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China’s international flight suspensions leave travellers stranded, hurt businesses

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When Dwight Law’s father died in November, the Shanghai-based U.S. expat flew back to Kansas, leaving his wife and dog behind in China while he attended to matters relating to his father’s death.

Law, who runs an architecture and design firm, has lived in Shanghai for 20 years and had expected to return last week.

But with dozens of flights between China and the United States suspended by Chinese authorities because of passengers testing positive for COVID-19 on arrival, finding a flight back even in February is proving near-impossible and posing a threat to Law’s company.

“Now with no flights scheduled, I am currently locked out of China, away from my wife and family and not able to attend to business,” Law said. “I have 50 employees in China. Without my presence, the business will suffer and so will the livelihoods of each employee.”

Even before the latest flight cancellations, international capacity to and from China was running at just 2% of pre-COVID levels as the country sticks to a strict zero-COVID policy of stamping out all cases while other parts of world open up.

The zero-COVID mentality is likely to stay for most of 2022, Bank of America Securities analysts said in a note on Tuesday, in bad news for the 845,000 foreign passport holders in China, a number already reduced since the start of the coronavirus pandemic.

China’s aviation regulator in January alone cancelled 143 return flights as the highly transmissible Omicron variant spreads across the globe, according to a report from Chinese aviation data provider flight master last Friday.

That was the most in a month since it introduced a policy of suspending flights when positive cases were found in June 2020.

The flight suspensions, which also include some services to Europe and other parts of Asia, are one of the biggest challenges faced by companies doing business in China, said a spokesperson for the Europe Chamber of Commerce in China.

“The recent cancellations send a clear message that China will not deviate from its current strategy,” the spokesperson said, referring to the zero-COVID policy.

 

Graphic: China’s international flight suspensions – https://graphics.reuters.com/CHINA-AVIATION/USA-FLIGHTS/lbvgnjerbpq/chart.png

 

China now requires passengers to have started costly COVID tests seven days before boarding in the departure city of their direct flight into China. That creates a headache for travellers like Law who are not based in U.S. cities with direct flights.

Tough travel policies in transit hubs for U.S.-China travellers like Taiwan, Korea and Japan also effectively rule out less costly indirect flights.

A Google Flights search by Reuters shows no flights from San Francisco to Shanghai are available for booking until late March at any price.

Jing Quan, minister of the Chinese embassy in the United States, said Beijing is working closely with the U.S. State Department to strike a balance on the number of commercial flights to China. Charter flights for Olympics athletes have not been affected, he said.

There has also been less of an impact on cargo. China Southern Airlines plans to fly its A380 superjumbos with cargo only from Los Angeles to Guangzhou, while carrying passengers in the other direction, it told the U.S. Department of Transportation (DOT).

Hainan Airlines has received U.S. approvals for cargo-only flights using passenger planes and China Eastern is seeking a similar nod, according to DOT filings.

While that is a comfort to exporters, it provides little solace to stranded travellers like Law.

“COVID will not go away I am afraid. It is here to stay,” he said. “What’s China going to do, close its borders for the next five or 10 years while the world outside of China learns to manage, live and gain herd immunity? It’s nuts.”

 

(Reporting by Stella Qiu in Beijing and Jamie Freed in Sydney; additional reporting by Martin Pollard in Shanghai; Editing by Raju Gopalakrishnan)

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Bankers buck gloomy trend by forecasting growth amid concerns about economic slowdown – The Globe and Mail

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Bank of Montreal reported a modest increase in second-quarter profit on Wednesday.Nathan Denette/The Canadian Press

Top executives at two major Canadian banks predict they can keep adding new loans and increasing profits in the coming quarters, offering an optimistic outlook for the financial sector that is at odds with economists’ increasingly gloomy forecasts of a downturn ahead.

Bank of Nova Scotia BNS-T and Bank of Montreal BMO-T both reported higher second-quarter profits on Wednesday, underpinned by robust demand for personal and commercial loans as well as lower loan loss reserves than analysts anticipated. Profits increased 12 per cent compared with those in the same quarter a year earlier at Scotiabank, and 4 per cent after adjustments at BMO, as rising interest rates helped increase margins on loans.

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That marked a strong start to the major banks’ earnings season, but analysts cautioned those results, which cover the three months ended April 30, already look distant in the rear-view mirror. They pressed senior executives about how the banks are bracing for a deteriorating economic environment marked by war in Ukraine, high inflation, rapid central bank rate hikes and the increasing prospect of a recession that could curb customers’ appetite to borrow.

Bank chief executives and finance chiefs stressed they still expect economies to grow as COVID-19-related headwinds ease. They noted that most households are in good financial health, as many stashed away extra savings during the pandemic, while unemployment remains low in a tight labour market. Businesses are borrowing to bulk up inventories as demand for products outstrips supply, and some sectors, such as commodities, are booming.

“The macroeconomic backdrop for our key geographies remains positive,” said Scotiabank chief executive Brian Porter, on a conference call with analysts on Wednesday. “Despite the macroeconomic and geopolitical uncertainties in recent months, we are encouraged by the resilience of our businesses.”

The mood among economists is much more downbeat as the threat of a global recession mounts, even though few are predicting that is highly likely. The tone has also been sombre as business leaders and policy makers rub elbows at the World Economic Forum’s gathering in Davos. And the former governor of Canada’s central bank, Stephen Poloz, recently predicted the country is heading for a period of stagflation – a mix of slow growth and high inflation.

Yet increases in banks’ loan balances have been broad-based, and BMO chief financial officer Tayfun Tuzun said in an interview that he still expects “high-single-digit loan growth” year over year – the same guidance he gave three months ago.

“All in all our clients are telling us that they’re still interested in investing in their businesses,” said Mr. Tuzun. He added that there are “a lot of good indicators for what’s to come” for the bank.

