Los Angeles Times - 18.03.2020

C4 WEDNESDAY, MARCH 18, 2020 LATIMES.COM/BUSINESS

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Group in New York, said in a statement that “many of our members have been asking us to stay open as an outlet to manage stress and anxi- ety” but that health con- cerns were paramount, so “we will temporarily close all Equinox locations effective 8 p.m. local time on Monday, March 16, until further no- tice.” The fast-growing Planet Fitness franchise started streaming free classes Mon- day night on the company’s website, Facebook page and YouTube channel. “We’re bringing the gym to you,” the New Hampshire chain said. Even small gyms are going online, armed with little more than smartphones, social media and YouTube. Outside Gold’s Gym in Venice on Monday, trainer Adam Friedman watched as frustrated patrons were turned away. “This is a matter of survival, so I’m going to do whatever it takes,” said Friedman, 47, a certified strength and conditioning coach whose roster of clients has included regular folks as well as professional and Olympic-class athletes. “I had already anticipated asking clients about training at home. I’m also starting to build an online platform where I can guide people

through their fitness rou- tines.” Southern California fitness facilities — including Actually Awesome Yoga, Open Circles, Theta Pin and True Fitness — were already among about 500 gyms and studios that had turned to BurnAlong, which helps them get their workouts online. The Baltimore company has gotten a surge of inquir- ies from Southern California in the last few days, said Bur- nAlong co-Chief Executive Daniel Friedman. “We can get some of them online and streaming classes within three hours,” said Friedman (who’s not re- lated to trainer Adam). Friedman said his company aimed to satisfy “the social motivation of group fitness based in the home. It’s that social experience that will hopefully prevent people from feeling de- pressed and isolated by these restrictions.” Online fitness company Beachbody on Demand, which relies on an army of 340,000 influencers, has come a long way since it was founded in 1998 to peddle workouts on VHS tapes. It now has 1.7 million subscrib- ers. The Santa Monica company’s influencers have fol- lowings of a few dozen to thousands; celebrity trainer

Autumn Calabrese has 780,000 followers on Insta- gram. “Our business model is trying to make online classes as effective and gratifying as going to the gym,” said Carl Daikeler, Beachbody chief executive, “and we have seen a real spike in demand for our services in recent days. Some of it is as simple as moms scheduling a morning recess class for physical ac- tivities for their kids. At other times we can have as many as 200 people on the same Zoom group fitness call. “This is the last kind of good luck that you want to have,” he said, “but it’s pretty cool knowing we have a cata- log of 1,200 different workouts that people can use at a time like this.” Adam Friedman fears that if the virus continues to spread unabated, a general quarantine could be ordered that would force residents to shelter in place without much in the way of outside contact. “That would really affect my business and everyone else’s,” he said. In the meantime, he’s backing the decision to close gyms. It “wasn’t an ‘if ’ but a ‘when.’ It’s a necessary mea- sure that will hopefully help slow and then stop the spread of the virus.”

TRAINERAdam Friedman, whose facility is next to the closed Gold’s Gym in Venice, says, “This is a matter of survival, so I’m going to do whatever it takes.”

Ronald D. WhiteLos Angeles Times

Gyms adapt amid virus

[Fitness,from C1]

American public get in
return?
Saying that the survival
of these industries should
be reward enough won’t do.
Unlike such small busi-
nesses as restaurants and
bars, which have been shut
down in parts of the country
by government order and
were facing huge drops in
patronage anyway, most of
the hardest-hit major indus-
tries have the capacity to
survive one way or another.
But no government help
should be provided without
strict oversight about how
it’s used. That’s warranted
because American industry
has grossly misused its
previous handouts, fatten-
ing shareholder returns and
executive pay while leaving
employees aside. That can’t
happen again.
That’s the theme of a
statement Monday by Sara
Nelson, president of the
Assn. of Flight Attendants,
which represents 50,000
airline employees. In a se-
ries of tweets, Nelson ac-
knowledged that the airline
industry could face a crip-
pling setback from the
coronavirus emergency.
She called for “direct
payroll subsidies to workers
in the passenger airline
industry,” including “flight
attendants, pilots, airline
ground workers, airline
caterers, airport cleaners,
greeters, security screeners,
wheelchair attendants, and
other airport service work-
ers. Anyone who touches
aviation.”
Those subsidies may well
be subsumed into a stimu-
lus plan being worked out
on Capitol Hill on Tuesday
by congressional leaders
and Treasury Secretary
Steven T. Mnuchin.
But Nelson wisely is
seeking specific guarantees
to ensure that government
money flows to the work-
force: “Airlines must com-
mit to maintaining payroll,”
she wrote. “It means no
bonuses, no buybacks, & no
breaking union contracts in
bankruptcy. Companies
should commit to pay a min
$15 wage & board seats for
workers.”
That’s as good an outline
of the mandates as one
could hope for. The current
crisis could present a
unique opportunity to re-
verse the decline of labor’s
voice in American business
practice. Setting minimum
wages and raising the bar
for layoffs is a good start.
Prohibiting the use of
government help to pay
executives or raise returns
for shareholders is manda-
tory, along with preserving
union contracts.
Airlines and all other
recipients of government
largess should be required
to commit to noninterfer-
ence with union organizing
in their shops and to wel-
coming labor representa-
tives onto their boards. If
any industry needs to be put
out of business as a result of
the crisis, it’s the union-
busting business.
Let’s be clear what we’re
talking about. Mnuchin, in
congressional testimony
March 11, rejected the term
“bailout.” He said, “This is
not a bailout. This is consid-
ering providing certain
things for certain indus-
tries.”
In other words, a bailout.
Nelson’s suggestion of an
oversight board with sub-
poena powers and repre-

