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Airlines Tell Employees to Prepare for Difficult Times: Live Updates

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The $2 trillion stimulus bill that President Trump signed on Friday will prevent mass layoffs at the nation’s biggest airlines but it will not prevent a major restructuring of the industry.

The legislation provides $50 billion in grants and loans to airlines, money that is meant to cover employee paychecks and forestall job cuts until October. But even as they welcomed the help, airline executives told their employees to prepare for difficult times, saying they would still have to make tough decisions to get through the coronavirus outbreak and its aftermath.

The pandemic could permanently alter the industry, United’s chief executive, Oscar Munoz, and president, Scott Kirby, warned employees in a memo on Friday. Also on Friday, Delta Air Line’s chief executive, Ed Bastian, asked his employees to consider taking unpaid leaves from the company.

“If the recovery is as slow as we fear, it means our airline and our work force will have to be smaller than it is today,” the United executives wrote in their memo.

The airline warned that it planned to cut service next month by more than 60 percent and still expected its flights to be largely empty. As a result, United is likely to have to cut its schedule even more in May and June.

Mr. Bastian, Delta’s chief executive, thanked the 21,000 Delta workers who have volunteered to take unpaid leave, but encouraged more to join them.

“While this assistance is welcome, it’s important to remember that the relief package is not a cure for the unprecedented challenges we face,” Mr. Bastian said.

On Thursday, American Airlines’ chief executive, Doug Parker, struck a slightly more optimistic tone in a recorded message for employees, saying that the stimulus and the cash available to the airline would allow it to “ride through even the worst of potential future scenarios.”

One airline chief executive, Gary Kelly of Southwest Airlines, went even further, saying he was not sure his company would end up taking any money from the government. “It gives us another option,” Mr. Kelly said. “We have opportunities to raise capital in the private markets and now we also have that opportunity with the federal government.”

Stocks fell on Friday as investors who initially cheered progress on the Washington’s aid package saw further economic trouble ahead.

The package delivers direct payments and jobless benefits for individuals, money for states and a huge bailout fund for businesses battered by the crisis. President Trump signed it into law soon after trading ended on Friday.

The plan is the largest emergency spending program in the nation’s history, but some economists have said it might not be enough to counter the potentially enormous economic damage from the coronavirus pandemic. And investors also faced fresh evidence of the economic impact of the pandemic in the form of a consumer sentiment reading that showed a sharp drop in confidence.

The S&P 500 dropped more than 3 percent on Friday. Stocks in Europe were also lower.

The selling reflected caution ahead of the weekend, when bad news about the virus’s spread or further efforts to contain it could overtake the positive sentiment stirred up by the passage of the stimulus bill, Steven Ricchiuto, the chief economist at Mizuho, said in a note to clients.

“After the stimulus bill passes, and households and companies begin waiting for the government money to start flowing, news stories will resume a more negative tilt,” Mr. Ricchiuto wrote.

All told, it was a relatively good week for stock investors. Even after Friday’s drop, the S&P 500 remains up more than 10 percent this week, after a three-day romp for stocks on Tuesday, Wednesday and Thursday.

But the decline on Friday suggests that there is still little clarity on whether the worst is over for the market after weeks in which benchmark indexes collapsed amid violent swings.

“We were oversold and we bounced,” said Jeff James, a portfolio manager at Driehaus Capital Management in Chicago, crediting the optimism about actions from the Fed and optimism about Congress’ stimulus bill for the rally earlier in the week.

Still, he thinks that the underlying cause of the recent market turmoil, the spread of the virus, will continue to gnaw at investors in the near future. “We need to see the cases stabilize and come down and that could take some time,” said Mr. James, who invests in small and medium-size companies.

Richard Curtin, chief economist for the survey, noted that two of the larger monthly drops — in October 2008 and December 1980 — presaged long and deep recessions. The other came after Hurricane Katrina ravaged the Gulf Coast in 2005. The coronavirus is in some ways the equivalent of a hurricane hitting the entire country at once.

Sentiment fell even further at the end of the month, putting April on track for the steepest decline on record.

“As with so much else related to this episode, the numbers are going to get worse before they get better,” Stephen Stanley, chief economist for Amherst Pierpont, wrote in a note to clients.

