The airline industry is poised to receive an enormous bailout as part of the stimulus bill, a draft of which sets aside around $30 billion to pay employees of passenger and cargo employees. It also provides loans to passenger and cargo carriers in addition to some tax relief.
In exchange for the aid, airlines are prohibited from stock buybacks and dividends until a year after the loan is repaid. They must also maintain current staffing levels through September.
THE CONTEXT In recent weeks, the outlook for the global aviation business has soured significantly, with major carriers like American Airlines fighting for survival and United Airlines eliminating virtually all of its international flights for April. During that time, airline executives and industry groups had been lobbying the White House and members of Congress for aid.
THE RESPONSE As executives and union officials pored over the details of the stimulus deal on Wednesday morning, the influential president of the Association of Flight Attendants union, claimed victory, calling it “a rescue package for workers.”
The stimulus will allow the troubled hotel industry to gain access to loans and other support. But what remains unclear for some owners is how quickly the money will be available and whether it will be enough to help, with travel expected to be down well into the summer.
THE CONTEXT Top executives from Hilton Hotels & Resorts, Marriott International and large hotel chains met with President Trump as they watched occupancy levels at their hotels in the United States drop through the floor in recent weeks. Lobbying arms pressed lawmakers, warning of layoffs and hotel closures.
Large hotel chains have kept investors happy in recent years with dividend and share buyback programs, but they may be barred from continuing to do so until a year after they repay any money borrowed through the program. And compensation levels for top executives will be capped.
THE RESPONSE The vast majority of brand-name hotels in the country are owned either by individuals or investors, and there is worry over how much red tape these small-business owners will face in obtaining aid. And, once they get the money, there is the question of whether it will be enough to cover expenses for more than a couple of months.
“We don’t have weeks to get this done. Hotels are closing every day,” said Cecil Staton, the president and chief executive of the Asian American Hotel Owners Association, which says its members own half of the hotels in the United States. “But the real question is, do you really think travel is going to return by mid-May? We don’t.”
The Rescue Plan
Big companies could see tax breaks
The stimulus includes several tax breaks that will largely benefit businesses — although it would not necessarily get cash to the companies most in need today. For instance, the bill would temporarily make it easier for big companies to take interest deductions and would roll back losses into older tax years, potentially leading to refunds.
HOW IT COULD PLAY OUT Companies that suffer enormous losses this year would be able to deduct those against profits from the past five years, potentially wiping out their old tax liabilities and generating cash refunds. If they had losses in 2018 and 2019 to offset taxes from profits in even older years, they could get quick cash refunds. But they would not see the cash from any refunds related to this year until at least early 2021.
“It is not targeted at the companies who are most in need today, so it is not an ideal way to allocate relief resources,” said Stephen Shay, a tax law professor at Harvard and former U.S. Treasury official. “It is clearly not the best way, but it’s reasonably fast compared to some alternatives.”
The Rescue PLAN
A $2 trillion lifeline will help, but more may be needed.
If you want to shut down an economy to fight a pandemic without driving millions of people and businesses into bankruptcy, you need the government to cut some checks. The coronavirus response deal that congressional leaders struck early Wednesday will get a lot of checks in the mail, but those checks will soothe financial pain for only a few months.
Among the items in the bill are:
$350 billion in loans for small businesses to help bridge their expenses for up to 10 weeks. Firms would not need to repay up to eight weeks of the loans if they refrain from laying off employees or if they move by June to rehire workers they have already laid off.
$500 billion in aid to airlines and other large corporations that have been hurt by the cratering of consumer demand. Much of the money would be used to backstop loans and other assistance that the Federal Reserve said it planned to extend to companies.
A $1,200 payment for each adult, and $500 per child, in households that earn up to $75,000 per year for individuals or $150,000 for couples. The assistance phases out for people who earn more. Democratic aides in the Senate said on Wednesday that eligible Americans with direct-deposit bank account information on file with the Internal Revenue Service should see their payments arrive within a few weeks of the bill being signed into law. Those who did not have such information on file and would instead by mailed a check will need to wait up to four months to receive one, the aides said.
Stocks rose as Congress moved toward passing the aid package.
Stocks on Wall Street rose on Wednesday as investors sized up a $2 trillion coronavirus rescue package intended to shore up the American economy, but the gains faded late in the day as debate over the bill continued without a vote in the Senate.
The legislation would be the biggest fiscal stimulus package in modern American history, and more than double the size of the roughly $800 billion stimulus package that Congress passed in 2009, during the last recession.
The S&P 500 climbed more than 1 percent, adding to a 9.4 percent gain on Tuesday that had come as investors anticipated that Democrats and Republicans would reach a deal over the plans.
Some of the companies expected to benefit from government help led Wednesday’s gains. Boeing was up more than 20 percent, helping lift the Dow Jones industrial average. American Airlines and Carnival Corporation both jumped more than 10 percent.
Investors have welcomed the plans, but few are willing to conclusively say that the worst of the market sell-off is over.
In the United States, widespread social distancing measures put in place to control the spread of the coronavirus have hammered consumer spending, the heart of the American economy.
Economists are expecting almost unthinkable declines in the gross domestic product in the second quarter. Analysts at Capital Economics said on Wednesday that they expected U.S. growth to fall 40 percent in the second quarter at an annualized pace, as the unemployment rate jumps to 12 percent, higher than its 10 percent peak in 2009.