sentatives from manage- ment and unions is a good one too. We don’t need guesswork to know how corporations will spend their bailouts if they aren’t watched like hawks. Past experience tells the tale. Take the Tax Cuts and Jobs Act, the massive giveaway to corporations and the rich enacted by the Republican- controlled Congress and signed by Trump in Decem- ber 2017. The tax cuts would pro- duce a massive spur to U.S. economic investment, yield- ing fortunes in economic growth, the proponents said. “It will be rocket fuel for our economy,” Trump promised. Didn’t happen. To be more precise, the short- term spurt in growth dissi- pated faster than a sugar high from Jolt Cola. One reason was that businesses didn’t fulfill the promise of pumping their tax breaks into investment — whether capital investment or investment in their work- forces via higher wages. Sure, not a few employ- ers funneled some money to their workers, generally via onetime bonuses. Compa- nies announced these pay- outs as though they signi- fied the bounty brought by the tax cut bill, but in fact they were cheeseparing handouts that, unlike wage increases, weren’t lasting; in most cases they didn’t even approach the $1,000 head- line sums the companies claimed. As for capital spending, this was also evanescent. Gross private domestic investment rose from $2.7 trillion in the first quarter of 2018, as the tax cuts took effect, to $2.9 trillion a year later. That was its high- water mark; it was down to $2.8 trillion in the last quarter of 2019. The vast majority of businesses — 84% of re- spondents to a January 2019 poll by the National Assn. for Business Economics — had made no change in their hiring or investment plans as a result of the tax cuts. By December 2019, a leading

index of new capital orders had sunk to its lowest level since August 2016, raising fears for economic growth in 2020. So where did the money go? Mostly in share buybacks, a neat way for corporations to pump money out to their shareholders. In the third quarter of 2018, buybacks by Standard & Poor’s 500 companies reached $203 billion in those three months alone — the first time quarterly repurchases exceeded $200 billion. In the year ending September 2019, they came to almost $800 billion. No one has a right to be surprised at this outcome. It merely replicates what happened after the previous major giveaway to corporate America, a 2004 tax holiday designed to prompt corporations to bring home profits they had parked overseas. The idea was for them to spend the money on jobs and domestic investment. Instead, they spent the money on stock buybacks to benefit their shareholders and fatten executive pay. A Senate subcommittee report in 2011 determined that the 15 biggest companies taking advantage of the tax holiday, including Pfizer, Hewlett-Packard and IBM, actually cut jobs and re- duced research spending. The treasury lost $3.3 billion in revenue over 10 years, the panel found. “There is no evidence that [the tax break] in- creased U.S. investment or jobs, and it cost taxpayers billions,” a U.S. Treasury report determined. After the tax holiday, U.S. corporations even stepped up their sequestering of profits abroad, figuring that sooner or later a new adminis- tration would offer them yet another break. That’s ex- actly what happened: A discounted tax rate on repatriated funds was a central element in the 2017 tax cut bill. Airlines have been among the big spenders on their own shares. As Bloomberg reported this

week, America’s major airlines spent 96% of their free cash flow on share buybacks from 2010 through

That included United,
which launched a $3-billion
share repurchase in Decem-
ber 2017, as the tax cuts were
nearing congressional ap-
proval. That was on top of a
$2-billion program it had
completed that very month.
Those figures should
give some color to the ap-
peal sent by United Chief
Executive Oscar Munoz to
Mnuchin and congressional
leaders Monday. In his letter
, Munoz pleaded for the
government to “offer sup-
port to the men and women
of United Airlines.... Finan-
cial support that you pro-

vide would allow United to continue paying our employees as we weather this crisis — protecting tens of thousands of people from imposing a temporary fur- lough.” You would almost think that the company’s concern in shoveling out $5 billion via share buybacks was for its rank-and-file workers, rather than its shareholders. The airlines arguably were especially foolhardy in diverting to shareholders’ pockets the surge in profits they collected over the last 10 years, a post 9/11 golden age for air travel. Few industries are as trapped in a permanent boom-and-bust

cycle as the airlines, which are continually buffeted by fuel costs and intense com- petition. As Tim Wu of Columbia Law School observed, American Airlines, which has become known for lousy customer service and lousi- er (if possible) labor rela- tions, began raking in the bucks after completing its merger with US Airways in 2013. “There are plenty of things American could have done with all that money,” Wu writes. “It could have stored up its cash reserves for a future crisis.... It might have tried to decisively settle its continuing con- tract disputes with pilots, flight attendants and me- chanics.” Instead, from 2014 through 2020, American spent $15 billion buying back its own stock. To be fair, there can be justifications for share buybacks. Corporate executives sometimes can make the case that no other investment yields as much potential return as buying up their own undervalued shares. But given the relentless neglect of middle-class employees by big employ- ers, buybacks have done little except exacerbate economic inequality. Com- panies are always faced with the choice of investing in their workers or their shareholders; almost universally over the last few decades, they’ve chosen the latter. And now they want taxpayers to keep them afloat. Sure. That’s a worthy goal. But the public, through its political leaders, has unprecedented leverage over corporate America in this crisis. Let’s use it.

Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page or email michael.hiltzik @latimes.com.

Be careful with big business bailouts

SARA NELSON,president of the Assn. of Flight Attendants, shown in 2019, said any bailout of the airline industry needs to focus on helping workers and not be used for stock buybacks to enrich investors.

Andrew Caballero-ReynoldsAFP/Getty Images

[Hiltzik,from C1]

Los Angeles Times - 18.03.2020

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