The sharp drop in confidence is hardly a surprise. But it is another troubling sign of how the pandemic is rippling through the economy. If the economic collapse leads to a pullback in spending even among consumers who have not lost jobs and income, that could set off a downward spiral that could be hard to pull out of even when the immediate threat of the virus has passed.

President Trump, who has expressed reluctance in recent days to use the Defense Production Act to mobilize private industry to produce critically needed ventilators, reversed himself Friday in a series of posts on Twitter.

Mr. Trump lashed out at General Motors on Twitter, blaming it for failing to begin work on new production of ventilators. He said that the company “MUST immediately open their stupidly abandoned Lordstown plant in Ohio, or some other plant, and START MAKING VENTILATORS, NOW!!!!!!

G.M. sold the Lordstown plant last year to a company that is planning to use it to make electric pickup trucks.

Later on Friday, G.M. and Ventec Life Systems, which have been working together, said they would begin shipping ventilators as soon as next month. The automaker said it would use a factory in Kokomo, Ind., to make ventilators and Ventec said it would increase production at its plant in Bothell, Wash. G.M. will also manufacture surgical masks, ramping up to 50,000 masks per day within two weeks. The announcement said General Motors was “donating its resources at cost.”

“Depending on the needs of the federal government, Ventec and GM are poised to deliver the first ventilators next month and ramp up to a manufacturing capacity of more than 10,000 critical care ventilators per month with the infrastructure and capability to scale further,” the statement from the companies said.

An announcement with the White House had been planned for earlier in the week, but was canceled.

In a series of tweets, Mr. Trump accused the nation’s carmakers and others of dragging their feet, a contrast to his claim on Thursday that states were overstating their need for tens of thousands of ventilators. The carmakers note that they have not been given any contracts by the Federal Emergency Management Agency, and that the White House had failed to make a decision about who should be supplying the ventilators, which help critically ill patients breathe.

Ford said in a statement that it was in “active conversations with the administration seeking guidance about approvals, scope, and distribution relating to a series of products, including ventilators.”

Google said it had removed the Infowars app from its Google Play store. The app is part of the media company owned by Alex Jones, a conspiracy theorist and conservative radio show host. Google removed the app on Friday after Mr. Jones posted a video disputing the need for social distancing and some of the isolation policies aimed at curbing the spread of the virus.

Earlier this month, The New York State attorney general issued a cease-and-desist order to Mr. Jones because of false claims on his website that his diet supplements and toothpaste could be used to fight the coronavirus.

Google also said it was donating about $800 million in financial assistance to help small businesses secure capital and continue to advertise through the company. In a blog post on Friday, Sundar Pichai, chief executive of Google’s parent company, Alphabet, said it was providing $250 million in ad grants to more than 100 government agencies including the World Health Organization to disseminate information on how to prevent the spread of the coronavirus.

In addition, the company said it was creating a $200 million investment fund to support nongovernmental organizations and financial institutions to provide capital to small businesses and was granting $340 million in ad credits to existing small and midsize business customers who have had an account with the company for more than a year

Companies in the United States are rushing to develop easy-to-use, finger-prick blood tests that could be done on the spot in a doctor’s office or a pharmacy clinic and detect the presence of antibodies to the coronavirus within 15 minutes.

The preferred diagnostic approach involves testing genetic material for the virus extracted from deep nasal swabs. It can take hours or even a day for patients to obtain results, depending on whether specimens must be shipped to a diagnostic lab. The finger-prick blood tests, by contrast, are designed to quickly identify the presence of two antibodies that the body produces in response to the coronavirus.

Chembio Diagnostic Systems, a firm in Medford, N.Y., that has produced rapid tests for Ebola and Zika virus is developing a similar test for coronavirus. Last week, the company received a $4 million order to supply the finger-prick tests for the virus to Brazil’s Ministry of Health and said it also planned to apply for emergency authorization from the Food and Drug Administration to market the tests in the United States.

Another company, Scanwell Health, a start-up in Los Angeles that developed an at-home test for urinary tract infections, recently acquired the rights to a finger-stick blood test for the virus developed and approved in China.

