. Such a warning was not entirely necessary. Although Mr George is very much an inflation hawk he is also a firm proponent of economic growth. He has no wish to keep the lid on inflation while condemning millions to the dole queue. He has consistently argued that low inflation and economic growth are not mutually exclusive and this has been proved over the last five years.

The Governor and the Chancellor are singing very much from the same hymn sheet. Indeed, the harmony is almost melodious. Mr Brown would be foolish to break up what is a winning combination.

Slot of opportunity

The News that aircraft arriving at Heathrow airport will be allowed to land much closer together from next month raises a number of issues. In safety terms there is an inclination to believe that if aircraft are two-and-a-half nautical miles apart rather than the three currently specified it will create greater risks. In environmental terms there is an inclination to believe that cramming aircraft closer together will create more noise. In commercial terms there is an inclination to believe that quicker landings will create more scarce slots at Heathrow.

Although pilots and air traffic controllers have voiced concerns, the Civil Aviation Authority is confident that there are no safety implications. The new approach to approaches has been tested since 1994 with no safety problems reported. The separation distance is already standard at airports such as Paris, Frankfurt and Amsterdam and is widely used in the US. In short the CAA is confident that there is no increased risk.

Residents beneath the flight path are also being reassured that there will be no great increase in noise. Aircraft may land closer together but there will be no overall uplift in the number of landings.

The key to these positive safety and environmental conclusions lies in the strict conditions which must apply before the shortened separation can be allowed. It must be daytime, visibility must be 10km or more, the cloud ceiling must be 1500ft or more, the runway must be dry, there must be no wind sheer reported, the headwind must be 10kph or more and the controller must be able to see the landing aircraft from four miles away.

So onerous are these conditions that only around 10 per cent of Heathrow arrivals would qualify. When the weather is good the airport will be able to speed up its operations, but for 90 per cent of the time it will be business as usual.

The implication of this is that there will be no slot bounty. Slots are required day in, day out, irrespective of the weather. Indeed the CAA is adamant that there will be no increase in the capacity at Heathrow.

The question, though, is whether BAA will build the increased efficiency into its long-term slot calculations. The company is being remarkably coy about the CAA's proposals. But you can see the temptation, particularly as slots still hold the key to whether the British Airways alliance with American Airlines goes ahead. Proposed a year ago, it is no closer to consummation. Approval in the UK, US and EU is awaited, as is a new Open Skies agreement between Britain and the US.

The merger is not completely deadlocked. The parameters for what is acceptable to US carriers are more clearly defined now. In particular it has become clear that they want more slots than BA and American are prepared to concede. If BAA could make up the shortfall it might help put the US carriers in a more positive frame of mind.

Settle before drinking

Now That Bernard Arnault's LVMH Moet Hennessy Louis Vuitton is seeking arbitrage to settle its row with Guinness over the proposed merger with Grand Metropolitan it becomes quite apparent just how important it is for the proposed deal not to be judged as a takeover. If LVMH can demonstrate that the deal is a takeover, not a merger then a "control event" will be triggered paving the way for LVMH to buy back distribution joint ventures and a crucial 34 per cent stake Guinness holds in Moet Hennessy.

Arbitration could take a year. It may not be deal-breaking but it is still an irritant. The arguments for settling the dispute are stronger than ever.