U.S. airlines agree to the terms of a $25 billion bailout.
The Trump administration has reached an agreement in principle with major airline companies over the terms of a $25 billion bailout to prop up an industry that has been hobbled by the coronavirus pandemic.
The terms of the agreement were not disclosed on Tuesday. The Treasury Department said that Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Frontier Airlines, Hawaiian Airlines, JetBlue Airways, United Airlines, SkyWest Airlines and Southwest Airlines would be participating in the payroll support program, which was created as part of the economic stabilization package that Congress passed last month.
“We welcome the news that a number of major airlines intend to participate in the Payroll Support Program,” Treasury Secretary Steven Mnuchin said in a statement, saying the agreement would “support American workers and help preserve the strategic importance of the airline industry while allowing for appropriate compensation to the taxpayers.”
American Airlines said it would receive $5.8 billion as part of the deal, with more than $4 billion in grants and the remaining $1.7 billion as a low-interest loan. The funds are intended to be used to pay employees, and the airlines that take them are prohibited from major staffing or pay cuts through September.
Southwest Airlines said it expected to receive $3.2 billion, about $1 billion of which would come in the form of a low-interest loan with a 10-year term. That loan is expected to include about 2.6 million warrants issued to the agency.
The administration has been haggling with the airlines over the terms of the bailout, with Mr. Mnuchin pushing the airlines to agree to repay 30 percent of the money over five years. The Treasury Department also has been seeking warrants to purchase stock in the companies that take money. Airlines have complained that the Treasury was effectively turning the grants into loans by requiring repayment.
A drop in convention hotel traffic threatens municipal bonds.
The plunge in business travel caused by the pandemic has cast a shadow over hotels that cater to conferences and conventions, which need a steady influx of travelers to survive. That, in turn, could crimp the budgets of cities that used bonds to finance the construction of the hotels with the hopes of attracting more visitors.
Experts say that the industry can withstand a downturn of a month or two, but that a longer delay could hamper financing for construction projects in development.
As much as 80 percent of the 2,500 business-to-business conventions that are held from March 1 to May 15 each year have been canceled, or are likely to be, costing upward of $3.6 billion in revenue for show organizers and as much as $22 billion in broader economic activity, according to projections by the Center for Exhibition Industry Research, a trade group in Dallas.
Consequently, the upscale and luxury hotels across the United States that rely on these trade shows have closed. The timing is especially vexing for new publicly funded convention hotels that were built to draw business travelers.
Many cities fully or partly finance the construction and operation of convention hotels to compete for events, often by using bonds backed by the hotel’s income, as well as revenue from hospitality and tourism taxes. Noting the collapse in conferences and forecasting a U.S. recession, S&P Global Ratings recently warned that it could lower the ratings of bonds supporting existing convention hotels in several cities.
“The coronavirus puts them behind the eight ball in many ways,” said Heywood T. Sanders, professor of public administration at the University of Texas at San Antonio.
Federal banking agencies seek to ease home-buying.
The Federal Reserve and its fellow banking agencies said that they would temporarily defer real estate appraisals and evaluations, making it easier for would-be homeowners and businesses to get access to credit.
The announcement comes as coronavirus disrupts every aspect of business, including the housing and real estate market, which has seen a drop off in new-home purchases. Real estate agents have reported that drive-by and walk-around appraisals have become a new trend as shelter-at-home orders make it difficult to seal housing deals. The change could ease that burden.
“The temporary deferrals apply to all residential and commercial real estate secured transactions, including loans for new money or refinancing transactions,” according to a statement posted on the website of the Office of the Comptroller of the Currency, which issued the ruling along with the Fed and the Federal Deposit Insurance Corporation. The deferrals will last for 120 days following closing, but they does not extend to deals related to acquisitions, development and construction.
The provisions will expire on Dec. 31, 2020, unless extended by the agencies, the statement said.
U.S. stocks climb as investors look for signs of recovery.
Stocks on Wall Street rose on Tuesday, following global markets higher after China reported a smaller-than-expected hit to trade and some countries began to take tiny steps to reopen their economies.
The S&P 500 rose about 3 percent, with shares of companies that have been hard hit by the coronavirus-related shutdowns — like airlines, cruise companies and casino operators — all faring well.
Stocks have been slowly climbing their way out of a slump that had wiped trillions of value from financial markets in late February and early March, as investors have begun to look for signs of the eventual recovery from the outbreak. In parts of Europe, a small-scale return to normalcy has begun: Spain allowed some construction work to resume and a few factories to reopen on Monday, and Austria and Italy followed with a gradual easing of restrictions that allowed some shops to reopen.
Stocks were also helped on Tuesday by March trade data from Chinese customs officials that was better than expected. But the optimism may not linger, as China’s reopening could be a long and painful process, worsened by slumping demand for its goods in countries dealing with the coronavirus outbreak.
Technology stocks stood out for a second day on Tuesday, with Amazon extending a rally that has lifted its share by nearly 12 percent this week — to a record high — as the online retailer continues to face a surge in demand from consumers who are staying home. The company said on Monday that it was hiring another 75,000 workers to keep up with demand.
But investors will be tested by a slew of corporate earnings results due out starting this week. On Tuesday, shares of big banks fell after JPMorgan Chase and Wells Fargo both announced that they were taking substantial provisions for coming loan losses. JPMorgan dropped about 3 percent, while Wells Fargo was down by about 4 percent, and Citigroup was down about 3 percent.
Energy stocks also fell, following crude oil futures lower.
