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United Airlines said on Tuesday that it was cutting back on the August flight schedule it announced just last week because travel demand was sliding again as coronavirus cases surged across much of the country.
United management told employees this week that it expected to fly about 35 percent as many flights next month as it did last August, down from the 40 percent it announced a week ago, the airline said in a securities filing released after the market close.
The airline said its flight schedule for the rest of the year was likely to look much like its reconfigured August plan because the recovery would remain choppy. The airline does not expect demand to recover fully until a “widely accepted” treatment or vaccine for the virus is available. United had operated about 12 percent as many flights in June as it did last year and expects to operate about 25 percent as many flights in July compared with the same month last year.
Demand for flights started to fall as the recent increase in cases nationwide — and the associated travel and quarantine restrictions — made flying less appealing, United said. Bookings for upcoming flights at the airline’s Newark hub, for example, had started to recover in the first half of June only to reverse course after Connecticut, New Jersey and New York, said on June 24 they would require travelers visiting from states with rising infection rates to quarantine for 14 days.
The airline also said that it planned to send out legally required notices to workers by mid-July warning of possible layoffs once federal aid to the aviation industry expires at the end of September. Those affected could be notified as soon as next month, United said. — Niraj Chokshi
The Federal Reserve’s top bank regulator warned that the economic outlook remains uncertain and that the financial sector may face more pain as the pandemic wears on, leaving some borrowers short on cash to pay their bills.
“The next phase will inevitably involve an increase in nonperforming loans and provisions as demand falls and some borrowers fail,” Randal K. Quarles, the vice chair for supervision on the Federal Reserve Board of Governors, said in remarks delivered to the Exchequer Club, a Washington-based group focused on economics and finance.
“The corporate sector entered the crisis with high levels of debt and has necessarily borrowed more during the event,” Mr. Quarles said. “And many households are facing bleak employment prospects.”
Mr. Quarles, who is chair of the global Financial Stability Board, also touched on a key vulnerability that the pandemic crisis has exposed: shadow banking, which describes financial companies that are less heavily regulated than traditional banks, such as hedge funds and asset managers.
“As nonbank financial institutions increase their market share, risks have moved outside the banking system,” Mr. Quarles said. “The market turmoil in March underlines the need to better understand the risks in nonbank financial intermediation and reap the benefits of this dynamic part of the financial system without undermining financial stability.”
Mr. Quarles noted that the Financial Stability Board, which advises global regulatory authorities, has established a working group to look at the correct framework for dealing with nonbanks. He said the board’s next evaluation would also examine money market mutual funds, “which were once again front and center” in the March market meltdown. — Jeanna Smialek
Several movie theater chains — including the top three multiplex chains in the country, AMC Theatres, Regal Cinemas and Cinemark — are suing the State of New Jersey for not allowing theaters to reopen along with other businesses at this stage of the pandemic.
Citing the First Amendment, the theater chains, led by the National Association of Movie Theatres, are challenging Gov. Phil Murphy’s order that allows malls, libraries, churches and museums in New Jersey to reopen, but is keeping movie theaters and other entertainment venues closed. The suit suggests that Mr. Murphy’s decision to allow houses of worship to open at 25 percent capacity, with a maximum of 100 people, should be applicable to theaters, too.
New Jersey allowed churches to reopen at the end of June, subject to people covering their faces and adhering to social distancing guidelines. On July 2, libraries, museums, aquariums and public and private social clubs were permitted to reopen.
Movie theaters, which are part of Mr. Murphy’s Stage 3 reopening plan, have received no guidance when they can restart their businesses. They have been categorized alongside performing arts centers, fitness centers and indoor amusement parks.
The plaintiffs argue that movie theaters are similarly situated to religious ceremonies, “if not less of a risk, from a public health perspective.” — Nicole Sperling
Ever since the coronavirus emerged in Europe, Sweden has captured international attention by conducting an unorthodox, open-air experiment. It has allowed the world to examine what happens in a pandemic when a government allows life to carry on largely unhindered.
This is what has happened: Not only have thousands more people died than in neighboring countries that imposed lockdowns, but Sweden’s economy has fared little better.
