Saturday March 28th, 2020 5:04PM

Business Fallout: Airlines fear failure, delivery in demand

By The Associated Press
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It was less than 11 weeks ago that the first cases of pneumonia were detected in Wuhan, China. The speed at which what would soon be named COVID-19, the disease caused by the new coronavirus, knocked the global economy askew is unparalleled in our lifetimes.

Following are developments Thursday related to the outbreak, the efforts by governments to stabilize their economies, the companies that must navigate through an altered landscape, and the millions of people whose lives have been upended.


NATIONAL ECONOMICS: Mass disruptions have spread across the globe as nations simultaneously try to slow the spread of the coronavirus and limit damage to the economy.

The number of Americans filing new claims for unemployment benefits surged last week by 70,000, indicating that the impact of the coronavirus was starting to be felt in rising layoffs in the job market. The Labor Department reported Thursday that applications for benefits, a good proxy for layoffs, rose by 70,000 to a seasonally adjusted 281,000 last week.

A leading German economic index fell by the most since 1991, indicating Europe's largest economy is plunging into recession due to the disruption from the virus outbreak.

Saudi Arabia will cut spending by 5%, or about $13.3 billion, to offset the impact of plunging oil prices and the effects of the new coronavirus on its economic outlook and deficit.

Late Wednesday, the European Central Bank launched an expanded program to buy up to 750 billion euros ($820 billion) in bonds to support the economy. ECB head Christine Lagarde said Thursday that the the bond purchase stimulus is not the last word and could be increased if the coronavirus crisis demands that. Lagarde said in an op-ed article to appear in European newspapers Friday that “we are fully prepared to increase the size of our asset purchase programs and adjust their composition, by as much as necessary and for as long as needed.” She said the monetary authority for the 19 countries in the euro currency would “do everything necessary within our mandate to help the euro area through this crisis." Lagarde's words recalled the statement by predecessor Mario Draghi that “within our mandate, the ECB is ready to do whatever it takes” to ensure the euro survived its 2010-2012 debt crisis.

The Bank of England on Thursday slashed its key interest rate to 0.1%, its lowest-ever level, amid global economic turmoil sparked by the coronavirus pandemic.

AIRLINES: Germany's Lufthansa said that airlines may fail without government assistance if the outbreak lasts for an extended time. The airline has already slashed routes and frozen new hires. Lufthansa said members of its executive board also decided to take a 20% cut in basic pay for 2020.

The International Air Transport Association, which represents around 290 airlines worldwide, on Thursday put the price tag on combined lost revenue to date at $7 billion. It will get a lot worse. The group estimates total costs worldwide could reach $113 billion. The group called for emergency aid of up to $200 billion for airlines globally.

The Las Vegas airport is running with reduced operations after an air traffic controller tested positive for the new coronavirus, temporarily closing the control tower. Nearly 500 flights in Las Vegas were canceled by midday.

Seven Middle Eastern countries have suspended all commercial flights, while other airlines halted international flights amid a near total collapse in demand for travel. Vietnam Airlines was the latest with a halt to all international flights until the end of April.

The South American country of Guyana, meanwhile, has temporarily closed its two international airports.

SHOPPING IN AN OUTBREAK: The trend toward online shopping has been underway for years and the arrival of the novel coronavirus may be accelerating that shift. Amazon is hiring 100,000 people to fulfill orders. Domino’s Pizza said Thursday that it is hiring about 10,000 workers in the U.S. to meet rising demand for delivery and carryout. Domino’s put out the call for delivery drivers, pizza makers, managers and truck drivers. Domino’s U.S. stores remain open for carryout and it is also offering contact-less delivery.

DISLODGED: The hotel industry is being decimated as businesses cease travel and one-time tourists take shelter. Hotels were half emptied out last week, according to the analytics firm STR, with occupancy rates falling 24%. In cities particularly hard hit by the virus, like Seattle and San Francisco, occupancy was below 40%, according to STR.

Marriott's CEO, as well as the son of the hotel company's founders, have forfeited their salary for the rest of the year as the hotel company tries to slash costs. J.W. Marriott Jr., who serves as chairman, earned $3.2 million in 2018. CEO Arne Sorenson had a base salary of $1.3 million. The pay of other executives will be halved. Marriott occupancy in the U.S. and Europe is less than 25% — down from a usual rate of nearly 70%. Sorenson said cancellations have reached historic highs.

