Brief: WestJet Airlines will permanently lay off more than 3,000 employees across the country as a result of the COVID-19 pandemic’s devastating effect on air travel demand.In avideo messageWednesday, CEO Ed Sims announced major organizational changes at the Calgary-based airline, including the consolidation of call centre activity in Calgary and the restructuring of office and management staff. In addition, airport operations at all domestic airports except Calgary, Edmonton, Vancouver and Toronto will be contracted out.The restructuring will result in 3,333 permanent job losses, including 430 call centre positions (72 in Calgary, 73 in Vancouver, 35 in Halifax, and 250 in Moncton, N.B.), as well as 2,300 airport operations staff, including customer service agents and baggage handlers. Sims said he is hopeful that whatever company WestJet ends up contracting out its airport operations to will ultimately be able to rehire many of the laid-off airport employees… For WestJet, which was acquired last year by Toronto-based Onex Corp. in a $5-billion friendly takeover deal, these are the most challenging circumstances it’s faced since the airline was founded in 1996, said Calgary-based aviation consultant Rick Erickson. Leisure travel has been squashed, although the public’s appetite for flying will return when the “fear factor” of catching the virus declines, he said.
Brief: Bob Prince, co-chief investment officer of the world’s biggest hedge fund at Bridgewater Associates, said the impact of the coronavirus pandemic could last 18 to 24 months, complicating monetary and fiscal policy efforts to bolster the economy. “There’s a huge amount of uncertainty,” Prince, who helps manage the firm’s investment process alongside co-CIOs Ray Dalio and Greg Jensen, said Wednesday in an interview during the Bloomberg Invest Global virtual event. Bridgewater’s hedge fund has suffered losses this year amid the market chaos surrounding the coronavirus pandemic. The firm’s flagship Pure Alpha II fund fell 20% in 2020 through May. Bridgewater got hit by the crisis at “the worst possible moment,” when its portfolios were positioned to profit from rising markets, Dalio wrote in mid-March. The Westport, Connecticut-based firm saw a 15% drop in assets during March and April, declining to $138 billion. Bridgewater wasn’t alone in getting caught on the wrong side of a sell-off that began in late February. Several prominent names have stumbled as the spread of the pandemic halted the economy and put an end to Wall Street’s longest-ever bull run. But U.S. stocks have since defied initial gloomy expectations, rallying 37% since the March low, with stimulus from the Federal Reserve and the easing of lockdowns fueling hopes for a fast recovery.
Brief: Man Group chief executive Luke Ellis said that corporates could face stress testing after the Covid-19 pandemic, similar to those imposed on banks after the 2008 financial crisis. “There will be a drive to some form of stress testing of businesses, to make sure they have less operational gearing so that they are able to withstand things,” said the CEO of the world’s largest listed hedge funds company. Man Group manages $104.2bn as of March 31. Ellis was speaking at the Bloomberg Invest Global online forum. When asked what regulation might emerge from the current crisis, Ellis said that it would be “similar to what banks have, but not just around financial constraints”. Businesses could be required to limit the amounts of financial leverage — or debt — they can have, for instance. He also said that “just-in-time manufacturing” would have to be rethought: “It started as a good idea, reducing inventories, but got to a place where major manufacturers... had one hour of spare parts and supplies [...] which meant they couldn’t withstand any sort of shock at all.” “What we’ve seen that in the 10 years since the last crisis, [is that] an awful lot of the corporate community has moved to maximum leverage that they can possibly get onto their balance sheet — so maximum financial leverage but also maximum operational gearing and minimal resilience,” Ellis said during the webinar, which was focused on how funds, such as those managed by Man Group, can outperform in the age of Covid-19.
Brief: Brookfield Asset Management Inc., one of the world’s biggest real estate investors, is seeing higher demand for office space as workers return to socially-distanced buildings. Rather than ditching their skyscraper offices after the pandemic, companies are keen to return to the workplace after spending as long as three months in lockdown, Bruce Flatt, chief executive officer of Brookfield, said at the Bloomberg Invest Global virtual conference on Wednesday. “Today we’re leasing greater amounts of space to people than they had before,” Flatt said. “They want to accommodate their people and get them back quickly. They’re increasing their footprints versus taking less.” Most companies that Brookfield leases offices to are bringing workers back, said Flatt. The only reason some weren’t was a lack of social distancing space. Brookfield has reopened nearly all of its global offices, he said, with about 70 per cent of London workers returning and around 30 per cent of New York employees. Brookfield is well-positioned to weather the pandemic. Flatt last month said the company had US$46 billion in client commitments for new investments and US$15 billion in cash, other financial assets and long-dated credit facilities across its various businesses that remain largely undrawn.
Brief: Most asset managers have found video conferencing an effective alternative to interacting with clients now that the coronavirus pandemic has severely hampered the ability to meet with clients face-to-face, according to results of a survey by Cerulli Associates. While almost all (95%) of managers surveyed by Cerulli in April said that in-person meetings are the most effective way to interact with clients, travel restrictions brought about by the COVID-19 pandemic have prevented such interaction. So, with face-to-face meetings not being an option for most managers, 75% find conference calls or video conferences with clients a highly effective alternative method of communication since the outbreak of COVID-19, while 17% find them somewhat effective. "The amount of people that said video calls are effective could be a sign of a more long-term trend," said Cerulli analyst Christopher Swansey in a phone interview, noting that face-to-face meetings are still crucial for due diligence. "I don't think they'll be replaced, but I think you'll see a lot more meetings conducted virtually in the future…
Brief: Goldman Sachs CEO David Solomon still sees a V-shaped recovery ahead even as coronavirus cases are increasing throughout the US.It just might not bring the economy back to its pre-pandemic levels as quickly as hoped.Appearing in theBloomberg Invest Globalvirtual conference, Solomon said the US is "somewhere in the middle" of its turnaround. Just as economic activity nosedived in the second quarter, the CEO sees reopenings driving a similar turn higher through the end of the year."This crisis has had a profound impact on the economic environment that we're operating in," he said on Wednesday. "My guess is when you look at the shape of the recovery, the initial shape is going to look quite like a V." Solomon added that uncertainty still clouds such forecasts and second shocks could endanger the nation's long-term trajectory. The healthcare industry represents a major variable, as an effective coronavirus vaccine is largely viewed as the best bet for boosting consumer confidence. Human behavior can also deviate from expectations and either accelerate or halt reopening measures. These factors will likely slow the US economic bounce-back after 2020 and push a full rebound further down the road, Solomon said. "I do think we're going to see a sharp V to start with, but it's very open-ended as to what kind of economic friction we're going to see as we get through the end of the year and into 2021," the CEO said.