EasyJet grounds entire fleet as coronavirus pushes airlines to brink

LONDON (Reuters) – British low cost airline easyJet (EZJ.L) said it had grounded its entire fleet of over 330 aircraft and had no visibility on when it could restart flights, highlighting the heavy strain on airlines trying to survive to fly again after coronavirus.

EasyJet also said on Monday that it would furlough its 4,000 UK-based cabin crew for two months, meaning they will not work from April 1 but will be paid 80% of their average pay under a government job retention scheme.

The health emergency has brought European air travel to a standstill, meaning airlines have no revenues and face a battle to survive.

Some UK airlines had been hoping for an airline specific state aid package but Britain told them last week that it will only consider stepping in once they had exhausted all other possible options, such as raising capital from existing investors.

EasyJet said on Monday it was focused on short term liquidity, including removing cost from the business and working with suppliers to defer and reduce payments where possible, including on aircraft expenditure, and was in ongoing discussions with liquidity providers.

The airline said that grounding its aircraft removed significant cost.

“We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus,” easyJet’s CEO Johan Lundgren said in a statement.

Separately, small regional UK carrier Loganair, which flies between Scottish islands and the mainland, said on Monday that it would approach the government for financial help this week, having already tried to ask its owners for help.

“I do think, that like the vast majority of UK airlines, we will be going back to take up that invite for further conversation with the Treasury in the coming days because we have to,” Loganair CEO Jonathan Hinkles told BBC radio.

EasyJet said in its statement it had struck the deal to furlough cabin crew with Unite, the union. Asked about a potential similar deal with its pilots, easyJet said it continued to talk to BALPA, the UK pilots union.

Virgin Atlantic has already requested state aid, asking for a package of commercial loans and guarantees worth hundreds of millions of pounds, according to the Financial Times.

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EasyJet grounds fleet, furloughs cabin crew for two months

LONDON (Reuters) – British low cost airline easyJet (EZJ.L) said it had grounded its entire fleet and reached a deal with its cabin crew for employees to be furloughed for two months under a government job retention scheme.

The airline said on Monday that its entire fleet of over 300 aircraft was parked up and there was no certainty for the date of restarting commercial flights.

EasyJet said that under a deal with Unite, the union which represents its cabin crew, they would not work for two months from April 1 and will be paid 80% of their average pay under the government job retention scheme.

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Trump's attack on GM over ventilators quickly turns to praise

WASHINGTON (Reuters) – President Donald Trump, who excoriated General Motors Co on Friday and invoked emergency powers to compel the production of badly needed ventilators to tackle the coronavirus pandemic, has abruptly shifted gears to praise the automaker.

“General Motors is doing a fantastic job. I don’t think we need to worry about General Motors,” Trump said Sunday, speaking highly of the company in two appearances.

“They really seem to be working very, very hard. I think I’m getting very good reports about General Motors.”

Trump, who has been on the defensive for not moving faster to compel the production of medical equipment, invoked the Defense Production Act (DPA) for the first time on Friday, saying GM was wasting time in negotiations. GM had announced earlier on Friday, however, that it would begin quickly building ventilators.

On Sunday, GM vowed to move forward and released photos of its efforts to build ventilators at its Kokomo, Indiana plant.

GM’s manufacturing chief, Gerald Johnson, told Reuters the company aims to produce 10,000 ventilators a month by summer.

“No later than mid-April we expect to be up and running ventilators,” Johnson said, noting the ventilators will need U.S. regulatory approval, significant testing and that the company must train over 1,000 workers to assemble them.

GM has been working with ventilator firm Ventec Life Systems, numerous auto suppliers and other ventilator firms as officials warn the United States may need tens of thousands of additional ventilators.

“We’re unwavering in our focus to get this done,” Johnson said.

In any earlier tweet on Friday before GM’s announcement, Trump accused the automaker of wanting top dollar for its ventilators.

A GM spokesman said the company is doing the project “at cost” and will not make a profit.

Johnson said the automaker is spending tens of millions on retooling costs and that if supplier retooling costs are factored in, total retooling costs were in the hundreds of millions of dollars.

