“Full year results at Rolls-Royce were brutal… No amount of cost-saving and restructuring was enough to offset massive declines in civil aerospace,” said Hargreaves Lansdown analyst Laura Hoy. If airlines around the world are suffering in the COVID-19 lockdown, then the pain is being felt in the vast global supply chain behind them.
The UK’s Rolls-Royce is no exception, with bosses describing an “unprecedented” year of multi-billion dollar losses. CEO Warren East is promising a rosier 2021, but profits may not return until the second half of the year at the earliest.
Elsewhere, another troubled airline, Norwegian Air, is preparing to make a last ditch attempt to save its business and arrange a deal with creditors that will allow it to emerge from bankruptcy protection in one piece, albeit with its wings clipped.
We speak to the International Air Transport Association to find out what can be done to kickstart the aviation industry in 2021.
And times are tough on main street too. The UK’s flagship retailer Marks and Spencer says it is to start selling clothing from rival firms online, in a bid to boost its digital offer.
Once lockdown is over, people will be desperate to get out and start socializing again according to the bosses at dating app Bumble. Announcing that revenues rose by almost a third at the end of last year, Bumble says apps for platonic friendships and group meet-ups could be the next big thing.
And in more evidence of seismic changes in another industry, British American Tobacco is partnering with Canada’s nascent commercial cannabis farmers to develop the products of the future.
Read on for more of the day’s business news in full.
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British engine-maker Rolls-Royce has announced a loss of $5.6 billion last year, as the COVID-19 pandemic took its toll on the wider airline industry. The aerospace giant, whose engines power Airbus A350 and Boeing 787 jets, operates by charging carriers for the number of hours its engines are in use. Last year the firm burnt through $5.8 billion in reserves to stay afloat, while cutting 15 percent of its workforce and holding a $2.7 billion asset sale.
Rolls-Royce has since secured a debt and equity support package of over $10 billion pounds, with CEO Warren East saying “The worst is now well behind us” and predicting a more profitable 2021.
A group of European low-cost carriers has written to EU regulators urging that plans to force airlines to use a certain share of sustainable fuels should apply to all flights, not just short-haul. Ryanair, Easyjet, Wizz Air and Jet 2 have have asked EU’s climate and transport policy chiefs to extend the sustainable aviation fuels directive to long-haul carriers, saying to exclude them “would mean the very area of our sector that most needs to decarbonize would not be covered at all.”
Meanwhile, Norwegian Air has submitted its final restructuring offer to creditors ahead of a crucial court hearing that will determine whether it can emerge from bankruptcy protection. The troubled carrier has proposed a so-called “scheme of arrangement” with lenders, under which it will slash debt and raise fresh capital. Heavily indebted Norwegian, which had grown to serve routes across transatlantic, Southeast Asia, and Middle-Eastern routes, was left exposed by the outbreak of the pandemic. The application for investor approval for its new plans will be made at Ireland’s High Court next month.
As expected, U.S. President Joe Biden’s $1.9 trillion relief bill to help Americans deal with the impact of the COVID-19 pandemic has been passed by Congress. The House of Representatives approved the massive economic aid plan late on Wednesday, although no Republicans voted in favor. The bill, which has boosted market sentiment, will now be signed into law.
European stock markets edged higher early on Thursday ahead of the latest rates meeting by the European Central Bank. Investors expect the ECB’s governing council to discuss the recent rise in government bond yields after a sudden sell-off in the U.S. driven by inflation worries, and pledge ongoing support from the COVID-19 impact.
HSBC says it will phase out its support for the coal industry in the developed world by 2030 and globally by 2040. The lender has long been criticized by environmental groups for its investment links to fossil fuel and resource extraction firms in Asia and sub-Saharan Africa. The new commitments go further than those made last October, when the bank set out plans for a net zero carbon emissions target by 2050. Earlier this year, investors filed a resolution that would have bound the bank to stronger commitments on meeting the goals of the 2015 Paris climate agreement.
Royal Dutch Shell CEO Ben van Beurden saw his pay drop by 42 percent to $7 million last year as the outbreak of COVID-19 saw a collapse in profits at the oil major. Falling demand sent Shell’s profit tumbling to a two-decade low, while shares hit their lowest since the 1990s.
Talks are continuing between Paris and Brussels over the future of the French state-controlled power group EDF. Unions say they remain hopeful of a deal being reached soon over a planned reform program dubbed Project Hercules. Regulators have been at odds with Paris over plans to separate the nuclear power unit from other divisions at EDF, to avoid creating a structure in which the whole business would benefit from state aid.
