6 ★ FINANCIAL TIMES Wednesday8 April 2020

SA M J O N E S— Z U R I C H

A Swiss medical diagnostics company

has said it is ready to ship high-capacity

machines capable of more than 30m

clinically accurate coronavirus anti-

body tests this year from Monday.

Eysins-based Quotient said its tests

were ready for immediate use, thanks to

years ofwork developing a new serologi-

cal screening machine that it had

intended to launch this summer.

Over the past month Quotient has

adapted the machines to test for corona-

virus antibodies. Each machine can con-

duct 3,000 tests a day.

Experts say ntibody testing will be aa

critical part of easing lockdowns sa

countries try torestart economies av-r

aged by the pandemic. Antibody screen-

ing identifies who has already been

exposed to the virus and developed

immunity, a group likely to include mil-

lions of asymptomatic individuals and

mild sufferers of Covid-19.

Franz Walt, Quotient’s chief execu-

tive, warned that the world was facing

shortages of the critical components

needed to make the tests, because of

widespread supply-chain disruption

and government hoarding.

“Demand for antibody testing is going

to be absolutely enormous in the next

couple of months,” Mr Walt told the

Financial Times. “I think we are a trail-

blazer here, but I really hope that more

than one of us is moving on this because

even we do not have the capacity to

meet demand.

“There is a real shortage of supply of

secondary reagents, biomarkers, spe-

cialised spare parts [for testing mach-

ines] and their components from China

... Supply chains are badly disrupted.”
Companies will take months to ramp
up antibody testing, he said.
Mr Walt was managing director of the
Singapore-based Roche laboratory that
developed the first diagnostic case for
Sars in 2003: “I hoped I would never see
a similar virus again in my life, but here
we are.”
Two US companies ave also said theyh
have developed antibody tests for the
novel coronavirus but so far they have
given no firm date ontheir availability
for use. New Jersey-based medical tech-
nology company BD has said it will
make 1m antibody tests available in the
coming months.
Mr Walt said he was in discussions
with health authorities in the US, UK,
Spain and Switzerland.

Swiss group

says antibody

test machines

ready for use

J O E M I L L E R— F R A N K F U RT
TA N YA P OW L E Y A N D
P E G GY H O L L I N G E R— LO N D O N

Lufthansa is to permanently decommis-
sion more than 40 of its aircraft and axe
its Germanwings low-cost arm as it
warned it will take years for the airline
industry to return to its pre-coronavirus
peak in passenger numbers.
Following a board meeting yesterday,
the German group added that it would
reduce the capacity of its Eurowings
brand by cutting its long-haul opera-
tions. It will also accelerate the restruc-
turing of its Austrian Airlines and Brus-
sels Airlines subsidiaries.
The passenger jets that will no longer

fly under a Lufthansa flag will include
six Airbus A380s, seven A340-600s,
and five Boeing 747-400s. Eleven Airbus
A320s, which had been used for short-
haul connections, will also be dropped.
As a result, Lufthansa’s capacity at its
main hubs in Frankfurt and Munich will
be reduced.
Last month, a memo that was circu-
lated to staff at one of Lufthansa’s tech-
nical sites in Ireland, and seen by the
Financial Times, outlined a worst-case
scenario.
In this, the carrier assumed that it was
able only to ramp up to 25 per cent of its
pre-crisis capacity in October, and
would still be only three-quarters of its
former size by the end of 2020.
In a statement yesterday, the com-
pany, which has already furloughed
almost 90,000 workers and scrapped its

dividend, said that it would take

“months until the global travel restric-

tions were completely lifted and years

until the worldwide demand for air

travel returns to pre-crisis levels”.

The Frankfurt-based airline, which is

in daily talks with the German govern-

ment about its rapidly diminishing

liquidity, said in March that it had credit

lines of more than €5bn available.

The carrier, which has cut 95 per cent

of its flights, also has an unencumbered

fleet worth €10bn against which it could

borrow money.

“Lufthansa was the first to trim

schedules in response to the Covid-

outbreak, and the first to essentially

ground the entire fleet,” said analysts at

Bernstein.

“Clearly the company is serious about

being 20 per cent smaller in the future.”

