the times | Saturday August 1 2020 2GM 49
Business
is expected to receive a further income
boost when it launches 5G-enabled
iPhones later this year.
Mark Zuckerberg, founder and chief
executive at Facebook, used his call
with Wall Street analysts to make a case
for maintaining the regulatory status
quo. More restrictions would “reduce
opportunities for small businesses so
much that it would probably be felt at aPilot can’t be blamed
for BA turbulence
W
hat a way to bow
out. Willie Walsh
retires on
September 24 after
15 years at the
controls of first British Airways and
then its parent IAG. And look at his
parting gift to shareholders: a half-
year loss of €4.2 billion pre-tax and
confirmation that he’s asking
around for €2.75 billion of refuelling.
How’s that for perspective on
claims from the Unite union that
the BA owner is merely suffering a
bout of “temporary” turbulence and
that Mr Walsh is relishing the
chance to settle old scores with the
cabin crew? As he puts it: “The idea
that there is some unfinished
business is complete nonsense.”
Indeed, if Mr Walsh’s last ever
IAG figures aren’t a wake-up call for
the Unite boss Len McCluskey, it’s
hard to guess what is. Ditto for a
bunch of delusional MPs, led by
Huw “Make it Up” Merriman, the
Tory who’s somehow chairman of
the transport committee. No one is
happy that a pandemic has forced
BA to cut up to 12,000 of its 42,000
staff or that, as a last resort, it would
“fire and rehire” the rest on new
terms if they won’t agree
“reasonable” changes to legacy
contracts. Mr Walsh understands
“this is distressing for everybody”.
But he’s right that Unite is “blind
and deaf to the reality” of this crisis,
complete with an absurd threat to
strike when most planes are already
on the tarmac. So, too, are the 100-
plus MPs who’ve joined the union in
a kamikaze campaign to strip BA of
Heathrow slots. They need to look
at the latest figures.
Yes, they include a €1.27 billion hit
from “overhedging” fuel that IAG
wasn’t using and writedowns on the
older planes being retired early. But
second-quarter operating losses
were a record €1.37 billion. BA, the
biggest airline in a group also
spanning Iberia and Aer Lingus, was
the hardest hit. In the three months
to June 30, it lost £711 million.
Compare the quarter after 9/11: a
loss of £187 million. Or the worst
quarter of the financial crisis:
£309 million losses.
Covid-19, says Mr Walsh, is an
“unprecedented crisis”. To boot, he
reckons it will take “until at least
2023 for passenger demand to
recover to 2019 levels”. First-half
passenger revenue fell 61 per cent.
And BA is in the eye of the storm.
It’s dependent on long-haul traffic,
not least its transatlantic business
shuttle where Mr Walsh is braced
for a “structural” drop in demand.
The half-year results show the hit to
BA: from €873 million operating
profits to €1.09 billion losses.
The upshot? A group that for all
its €8.1 billion liquidity is lugging
around €10.5 billion net debt: a vast
sum for a business valued at
€3.3 billion on shares down 9 per
cent to 164¾p. Hence the cash-call.
It’s led to IAG’s biggest investor,
Qatar Airways with 25.1 per cent,
claiming two board seats, even if Mr
Walsh insisted it was “not the price”
of its “irrevocable” support. Hence,
too, the need for restructuring to
give IAG a “viable” future and
“protect as many jobs as feasible”.
Of course, Mr Merriman thinks
Mr Walsh’s efforts at BA a “nationaldisgrace”. But luckily the MP doesn’t
run the airline. As Mr Walsh noted,
that job requires “doing what’s
necessary” even when you “don’t
want” to do it. He didn’t want to
bow out like this.One mess is plenty
N
ot MTS again. Who can
forget the Sunday night
drama in February 2017
when the London Stock Exchange
declared its £24 billion merger with
Deutsche Börse suddenly in
trouble? The reason? An obscure
Italian bond trading platform MTS.
Most people hadn’t even heard of
MTS. Yet, apparently, it was so
pivotal that the stock exchange
couldn’t possibly sell it to get the
deal past Brussels. Not bad for a
unit whose sole appearance in June
2016’s presentation on the merger
was as a logo in a box. It barely
featured in the 1,015-page
prospectus. As things turned out, a
more plausible explanation arrived
for the deal’s implosion: an insider
trading inquiry into a €4.5 million
share deal by Deutsche Börse’s ex-
boss Carsten Kengeter. It was
dropped after he paid a similar sum
to settle the case.
Anyway, guess what? MTS is back
in the spotlight as a latent
dealbreaker for the stock exchange’s
$27 billion Refinitiv data deal
(report, page 52). Brussels has
noticed that Refinitiv owns 54 per
cent of Tradeweb, a rival to MTS.
