Wednesday 21/10/20

  1. In TRANSPORT-RELATED NEWS, Cathay Pacific takes drastic action, airports lose £83m a week, the Trainline boss quits and TfL gets threatened by government
  2. In TECH-RELATED NEWS, Google gets sued by the Justice Department, Snapchat adds more users and Sweden is the latest country to ban Huawei
  3. In CORONATRENDS NEWS, testing goes to the next level for some, Odeon’s owner AMC Entertainment raises cash, Netflix subscriber growth loses momentum and Reckitt Benckiser cleans up
  4. In INDIVIDUAL COMPANY NEWS, Pioneer buys Parsley Energy in another shale deal, Waitrose readies for a price war and Next has wage issues
  5. AND FINALLY, I bring you a very unfortunate photo…



So Cathay Pacific makes big cuts, airports continue to bleed cash, the Trainline boss quits and TfL gets heavily leaned on…

Cathay Pacific to slash 8,500 jobs and shut regional airline (Financial Times, Alice Woodhouse and Primrose Riordan) shows that the Hong Kong airline plans to cut almost 25% of its staff and shut down its regional airline Cathay Dragon in attempts to survive the coronavirus-induced decimation of the airline industry. Cathay Pacific said that the latest moves would reduce its monthly cash burn of HK$1.5bn-HK$2bn by HK$500m. * SO WHAT? * Given that passenger traffic has fallen by 98% year-on-year for December and that the airline only expects to run at about 10% capacity for the rest of the year and below 50% for 2021, these aggressive moves are not surprising. Airports lose £83m a week due to Covid, say operators (Daily Telegraph, Charles Hymas) cites figures from the Airport Operators Association which just put a figure on the current carnage afflicting the industry in the UK. Everywhere is suffering.

Meanwhile, on land, Trainline boss quits after cashing in shares (The Times, Ashley Armstrong) shows that the boss of Trainline, Clare Gilmartin, announced she will be leaving in order to spend time with her young family, after selling shares worth £15.8m over the last few months. Her

seven-year tenure culminated in a very successful stock market listing last year and the company’s share price fell by 12.9% on the announcement. She will stay on as a senior advisor after handing over the CEO job to Jody Ford who joined last month from Photobox. * SO WHAT? * This was an unexpected move and it will undoubtedly prompt concerns among investors that something is amiss at the top of Trainline at a crucial time, but at least Gilmartin is staying on in some capacity to provide continuity.

Government threatens to take direct control of Transport for London (Financial Times, Jim Pickard) shows that ministers have threatened to take over Transport for London if Sadiq Khan doesn’t accept a package of measures to unlock rescue funding that include higher council tax, an enlarged congestion charge zone and higher fares for buses and tubes. Khan wants £4.9bn for the next 18 months and a decision was due last Friday but the deadline has been pushed back for two weeks. * SO WHAT? * The government has Khan by the balls and ultimately, I think that he has very little room for manoeuvre. The fact is that bailing out London is going to cost a fortune and Khan will obviously keep arguing for more money (that’s kind of part of his job and you’d expect that) while the government will obviously play the bad guy in this negotiation charade saying that there isn’t an endless supply of money. Any solution is going to have to be a major compromise although I suspect that Khan will have to make more concessions than the government.



Google faces more scrutiny, Snapchat adds users and Sweden bans Huawei…

US challenge to Google’s ‘illegal’ search monopoly (The Times, James Dean) shows that the US Department of Justice and 11 state attorney-generals yesterday filed a competition case against Google saying that it has illegally shut out competitors via a number of exclusive business contracts. This is thought to be the most aggressive action against a tech company since that taken against Microsoft in the ’90s. One such contract is the agreement with Apple – for billions of dollars a year – to make sure Google is the default search engine on iPhones. Critics also cite how Android, Google’s mobile operating system, stops competitors’ search apps from being pre-loaded on mobile phones. * SO WHAT? * Momentum is building against Big Tech at the moment as competition cases are being considered against Amazon, Facebook and Apple. This case against Google could result in various sanctions, including forcing it to sell parts of its business and/or pay hefty fines. Given that Google has a 90% market share for online searches and has the #1 position in online advertising, it has a big target on its back. Let the fireworks begin!

