Business

By Jerome Taylor
Agence France-Presse

HONG KONG — Hong Kong carrier Cathay Pacific said on Wednesday it suffered a record $2.8 billion loss last year as the coronavirus pandemic wiped out demand for travel — and the airline warned of a long road to recovery ahead.

Chairman Patrick Healy described 2020 as the "most challenging" in the airline's 70-year history and said much will now depend on how effective and widespread global vaccination programmes are. 

"It is by no means clear how the pandemic and its impact will develop over the coming months," he warned, saying the group expected passenger traffic to remain "well below" half of pre-pandemic levels throughout 2021.

The company's losses were higher than estimates compiled by Bloomberg News.

Cathay racked up an attributable loss of HK$21.6 billion ($2.8 billion) for 2020, going deeper into the red as the year wore on.

Its second half losses clocked in at HK$11.8 billion, up from HK$9.9 billion in the first six months of the year when the pandemic first emerged.

Revenue was better than expected at HK$46.93 billion, thanks mainly to cargo which the airline has kept flying throughout the global health crisis.

Like all major airlines, Cathay Pacific has seen its business evaporate during the coronavirus pandemic but the Hong Kong carrier has had an especially torrid year because it has no domestic market to fall back on. 

It also entered the pandemic in an already vulnerable position. When the coronavirus first emerged Hong Kong had fallen into recession and Cathay Pacific in the red as months of huge and disruptive democracy protests in 2019 led to a plunge in customers, especially from the lucrative mainland Chinese market.

The airline also found itself punished by authorities in Beijing because some of its employees joined or voiced support for the protests.

First vaccinations 

As the pandemic spread, the airline went on a cost-cutting spree, closing its Cathay Dragon subsidiary, making about 8,500 redundancies and slashing executive pay.

With the help of a government bailout it underwent a recapitalisation in July that raised HK$39 billion. 

But passenger numbers have been some 98 per cent below pre-pandemic levels since April and for much of last year the company was burning through cash at a rate of up to HK$1.5 billion a month. 

By the time 2020 closed, Cathay's shares had fallen 29 per cent for the year. On Wednesday they closed 0.56 per cent down. 

In Wednesday's annual report, Cathay said it had managed to reduce the cash burn towards the end of the year but longer quarantine restrictions that Hong Kong placed on all long-distance flight crew in January was now cancelling out most of those savings.

It added that it would keep executive pay slashed and ask staff to go on a third round of unpaid leave — to which some 80 per cent of employees have already signed up.

Its liquidity at the end of 2020 was HK$28.6 billion and Cathay also issued HK$6.74 billion in convertible bonds in January to secure more funds.

Hong Kong managed to keep coronavirus infections comparatively low by bringing in strict quarantine measures for all arrivals early on in the pandemic.

Currently, most of those arriving in the city must quarantine in a hotel for 21 days, one of the longest mandatory quarantine periods in the world. Outbound travel is almost non-existent.

There is little sign of those measures being lifted any time soon.

The first vaccinations began last month but so far only 114,000 of the city's 7.5 million population have received a first dose, the vast majority China's Sinovac jab.

Authorities say they hope to vaccinate all residents by the end of the year.

Last week, the head of the city's tourist board warned it could be at least six months before residents would be able to travel again.

LONDON — Stocks markets on both sides of the Atlantic pushed into record territory on Tuesday on growing confidence in the global economic recovery from the Covid pandemic.

A rally in equities across the world over the past months appeared to have run out of steam on concerns about a rise in interest rates, but those worries were pushed to the background on Tuesday as yields on US government bonds retreated.

"The dip in government bond yields has acted as the green light for the equity bulls," said David Madden at CMC Markets UK.

On Wall Street, the Dow came within striking distance of its all-time high set last month and could close at a record level.

Meanwhile, Frankfurt's DAX closed at a record high for a second straight day.

"The positive mood is being fuelled by the hopes the US government will implement the $1.9 trillion relief package soon," added Madden.

The package is on track to be signed by US President Joe Biden this week.