Public health officials in Britain said this week that they were working to validate an at-home virus antibody test that could be made available to millions.

The United States government is poised to take on a huge amount of debt to contain the effects of the coronavirus pandemic, with budget deficits on a scale not seen since World War II looking likely.

But the only thing worse for the public debt outlook would be if it didn’t. That’s why a broad range of economic analysts — including even many fiscal conservatives who generally view high public debt as a long-term threat — support aggressive action.

The very large deficits on the way in 2020 are more likely to leave the United States in a better fiscal situation for the years ahead than an alternative in which the government is more tightfisted but fails to prevent the widespread collapse of American businesses or help workers in desperate financial straits.

The coronavirus pandemic has created an immediate need for wealthy benefactors to fund nonprofit organizations that support people in health or economic distress.

More than a dozen philanthropists, including Connie and Steven Ballmer and Michael Bloomberg, offered tips on how to make the most of charitable giving in a time of crisis to ensure donations have the biggest impact.

Let someone else do the vetting. Give to established funds that act as clearinghouses to distribute donations. They have the experience and knowledge to mobilize quickly in a crisis.

Double down on regular charities. Money is rushing into coronavirus-related charities, but most other nonprofit groups are lacking in funds, too. Most have canceled their spring fund-raising galas, which can account for a significant part of their annual budgets.

Speed up long-term giving plans. Some of the largest gifts are made over several years. Now is the time to accelerate those donations.

  • The food distribution company Sysco said on Friday that some of its employees who have been furloughed because of the coronavirus will have the option to work at Kroger locations for the next 30 days. Like many grocery stores, Kroger has seen a surge in demand over the last few week as panic-shopping customers have filled their shopping carts with shelf-stable supplies.

  • Walt Disney World in Florida and Disneyland in California will remain closed “until further notice,” Disney said on Friday. Tens of thousands of hourly workers at the parks will be paid through April 18. NBCUniversal, which operates Universal Studios theme parks, said earlier this week that its domestic properties would stay closed until at least April 19.

  • L Brands, the owner of Bath & Body Works and Victoria’s Secret, said on Friday that it would furlough most store associates “plus those who are not currently working to support the online businesses or who cannot work from home” starting April 5. Associates will receive pay and benefits through April 4. Senior executives will also take a pay cut.

  • The coronavirus could cause job cuts of more than one million workers in the global oil field services industry, according to a forecast from Rystad Energy. The Norway-based consulting firm estimated that the industry employs more than five million people, including drillers, engineers and technicians, and that firms will cut people because of plummeting demand, low prices for oil and safety reasons.

  • The average national price for gasoline fell on Friday to a penny under $2 a gallon for the first time since March 2016, according to GasBuddy, the travel and navigation app. Gasoline prices have been falling steadily since late February as the coronavirus outbreak has curtailed business and leisure driving.

Reporting was contributed by Ben Casselman, Sapna Maheshwari, Stanley Reed, Clifford Krauss, David E. Sanger, Niraj Chokshi, Natasha Singer, David Streitfeld, Daisuke Wakabayashi, Mary Williams Walsh, Vindu Goel, Amie Tsang, Carlos Tejada, Kevin Granville and Daniel Victor.

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Hong Kong Stocks See Relief Gains; Dollar Slips: Markets Wrap

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(Bloomberg) — Stocks in Asia nudged higher, with Hong Kong jumping at the open after U.S. President Donald Trump on Friday stopped short of specifying tough sanctions over China’s new national security law for Hong Kong.

The dollar retreated. Hong Kong’s Hang Seng saw early gains of over 3%, while Tokyo, Seoul, Sydney and Shanghai saw more modest moves. U.S. stock futures erased earlier declines as investors weighed the violent protests in some American cities that have stoked concerns about a reacceleration in infection rates and a damper on the economic recovery. Crude oil fell.

The escalation in tensions between the U.S. and China last month had threatened to derail a recovery in global equities. While the U.S. president’s speech Friday was heated in rhetoric, it lacked specifics around measures that would directly affect Beijing.

“President Trump’s response on Friday was pretty muted and far less disruptive than markets had feared,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney.