The Treasury Department will add President Trump’s signature to stimulus checks.
President Trump’s signature will appear on the economic stimulus checks that will be mailed to millions of Americans beginning next month, the Treasury Department confirmed on Tuesday.
The decision to have Mr. Trump’s name appear on the checks, which is a break in protocol, was made by the Treasury Department after Mr. Trump suggested the idea to Treasury Secretary Steven Mnuchin, according to a Treasury official. The president’s name will appear on the “memo” section of the check because Mr. Trump is not legally authorized to sign such disbursements.
The decision to have Mr. Trump’s signature on the checks was first reported by The Washington Post, which said the move would result in a delay for getting the checks out the door because of technology changes needed to include the new signature.
Representatives for the I.R.S. and the White House referred questions to the Treasury Department. A Treasury official, speaking on the condition of anonymity, denied that the decision would delay the disbursement of the checks and that they would be mailed beginning next week.
Many Americans may not see the president’s signature. Those who are eligible for stimulus payments and have provided their banking information to the I.R.S. will receive the money through direct deposit.
The International Monetary Fund issued a stark warning about economic damage from the coronavirus, saying on Tuesday that the global economy faces its worst downturn since the Great Depression as shuttered factories, quarantines and national lockdowns cause economic output around the world to collapse.
In its World Economic Outlook, the I.M.F. projected that the global economy would contract by 3 percent in 2020, an extraordinary reversal from earlier this year, when the fund forecast that the world economy would outpace 2019 and grow by 3.3 percent. This year’s fall in output would be far more severe than the last recession, when the world economy contracted by less than 1 percent from 2008 to 2009. A 3 percent decline in global output would be the worst since the Great Depression, the I.M.F. said.
“As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown,” said Gita Gopinath, chief economist of the I.M.F. “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.”
Ms. Gopinath said that the loss of global output would be “far worse” than the 2008 financial crisis and that policymakers are facing an unusual predicament in that traditional stimulus measures are little match for a pandemic that is being fought with shutdowns and quarantines.
If the pandemic persists into the second half of the year, the contraction could be twice as severe and the expected rebound in 2021 could fail to materialize if additional waves of the virus spread later in the year. Over the next two years, the pandemic could shave $9 trillion from global G.D.P.
Tentatively, the fund projects growth to rebound to 5.8 percent next year.
In 2020, the I.M.F. projects that the U.S. economy will contract by 5.9 percent. In Europe, it will shrink by 7.5 percent, led by steep declines in Italy and Spain.
Emerging markets and developing economies will not be spared, but in some cases they fare better. In China, where the virus originated and where draconian measures were imposed to combat it, growth is forecast to slow to a rate of 1.2 percent this year.
The coronavirus pandemic is destroying the economy of some small towns.
As the coronavirus upends economic life around the world, small towns are particularly vulnerable.
For Bristol, a lakeside town of 3,300 residents in New Hampshire, the economic destruction has come quickly. By the end of March, gift shops, yoga studios and restaurants had all shut their doors. Hundreds lost jobs, contributing to a record surge in national unemployment claims.
Now one of Bristol’s biggest employers, a factory owned by the German conglomerate Freudenberg, has shut down its production of bonded piston seals and laid off 100 people, more than a quarter of its work force.
As the coronavirus upends economic life around the world, small towns like Bristol are particularly vulnerable. Freudenberg is its lone large employer. There are just a few national chains — a Dunkin’, a Rite Aid and a Dollar General. And many of the small locally owned businesses depend on seasonal residents, who flock to Newfound Lake during the summer, doubling the town’s population for a few months.
“If this goes on too long, we won’t survive,” said Brad Tonner, who runs a gift shop called TwinDesigns with his twin brother, Jim. “This is going to kill small-town America.”
Catch up: Here’s what else is happening.
-
The parent company of The Los Angeles Times is furloughing 40 employees and cutting the pay of senior managers in an effort to make up for losses brought on by a pandemic-related decline in advertising revenue. “Due to the unexpected effects of Covid-19, our advertising revenue has nearly been eliminated,” said a memo to the staff on Tuesday from Chris Argentieri, the president of California Times, the publishing company that includes The Times and The San Diego Union-Tribune.
-
Boeing booked 31 new orders for aircraft in March, but its customers canceled 150 orders for the troubled 737 Max jet, the company said on Tuesday. The cancellations, half of which were placed by a single customer, the aircraft leasing company Avolon, come as airlines around the world slash costs in a fight to survive.
-
China’s exports were down 6.6 percent in dollar terms in March compared with a year ago, the General Administration of Customs announced on Tuesday. That was considerably better than the 15.7 percent drop forecast by economists surveyed at Chinese and foreign institutions by Caixin, a Chinese news organization. In another promising sign, China’s imports fell 0.9 percent in March from a year earlier, much better than a forecast by economists for a drop of 10.2 percent.
-
Global airline revenue is expected to fall by $314 billion this year, a 55 percent decline from last year’s revenue, according to the International Air Transport Association. Some of those losses could be attributed to a broad economic recession, but the travel restrictions imposed by governments around the world have had a much greater toll on the industry, the group said.
Reporting was contributed by Jeanna Smialek, Vindu Goel, Emily Flitter, Alan Rappeport, Niraj Chokshi, Keith Bradsher, Kate Conger, David Gelles, Elizabeth Paton, Jason Karaian, Clifford Krauss, Peter Eavis, Matt Phillips, David Waldstein, Mohammed Hadi, Katie Robertson, Carlos Tejada and Daniel Victor.