Sentiment was also boosted by the Organisation for Economic Co-operation and Development sharply raising its 2021 global growth forecast as the deployment of vaccines and a huge US stimulus programme have greatly improved economic prospects.

Concerning inflation, the organisation said underlying price pressures generally remain mild and are being held in check by ample spare capacity around the world.

Next week's US Federal Reserve policy meeting will be pored over for signs of change in its outlook for interest rates and its huge bond-buying scheme, with Biden's stimulus likely to have been signed by then.

A rise in benchmark US Treasury yields in recent weeks has been fuelled by investors moving out of the haven assets, betting that a rise in inflation will eat into their returns.

Fears of higher rates has in particular hit US tech stocks hard, with the Nasdaq Composite having entered correction territory by falling more than 10 per cent from the record high it set last month.

However, the Nasdaq rebounded sharply on Tuesday, jumping 3.6 per cent in late morning trading.

Oil prices rose and then fell back, a day after Brent briefly shot above $71 per barrel following a drone attack on Saudi oil facilities, with the main international contract slumping below $68.

"Today's choppy trade could reflect hesitancy to have a big position before the EIA weekly crude oil inventory report," said analyst Edward Moya at currency trading platform Oanda, referring to the weekly US government data on the market.

"Energy traders will want to closely watch how strong US production can bounce back and if that poses a risk for OPEC+'s hesitancy to raise output," he added.

Last week, OPEC and its allies held back on most of its scheduled production cuts despite indications of greater demand as vaccination campaigns in the US and elsewhere help economies get back to work.

PARIS — The Organisation for Economic Co-operation and Development (OECD) sharply hiked its 2021 global growth forecast on Tuesday as the deployment of coronavirus vaccines and a huge US stimulus programme greatly improve the economic prospects.

The Paris-based Organisation for Economic Cooperation and Development (OECD) said it now expects the global economy to grow 5.6 per cent, an increase of 1.4 percentage points from its December forecast.

"Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus," it said in a report.

The recovery will be largely led by the United States, thanks to President Joe Biden's $1.9 trillion stimulus programme, according to Laurence Boone, chief economist of the OECD.

The OECD sees the US economy growing 6.5 per cent this year, a very sharp increase of 3.3 percentage points on its previous forecast, with the world as a whole returning to pre-pandemic output levels by mid-2021.

But for the moment, only China, India and Turkey have surpassed pre-pandemic levels and the picture is very mixed elsewhere.

"Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022," said the OECD, which groups the world's most developed economies.

It said the "top policy priority" is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.

"There are huge and significant risks to our economic projections, most notably the pace of vaccination," Boone noted.

"What we know is the faster countries vaccinate, the quicker they can reopen their economy," she said.

Britain, which also has rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 per cent — higher than the UK's own forecast, which was lowered last week.

The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 per cent, as the recoveries in both Italy and France were revised lower.

LONDON — Luxury British carmaker Aston Martin will make its fully-electric vehicles in Britain from 2025, its chairman told The Financial Times (FT), in a boost to the country's auto sector.

Canadian billionaire Lawrence Stroll said a battery-powered sport utility vehicle (SUV) and fully-electric sports cars will be made at Aston plants in England and Wales.

James Bond's favourite carmaker is 20 per cent owned by Mercedes-Benz and there were suggestions production could have taken place in Germany.

Meanwhile, Aston plans this year to launch hybrid versions of its cars ahead of rolling out fully-electric versions.

In an interview with the business daily, Stroll said its electric "SUV will be built in Wales" and battery-operated sport cars at its plant in Graydon, England.

It comes as Stellantis, the newly-formed European carmaker, is yet to decide over the future of a Vauxhall plant in England.

Stellantis — a merger of France's PSA and US-Italian rival Fiat Chrysler — is said to be seeking financial incentives from the British government to produce a fully-electric vehicle in the UK.

Indian-owned Jaguar recently announced it would produce only electric vehicles from 2025 — and at its facilities in England.