GM’s ventilator efforts first came to light on March 18 when White House economic adviser Larry Kudlow disclosed he had spoken to GM Chief Executive Mary Barra about the idea. Barra spoke to Kudlow again on Friday after Trump’s criticism, a person briefed on the matter said.

Tony Fratto, a former deputy press secretary under President George W. Bush, tweeted on Friday: “you have to think if GM HADN’T stepped up to TRY to make ventilators no one would be trying to force them to make them. No one’s banging on other random companies today.”

Other automakers have said they are working to produce ventilators, masks and other medical equipment. Ford Motor Co said Friday it was moving as fast as it could to gear up its ventilator manufacturing efforts. Toyota Motor Corp is working with “at least two companies that produce ventilators and respirators to help increase their capacity.”

GM will also begin producing surgical masks at a plant in Michigan this week and expects to produce 50,000 a day by mid-April.

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Asia shares suffer fresh spill as virus damage deepens

SYDNEY (Reuters) – Asian shares slid on Monday and oil prices took another tumble as fears mounted that the global shutdown for the coronavirus could last for months, doing untold harm to economies.

“We continue to mark down 1H20 global GDP forecasts as our assessment of both the global pandemic’s reach and the damage related to necessary containment policies has increased,” said JPMorgan economist Bruce Kasman.

They now predict global GDP could fall at a 10.5% annualized rate in the first half of the year.

There was much uncertainty about whether funds would have to buy or sell for month and quarter end to meet their benchmarks, many of which would have been thrown out of whack by the wild market swings seen over March.

E-Mini futures for the S&P 500 skidded 1.2% right from the bell, and Japan’s Nikkei 3.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%, while South Korea shed 2.7%.

Central banks have mounted an all-out effort to bolster activity with rate cuts and massive asset-buying campaigns, which has at least eased liquidity strains in markets.

Canada’s central bank on Friday surprised many with an emergency rate cut to 0.25% and a program of quantitative easing, while New Zealand policy makers on Monday launched a loan program for corporates to meet liquidity needs.

Rodrigo Catril, a senior FX strategist at NAB, said the main question for markets was whether all the stimulus would be enough to help the global economy withstand the shock.

“To answer this question, one needs to know the magnitude¬†of the containment measures and for how long they will be implemented,” he added. “This is the big unknown and it suggests markets are likely to remain volatile until this uncertainty is resolved.”

It was not encouraging, then, that British authorities were warning lockdown measures could last months.

While President Donald Trump had talked about reopening the U.S. economy for Easter, on Sunday he extended guidelines for social restrictions to April 30.

Japan on Monday expanded its entry ban to include citizens traveling from the United States, China, South Korea and most of Europe.

DOLLAR NOT DONE YET

Bond investors looked to be bracing for a long haul with yields at the very short end of the Treasury curve turning negative and those on 10-year notes dropping a steep 26 basis points last week to last stand at 0.66%.

That drop has combined with efforts by the Federal Reserve to pump more U.S. dollars into markets, and dragged the currency off recent highs.

Indeed, the dollar suffered its biggest weekly decline in more than a decade last week.

Against the yen, the dollar was pinned at 107.44, well off the recent high at 111.71. The euro was firm at $1.1126 after rallying more than 4% last week.

“Ultimately, we expect the USD will soon reassert itself as one of the strongest currencies,” argued analysts at CBA, noting the dollar’s role as the world’s reserve currency made it a countercyclical hedge for investors.

“This means the dollar can rise because of the deteriorating global economic outlook, irrespective of the high likelihood the U.S. is also in recession.”

For now, the dollar’s retreat provided a fillip for gold, which was up 0.3% on Monday at $1,622.50 an ounce.

But it has been little help for oil as Saudi Arabia and Russia show no signs of backing down in their price war.

Brent crude futures lost $1.45 to $23.48 a barrel, while U.S. crude fell 91 cents to $20.60.

