56 Buaines
~and utilities ($56bn).
Oil companies in particular have been
clobbered by the steep ran in the price of
crude, which sank to $25 a barrel on March
18th, the lowest level in nearly two decades.
Morgan Stanley calculates that the median
exploration and production finn needs an
oil price of $51 a barrel to break even. Saudi
Al3Inco, the world's mightiest oil colossus,
said it might cut capital spending by up to a
quarter this year. America's ExxonMobil
echoed that it will make Msignificant" cuts.Oilmen are not the only ones trying to
preserve cash. Many companies are send-
ing workers on leave or worse. Norwegian
Air shuttle, an airline, is temporarily laying
off 90% of its 10,000 employees. .Mauiott
Intemational, the world's largest hotel
chain, said on March 17th that it will have to
let go of tens of thousands of workers.
Companies are rushing to tap credit
lines secured with their bankers. AB InBev,
the world's biggest brewer, is drawing
down its $9bn revolving credit. Boeing, aFlight risk
MOit airlines are runnin1 on emptyN
o INDUSTRY HAS been more battered
byc:ovid-19thanairtransport. With
peoplewuyof confined spaces-and
country after country imposing travel
bans-passenger numbers have nose-
dived, and with them airline revenues.
The estimate of $u3bn in lost sales,
which the lntemational.AirTransport
Association (IATA) made on March 5th,
already looks rosy. The trade body says
that the world's carriers may need
$2oobn in state aid to stay aloft.
Plenty were stalling before the pan-
demic. Ofthe120 airline companies
ranked byIATAonlyaround 30 made
money in 2017 and 20dl. Last year the
biggest half-dozen in Burope earned the
bulk of the $7bnin profits there, calcu-
lates Citigroup. a bank. Many firms had
borrowed heavily to buy planes which
the virus has grounded. The go-odd that
are in the red have on average six times as
much netdebt(adjusted for aircraft
leases) as BBITDAR. (a measure of airline
profits). In January the typical canier had
enough cash to cover between so% and
80% of short-tenn liabilities and about
two months ofrevenues, 1A:rAsays (see
chart). Thre~quarterscould not cover- Burninsup
World airlines, December 2019 or latest
c.h CDVerap of annuel """"'* monthe
- Median I Minimum I Maximum
0 2 4 6 8
Middle East* I •
Africa" I • I
Latin Amer1ca• • IEurope • I
Asia Pacific •Nortti America • I
Scuce:IATA10
II
costs beyond three months-if that.
Big companies have secured generous
credit lines from bank&. JAG, which owns
British.Airways, can tap€1..gbn ($2.lbn) in
revolving credit. EasyJet, a British low-
cost canier, has $5oom available. Most
firms, especially in Europe and Asia.,
nevertheless have no choice but to cut
flights and sack staff. cancellations in
America are a bit less savage while planes
are still permitted to crisscross its air
space; southwest has cut just one in five
flights. If revenues fall by 35% in 2000,
Delta, Southwest and united should encl
the year with "adequate" liquidity, says
JPMorgan Chase, anotherbank-aslong
as demand begins to bounce baclc.
China offers hope that it might. The
first to be infected, its airlines are lifting
off again. In mlcl-February capacity was
down by71% compared with a year ago,
saysOAG, a data firm. In the firstweekof
March it was 43% lower, as people re-
turned to the skies lured by cheap fares
(see Graphic detail). Combined with
government handouts to carriers, which
are mostty state-owned, this may tide
them over. Airline bosses elsewhere are
banlcing on similar luck-and largesse.Caeh • IJll of ehort-tem debtMiddle East*Africa•Latin America•Europe
Asia PacificNortti America
*May not be representatM?dueto small Silmple slmThe Economiat March 21st 2020troubled aerospace giant, has accessed
$13.Sbn. Carnival Cruise Line hopes to stay
afloat thanks to a $3bn lifeline. Bloomberg,
a financial-data. firm, reckons that if finns
in five big sectors (healthcare, energy, tran-
sport, leisure and mining) drew down 70%
of their credit lines, and the rest tapped
30% of theirs, America's biggest banks
would be on thehookfor $7oobn.
Companies' second wlne1ability be-
slcles a liquidity crunch arises from their
business models. Some tried and tested
ones suddenly look Iilther fiagile in the age
of pandemic. If Apple does not sell a new
iPhone it may still convince consumers to
buy one later. Revenues from a restaurant
meal not eaten or a forgone trip to the cine-
ma are lost forever.
That is bad news for industries like the
arts, which depend on a few big. one-off
events-at least in countries like Britain,
where state-funding of the arts is less lav-
ish that in Flance, Germany or Gulf sheikh-
doms. Art Basel Hong Kong was cancelled
last month. The main Art Basel fair in Swit-
zerland, which is due to open on June 18th,
may also not go ahead. Galleries that de-
pend on such fairs. as many do, could see as
much as Bo% of their sales evaporate.
No surprise, then, that the coronavirus
is provoking some soul-searching, espe-
cially in conservative industries. on March
20th Art Basel Hong Kong will launch on-
line "viewing rooms· with more than 231
galleries-over 90% of the original exhibi-
tor line-up. They will offer over 2,000 art-
works worth a total of $27om. The crisis is
also breaking down Hollywood bosses'
stubborn attachment to the old-fashioned
model of distributing films in theatres.
Universal Pictures is making some movies
available at home on the same day as their
theatrical release. •The Invisible Man" and
·Emma~ can now be streamed online. Dis-
ney has released its popular "Frozen 2• on
its newish Disney+ streaming service well
ahead of schedule.
some companies may not only survive
the pandemic but thrive, either now or
once it recedes. SUpennarkets are strug-
gling to keep up with demand from panic
buying. ICimberly Clark and other peddlers
of toilet paper, which many people are
frantically stockpiling, are riding high, too.
so are purveyors of cleaning products such
as Clorox and Porell.
This boomletwill probably not last. Ear-
ly panic will inevitably die down. Other in-
dustries may prosper for longer. By forcing
many people to work, shop and amuse
themselves at home, the crisis may give a
pennanent boost to online companies.
zoom, Microsoft Teams, slack, wecbat
work and other cor:porate-messaging ser-
vices are experiencing a surge in demand.
Data from sensor Tower, an analytics finn,
suggests that weekly new users of such
apps leapt from 1.4m in early January to ..