The U.S. president also promised sanctions against Chinese and Hong Kong officials “directly or indirectly involved” in eroding Hong Kong’s autonomy but didn’t identify individuals. The administration hasn’t yet decided under what authority it would implement that action, according to a person familiar with the matter.

“The impact is likely to be limited and more symbolic while the financial sector is unlikely to be affected,” Sean Darby, Jefferies’ global equity strategist in Hong Kong, wrote in a research note. “We are not too surprised by the move and don’t expect the Hong Kong financial markets to be either.”

Here are some key events coming up:

Australia’s central bank is expected to keep its main policy programs unchanged on Tuesday. So too is the case for Canada, which has options to add stimulus but will probably stand pat on Wednesday to allow more time to evaluate the progress of policy action.In Europe, the ECB is expected to top up its rescue program with an additional 500 billion euros of asset purchases. Anything less than an expansion at Thursday’s meeting would be a big shock, Bloomberg Economics said.The U.S. labor market report on Friday will probably show American unemployment soared to 19.6% in May, the highest since the 1930s.

These are the main moves in markets:

Stocks

Futures on the S&P 500 Index rose 0.1% as of 10:50 a.m. in Tokyo. The index climbed 0.5% on Friday.Japan’s Topix index rose 0.5%.Hong Kong’s Hang Seng advanced 3.4%.South Korea’s Kospi index rose 1.3%.Australia’s S&P/ASX 200 Index gained 0.7%.Euro Stoxx 50 futures advanced 1.3%.

Currencies

The yen rose 0.1% to 107.68 per dollar.The euro bought $1.1135, up 0.3%.The offshore yuan rose 0.1% to 7.1263 per dollar.The Australian dollar climbed 0.9% to 67.27 U.S. cents.

Bonds

The yield on 10-year Treasuries rose one basis point to 0.66%.Australia’s 10-year yield was at 0.90%, up about one basis point.

Commodities

West Texas Intermediate crude fell 0.6% to $35.27 a barrel.Gold rose 0.4% to $1,737.21.

For more articles like this, please visit us at bloomberg.com

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©2020 Bloomberg L.P.

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The Villages’ policy on face masks presents a financial risk

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Scott Fenstermaker

Villages-news.com has reported on the new Recreation Department policy of not requiring masks for situations in recreation centers where social distancing is not feasible. In fact, the new policy has just turned the task of checking Villager ID’s into a potential suicide mission for employees.

Furthermore, if the staff, themselves, don’t wear masks, a sick, maskless ID checker could infect hundreds, and indirectly, thousands of Villagers. While this potential death and suffering has been discussed, at length, on this site, what has not appeared here is a discussion of the financial risk of the new policy.

In addition to the death and suffering that the new policy will likely cause, the new policy could jeopardize the financial solvency of our amenity system. Sick employees (or their survivors) will be filing worker compensation claims. Even more costly, sick Villagers (or their survivors) will be filing lawsuits against the amenity system for negligently not following the recommendation of both the CDC and virtually every other expert in the field.

I won’t get into the merit of such lawsuits (which will depend on the facts), the intricacies of the ownership and administration of the amenity system, or the effectiveness of masks. But do not think for a moment that such worker compensation claims and lawsuits will have no chance of succeeding. For people interested in learning more, here is a link to one of many articles that have appeared on the general subject: https://www.nytimes.com/2020/04/28/business/businesses-coronavirus-liability.html For more, Google: “COVID-19 business liability”.

Scott Fenstermaker is a resident of the Village of Winifred.

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Pandemic-related restaurant closures take an emotional and financial toll

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Michael Raviele agonized for hours over how to break the news to his loyal customers before finally announcing at 4:30 a.m. on May 15 that he was closing Il Gatto Nero, the Italian restaurant his father first opened some six decades prior.

“I did that road for 18 years — up and down, every single day,” said the man with a tattoo of the restaurant’s logo on his arm. “I worked there every single day.”

Restaurants across Canada — from local institutions to newer spots hustling to establish themselves — have closed permanently in recent weeks as the COVID-19 pandemic ravaged an industry already plagued by razor-thin margins. Their owners face not only the emotional loss of their business, but also often large debt, little savings and an uncertain future.

