The Lemon Fool

27th March 2020
Coronavirus: Virgin Atlantic to seek bailout in coming days
Virgin Atlantic is expected to ask for a government bailout worth hundreds of millions of pounds in the coming days, the BBC understands.

Coronavirus: 2,000 jobs at risk as Carluccio's faces collapse
Italian restaurant chain Carluccio's is facing collapse, after warning it was facing permanent branch closures due to the coronavirus.

Rent-to-own firm Brighthouse calls administrators
Rent-to-own giant BrightHouse is close to collapse, the BBC understands, putting 2,400 jobs at risk.

AiYn'U

How are those due to covid? These are businesses with pre-existing medical conditions that made their demise likely!

UncleEbenezer wrote:How are those due to covid? These are businesses with pre-existing medical conditions that made their demise likely!

I hadn't looked it from that singular point of view. Perhaps you're correct although I'm not sure that applies to Virgin Airlines. The mere fact that the UK has announced £330bn and the US £2tn to support their respective economies suggests business failures will not stop when the "weaker" companies have failed. This is going to take some very good companies to the wire and I am not sure there's much we can do about it.

I hate to sound like a soothsayer or a doomster but I think we've a deep recession to face after this is all over. We must already be in the territory of some form of recession going forward. Let's just hope I'm wrong shall we?

AiYn'U

Everyone is asking their governments for cash at the moment (except IAG of the British airlines, who think they've got the reserves to be last one standing). but their pockets aren't that deep. If all countries react the same, then the weak go to the wall, and the strong pick up the slack, but you'd not want to be in a sector which won't recover. High street shop chains are under the biggest threat as employers and staff decide they like home working and deliveries. Tourism could be a problem as countries.

So I see lots of consolidation into larger firms that have good relations with their backers, with Amazon to rule them all.

AsleepInYorkshire wrote:

UncleEbenezer wrote:How are those due to covid? These are businesses with pre-existing medical conditions that made their demise likely!

I hadn't looked it from that singular point of view. Perhaps you're correct although I'm not sure that applies to Virgin Airlines. The mere fact that the UK has announced £330bn and the US £2tn to support their respective economies suggests business failures will not stop when the "weaker" companies have failed. This is going to take some very good companies to the wire and I am not sure there's much we can do about it.

I hate to sound like a soothsayer or a doomster but I think we've a deep recession to face after this is all over. We must already be in the territory of some form of recession going forward. Let's just hope I'm wrong shall we?

AiYn'U

Virgin (aka Delta) were undercapitalised and underprofitable vs their competitors - IAG et al. Hence IAG et al being coy about bailouts, i.e. yes please, but not until after the weaker brethren have been culled. Ditto EZY etc. being in a stronger position versus others in their segment.

regards, dspp

As was said in a report yesterday, Corporate Darwinism on steroids.

I think the other point is correct; that some of the now very weak businesses were weak before Coronavirus had hit the headlines. It is a bit like the reported number of deaths from Covid19. A significant number of those dying certainly in the over 80s age group would have died within 6 months anyway.

Dod

dspp wrote:Virgin (aka Delta) were undercapitalised and underprofitable vs their competitors - IAG et al. Hence IAG et al being coy about bailouts, i.e. yes please, but not until after the weaker brethren have been culled. Ditto EZY etc. being in a stronger position versus others in their segment. regards, dspp

I do agree with dspp's comments re Virgin Atlantic aka Delta. Virgin Atlantic has Never been the most vibrant of businesses, perhaps the high-point from Branson's viewpoint was Singapore Airlines buying a large non-controlling share (subsequently quickly sold) for a ridiculously large amount circa 20 years ago? After the disaster of CV19 passes it may be that Britain itself can only sustain 1 long-haul carrier, bi-lateral and fifth-freedom alternatives removing monopoly concerns. British Airways itself is actually part of IAG along with Aer Lingus, Iberia et al. Despite IAG being managed from and listed in London, it is actually a Spanish Company. How a British Government pro-rates a bail out of a Spanish Holding Company alongside the Irish & Spanish Governments is something that's worth buying pop-corn to watch! Perhaps the solution would be IAG put British Airways into liquidation and HMG purchase the assets from the receiver? Intelligent opinion gratefully received!

Dod101 wrote:
I think the other point is correct; that some of the now very weak businesses were weak before Coronavirus had hit the headlines.

I was reading a comment elsewhere yesterday, suggesting that this virus has exposed the fact that the world is chock full of paycheck-to-paycheck employees working for paycheck-to-paycheck corporations...

It's difficult to disagree given recent developments...

Cheers,

Itsallaguess

I agree and thought about that when the talk was about bailing out the self employed. I have used my painter and decorator for more than 25 years and I know them pretty well. He was able to have a good conversation with me about investments because as he said, he can't rely on anyone else so of course they need to have a back up in case things go wrong. I think he was thinking more of illness and so on than Covid19, but supposing we all behaved in that hand to mouth existence of many it would seem?

