Financial Times Europe - 21.03.2020 - 22.03.2020

8 ★ FT Weekend 21 March/22 March 2020

P E T E R C A M P B E L L —LONDON

Volvo Cars said its Chinese business

had returned to “normal”, offering a

ray of hope to European and US car-

makers that have shuttered operations

in the face of thecoronavirus pan-

demic.

As the Swedish group closed its US plant

and became the final carmaker to cease

production in Europe, chief executive

Hakan Samuelsson said factories and

dealerships in China were operating

close to pre-shutdown levels.

“All factories are back, and there are

very positive signs of normalisation, all

dealerships are open and showrooms

are showing signs of being very close to

normal,” he told the Financial Times.

“Everybody has the feeling they are

through.”

Carmakers have in the past week

announced the closures of every large

European plant and more than 100

facilities across North and South Amer-

ica in a wave of measures to impede the

spread of the virus.

Volvo is the sector’s last big group to

shut European operations. Jaguar Land

Rover announced on Thursday evening

that it would close all its UK plants in the

coming week.

Volvo’s Swedish plants will close until

April 14, with its Belgian site in Ghent

intending to reopen a week earlier.

“We need to plan for normality after

Easter, to give people a light at the end of

the tunnel,” said Mr Samuelsson. “Let’s

hope that will be the case. Continuing to

Christmas would be a disaster.”

Every other manufacturer, from

Volkswagen to Toyota, has announced

European shutdowns over the past

week, while Ford has closed all sites

across North and South America, and

General Motors and Fiat Chrysler have

shuttered plants across the US, Canada

and Mexico. Ford on Thursday drew

down $15.4bn in credit, as well as can-

celling its dividend to preserve cash, fol-

lowing a complete shutdown of its North

American operations.

Volvo is not looking to tap its credit

line but is reducing pay for staff and

working hours for non-factory employ-

ees, Mr Samuelsson said.

Automobiles

Volvo says China plants almost

back to pre-shutdown levels

TA N YA P OW L E Y
TRANSPORT CORRESPONDENT

Ryanair chief executive Michael
O’Leary and the rest of the airline’s
employees are to take a 50 per cent pay
cut, as Europe’s largest low-cost carrier
prepares for a lengthy shutdown in the
region’s air travel.
The outspoken executive said Rya-
nair was working on a best-case scenario
of two o three months in which flightst
would be grounded and revenues would
vanish as the coronavirus outbreak
wreaks havoc on the industry.
However, in an interview with the
Financial Times, he admitted that “hon-
estly none of us have any idea”.
“All that you can draw on is what
appears to be the Chinese experience.
Both for hope and optimism. They seem
to have no new cases now in the last two
days, that’s three months later but after
very draconian lockdown measures,”
he said.
“If we follow the same pattern as the
Chinese, then I think certainly from our
perspective... we’re talking about a

closedown that will last for at least three

months.”

Ryanair’s move comes asrival easyJet

became the latest airline to warn that it

will ground the majority of its aircraft

from Tuesday following similar action

by airlines.

EasyJet said itwould continue to oper-

ate rescue flights to repatriate custom-

ers and expects most of these to be com-

pleted by Monday. After that it will

operate a minimal schedule of essential

services, mainly on UK domestic routes.

The airline industry has been at the

sharp end of the economic disruption

unleashed by the virus, with many

major carriers lobbying their govern-

ments for financial support and a series

of top executives taking pay cuts along-

side their staff.

Willie Walsh,chief executive of BA

owner IAG, this week took a 20 per cent

pay reduction for the remainder of his

contract after delaying his retirement.

Mr O’Leary said he was waiting for

details from the UK and Irish govern-

ments on programmes to help pay

May. Mr O’Leary said at the end of May

the groupwould have to reassess the sit-

uation. He added that he could not rule

out job cuts further down the line.

Ryanair had cash and cash equiva-

lents of more than €4bn as of March 12.

In addition, the grouphad undrawn

credit lines and nearly 300 aircraft that

it owned with a current value of about

$8bn-$10bn, Mr O’Leary said. He did

not expect the airline to have to draw on

the credit lines for the moment.

Earlier this week, the global airline

industry said it would need up to

$200bn in emergency support as the

travel industry continued to bleed cash.

The International Air Transport Associ-

ation, the airlines’ main trade body, said

the majority of carriers faced running

out of money within two months.

But Mr O’Leary warned he EU had tot

be careful over how it offersstate aid,

saying that governments had to be care-

ful not to create “massive distortion”

with bailouts thatwould leave “well-run

airlines at the mercy of nationalised air-

lines at the end of this process”.

