Boeing to resume Washington output; data shows economic hit
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.
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 “essentially zero and shows no sign of improving in the near-term.”
“We expect to fly fewer people during the entire month of May than we did on a single day in May 2019,” 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.
— Boeing, meanwhile, said it will resume production of passenger jets in Washington state next week after suspending work in late March after workers tested positive for the new coronavirus. The company said 27,000 people will return — most of them by April 21 — to build several jet models and to prepare to resume production on the grounded 737 Max. Boeing said it will take precautions including staggered shift times, face coverings and floor markings to separate workers.
CEO David Calhoun said in a message to workers that the virus “will change our business for years to come.” Calhoun did not indicate whether Boeing intends to apply for government financial help from last month’s $2.2 trillion virus-recovery package. A Boeing spokesman declined to comment on whether the company will seek federal aid.
— 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.
— Ride-hailing giant Uber to withdraw its financial guidance for 2020 and predict a larger than expected first-quarter net loss. The company says it expects its to reduce the value of some minority equity investments, that that will increase its net loss by $1.9 billion to $2.2 billion. Uber will report quarterly results on May 7.
SALES SLIDE: Figures release by the U.S. this week revealed a retail sector staring down a crisis. See-and-be-seen is from another era, one without face masks and home confinement. Even if you can afford luxury goods, your not likely to be buying it now.
— Sales fell 4.8% at the cosmetics giant L’Oreal in the first quarter, though online sales increased 52%. The company said Thursday there were sharp sales drops in luxury cosmetics and professional hair products as department stores, hair salons shuttered across continents.
— Global sales tumbled 15% for luxury group LVMH in the first quarter. More people are drinking at home, but they’re not opening bottles of LVMH Moet & Chandon Champagne, or its Vuitton handbags or Dior perfumes. It has begun to produce hand sanitizer and has financed millions of masks for French medical personnel.
— 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: Gains by Amazon and health care stocks helped lift U.S. stocks Thursday despite 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.