Dear Chancellor, Me too please!

Dod

YeeWo wrote:

dspp wrote:Virgin (aka Delta) were undercapitalised and underprofitable vs their competitors - IAG et al. Hence IAG et al being coy about bailouts, i.e. yes please, but not until after the weaker brethren have been culled. Ditto EZY etc. being in a stronger position versus others in their segment. regards, dspp

I do agree with dspp's comments re Virgin Atlantic aka Delta. Virgin Atlantic has Never been the most vibrant of businesses, perhaps the high-point from Branson's viewpoint was Singapore Airlines buying a large non-controlling share (subsequently quickly sold) for a ridiculously large amount circa 20 years ago? After the disaster of CV19 passes it may be that Britain itself can only sustain 1 long-haul carrier, bi-lateral and fifth-freedom alternatives removing monopoly concerns. British Airways itself is actually part of IAG along with Aer Lingus, Iberia et al. Despite IAG being managed from and listed in London, it is actually a Spanish Company. How a British Government pro-rates a bail out of a Spanish Holding Company alongside the Irish & Spanish Governments is something that's worth buying pop-corn to watch! Perhaps the solution would be IAG put British Airways into liquidation and HMG purchase the assets from the receiver? Intelligent opinion gratefully received!

In a post-Brexit world it is unclear how the UK will be able to support any purely-domestic-ownership airlines as they would all be subscale vs their EU or US or ME competitors. And unless a Brexit agreement finds in favour of UK ownership of EU conglomerates (which I doubt the EU will be daft enough to do) then the UK is stuffed, except of course for the LHR jewel. And since LHR is owned by Ferrovial then that is no longer really UK at all.

Bottom line IAG may shed BA, but a standalone BA will be unviable as a healthy airline. That after all is why IAG were created. OR a way is found to continue the existing situation where some tame subsidiaries of foreign corporations fly a UK flag of convenience, that is the continuation of the IAG/BA; Delta/Virgin; and EZY/EZY model. In the latter case UK taxpayer is not on tap at all. Unless politicians really really stupid. Mind you Brexit proves they are.

Oh well.

regards, dspp

dspp wrote:In a post-Brexit world it is unclear how the UK will be able to support any purely-domestic-ownership airlines as they would all be subscale vs their EU or US or ME competitors. And unless a Brexit agreement finds in favour of UK ownership of EU conglomerates (which I doubt the EU will be daft enough to do) then the UK is stuffed, except of course for the LHR jewel. And since LHR is owned by Ferrovial then that is no longer really UK at all.

Bottom line IAG may shed BA, but a standalone BA will be unviable as a healthy airline. That after all is why IAG were created. OR a way is found to continue the existing situation where some tame subsidiaries of foreign corporations fly a UK flag of convenience, that is the continuation of the IAG/BA; Delta/Virgin; and EZY/EZY model. In the latter case UK taxpayer is not on tap at all. Unless politicians really really stupid. Mind you Brexit proves they are.

Oh well.

regards, dspp

How wonderful to be back talking Brexit! The issue of Brexit and future structure of Aviation consolidates well in the current Covid context. Singapore Airlines did well using Singapore as a hub without needing to merge with another Asean carrier, likewise Cathay Pacific albeit with a cross-shareholding with Air China. If the EUSSR seek to give Britain a punishment beating for daring to leave then clearly all bets are off for aviation. Perhaps an UK/EU carrier "BEA" could be open to shareholders from the UK/EU, a BOAC type operation (UK holders only) could fly BA's traffic rights beyond the community? As things stand who knows?, given weeks more of this the whole sector will be bankrupt.

"Bottom line IAG may shed BA, but a standalone BA will be unviable as a healthy airline."

In one sentence, that is a proxy for Brexit.
The UK may not be unviable outside the EU, but it certainly will make us poorer, and like BA suffer for years. Probably until a more outwardly looking generation decides their grandfathers had had an unaccountably europhobic crazy fit, then decide to rejoin.

Arb.

28th March 2020
Coronavirus: OneWeb blames pandemic for collapse
OneWeb, the high-profile London-based satellite start-up, has filed for bankruptcy protection in the US.

AiYn'U

dspp wrote:"Bottom line IAG may shed BA, but a standalone BA will be unviable as a healthy airline."

IAG's by far most successful component pre-covid was far and away British Airways. If you feel BA is unviable without EI/IB imagine what they're going to be without BA!

Arborbridge wrote:In one sentence, that is a proxy for Brexit. The UK may not be unviable outside the EU, but it certainly will make us poorer, and like BA suffer for years. Probably until a more outwardly looking generation decides their grandfathers had had an unaccountably europhobic crazy fit, then decide to rejoin. Arb.