The Trump administration said it would defer some tariff payments.
The Trump administration will defer tariff payments for some companies affected by the coronavirus, but officials say they are not considering a measure to lift tariffs across the board.
In a notice posted March 20, Customs and Border Protection said it would “approve on a case-by-case basis additional days for payment of estimated duties, taxes and fees due to this emergency.” People familiar with the matter said the measure would allow some companies to defer payments owed on imports, though not cancel them outright.
Trade groups and politicians of both parties have encouraged the administration to remove the tariffs it has imposed on foreign metals and Chinese goods as a way to ease pressure on American businesses and consumers as the economy slows.
Unemployment claims are expected to dwarf the weekly record.
The Labor Department’s weekly estimate of new claims for unemployment insurance, which will be released at 8:30 a.m. Thursday, typically draws little attention. Not this week: The report will provide some of the first hard data on the scale of the economic damage caused by the pandemic.
Citigroup economists estimate that the report could show that four million people applied for benefits last week. Other forecasters put the number a bit lower. But there is wide agreement that the total will dwarf the previous record of 695,000 new claims, from October 1982.
“In the whole history of initial claims, there’s never been anything remotely close to that,” said Ben Herzon, executive director of IHS Markit, a business data and analytics firm.
Amazon is urged to offer more paid sick leave.
The attorneys general of Washington and 14 states sent a letter to Amazon’s founder, Jeff Bezos, on Wednesday calling on the company to provide more paid sick leave for its workers.
Amazon has given workers two weeks of paid leave if they learn they have the coronavirus or are placed into quarantine, but the attorneys general said that “narrow criteria is particularly insufficient given the realities of the public health crisis, where the lack of access to Covid-19 testing has been widely reported.” Among other things, they said Amazon allow two weeks of paid time off for employees to self-quarantine and seek a diagnosis, as well as to care for children whose schools may have closed.
Amazon workers in a handful of warehouses across the country, including in New York City, have gotten sick from the virus. Amazon did not immediately respond to a request for comment.
There’s unease over Trump’s White House briefings, even as ratings soar.
President Trump is a ratings hit, and some journalists and public health experts say that could be a dangerous thing.
Since reviving the daily White House briefing — a practice abandoned last year by an administration that bristles at outside scrutiny — Mr. Trump and his coronavirus updates have attracted an average audience of 8.5 million on CNN, Fox News and MSNBC, roughly the viewership of the season finale of “The Bachelor.” On Monday, nearly 12.2 million people watched Mr. Trump’s briefing on cable news, according to Nielsen — “Monday Night Football” numbers.
And the audience is expanding even as Mr. Trump has repeatedly delivered information that doctors and public health officials have called ill-informed, misleading or downright wrong.
A sewing army, making masks for America.
They are scrounging for fabric, cutting it up, stitching it together. They are repurposing drapes, dresses, bra straps, shower curtains, even coffee filters. They are building supply chains, organizing workers, managing distribution networks.
Most of all, they are sewing.
All over the country, homebound Americans are crafting thousands upon thousands of face masks to help shield doctors, nurses and many others from the coronavirus.
Legions of sewers have been called to duty in a matter of days via social media and word of mouth, their skills no longer taken for granted or dismissed as a mere hobby. They are making masks for America, much as a previous generation manufactured ammunition and tended “victory gardens” during World War II.
Here’s what else is happening:
S&P Global Ratings lowered Ford Motor’s credit rating to junk status on Wednesday, citing “supply-side and demand-side shocks” of the coronavirus outbreak on the company. Ford, which already had a junk rating from Moody’s Investors Service, said on Wednesday that it would keep its North American plants closed past March 30 because of the outbreak.
Hollywood agencies are moving ahead with layoffs and announcing that senior executives — Ari Emanuel among them — will forgo salaries for the remainder of the year. On Wednesday, Endeavor, a media company that includes the William Morris and IMG agencies and is run by Mr. Emanuel, laid off about 250 of its 7,500 employees. United Talent Agency instituted a companywide salary cut on Monday, with pullbacks based on income. And Paradigm, an agency with a large roster of musicians, jettisoned more than 100 of its 700 employees on Friday.
BuzzFeed’s chief executive, Jonah Peretti, told employees Wednesday that their salaries would be reduced by up to 13 percent (and up to 25 percent for executives) in April and May in order to avoid layoffs. BuzzFeed is the first major digital news outlet to institute cutbacks in response to the pandemic-induced economic headwinds that have already swept across other sectors of the news industry.
Gap said it would help source masks and protective gowns from its vendors for California hospitals. Canada Goose said it would reopen two manufacturing facilities to produce scrubs and patient gowns for health care workers and patients in Canada.
Reporting was contributed by Jesse Drucker, Karen Weise, Ana Swanson, Brooks Barnes, Ben Casselman, Patricia Cohen, Niraj Chokshi, Jim Tankersley, Alan Rappeport, Alexandra Stevenson, David Gelles, Julie Creswell, David Yaffe-Bellany, David Enrich, Rachel Abrams, Steven Kurutz, Eduardo Porter, Clifford Krauss, Michael M. Grynbaum, Edmund Lee, Sapna Maheshwari, Brian X. Chen, Neal E. Boudette, Elaine Yu, Daniel Victor, Jason Karaian, Kevin Granville and Carlos Tejada.