A particular bright spot is commercial lending in Canada, where loan balances rose 13 per cent at BMO and 19 per cent at Scotiabank in the second quarter. Scotiabank’s chief financial officer, Raj Viswanthan, said corporate clients and consumers have “very strong” balance sheets at the moment, “so we see a lot of pent up demand.”

Mortgage balances rose 16 per cent year over year at Scotiabank, benefitting from the tail end of a red-hot streak for housing markets.Chris Young/The Canadian Press

The disruptions caused by COVID-19 and war in Ukraine have also increased demand in key areas, Mr. Viswanathan said. “It’s supply chain issues, it’s the rise of e-commerce, it’s the demand for food.”

Bankers aren’t blind to the gathering economic storm clouds. BMO chief risk officer Pat Cronin said his bank is giving greater weight to a hypothetical scenario that predicts the impact of a severe downturn, and has lowered expectations for parts of its forecast it considers the base case.

When U.S. banking giant JPMorgan Chase & Co. hosted an investor day this week, chief executive Jamie Dimon summed up the outlook as, “strong economy, big storm clouds,” saying those clouds “may dissipate. If it was a hurricane, I would tell you that.” But he acknowledged “they may not dissipate, so we’re not wishful thinkers.”

The Bank of Canada published a paper this month that suggests the country’s banks are strong enough and well capitalized to withstand even a severe, prolonged downturn in which unemployment peaks at 13.5 per cent and house prices fall 29 per cent.

Gabriel Dechaine, an analyst at National Bank Financial Inc., wrote to clients that, “in a normal environment, such optimism would be met with positive expectations for stock price appreciation,” but he remains “more cautious … as long as the disruptive forces of inflation that heighten recession expectations persist.”

In the fiscal second quarter, Scotiabank earned $2.75-billion, or $2.16 per share, compared with $2.46-billion, or $1.88 per share, in the same quarter last year. Adjusted to exclude certain items, Scotiabank said it earned $2.18 per share, well above the consensus estimate of $1.98 per share among analysts, according to Refinitiv.

In the same quarter, BMO earned $4.76-billion, or $7.13 per share, compared with $1.3-billion, or $1.91 per share, a year earlier. After adjusting to exclude one-time items that include a $2.6-billion gain on a financial instrument tied to BMO’s US$16.3-billion acquisition of California-based Bank of the West, profit was $2.187-billion, or $3.23 per share. On average, analysts expected $3.24 per share on an adjusted basis.

Former Bank of Canada governor Stephen Poloz recently predicted the country is heading for a period of stagflation – a mix of slow growth and high inflation.Sean Kilpatrick/The Canadian Press

Both banks raised their quarterly dividends, by 3 cents per share to $1.03 at Scotiabank, and by 6 cents per share to $1.39 at BMO.

Two key factors that have supported banks’ rising profits through much of the pandemic – rapidly rising mortgage balances and unusually low losses from defaulting loans – appear to have reached peaks, and are set to return to more normal levels.

Mortgage balances rose 16 per cent year over year at Scotiabank and 8 per cent at BMO, benefitting from the tail end of a red-hot streak for housing markets. But that yearly growth rate is “slowly slowing,” said Dan Rees, Scotiabank’s head of Canadian banking, and is likely to revert to a pace in the range of 6 to 9 per cent in the coming quarters even as some economists are predicting housing prices will fall.

Provisions for credit losses – the funds banks set aside to cover losses in case loans default – “reached the floor this quarter,” said Phil Thomas, Scotiabank’s chief risk officer. He and his BMO counterpart, Mr. Cronin, expect loan loss reserves will gradually drift higher. But with write-offs and delinquencies still very low, neither risk officer is predicting a spike in loan losses, even though it will rapidly get more expensive for consumers to service their debts.

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World's fastest passenger jet goes supersonic in tests – CNN

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YYJ delays: RCMP called to Victoria International Airport | CTV News – CTV News VI

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Travellers who have a flight planned at Victoria International Airport (YYJ) on Tuesday are being warned of travel disruptions due to police activity.

Sidney/North Saanich RCMP say the airport was closed after a suspicious package was discovered around 1:30 p.m.

Cpl. Andres Sanchez of the Sidney/North Saanich RCMP says that the airport was closed to all incoming and outgoing flights “out of an abundance of caution.”

He said the airport will remain closed until police “can be sure it is safe for the public to travel.”

‘INCENDIARY DEVICE’

“The package was located at the departures/check-in [area], so it was brought in by a passenger,” said Sanchez Tuesday afternoon.

The package was flagged by Canadian Air Transport Security Authority (CATSA) staff who spotted what appeared to be an “incendiary device” within a bag, he said.

“CATSA employees performed the checks that you normally do at a departure situation at the airport,” he said.

“They scanned the bag and found there were items inside that could be of a dangerous nature and at that point police were called to the scene to investigate further,” he said.

Mounties say a specialized RCMP team has been called in from the mainland to remove the bag from the premises and to “ensure the package is dealt with in a safe manner.”

PASSENGER UNDER INVESTIGATION

Sanchez says the individual who brought the bag is under investigation, but it’s unclear if any criminal charges will be recommended yet.

“Again, because we don’t know what’s in that bag we can’t speak further on that,” he said.

In the meantime, people are asked to avoid the airport for the next few hours, according to RCMP spokesperson Sgt. Chris Manseau.

Around 4:20 p.m., the airport said all scheduled commercial flights for the next two hours were cancelled.

The airport is working with airlines to keep them updated on the status of flights.

Police say they hope the airport will be able to reopen Tuesday night, but it’s uncertain how long the investigation at the property will take.

Travellers should check the YYJ website for the latest updates on their flights, according to the airport. 

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