Great to read some losers bile. The whole world beyond the failing experiment is there for future generations. CANZUK, FTA with NAFTA et al. I have no doubt CV19 will change the nature of bi-lateral trade over time, I'm in awe of the comprehensive package an Independent BoE with it's own currency has been able to arrange to save incomes in Britain. I genuinely feel Europhiles should reflect on the disaster in Italy and contemplate that Brussels' is still fining the country for perceived transgressions and is offering thin-gruel in the form of actual assistance.

YeeWo wrote: If the EUSSR seek to give Britain a punishment beating

If it's the EUSSR then you might as well call it the UKraine too, with predictably similar economic outcome for 30 years post-departure from the trading bloc, no doubt...


GS

YeeWo wrote:

dspp wrote:In a post-Brexit world it is unclear how the UK will be able to support any purely-domestic-ownership airlines as they would all be subscale vs their EU or US or ME competitors. And unless a Brexit agreement finds in favour of UK ownership of EU conglomerates (which I doubt the EU will be daft enough to do) then the UK is stuffed, except of course for the LHR jewel. And since LHR is owned by Ferrovial then that is no longer really UK at all.

Bottom line IAG may shed BA, but a standalone BA will be unviable as a healthy airline. That after all is why IAG were created. OR a way is found to continue the existing situation where some tame subsidiaries of foreign corporations fly a UK flag of convenience, that is the continuation of the IAG/BA; Delta/Virgin; and EZY/EZY model. In the latter case UK taxpayer is not on tap at all. Unless politicians really really stupid. Mind you Brexit proves they are.

Oh well.

regards, dspp

How wonderful to be back talking Brexit! The issue of Brexit and future structure of Aviation consolidates well in the current Covid context. Singapore Airlines did well using Singapore as a hub without needing to merge with another Asean carrier, likewise Cathay Pacific albeit with a cross-shareholding with Air China. If the EUSSR seek to give Britain a punishment beating for daring to leave then clearly all bets are off for aviation. Perhaps an UK/EU carrier "BEA" could be open to shareholders from the UK/EU, a BOAC type operation (UK holders only) could fly BA's traffic rights beyond the community? As things stand who knows?, given weeks more of this the whole sector will be bankrupt.

SA could fly into all the Asian and long haul destinations on an equal basis vs local flag carriers. Any airline outside of EU is disadvantaged in accessing the internal EU market. This is why SA has no route network within EU, USA, China. Bottom line you are not making a valid comparison. The historical situation that led to the emergence of a LHR hub and profitable BA was running towards difficulties. Seeing that Walsh positioned for the future with IAG. That IAG strategy has been gutted by Brexit, but it does not make Walsh's diagnosis of the problem and the rationale of the solution incorrect.

There is trouble ahead, because of Brexit, which will be accelerated by CV-19.

regards, dspp

There is considerable moral hazard in bailing out airlines, and certainly not by grants. Possibly some argument for short term loans, as long as they take priority over the airlines existing debts. But if an airline goes bust, we know what will happen. The aircraft will be bought by solvent airlines, who will also take over most of the routes and staff, and life will go on. The lenders will take a haircut and may even learn something about prudent lending.
The state should not get involved unless there are much more convincing arguments – can’t see any with airlines

YeeWo wrote:

Great to read some losers bile. [/quote]

That's an unfair characterisation, if I understand what "bile" means. I feel no bile, just a dull acceptance of living in a country where a small number of us wanted to shoot everyone else in the foot.

It's over for at least a generation, but at least allow us remainers to point out the stupid and disadvantageious positions Brexiters have placed us in from time to time.

Arb.

Arborbridge wrote:

YeeWo wrote:

Great to read some losers bile.

That's an unfair characterisation, if I understand what "bile" means. I feel no bile, just a dull acceptance of living in a country where a small number of us wanted to shoot everyone else in the foot.

It's over for at least a generation, but at least allow us remainers to point out the stupid and disadvantageious positions Brexiters have placed us in from time to time.

Arb.[/quote]

Not necessarily. That is why they are so afraid of democracy.

regards, dspp

28 March 2020
March 2020 Letter
The US economy is roughly $20 trillion annually, and much of it has ceased to function. In that context, the $2 trillion rescue package now being negotiated in Congress covers just 10% of that, making it like a Band-Aid on a harpoon wound.

The article also outlines a need to support Airbus by EU countries.

Why have I chosen to put this here on this thread?

I am convinced that there are going to be a number of substantial business failures. And I don't think they have to occur just in the UK to have a negative impact upon our economy. I'd hope my prognosis is over-thought and the damage to business world wide will be minimal. Governments don't seem to think that though and clearly the level of support, regardless of minutia, seems to underpin a feeling that the overall impact is going to be significant.

AiYn'U