Sweden put stock in the sensibility of its people as it largely avoided imposing government prohibitions. The government allowed restaurants, gyms, shops, playgrounds and most schools to remain open.
More than three months later, the coronavirus is blamed for 5,420 deaths in Sweden, according to the World Health Organization. Per million people, Sweden has suffered 40 percent more deaths than the United States, 12 times more than Norway, seven times more than Finland and six times more than Denmark.
Despite letting its economy run unimpeded, Sweden has still suffered business-destroying, prosperity-diminishing damage, and at nearly the same magnitude of its neighbors. Sweden’s central bank expects its economy to contract by 4.5 percent this year, a revision from a previously expected gain of 1.3 percent. The unemployment rate jumped to 9 percent in May from 7.1 percent in March. This is more or less how damage caused by the pandemic has played out in Denmark. — Peter S. Goodman
Stocks on Wall Street dipped on Tuesday, cooling off after a five-day rally, as new economic data for Europe forecast a grim outlook for the year and cases of Covid-19 continued to spread.
The S&P 500 fell about 1 percent, after earlier swinging from losses to gains and back again. The slump came as shares of big technology stocks gave up early gains.
Tuesday’s sell-off came after the index had climbed more than 5 percent since June 29, despite mounting concerns about the coronavirus outbreak and new measures to slow its spread in parts of the United States.
Stocks in Europe were sharply lower after the European Commission issued a forecast on Tuesday saying this year’s recession would be worse than previously predicted.
The European Union’s economy is now expected to shrink by 8.3 percent this year, a downgrade from the previous forecast of a 7.4 percent. Forecasters did say that it appeared the worst of the downturn may be past. “The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across member states,” the commission said.
Wall Street’s recent gains have come despite the surge of the coronavirus around the world. In the United States, more than 47,000 new cases were reported on Monday.
— Mohammed Hadi and Kevin Granville
All four of the large U.S. airlines have agreed to terms for loans from the federal government under the March stimulus bill, the Treasury Department said Tuesday.
Delta Air Lines, United Airlines and Southwest Airlines signed letters of intent under that law, known as the CARES Act, Treasury said. Last week, the department announced that American Airlines had agreed to a five-year $4.75 billion loan.
The terms of the loans announced Tuesday have not yet been disclosed, though Delta and United have said that they expect to receive loans nearly as large as American’s. Southwest has said it expects to receive a $1.1 billion loan. In a statement, Southwest said it has only agreed to terms for a loan but has not decided whether it will borrow the money, a decision it will make by Sept. 30.
The CARES Act set aside $25 billion in loans for passenger airlines. The Treasury earlier distributed another $25 billion to help the airlines pay workers through September.
Besides the big four airlines, Treasury has also agreed to lend to Alaska Airlines, JetBlue Airways, Frontier Airlines, Hawaiian Airlines, Sky West Airlines and Spirit Airlines. —Niraj Chokshi
Across the country, the pandemic has produced something of a silver lining for infrastructure projects as commuting decreased drastically and railways and highways emptied. And low interest rates have helped reduce borrowing costs, spurring construction activity.
But the crisis is already straining state and local finances, muddling the long-term prospects for infrastructure improvements and the real estate developments that count on them.
“Several states and localities really did take advantage of the fact that when this pandemic started, they saw fewer people on the road or transit systems and the opportunity to accelerate work already planned for the winter and spring time period,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.
In New York, officials are predicting that roadwork at La Guardia Airport will be completed six months ahead of schedule. Track work on the city’s subway system, including upgrades to the subway shuttle between Times Square and Grand Central Terminal, is also ahead of schedule. Road work on the New York Thruway has also gained speed.
But the looming question for developers, planners and commercial enterprises is: What happens next?
As industry insiders try to predict revenue for the next six to 18 months — the time expected for a coronavirus vaccine to be developed — they see a likely decline in gas taxes, permit fees, tolls and other user fees that fund infrastructure. That will have a ripple effect on commercial real estate projects that rely on the infrastructure to be in place. — Miranda S. Spivack
The economic recession unleashed by the coronavirus in the European Union this year will be even worse than previously predicted, the European Commission said in its latest forecasts Tuesday, taking into account data from the second quarter during which the vast majority of its economies were under lockdown.