The scrapping of the Cologne subsidi-

ary Germanwings, which ran flights for

Eurowings, provoked anger from work-

ers’ representatives, who will now nego-

tiate on the future of the unit’s staff.

erdi, the services union, said thatV

the brand had been made a victim of the

Covid-19 crisis.

“We welcome every form of aid,” the

union said, adding: “Nevertheless, the

logical conclusion is that state aid

should only be given if it is accompanied

by job and income security.”

Lufthansa’s decision came on the

same day that the global airline trade

body, Iata, warned that any recovery in

travel demand is likely to take longer

than after previous economic or health

shocks the industry has endured.

The organisation is forecasting a

three-month lockdown, but said that

there was likely to be a delay in the

return to travel, because of the impact of

the recession on the public and busi-

nesses.

Lufthansa to

decommission

40 aircraft

amid shake-up

3 Capacity slashed by virus-hit airline

3 Germanwings low-cost unit ditched

‘Clearly the company is

serious about being 20%

smaller in the future’

Bernstein analysts

Matthew HarrisonInvestors are underestimating the risk to the US economy from the coronavirus pandemicyMARKETS INSIGHT

L E I L A A B B O U D —PA R I S

LVMH and Kering, the world’s big-

gest luxury-goods groups, told staff

they would be a placed on an emer-

gency government assistance

scheme but backtracked after

smaller rivals Hermès and Chanel

pledged to cope without state aid in a

spirit of “national solidarity”.

Internal emails and documents

reviewed by the Financial Times show

that soon after France entered lock-

down on March 15, LVMH had started

to put some workers on the govern-

ment’s so-called “partial activity”

scheme across its various businesses.

The scheme, the centrepiece of

France’s emergency efforts to prop up

its economy during coronavirus,

allows companies to put workers on

reduced hours or furlough them while

the state finances most of their sala-

ries in an attempt to avoidlay-offs.

Workers at Louis Vuitton, LVMH’s

biggest brand accounting for almost

half of group operating profit, and

beauty retailer Sephora were among

those told that hey would be put ont

the government programme — only to

have the decision reversed last week.

Similar events took place at Gucci-

owner Kering. A union representative

at Boucheron, a watch and jewellery

brand, said hat three meetings had t

been held to discuss putting staff on

thescheme. But on Monday, the

union was told that the plan would not

go ahead, said Yannick Blaise, a CFDT

representative at Boucheron.

Whether or not to tap state aid has

turned into a fraught question for

some of France’s biggest companies

because asking for help risks turning

once internal matters such as execu-

tive payinto matters of public debate.

Some, such as Total and Société

Générale, have vowed not to use the

scheme so as not to weigh on public

accounts. About 473,000 groups have

applied for aid to cover the costs of

some 5m staff, including at Airbus,

Renault and Air France-KLM, at a

cost of more than €11bn for the state.

In luxury, the equation is compli-

cated by the fact that LVMH and Ker-

ing are run by the richest and third-

richest men in France respectively,

Forbes magazine’s rankings say.

The two billionaires, LVMH’s Ber-

nard Arnault and Kering’s François-

Henri Pinault, are fierce competitors

and high-profile figures.Both have

donated money and resources to the

fight against Covid-19, with LVMH

being lauded for converting perfume

factoriesto making hand sanitiser for

health workers.

Jenny Urbina, a CGT labour repre-

sentative at Sephora, said:“I think

they moved ahead too quickly and

didn’t think about how it would look,

and were caught out when competi-

tors made their announcements.”

Additional reporting by Domitille Alain

In line VMH and Kering backtrack on planL

to tap state aid to pay staff during lockdown

The 2020 fall-winter collection of Louis Vuitton, the key brand of France’s LVMH luxury group —Julien de Rosa/Epa-EFE

INSIDE BUSINESS

ASIA

Tom

Mitchell

I

n Xi Jinping’s China, any state-

owned enterprise “reform” that

diminishes a powerful national

champion in favour of private-

sector or consumer interests has

long seemed like a pipe dream.

On thepresident’s watch over the past

seven years, SOE reforms have focused

instead on taking two or more huge

state groups and mashing them

together to form an even larger entity.