With Britain banning the sale of new high-polluting diesel and petrol cars from 2030, the country's largely foreign-owned car manufacturing sector must increasingly switch to producing fully-electric vehicles.

Meanwhile, after much uncertainty, the UK automotive sector was a big winner from the recent Brexit agreement struck between London and Brussels as it allows for smooth tariff-free trade.

UK electric car exports will however face tariffs from 2027 if they do not have a majority of components sourced from either Britain or the European Union.

Monday's announcement comes after Aston last month revealed that its losses almost quadrupled in 2020.

Aston Martin's fortunes have been hit also by coronavirus-related delays to James Bond spy blockbuster "No Time To Die".

Bond films traditionally feature various top-end Aston Martin cars that give the company a valuable marketing boost.

The company launched on the stock market in 2018 to great fanfare.

However, losses almost doubled in 2019, as the group crashed spectacularly on weak global demand linked also to a Chinese economic slowdown.

Aston subsequently clinched a cash injection from Stroll at the start of last year.

As part of the deal, the Racing Point Formula One team — whose drivers include Lawrence Stroll's son Lance Stroll — has rebranded as Aston Martin for the 2021 season.

LONDON — Oil prices surged on Monday and stock markets traded mostly higher as investors weighed worries over high inflation against the reopening of virus-hit economies.

After Asian indices closed mostly lower, with sharp losses in Hong Kong and Shanghai, Europe pushed higher. Wall Street open mixed.

Benchmark oil contract Brent North Sea crude, which has been rising strongly on rebounding demand, broke past $70 per barrel for the first time since January 2020 after an attack on energy facilities in Saudi Arabia.

Wall Street had surged Friday following news that the US economy created 379,000 jobs in February, reaffirming the view that it is on track for a strong recovery.

The report came just ahead of senators passing Joe Biden's $1.9 trillion rescue plan, setting it up for the US president's signature by the end of the week.

'Runaway inflation' 

Brent peaked at $71.38 — the highest level since January 2020 — before falling back under $70 per barrel.

The strike on the Aramco facilities — including one of the world's biggest oil ports — by Yemen's Houthi rebels on Sunday followed the bombing of the country's capital Sanaa by a Saudi-led military coalition.

The rising hostilities underscore a dangerous intensification of Yemen's conflict between the coalition-backed Yemeni government and the Iran-backed Huthis, despite a renewed US push to end the war in the crude-rich region.

While surging oil prices were boosting share price across the heavyweight energy sector, they "will only add to the key concern which is dogging [stock] markets — namely the risk of runaway inflation and a resulting increase in interest rates", noted AJ Bell investment director Russ Mould.

A surge to inflation could force the Federal Reserve (Fed) and other central banks to wind back the ultra-loose monetary policies that have been a key driver of a year-long equity market rally, according to analysts.

In another sign that the world economy is getting back on track, China at the weekend released data showing a better-than-expected jump in exports in January and February, suggesting global trade is revving up again after being hammered by the coronavirus pandemic.

Inflation fears are mounting as benchmark US 10-year Treasury bond yields continue to rise.

Yields rise as bond prices fall, and investors have been rushing out of them as inflation would eat into their returns over time, sparking the selloff in world markets.

Investors will be keeping tabs on the European Central Bank's policy meeting on Thursday, hoping officials will stress their commitment to keeping borrowing costs low, while the Fed is due to gather next week.

LONDON — Amazon on Thursday launched its first "just walk out shopping" outlet outside the United States, as the online retail giant steps up its competition with traditional supermarkets and other retailers. Customers at Amazon Fresh in Ealing Broadway shopping centre in west London queued outside the black and green storefront under social distancing measures to be first to use the convenience store which has no checkouts.

The outlet, according to Amazon, is the "first convenience grocery store to offer just walk out shopping in the UK" and its "first physical shop and grocery store outside of the US".

To use the new outlet, customers have to download an app and then scan a QR code before an electronic gate swings open and allows them to browse a range of Amazon-brand products.