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Exclusive: Coronavirus crisis could destroy far more than 25 million jobs – ILO official

GENEVA (Reuters) – The number of jobs lost around the world due to the coronavirus crisis could be “far higher” than the 25 million the International Labour Organization (ILO) estimated just a week ago, a senior ILO official said on Thursday.

The United Nations agency said on March 18 that, based on different scenarios for the impact of the pandemic on global economic growth, estimated the global ranks of jobless would rise by between 5.3 million and 24.7 million.

However, Sangheon Lee, director of the ILO’s employment policy department, told Reuters in Geneva on Thursday that the scale of temporary unemployment, lay-offs and the number of unemployment benefit claims were far higher than first expected.

“We are trying to factor in the temporary massive shock into our estimate modeling. The magnitude of fluctuation is¬†much bigger than expected,” he said.

“We need to make downward adjustment, the projection will be much bigger, far higher than the 25 million we estimated.”

ILO’s next forecast is expected to be issued next week.

By comparison, the 2008/9 global financial crisis increased global unemployment by 22 million.

Figures released on Thursday showed the number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week.

Strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the longest employment boom in U.S. history.

Data is also pointing to a sharp jump in job losses in Western Europe despite government spending packages that include support for companies to keep workers on.

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Ackman says Pershing Square no longer has hedges on stocks

(Reuters) – William Ackman’s Pershing Square Capital Management no longer has hedges on its stock portfolio, but still has some cash to invest if equities decline further as the United States battles the coronavirus outbreak, the billionaire investor said on Saturday.

Pershing Square earned roughly $2.6 billion by hedging its stock portfolio in early March through credit protection on investment grade and high yield credit indices. Much of the money has been reinvested in stocks the firm already owns.

“Today, we are unhedged, and we no longer own any insurance”, Ackman said in a Twitter thread bit.ly/2xsAEFA, adding that he continues to believe the sooner the entire United States is shut down, the more lives will be saved and the sooner the economy will recover.

“Every day we wait, we prolong our collective misery”, Ackman said.

He told CNBC in an interview on March 18 that he thought the best approach to killing off the coronavirus was to close the borders and shut down the entire country, barring essential services, for 30 days.

The S&P 500 .SPX and the Dow Jones Industrial Average .DJI fell sharply after the interview aired.

He later said the interview was not designed to enable his firm to profit from any trades, dismissing some media speculation that he had purposely pushed markets lower to make money off his hedges.

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'This is a war and we want to survive,' says Polish retailer

WARSAW (Reuters) – Polish fashion retailers may not survive the coronavirus crisis if the government, banks and shopping mall owners do not help them bear the costs, a lobby group said on Friday, as Poland closed non-essential shops to stop the spread of the virus.

A new lobby group set up by the retail industry said it has asked the state to help pay out salaries, shopping mall owners to stop taking rents and banks to suspend loan payments. The group says it represents 100 companies and that 200,000 jobs directly depend on their survival.

“This is not even a crisis, it is difficult to name it. It is unlike anything that has happened before….This is a war and we want to survive. I do not care what the financial results will be,” Marek Piechocki, Chief Executive at Poland’s biggest fashion retailer LPP told Rzeczpospolita daily.

He said LPP, a home-grown rival to the likes of H&M and Inditex, had enough resources to continue paying salaries for the next 4-6 months. Before the crisis it had hoped to reach revenue of 10.5 billion zlotys ($2.73 billion) this year.

Tomasz Ciapala, the CEO and majority owner of Lancerto, a men’s suit maker, said that many workers in the industry are paralyzed with fear about their jobs.

“Our union comprises mostly family businesses. Most of our employees, who have been with us for a long time, are scared. This has wide social effects. Mental illness, depression, suicides – these are all side effects of joblessness,” Ciapala told a videconference on Friday.

Pawel Kaplon, a partner at Paan Capital private equity fund, has compared the functioning of fashion retailers to a large-scale restaurant which has hired suppliers and staff and bought products to prepare dishes for the next 100 days. And now has to shut down.

“We have done the cooking for the next half a year, we have payments ahead and we have nowhere to get the cash flow from,” Kaplon told the same conference.