The Commission, the bloc’s administrative branch, said the European Union economy would shrink by 8.3 percent this year, a steep downgrade from predictions released in the spring that saw a 7.4 percent contraction. The smaller euro-area, the subgroup of 19 E.U. nations that share the common currency, will have it even worse, shrinking by 8.7 percent this year.
At stake is the economic health of the richest bloc of nations in the world, a key trading partner to the United States and home to one of the most important currencies in global trading and saving, the euro.
The data is especially grim for nations in the bloc’s southern rim, some of which were particularly pummeled by the virus. Italy, the E.U.’s third-largest economy is seen as worst-affected, set to shrink by 11.2 percent; Spain, the fourth-largest economy, is facing a 10.9 percent recession; France, the second-largest economy after Germany, will shrink by 10.6 percent.
But, forecasters cautiously pointed to a silver lining, noting that a recovery was already afoot in parts of the bloc. “Early data for May and June suggest that the worst may have passed,” it said. “The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across Member States.”
European Union leaders are expected to meet in person for the first time in months next week to try and hammer out a compromise on a 750-billion euro fund that will inject money into member states’ economies in a bid to prop up their recoveries. — Matina Stevis-Gridneff
The magnitude of job losses from the coronavirus pandemic has been 10 times greater than the hit inflicted during first months of 2008 global financial crisis, making it unlikely that employment in Europe, the United States and other developed economies will return to pre-pandemic levels before 2022 at the earliest, the Organization for Economic Cooperation and Development said Tuesday.
In a detailed report on the pandemic’s impact on the world’s labor markets, the O.E.C.D. urged governments to continue throwing financial support behind programs that support businesses and keep people employed, even as the global economy slides deeper into a recession.
Joblessness in the 37 O.E.C.D. member countries is expected to reach 9.7 percent at the end of the year, up from 5.3 percent in 2019, and could march even higher — to more than 12 percent — should a second wave of the virus force countries to shutter parts of their economies again.
“In a matter of a few months the Covid-19 crisis wiped out all improvements in the labor market made since the end of the 2008 financial crisis,” Stefano Scarpetta, the O.E.C.D.’s director of employment, labor and social affairs, said in an online press briefing.
Many countries have responded by providing financial support to companies and strengthening or extending income support to workers unable to work or who are jobless. Governments have extended or introduced job retention schemes and introduced or strengthened sick pay.
Those safety nets will need to remain in place as the virus continues to pose a threat to a global economic recovery, the O.E.C.D. said. — Liz Alderman
Gap, the owner of its namesake brand, Banana Republic and Old Navy, said on Tuesday that it would start selling nonmedical-grade cloth face masks to large organizations as employees return to work. The retailer is offering the masks, which have three layers and can be customized with logos and ear stoppers, in minimum quantities of 100,000 units. It said that it has already sold about 10 million masks to employers including New York City, the State of California and Kaiser Permanente.
Levi Strauss & Company, the denim brand that went public last year, said on Tuesday that it would cut about 15 percent of its nonretail, nonmanufacturing work force, or about 700 positions. Levi’s, which is based in San Francisco, is one of a slew of retailers struggling to cope with fallout from the pandemic. It said that its net revenue tumbled 62 percent to about $500 million in the three months that ended May 24, and it fell to a net loss of $364 million in the period from a $29 million profit in the same quarter last year. The company said the job cuts would result in annualized savings of $100 million.
The Treasury Department is requiring all employees to wear masks and remain six feet apart whenever possible as the agency begins transitioning more employees back to work. The agency is “requiring both social distancing and face covering” within the main Treasury building as well as other facilities, David Eisner, the department’s assistant secretary for management, said in an email sent to staff this week. The Treasury Department, which sits adjacent to the White House, will move to “Phase 2” of reopening on July 13, allowing offices to return up to 75 percent of their work force.