Greece ordered most hotels to shut down by Sunday and remain closed through all of April.

ENERGY: Oil prices are seeing as much volatility as stocks amid the virus outbreak. Crude oil clawed back on Thursday from some of its steep losses the day before, and benchmark U.S. oil rose back above $25 per barrel. U.S. crude dropped below $21 a barrel on Wednesday, the first time it'd sunk to that level since 2002.

FACTORED OUT: More companies are closing factory gates a day after the top U.S. automakers announced a total production shutdown in North America.

Electric vehicle maker Tesla Inc. is indefinitely suspending production at its assembly plant in Fremont, California, at the end of the day Monday. The company says it followed federal guidelines in staying open even though seven Bay Area counties have ordered residents to shelter in place. Alameda County on Tuesday night declared Tesla a “nonessential business" under the county's shelter-in-place order, but the Fremont factory kept producing. On Thursday, Tesla said it would shut down except for basic operations. The company said its solar factory in New York also will temporarily suspend production, but its battery plant in Nevada and other operations will continue.

Subaru is temporarily closing its only U.S. factory out of concerns for worker safety due to the coronavirus, as well as to adjust for falling sales. The Japanese automaker says the plant in Lafayette, Indiana, will shut down on Monday and remain closed for at least a week. All workers will be paid for the week. The plant has about 5,700 workers.

Kia and Volkswagen also said they would suspend production at their U.S. factories. The 2,700-worker Kia plant in West Point, Georgia will be closed Thursday and Friday due to a parts shortage. It will be cleaned and is expected to reopen Monday. Worker pay is being discussed. Volkswagen will halt assembly lines for a week starting Saturday at its Chattanooga, Tennessee, plant that employs 3,800. It's scheduled to reopen the night of March 29. VW says it will use the time to clean the plant and assess future production. Workers will get full pay, VW says.

Toyota also announced Thursday it will extend the closure of its North American plants until April 6. The plants will close Monday and Tuesday and had been scheduled to reopen Wednesday.

They join General Motors, Ford, Fiat Chrysler, Honda, Nissan and Hyundai in suspending production at North American factories. Auto factories run by BMW and Mercedes-Benz are still running.

Hyundai said Thursday that it would close its plant in the Czech Republic for two weeks starting Monday. The plant produced almost 310,000 cars last year and employs some 3,300 people. Auto factories have been closed across much of Europe already.

MANUFACTURING'S SECOND ACT: Germany-based Beiersdorf, whose brands include Nivea and Coppertone, says it is launching production of medical disinfectant in Europe to support the fight against the virus. Beiersdorf said Thursday that it initially will provide 500 tons of disinfectant for hospitals, medical staff and emergency responders such as police and firefighters.

SUPPLY CHAIN: Factories in China, struggling to reopen after the coronavirus shut down the economy, face a new threat from U.S. anti-disease controls that might disrupt the flow of microchips and other components they need. Chinese manufacturers assemble more than 80% of smartphones for Apple, Samsung and other brands, half of the world’s personal computers and a big share of home appliances and other goods. But they need U.S. processor chips and other high-value components. It isn’t clear how U.S. anti-coronavirus curbs might affect trade.

CRUCIAL SUPPLY: Supermarkets have become one of the few places where social distancing rules are stretched. Brands like Campbell, which have struggled as more people seek out non-processed foods or those they believe are more fresh, have seen their stock spike., a data analytics firm, said traffic at Kroger and Albertsons stores rose more than 35% the second week in March.

British supermarkets have brought in measures to control the coronavirus-induced panic-buying that's seen many of their shelves emptied and elderly and vulnerable people often unable to get the products they need.

Established companies like Campbell and Hormel are not the only ones seeing demand surge. Blue Apron, which makes fresh meal kits for dinner preparation at home, was threatened with delisting from the New York Stock Exchange not so long ago after its shares fell below the exchange minimum $1. Company shares are up almost 530% this week. Blue Apron said it has seen a sharp increase in consumer demand over the last week and is increasing its capacity to fill those orders. It said it’s hiring workers for temporary and permanent positions in New Jersey and California.


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