Skeletal flights for airlines; economic signals flash red
The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Thursday related to the global economy, the work place and the spread of the virus.
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SEATBELTS FASTENED: The U.S. is offering airlines a $25 billion aid package, but damage to the sector will be extensive and long-lasting. Industry analysts say it could be five years before the industry fully recovers.
- United Airlines' flight schedule will be cut to 10% in May and it expects more of the same in June. In a letter to employees, CEO Oscar Munoz wrote that travel demand is 'œessentially zero and shows no sign of improving in the near-term."
'œWe expect to fly fewer people during the entire month of May than we did on a single day in May 2019,'ť Munoz wrote. Job cuts at the airline, though prohibited through September under strings tied to the aid package, are likely in the fall.
- At American Airlines 32,000 workers have volunteered for early retirement or leave at reduced pay. American started the year with about 133,000 employees.
- Passenger traffic at Cathay Pacific Group fell 90% in March from a year earlier. The company said its schedule through may will be a "bare skeleton,'ť at only 3% capacity.
ECONOMIC PARALYSIS: Figures released by the U.S. Thursday revealed a collapse in housing construction, and millions of lost jobs.
- A quarter of British businesses have closed their doors. The Office for National Statistics surveyed 5,316 companies to find out how many had shut down operations between March 23 and April 5. Those that have remained open have furloughed an average 21% of their staff. A national aid package pays 80% of the wages of for retained workers.
- The International Monetary Fund warns Pakistan's budget deficit could hit a record 4 trillion Pakistani rupees (approximately $23.7 billion) this year because of the virus outbreak, accounting for nearly 9.2% of gross domestic product.
SERVICE POSTPONED: The service sector - gyms, hotels and retail stores - relies on human contact, and it may have been changed forever by the outbreak.
- J.C. Penney is postponing $12 million in interest payment. The company has a 30-day grace period before it is considered in default on the 2036 senior notes.
- Hilton has suspended operations at almost 1,000 hotels globally, or 16% of them. That includes 12% of hotels in the Americas, 60% in Europe, the Middle East and Africa and 15% in Asia. The company has seen some recovery in China, where all but 20 of the 150 hotels that closed there have reopened. Hilton expects revenue per available room to fall nearly 25% in the first quarter.
FIELDS AND FACTORIES: The pandemic has created a potential nightmare for farmers, ranchers, dairy farms, as well as manufacturers. The labor-intense sectors cannot function without workers who are often required to do their jobs in close quarters.
- More than 30,000 people have registered for special flights that will bring them from Romania to Germany to help with the harvest season, budget airline Eurowings said. German farms rely heavily on Eastern European laborers for sowing, planting and harvesting crops.
- Italy's severely ravaged region of Lombardy is pushing to relaunch manufacturing on May 4, the day that the national lockdown is set to lift. Lombardy's plan focuses on maintaining a one-meter distance between workers, mandating the use of masks, mobile working where possible and the use of antibody blood testing, which is set to launch in the region on April 21.
- The market for used cars, trucks and SUVs in the U.S. has evaporated. Cox Automotive estimates that retail used vehicle sales fell 59% last week compared with a year ago. Sales at Cox's Manheim used vehicle auction houses, where dealers get their supplies, tumbled 75%. New vehicle sales slumped 38% in March.
MARKETS: Stocks are flat Thursday after another round of disconcerting economic indicators arrived.
LATTE AT THE END OF THE TUNNEL: For the first time since going drive-thru only on March 20, Starbucks is looking at a very gradual expansion of service. CEO Kevin Johnson said in a letter to employees Thursday that decisions to expand service using contactless pickup and delivery or to-go ordering would be made on a store-by-store basis.