The coronavirus outbreak is rampaging across the balance sheets of airlines around the world, as countries close borders, people shelter in place, and travel grinds to a halt.
In the United States, carriers are looking to the federal government for immediate assistance to help cushion the blow that the pandemic has delivered to the industry.
Hundreds of thousands of jobs are directly on the line, the US airline trade body – Airlines for America – hassaid, as are millions of other jobs tied to the industry.
The White House is proposing a $50bn bailout in the form of secured loans. “No one can be blamed for this,” President Donald Trump said during a news conference on Wednesday, defending his administration’s plan to save airlines. “We went from full planes to, boom, empty.”
But many are questioning why – after an 11-year economic expansion – US carriers are not in a better financial position to weather the coronavirus storm. And a growing chorus of voices – from unions to politicians – are demanding that any bailout package airlines receive ensures that it is not just shareholders and executives who dictate how the funds are spent.
Others want industry-wide reforms to boot. But some free-market economists say the government needs to focus on the public health crisis first, and that if the airlines cannot compete, they should just be allowed to go bankrupt.
‘Uncharted territory’
An analysis by Bloomberg found that between 2010 and 2019 the biggest US airlines spent 96 percent of the money they had left over after covering expenses and capital expenditures buying back their own stock.
Stock buybacks are heavily criticised because they do nothing to boost productivity and effectively serve as stealth dividends that enrich shareholders and the pay packages of executives who are compensated in part by stock.
As bailout talk intensifies in Washington, the blowback against buybacks is turning decidedly bipartisan.
On Thursday, Trump told reporters he would be “OK” if the $1 trillion-plus stimulus bill under discussion on Capitol Hill bans firms that receive bailouts from using government funds to buy back their own stock or pay executive bonuses.
Earlier this week, Trump’s polar opposite on the political spectrum, self-described democratic socialist, New York Congresswoman Alexandria Ocasio Cortez, also called to prohibit stock buybacks with bailout money.
And preventing airlines from using taxpayer money on such shenanigans is not just a focus for politicians. Airline workers want those restrictions too. And they want any aid package to put the needs of employees front and centre.
Sara Nelson, international president of the Association of Flight Attendants has said that while Congress must protect flight attendants’ paycheques, she believes “any stimulus funds for the aviation industry must come with strict rules”, including maintaining pay and benefits for every worker and “no taxpayer money for CEO bonuses, stock buybacks or dividends”.
Joseph G DePete, international president of the Air Line Pilots Association (ALPA) also told Al Jazeera that legislative or regulatory proposals to stabilise the aviation industry must address labour concerns.
“Airline pilots have already been furloughed as a result of COVID-19,” DePete said in a statement. “More furloughs will surely follow if we fail to address this challenge as partners.”
‘Keep this industry alive’
A 2019 Gallup poll found that 23 percent of Americans have a negative view of airlines. Viral videos like the now infamous 2017 clip of a passenger being dragged off an overbooked United Airlines flight after he refused to give up his seat have only reinforced opinions that airlines put profits before people.
On a global scale, US airlines fare poorly in customer experience rankings. Not a single US carrier managed to crack the top 35 list of the world’s best carriers compiled by Skytrax last year.
Many blame an inherent lack of competition among US airlines following a wave of mergers that has left only a handful of carriers controlling the market.
But analysts say that for all its flaws, the airline industry is still a vital component of the US economy and should not be allowed to go under.
“We need to ensure that our infrastructure is not destroyed by this pandemic,” said Mike Boyd, president of aviation forecaster Boyd Group International. “We must keep this industry alive, and it will die without a bailout,” he told Al Jazeera.
Clifford Winston, an industrial and transportation economist at the Brookings Institution, says a bailout is warranted, but it should only happen if accompanied by major reforms to the aviation sector.
“We went through this during September 11th and the Great Recession when the airlines had trouble,” said Winston. “It’s a familiar theme with this industry.”
“The hope was they’d be able to respond better during a recession, but there are still a lot of inefficiencies,” he told Al Jazeera.
While Winston agrees that the airlines are not responsible for the black swan that is the coronavirus pandemic, he says that opening up US airlines, airport and air traffic control markets would inject some much-needed competition into the industry.
“If they just take this naive approach of transferring funds, [the government] is missing the opportunity to provide broad benefits in the long run,” said Winston, adding that “the real loser is us, the flying public”.
But some economists believe talk of a bailout should wait until the public health crisis of coronavirus is under control.
“Airlines can go into bankruptcy and continue to fly,” said Veronique de Rugy, a senior research fellow at George Mason University’s Mercatus Center. “You can bail out the airlines, but if people aren’t going to fly, it’s not going to make a difference,” she told Al Jazeera.
In the long run though, de Rugy believes airlines could even benefit if the taxpayers do not come to their rescue.
“It’s better to let the airlines go bankrupt and figure things out,” said de Rugy. “Let them become more effective and better fit to serve consumers on the other end.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