In one classic example, China’s two

largest railcar manufacturers — each a

global giant in its own right with huge

economies of scale — had for years

undercut each other on domestic and

overseas tenders, offering prices that

their overseas peers could only marvel

at. So China CNR and CSR Corp, which

hadbeen pitted against each other pre-

cisely in order to provide more competi-

tion, merged in 2014 to create CRRC.

Similarly, a year later China’s two larg-

est shipping groups were reshuffled to

create four mini-monopolies encom-

passing container shipping, energy

transport, maritime finance and ports.

In the shade of such giants there was

little space for private-sector groups to

survive, let alone thrive, in key areas of

China’s industrial economy. Mr Xi, it

appeared, could not have cared less.

TheCommunist party’s first big eco-

nomic blueprint of the Xi era, published

inlate 2013, had promised to give mar-

Circular nature ofChina’s stateenterprise reformis its Achilles heel

ket forces a “decisive role” in allocating

resources while also protecting the

“leading role of the state-owned sector”.

This contradiction could not last. Mr

Xi could not have both and his adminis-

tration soon demonstrated a clear pref-

erence for “bigger, better, stronger”

SOEs over the establishment of more

market-based competition in the

world’s second-largest economy.

Against this backdrop, the establish-

ment of China Oil & Gas Piping Network

Corporation in December deserved

more attention than it received. But the

China-US trade war, Mark 1, was coming

to a climax then and, after coronavirus

erupted from central China a month

later, who was going to be that inter-

ested in the establishment of an obscure

SOE with a clunky acronym?

But with the creation of COGPC,Bei-

jing is doing some-

thing unusual. It is

forcing three pow-

e r f u l s t a t e o i l

groups — CNPC,

Sinopec and Cnooc

— to hand over the

valuable pipelines

that form the back-

bone of their respective monopolies.

CNPC is the largest of the three nd ita

controlled more than three-quarters of

China’s pipeline network before COGPC

was established.

“The establishment of the new

national pipeline company is a step in

the right direction in terms of realising

China’s goals of increasing domestic nat-

ural gas production and consumption,”

says Erica Downs, a China energy spe-

cialist at Columbia University’s Center

on Global Energy Policy.

CNPC, Sinopec and Cnooc had done a

poor job building out China’s pipeline

network, which is about only one-

seventh as long as that in the US and

reaches less than a quarter of the popu-

lation. Under guidelines in place since

2013, they were supposed to allow third-

party access to their networks. But as

Jenny Yang, energy analyst at IHS

Markit, notes: “Only a handful of [third-

party] cargoes have come through and

there is virtually no [third-party access]

to the transmission network.”

In theory, the establishment of

COGPC could prove as beneficial as the

break-up of China’s telecoms monopoly

into three competitors was for that

industry’s rapid transformation at the

turn of the century.

But it remains to be seen precisely

what pipeline assets will be surrendered

to COGPC. As Ms Downs puts it: “It is a

very long way from here to there

... and key questions, such as the
extent to which third-party access will
be enforced, remain to be answered.”
The new group will also reportedly be
30 per cent held by CNPC, making it the
second-largest shareholder after China’s
state assets regulator, although its own-
ership structure has yet to be con-
firmed. COGPC’s chairman and presi-
dent are former CNPC executives.
This blurring of the boundaries
between CNPC and COGPC is common
in the state sector. CNPC’s new chair-
man, Dai Houliang, was previously
chairman of its supposed arch rival,
Sinopec. Such shuffling of assets and
even senior executives between various
state-controlled companies ultimately
betrays the Achilles heel of SOE reform
in China — its circular nature.
At best the party-state takes assets
from some SOEs and redistributes them
to other SOEs. But private-sector inter-
ests need not apply for any key role in
the process, because in China the party-
state never ever gives up anything itself.

[email protected]

Policies have focused on

taking two or more huge

state groups and mashing

them together to form

an even larger entity

APRIL 8 2020 Section:Companies Time: 7/4/2020- 19:08 User:joe.russ Page Name:Comps&Mkts1-0002, Part,Page,Edition:EUR, 6, 1