Ryanair chief O’Leary and

staff to take 50% pay cut

3 Prolonged shutdown expected 3 EasyJet grounds planes 3 Sector jobs at risk

JAV I E R E S P I N OZ A , N I C F I L D E S ,

H A N N A H M U R P H Y A N D T I M B R A D S H AW

Netflix and YouTube, two of the world’s

largest online video services, are both

taking the unprecedented step of

reducing picture quality in Europe to

ease pressure on broadband networks.

The two internet groups are responding

tocalls by the European Commission

and some European telecoms compa-

nies to prevent internet congestion, as

more people work and take classes at

home during the coronavirus pan-

demic.

YouTube is the world’s most popular

video site with more than 2bn users tun-

ing in every month, while Netflix had

more than 160m viewers worldwide at

the end of last year, including tens of

millions across Europe.

“We are making a commitment to

temporarily default all traffic in the EU

to standard definition,” YouTube said

yesterday.

etflix said that “given the extraordi-N

nary challenges raised y the coronavi-b

rus”, it would temporarily throttle its

data throughput oo, meaningt some

viewers would see degradation in pic-a

ture quality, in he hopes of reducing itst

traffic by a quarter.

The unprecedented demand for

streaming services to curtail their band-

width usage is a sign of how concerned

the authorities are that broadband net-

works will quickly become overloaded,

as millionswork at home and school

children turn to live video streaming.

Last week, Telecom Italia reported a

70 per cent surge in internet traffic over

its landline network as Italy went into

lockdown, saying a “big contribution”

came from online games such as Fort-

nite. Spanish telecoms operators have

warned of a “traffic explosion”. How-

ever, in the UK, BT hasinsisted hat itst

network will be able to cope with the

increased demand.

Defaulting to standard definition,

rather than the high definition that

most viewers with good internet con-

nections have become used to, could cut

the data required to watch a video by

more than half.

“Netflix has decided to begin reducing

bit rates across all our streams in Europe

for 30 days,” the company said. “We

estimate that this will reduce Netflix

traffic on European networks by around

25 per cent while also ensuring a good

quality service for our members.”

YouTube and Netflix cut

picture quality in Europe

Ryanair expects European flights to be grounded until at least June as the coronavirus outbreak wreaks havoc on the airline industry —Chris Ratcliffe/Bloomberg

workers asDowning Street last night

pledged to meet 80 per cent of employee

wages up to £2,500 a month. Ryanair is

already accessing similar schemes that

have been put in place across many con-

tinental European countries.

“ We a r e f a c i n g a s i t u a t i o n

whereby... airlines and airports are

going to have no customers and no reve-

nues for the next two or three months,”

said Mr O’Leary.

What we’re clearly trying to avoid —“

if at all possible because we have to pre-

serve cash — we want to avoid mass lay-

offs but the only way we can avoid mass

lay-offs in our industry... is going to be

payroll support for the next two to four

months.”

The pay cut would be forApril and

YouTube is to

default all traffic in

the EU to standard

definition in order

to ease broadband

network pressure

New netizensEuropeans take crash course

in buying online groceries— ANALYSIS, PAGE 10

Fund managers joltedNorms are fractured

amid acute and growing pressure— MARKETS, PAGE 11

H A N N A H KU C H L E R— NEW YORK

Biotech start-ups are racing to create
faster and more accurate ways to test for
coronavirus s countries including thea
US and UKstruggle o expand produc-t
tion of existing methods fast enough.
Mammoth Biosciences, co-founded
byJennifer Doudna, one of the scientists
who discovered Crispr gene-editing
technology in 2012, is working with the
University of California San Francisco to
validate a test that it developed for Cov-
id-19 in less than two weeks.
The company, which is backed by
Apple chief executive Tim Cook and
Alphabet’s Verily, has only 32 staff and
no product on the market, but chief
executive Trevor Martin s confidenti
the technology is up to the task.
“This is exactly what [Crispr] tech-
nology is meant to help with: rapid
response to infectious diseases,” he said.
Crispr is a DNA editing process that
up until know has been most commonly
used to try totreat rare genetic diseases.

But it can also be used in diagnostics,

where it can be faster and more accu-

rate, with less risk offalse positives.

According to Mammoth, the test it

has developed takes 30 minutes, com-

pared with about two hours for the cur-

rent one used in the US, and does not

need large lab equipment.

Most of the tests currently in use are

based on a process called real time

polymerase chain reaction, which

amplifies the amount of DNA in a sam-

ple and identifies the virus with a fluo-

rescent marker. The Mammoth test

uses Crispr to search for and highlight

the genetic material of the virus and the

testing kit can be shrunk to the size of a

pregnancy test.