On its opening day, a team of assistants, dressed in vibrant green jackets — the same colour as the grocery shop's colourful branding — were on hand to explain how the system worked.

Once they have bagged their items, customers don't have to show a card or let anyone know, they simply walk out.

"It was really strange, it felt like I was a criminal, because I was just taking things and putting them straight in my bag," 71-year-old Ealing resident Philippa Dolphin said.

'You just walk right out'

"But apparently there are cameras watching me. And then you just walk out! It didn't seem right but I was assured it was okay!" she added.

Amazon has said the store, which is similar to 20 Amazon Go outlets in the United States, uses "deep learning" algorithms — technology which allows machines to learn by themselves — with cameras and sensors to tell what customers have picked up.

"It automatically knows what you've got in your basket and when you leave the shop it charges you and bills you automatically into the account you have set up," said Erica Ely, a 57-year-old local resident, holding her purchases on the street outside the shop.

Benjamin Rogers, 31, a sales manager who lives in the area, stopped in to buy ingredients for a cake and said the speed of shopping at the Amazon store made it appealing. 

"I think the major advantage is the fact that sometimes when you go to the supermarket you can do your shopping and then it can be a five, 10, 15-minute wait to pay for your goods at the end" he said.

"This is just a simple way to cut through and walk out and finish your job."

Matt Birch, a former Sainsbury's executive who now leads Amazon Fresh Stores UK, said the brand which is also used for online groceries in the UK has looked to make the experience "as convenient as possible".

Reversing the trend'

"We recognise that UK customers want to shop in a convenient way so we really think they will appreciate being able to walk in and walk out with the shopping they need," he added.

Amazon, which was already growing in Britain before the pandemic and competing with a struggling retail sector, has seen its position strengthen since the outbreak and months of closure for shops deemed non-essential.

Shopper Mark Lloyd said it was "interesting" that Amazon was moving from online into "bricks and mortar retail business". 

"It is kind of reversing the trend for e-commerce and digital shelves, so it is quite unusual in that respect," the 58-year-old creative director said.

Despite the ease of her shopping experience, Dolphin said she was somewhat troubled what about the arrival of the Amazon shop would mean in the long term.

"I am a bit worried that it is going to put other businesses that I use out of business. So yes, I am a little bit concerned because they are such a giant," she said.

LONDON — Britain's competition regulator on Thursday launched an investigation into US tech giant Apple that will focus on its App Store.

In a statement, the Competition and Markets Authority (CMA) said it will examine Apple's position regarding the distribution of apps on its iPhones, iPads and other devices in Britain.

Apple said in response that it looked forward to working with the CMA to explain how its "guidelines for privacy, security and content have made the App Store a trusted marketplace for both consumers and developers".

Apple's App Store is the only way for developers to distribute their apps on the US company's devices to the public.

"The CMA's investigation will consider whether Apple has a dominant position in connection with the distribution of apps on Apple devices in the UK," the regulator said.

The CMA will also examine "whether Apple imposes unfair or anti-competitive terms on developers using the App Store, ultimately resulting in users having less choice or paying higher prices for apps and add-ons".

Apple must first approve all apps before they are placed on the App Store and developers must agree to certain terms, the CMA noted.

"The probe has been prompted by the CMA's own work in the digital sector, as well as several developers reporting that Apple's terms and conditions are unfair and could break competition law," the regulator added.

The CMA said complaints highlighted also that Apple required "in-app" features, add-ons and upgrades to use the US group's payment system, rather than any alternative.

Apple charges a commission to developers on the value of those transactions.

"Millions of us use apps every day to check the weather, play a game or order a takeaway," said CMA Chief Executive Andrea Coscelli."So complaints that Apple is using its market position to set terms which are unfair or may restrict competition and choice — potentially causing customers to lose out when buying and using apps — warrant careful scrutiny.

"Our ongoing examination into digital markets has already uncovered some worrying trends. We know that businesses, as well as consumers, may suffer real harm if anti-competitive practices by big tech go unchecked," he added.

The CMA is establishing a digital markets division to tackle such practices.