Il Gatto Nero started as an Italian social club featuring pool tables and espresso more than 60 years ago. Raviele joined the business in the early 90s and slowly added to the club’s repertoire with a pizza oven, sandwiches and other tweaks.

The club moved to Toronto’s College Street about 18 years ago. At the new location, they saw a lot of success — like when Italy won the FIFA World Cup in 2006 — as well as some down times — like the 2008 recession — that prompted Raviele and his father to dip into personal savings to keep the restaurant afloat. Raviele invested more money into the business in 2014 for a renovation and expanded to a second location, a small cafe in Etobicoke, in October 2019.

When COVID-19 hit and government ordered dining rooms to close, Raviele attempted to shift to take away, but eventually stopped. Bills piled up from utility companies.

“I obviously incurred some debt and debt that wasn’t there,” he said.

But uncertainty over the future of dining was the final nail in Il Gatto Nero’s coffin.

Raviele speculated he might be required to remove the restaurant’s 10 bar seats and slash his 65-seat capacity in half to comply with pending physical distancing rules, which would cripple his business.

“I don’t see a future for my business or for my family,” he said. “The model for opening any restaurant is based on feeding capacity versus space, and how many people can you do over the course of a night… I mean, if you have one bad weekend, it could be disastrous for many small business.”

He plans to focus on the small espresso bar, add a pizza oven and hustle to keep that business going, which he said he invested his second life into.

“I’m angry because I wanted to do something good and now the possibility of losing both is always there.”

Mohammed Bin Yahya, co-founder and chief executive at Plentea, found the coronavirus to be “just like the knock out punch” for his Toronto tea bar.

Before the pandemic, the company was struggling to pay some $5,000 in rent. When they shifted to takeaway to abide by health regulations amid the pandemic, foot traffic dropped dramatically.

The tea shop, which Bin Yahya opened in 2015 with dreams of growing to multiple locations, will close at the end of the month.

“The numbers. Straight up, the numbers don’t lie,” he said.

The company had to pay penalties when closing some of their accounts with cleaning companies, internet and phone providers, and others, he said.

“We are in debt,” he said, estimating they’ll owe some $40,000 in the end.

For now, he’s trying to minimize his expenses, and said he may have to find a side job and move in with family to help pay back the loans.

But he’s keeping the dream alive. Plentea will continue selling tea online, he said, and — for now — he’ll keep the equipment in storage with the hopes of opening again.

With nearly four decades in the food industry, 77-year-old Frances Wood’s retirement plan relied heavily on the Cajun-and-Creole food restaurant she co-owns, Southern Accent in Toronto. 

After 34 years in one location, Wood dipped into her nest egg to help cover a move to a new spot about three years ago. It took some time to build up a new customer base and Wood noticed in recent years, lucky restaurants made 10 per cent in profit.

Still, at the start of this year, she started seeing “the light at the end of the tunnel” in making the new location work.

She debated selling the restaurant after her five-year lease ended. But with about one-and-a-half years to go, COVID-19 hit.

Southern Accent also attempted take-away and delivery, but found with high delivery app fees, it was losing money each day it stayed open.

Wood and her co-owner decided to close permanently in April and have about $60,000 in loans and bills to pay back between them.

In what Wood called “a miracle,” their landlord released them from their roughly $10,000 monthly lease early, Wood said.

“I don’t know what we would have done. We would have to go personally bankrupt, I guess” had that not happened, she said.

The next phase of the septuagenarian’s life “doesn’t look very good.” Wood didn’t draw a salary for the past several years, but the restaurant did pay some of her expenses. She collects Old Age Security, the Canada Pension Plan and has some personal savings, but that hardly covers her monthly expenses.

“My livelihood, what I was expecting to have at the end of 37 years in the restaurant business was some money from the restaurant when I sold it to help with my senior years.”

She planned to sell the name and recipes, and help set the buyer up for success. She even kept the restaurant’s 1940s bar in case a buyer emerges. It’s tucked away in the garage.

Still, she considers herself lucky all things considered.

“I think, ‘Okay, I’m lucky. I have my health.’”

This report by The Canadian Press was first published May 31, 2020.

Aleksandra Sagan, The Canadian Press



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