The multinational UK retailer Marks and Spencer is to start selling clothes from 11 rival brands online in a bid to boost sales. The firm, which earlier this week announced plans for 46 new websites in overseas markets, says it comes as part of plans to “turbocharge online growth.” Last year, M&S, which is in the middle of a restructuring exercise that will cost 7,000 jobs, posted its first loss in its 94 years as a publicly-listed company.
Elsewhere, the UK department store John Lewis has warned that some of its stores may not reopen after COVID-19 lockdown conditions end. Announcing a pre-tax loss of $721 million for 2020, store bosses have warned of “painful” desicions ahead. Any further closures would be in addition to the eight store shutdowns announced last year.
Dating app Bumble says it expects a boom in business after COVID-19 restrictions come to an end. The firm, which raised $2.2 billion on its Nasdaq floatation last month, has reported a better than expected fourth quarter, with revenue up 31 percent to $165.6 million. Bumble also says it plans a new “friendship” product, saying it expects apps supporting platonic relationships to be a massive growth opportunity going forward.
Tech giant Apple Apple has rejected a fresh attempt by the social media app Parler to re-enter its App Store, weeks after it was removed over hate speech concerns. The iPhone maker rejected Parler’s application to re-list its app after claiming to have found potentially offensive material on the service. The app was removed from Apple and Google’s stores in January following the right-wing violence in Washington DC.
Facebook has asked a U.S. court to dismiss major antitrust cases filed against it by the Federal Trade Commission and several individual states. Five separate lawsuits in December called for Facebook to sell its messaging app WhatsApp and photo-sharing app Instagram, claiming abuse of market position in social media. Facebook claims the charges fail to show the company had a market monopoly or had sought to harm consumers.
The world’s biggest advertising company WPP has forecast a return to growth this year after announcing a drop in underlying net sales of 6.5 percent in the fourth quarter. The ad giant, which owns Ogilvy, Grey, and GroupM agencies, has been hit by the sudden collapse in spending in mid-2020 as clients hoarded cash. WPP is pinning recovery hopes on its e-commerce and digital business.
Shares in the U.S. gaming company Roblox closed up 54 percent on their trading debut on the New York Stock Exchange, valuing the company at $45.2 billion. Roblox, which is the world’s most popular site for children’s gaming products, has benefited from surging demand amid lockdowns.
Tobacco giant British American Tobacco has announced a $175 million collaboration with the Canadian cannabis producer Organigram, as it seeks to push its portfolio “beyond nicotine.” A BAT subsidiary says it is taking a 19 percent stake in Organigram, to focus research and product development on the next generation of high quality medical and recreational cannabis products.
WATCH: A leading female health campaigner has told a WHO forum the domination of men in health sector leadership has led to poorer outcomes for women during the pandemic, both within and outside healthcare.
Cathay Pacific has become the latest carrier to warn of the ongoing impact of COVID-19 on operations, stating that it is in “survival mode” after reporting a record $2.8 billion loss for last year. The airline has grounded almost half its fleet. CGTN Europe spoke to Alexandre de Juniac, Director General of the International Air Transport Association, about the current state of the industry.
“The industry is still a difficult situation. By the end of 2020 we had hopes following various announcements on the vaccine, on testing – but with the surge of the variants, many states have closed their borders again or issued some travel restrictions again in January. So the traffic has dropped. Even in the Chinese domestic market, the traffic has been slow. So we have to postpone our estimate and we now forecast the beginning of the recovery by mid-2021. And in the meantime, we have still to survive.”
Do people want to travel or is the quarantine threat a dealbreaker?
“We are absolutely sure that the appetite for flight is still there. We have seen that, for instance, in China by the end of 2020, where the traffic will reach almost the same figures as 2019. We have seen that when we have reopened corridors between France and the UK and the Canary Islands: bookings have surged. So the appetite to fly is there, but undoubtedly travel restrictions such as closure or quarantine are a major deterrent to travel.”
What practical steps are needed?
“Not only do the airlines have to be ready, not only do passengers have to maintain the appetite to fly, but governments have to agree to welcome passengers or to reopen their borders and to lift travel restrictions. Then we can bring to the table a digital tool that can be used as a kind of health or vaccination or testing certificate that the passengers could use to justify that they have done everything, complying with the requirements that have been issued by each state in which they want to travel.”
You’re also talking about smart tech and AI playing a key role.
“We think that if there is, in terms of vaccination testing, something to certify that you have gone through it properly. Twenty years ago, 10 years ago, we were relying on people. You had the famous yellow passport for the yellow fever. Now, we think that a digital tool is absolutely key. And so we are developing an app that you will be able to download on your smartphone and in which you will be able to put your medical certification of vaccination and testing and transfer this data to the airline or the the state which is requiring it to allow you to enter.”
And finally, Norwegian Air has been brought low by a lack of hard cash, but the figures show that other bigger European carriers are continuing to burn through reserves as the pandemic continues.