Poland’s parliament is expected to adopt on Friday a package of legislation designed to help the economy and various industries survive the coronavirus crisis.

“The shopping malls, banks and us should participate in these costs together …as in the end each of us will win when this tsunami is over,” said Igor Klaja, the founder of popular sports wear brand 4F.

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Bank of America capital levels allow operational focus during crisis: CEO

(Reuters) – Bank of America Corp (BAC.N) is better positioned to focus on operations rather than financial risk during the coronavirus outbreak, thanks to regulatory safeguards put in place after the financial crisis in 2008, Chief Executive Brian Moynihan said on Friday.

“What’s different this time is clearly our capital liquidity,” Moynihan said in a CNBC interview. “Everything that changed has led the banking industry be in a great condition to service clients continuously for the last few weeks as this thing has hit.”

The second largest U.S. bank by assets has extended more than $50 billion in loans this so far month to commercial clients looking for cash to survive the coronavirus recession. The retail division has fielded more than 150,000 requests to defer payments on mortgages and auto loans. Many requests are managed digitally, he said.

The bank has also been hiring and reallocating employees to the consumer bank to help manage a surge in requests related to the pandemic, according to a memo seen by Reuters. So far this month the Charlotte-based bank has hired 2,000 people and shifted 3,000 internal employees to support its consumer bank.

Bank of America followed its peers like Morgan Stanley (MS.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) in reassuring employees that they would not be immediately hit by layoffs as a result of the pandemic. In the memo sent to employees on Friday, the bank said it “will not do layoffs or job reductions in 2020 due to coronavirus impacts.”

“We don’t want our teammates to worry about their jobs during a time like this,” Moynihan said.

(Corrects second-last paragraph to reflect that Wells Fargo did not suspend layoffs through 2020)

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U.S. consumer spending increases moderately in February

WASHINGTON (Reuters) – U.S. consumer spending rose moderately in February and momentum is set to fade rapidly in the coming months, with the coronavirus pandemic upending life for Americans.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2% last month as households spent more on electricity and gas, offsetting decreases in outlays on motor vehicles and parts as well as recreational goods.

Last month’s increase matched the gain in January and was in line with economists’ expectations.

The United States now has the most coronavirus cases in the world, with more than 82,000. Governors in more than half of the nation’s 50 states have ordered residents to stay mostly indoors, affecting more than 100 million people.

Restaurants and bars have been shuttered and airline travel severely curtailed, which economists say will greatly offset any boost to consumer spending from grocery purchases following a wave of panic buying as Americans prepared to hunker down.

When adjusted for inflation, consumer spending edged up 0.1% in February, matching January’s rise.

With “social distancing” measures to contain the virus throwing millions out of work and severely curtailing discretionary spending, economists are predicting a moderate decline in consumer spending in the first quarter, which would give way to a sharper contraction in the second quarter.

Consumer spending grew at an annualized rate of 1.8% in the fourth quarter, slowing from the brisk 3.2% pace logged in the July-September period.

Labor market strength, which was driving a steady pace of wage growth, was the economy’s main pillar of support. In February, personal income increased 0.6% after rising by the same margin in January.

Income was boosted by higher wages and government payments to farmers caught in the U.S.-China trade war.

Inflation remained muted in February. Consumer prices as measured by the personal consumption expenditures (PCE) price index edged up 0.1% after rising by the same margin in January. In the 12 months through February, the PCE price index rose 1.8%, matching the year-on-year gain in January.

Excluding the volatile food and energy components, the PCE price index gained 0.2% in February after nudging up 0.2% in January. That lifted the annual increase in the so-called core PCE price index to 1.8% in February from 1.7% January.

The core PCE index is the Fed’s preferred inflation measure. It missed the central bank’s 2% target in 2019.

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U.S. weekly jobless claims soar to record 3.28 million

WASHINGTON (Reuters) – The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the longest employment boom in U.S. history.

The weekly jobless claims report from the Labor Department on Thursday offered the clearest evidence yet of the coronavirus’ devastating impact on the economy, which has forced the Federal Reserve to take extraordinary steps and the U.S. Congress to assemble a record $2 trillion stimulus package.