The response of LSE boss David
Schwimmer? He’s not only put MTS
up for sale but the Borsa Italiana
wing that houses it: businesses
respectively valued by Redburn
analysts at up to €580 million and
€3.2 billion. Can’t be too careful.
One MTS merger mess is enough.Beastly bets
H
ow beastly is that? GVC
shares down another 3 per
cent to 664.6p: below the
666p where its ex-boss Kenny
Alexander last year sold £13.7 million
of shares days after declaring them
“significantly undervalued”. The
bookie may blame shortsellers. But
Mr Alexander’s abrupt exit a
fortnight ago looked odd enough
before GVC disclosed five days later
that it faced an HMRC inquiry. And
it hardly helps that a payment
processing company it once owned
and still uses, now called PXP
Financial, has a parent company
Senjo embroiled in the Wirecard
scandal. Maybe it’s no big shock the
shares are down 27 per cent since
Mr Alexander quit.Pet project
A
s tautological company
names go, little beats Pets At
Home. Where else are you
supposed to keep a pet? Abroad?
Whatever, it’s seen “heightened
demand for pet ownership” during
lockdown. And how nice is that?
Still, remember that a pet is for life,
not just for coronavirus.[email protected]business commentary Alistair Osborne
Revenue
+40%
Net Income
+100%
Share price
reaction
+4%
Market
capitalisation
$1.6 trillionRevenue
+11%
Net Income
+98%
Share price
reaction
+8%
Market
capitalisation
$730 billionmacroeconomic level”. He asked: “Is
that really what policymakers want in
the middle of pandemic and reces-
sion?”
Alphabet’s revenues fell 2 per cent to
$38.2 billion as advertisers reined in
spending, yet it still delivered $7 billion
in profits. Sundar Pichai, 48, chief exec-
utive, said the company would “adapt”
to possible changes in regulation.strong sales of Mac computers and
iPads as students return to schools and
universities in September. It said Apple
was “well within reach” of its target to
have 600 million subscriptions to ser-
vices such as music, cloud storage and
TV streaming by the end of September.
Traders said Apple’s four-for-one
share split was an invitation to small
investors to buy its stock. The company
have fallen under Softbank’s owner-
ship, it could book a profit on the sale as
valuations for semiconductor compa-
nies have increased markedly since
2016, according to analysts.
The talks, which were first reported
by Bloomberg, mark a dramatic change
of course for Masayoshi Son, Softbank’s
founder. In 2017 he said the acquisition
of Arm would come to be seen “as the
single most important deal in my life”.
Mr Son, 62, believed Arm’s low-pow-
er processor designs would be at the
heart of the trillions of everyday de-
vices that would one day connect to the
internet. However, he has been forced
to offload assets and repay loans due to
a series of ill-conceived investments,
including his calamitous bet on
Wework, the offices group.
The mooted disposal throws a pall of
uncertainty over Arm, which was
created in 1990 as a joint venture
between Acorn and Apple to develop a
processor for the latter’s Newton hand-
held computer. The device flopped but
Arm’s designs became a staple in mobile
phones and Apple gadgets like the iPad.
It employs 6,700 people worldwide,
compared with about 4,500 in mid 2016.
Waitrose digital boss logs
off as Ocado split looms
The John Lewis Partnership is parting
ways with the director in charge of
Waitrose’s online business.
Ben Stimson, digital director of
Waitrose, is understood to be leaving
next month in a move that has raised
some eyebrows in the industry.
Waitrose is severing its relationship
with Ocado on September 1 after 20
years and wants to treble food sales
through its own website. The retailer is
part of the John Lewis Partnership,
which is chaired by the former Ofcom
boss Dame Sharon White.
Mr Stimson’s departure is surprising
as his role was publicly reinforced in
February when he survived a manage-
ment cull. He is the only remaining
member of the old Waitrose food board
that reports directly to Dame Sharon.
James Bailey, formerly of Sains-bury’s, joined the partnership in April
as boss of Waitrose and has
been handed responsibility for
Waitrose.com.
A partnership spokesman said it had
been intended that Mr Stimson would
step down once the separation from
Ocado was completed. He leaves amid
job losses at Waitrose as it looks to close
shops and cut costs.
Mr Bailey said: “Ben has led Wait-
rose.com through a period of signifi-
cant change and rapid development.”
One industry source raised concerns
that Waitrose was losing another senior
director, particularly when the switch-
over from Ocado would be a big
pressure point for the business.
The surge in demand for online deliv-
ery slots during the pandemic forced
Waitrose to accelerate its plans and it
has doubled the number of orders its
website can service to 150,000 a week.Ashley Armstrong Retail Editor