“The long-term advantage f Crispr-o

based diagnostics is they are disposable,

easy-to-use, in a very accessible and

very accurate format,” Mr Martin said.

The company has already published

an initial research paper online so that

other scientists can try out or build on

its techniques.

In Boston, Sherlock Biosciences, co-

founded by another Crispr pioneer,

Feng Zhang from the Broad Institute,

has also developed a test for Covid-

using the technology. The 20-person

start-up is working with molecular diag-

nostics company Cepheid to develop a

test that can run on their machines,

which are owned by many labs.

Rahul Dhanda, Sherlock’s chief exec-

utive and a veteran in infectious disease

diagnostics, said a major advantage of

Crispr-based diagnostics is that they are

rapidly programmable, so do not

become less effective as the virus

mutates. A similar technique is being

researched by Darpa, the research arm

of the US Department of Defense, which

Sherlock would ultimately be allowed to

commercialise. The company is also

working on developing a home testing

kit. “[Crispr] is something that is going

to change healthcare in a way that I

didn’t think diagnostics could,” Mr

Dhanda said.

The businesses that are currently try-

ing to rapidly develop diagnostics face a

similar dilemma to drug companies:

their investment may not pay off after

the pandemic dies down. The diagnos-

tics industry also does not have the

same amount of funding as pharmaceu-

tical companies.

Between 2015 and 2019, start-ups

looking for disease treatments raised

more thansix times the private funding

raised by diagnostics start-ups. In 2018

and 2019, the ratio waseight times,

according to research firm CB Insights.

Even the large existing makers of

diagnosticswould not necessarily bene-

fit from the pandemic, said Puneet

Souda, an analyst at SVB Leerink. Ther-

moFisher and Danaher are worth about

$110bn and $86bn respectively, but the

problems the coronavirus will cause for

their operations may end up outweigh-

ing any boost from sales, he said.

He hopes that in the long run, the out-

break will make governments and regu-

lators much more aware of the impor-

tance of diagnostics.

Tara O’Toole, executive vice-presi-

dent of In-Q-Tel, the CIA’s non-profit

venture capital firm, and former under

secretary of state for science and tech-

nology, said it was a “market failure”

that diagnostics were less valued than

therapeutics.

In the short term, she said, the US

would have to focus on increasing the

volume of tests already in use. But in the

longer term, she called for a road map

for the industry.

“We’re in a diagnostic renaissance

from a technological point of view, and

yet we find ourselves without adequate

diagnostics yet again in a big outbreak,”

she said last week at a US government

event to tap scientific expertise.

The businesses focused on Crispr

diagnostics are hoping their tests will be

approved for use this year but ulti-

mately, the technology may be too ear-

ly-stage to be able to help this time.

Mr Martin said itwas “crazy” that in

2020 wedid not have this kind of rapid

molecular testing thatcould be done

anywhere.

“It is important now and in the

future,” he said. “This will not be the

only time we face an infectious disease

outbreak. We need to be prepared next

time something like this happens.”

Under the Hood age 9p

Lex age 16p

Pharmaceuticals. iotechB

Start-ups race to devise faster and more accurate virus tests

Crispr DNA editing can be

employed in diagnostics with

reduced risk of false positives

Yale Tung Chen, an emergency doctor

in Spain, is at home with coronavirus,

tweeting scans of his lungs from an

ultrasound probe connected to his

smartphone. On the fourth day, he saw

the pneumonia in his lungs was

worsening and added another

experimental drug, an antimalarial

that some clinics in China have tried.

As coronavirus can be diagnosed

and tracked using ultrasoundas well

as molecular tests,device maker

Butterfly iQ hasexperienced a surge in

demand. It aims to increase its

production capacity tenfold in the

second half of the year and has

boosted its executive team, including

Laurent Faracci, a senior executive at

Reckitt Benckiser who will take over as

chief in April.

The Connecticut-based start-up

hopes that its affordability — its kit

costs $2,000 comparedwith between

$25,000 and $50,000 for a

conventional machine — and

portability will allow it to help

overloaded healthcare systems

prioritise Covid-19 patients.

John Martin, Butterfly’s chief

medical officer, said the kit could be

used in pop-up screening clinics or in

patients’ homes.Doctors are also

using it to sharedata about how the

disease progresses, uploading

ultrasounds to the website. “This

device is going to change the way

doctors practise medicine,” he said.

Ultrasound tracker

Surge in demand for

device maker’s kit

‘Airlines and airports

are going to have no

customers and revenues

for two or three months’

MARCH 21 2020 Section:Companies Time: 20/3/2020- 18:42 User:cathy.pryor Page Name:CONEWS1, Part,Page,Edition:USA, 8, 1