Economists say the economy is already in recession. Weekly claims are the most timely labor market indicator. With nearly half the country’s population under some form of a lockdown and reports of state employment websites overwhelmed, economists are bracing for further increases in jobless claims.

“With partial lockdowns across the country leading to a sudden stop in economic activity, the U.S. economy will experience the largest economic contraction on record with the most severe surge in unemployment ever,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.

“We expect jobless claims will continue to climb as more economic activity shuts down.”

Initial claims for unemployment benefits rose 3.00 million to a seasonally adjusted 3.28 million in the week ending March 21, eclipsing the previous record of 695,000 set in 1982, the Labor Department said. That also dwarfed the peak of 665,000 in applications during the 2007-2009 recession, during which 8.7 million jobs were lost.

Economists polled by Reuters had forecast claims would rise to 1 million, though estimates were as high as 4 million.

The Labor Department attributed the surge to COVID-19, the respiratory illness caused by the coronavirus. A running tally kept by Johns Hopkins University showed that at least 1,046 people in the country have died from COVID-19.

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“This large increase in unemployment claims was not unexpected, and results from the recognition by Americans across the country that we have had to temporarily halt certain activities in order to defeat the coronavirus,” U.S. Labor Secretary Eugene Scalia said in a statement.

Layoffs were concentrated in the accommodation and food service, health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries.

Mounting job cuts and a sinking economy have prompted President Donald Trump, who is running for re-election in November, to push for businesses to reopen by Easter, which is April 12. With infections and the death toll rising, many health experts, economists and politicians have argued against such a move.

Fed Chair Jerome Powell said on Thursday in an interview on NBC’s “Today” show that the economy “may well be in recession” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen.

Recessions in the United States are called by the National Bureau of Economic Research. The NBER does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in economic activity, spread across the economy and lasting more than a few months.

The economy grew at a 2.1% annualized rate in the fourth quarter, the Commerce Department confirmed in another report on Thursday. The department also reported a 9.1% plunge in the goods trade deficit to $59.9 billion in February, as well as declines in wholesale and retail inventories, as the coronavirus helped to depressed imports.

Stocks on Wall Street were trading higher, with expectations rising that the record jump in unemployment benefits would spur additional fiscal relief. The dollar .DXY fell against a basket of currencies, while prices of U.S. Treasuries rose.

(Graphic: Unemployment benefits claims hit all-time high, here)

PAYROLLS SEEN DECLINING

The pandemic has prompted governors in at least 18 states to order residents to stay mostly indoors. “Non-essential” businesses have also been ordered closed. According to economists, a fifth of the workforce is on some form of lockdown.

The historic fiscal stimulus package, which is now before the U.S. House of Representatives, would increase payments for the unemployed by up to $600 per week per worker, and laid-off workers would get those payments for up to four months. Regular benefits, which typically run out after six months in most states, would be extended for an additional 13 weeks.

Unadjusted claims for California and Washington state, Ohio, New Jersey, Illinois, Texas and Massachusetts increased by more than 100,000 last week. Pennsylvania reported unadjusted claims increased more than 300,000.

Last week’s claims data likely will have no impact on March’s employment report as it falls outside the period during which the government surveyed employers for nonfarm payrolls, which was the week ended March 14.

Still, the unprecedented surge in jobless claims likely signals a record streak of 113 months of U.S. employment growth, dating to October 2010, came to an end this month.

“Jobs will decline in March,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “There are numerous reports of laid-off workers unable to file for unemployment insurance because so many people are trying to file at the same time. Millions of job losses are likely in coming weeks.”

(Graphic: End of a historic jobs boom, here)

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid increased 101,000 to 1.80 million for the week ended March 14, the highest since April 2018.

The so-called continuing claims data covered the period during which the government surveyed households for March’s unemployment rate. Continuing claims increased 110,000 between the February and March survey week, suggesting the unemployment rate will probably rise this month from the current 3.5%.

“We would be amazed if it didn’t exceed 10% by May, if not April,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “The unemployment rate could remain elevated for years.”

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