Elsewhere, Snapchat nears 250million daily users as advertisers lift spending on platform (Wall Street Journal, Kimberly Chin) shows that Snap’s revenues shot up by 52% in the latest quarter thanks to increasing user numbers and more advertisers wanting to reach people spending more time on their devices under lockdown. User growth was greater than market expectations and demonstrated decent performance against competition from TikTok and Facebook. The share price rose by over 20% in after-hours trading, which means it is now up by 74% so far this year. * SO WHAT? * This is a decent performance – and as it is one of the first online-ad reliant companies to announce results recently it could indicate similar success for rivals. The final quarter of the year is usually Snap’s strongest and if current momentum was to continue into the Christmas season its revenues could see a serious uptick versus last year.

Meanwhile, Sweden bans Huawei and ZTE from 5G telecoms networks (Financial Times, Richard Milne) shows that Sweden has become the latest country to blacklist Huawei and ZTE regarding involvement in its 5G networks, citing Beijing’s spying and “theft of technology”. This follows Germany’s latest move to cut Huawei out of its 5G plans. * SO WHAT? * Bad news for Huawei and ZTE, more good news for Nokia, Ericsson and Samsung who will no doubt be picking up the business.



Tests get serious, AMC Entertainment asks for cash, Netflix loses momentum and Reckitt Benckiser continues to benefit…

I thought that it would be interesting to bring your attention to Volunteers to be infected with coronavirus in world’s first ‘human challenge’ trials (Financial Times, Clive Cookson) because it sounds like a significant step towards finding a vaccine. The world’s first “human challenge trials” announced officially yesterday will speed up vaccine development by infecting healthy volunteers aged 18 to 30 at a secure clinic in London. Normally, they have to wait to be exposed to the virus while they go about their lives – which could take ages. This initiative will fast-track the process considerably and the company running the project, hVivo, will be looking for willing participants. They are looking for the “fittest of the fit” and could pay about £4,000 if people spend two to three weeks in quarantine during the study.

Under lockdown, we have been avoiding cinemas which has led to Odeon cinema owner AMC to raise cash (Daily Telegraph) by issuing up to 15m of its class A shares but warned even this might not be enough to restructure its debt. If it can’t do the latter the company said that it would go for bankruptcy protection.

We have, on the other hand, been gleefully streaming content under lockdown but Netflix subscriber growth slows amid heightened competition (Wall Street Journal, Joe Flint and Micah Maidenburg) shows a slowing of Netflix’s momentum. It seems that a relaxation of lockdown has resulted in some more energetic liaisons as per Durex sales surge after end of lockdown (The Guardian, Zoe Wood) shows that sales of Reckitt Benckisers’ Durex brand have risen by over 10% in the summer months. In addition to getting down and dirty it seems that consumers have also been getting up and cleaning if strong sales of the company’s Dettol and Lysol brands are anything to go by!



There’s more consolidation in the shale oil industry, Waitrose gears up for a Christmas price war and Next faces pay allegations…

Pioneer strikes $7.6bn deal for Texas shale rival Parsley Energy (Financial Times, Myles McCormick) highlights the second shale oil deal in two days (the other one was yesterday’s ConocoPhillips purchase of Concho Resources for $9.7bn) which will make Pioneer the biggest independent oil and gas producer in the Permian Basin. * SO WHAT? * Industry consolidation continues. Who will be next??

Waitrose and Co-op to cut prices of essential goods by an average of 15% (The Guardian, Sarah Butler) shows that the two supermarkets have laid down a marker this week by cutting prices of a range of basics ahead of the cut-throat Christmas season. This follows a spate of price

cutting from Tesco, Sainsbury’s, Asda and Morrisons. * SO WHAT? * OK, so many of us will not be earning huge sums going into the end of the year but at least our grocery shopping may cost a bit less! Supermarkets will no doubt be hoping to benefit from volume rather than margins.

Then in Next denies destroying records in pay fight (Daily Telegraph, Laura Onita) we see that the company is facing some potentially serious allegations over equal pay. It is alleged that the company disposed of records that would prove that they were paid unfairly. * SO WHAT? * This is an absolute shocker if it is true. However, in the scheme of things, I wouldn’t have thought this would affect the company very much. Just look at the moral outrage that was aimed at Boohoo over its Leicester factory failings – consumers just didn’t bat an eyelid. This is a serious issue – but I just don’t see it affecting the company that much in the short term. It is worth following, however, in case things do blow up…



…in other news…

Now I must admit that the following is a bit naughty. I ummed and arred about including it in today’s edition, but it was so funny that I thought I would! Once you see this, you can’t unsee it: Woman’s photo goes viral after friends spot unfortunate reflection in mirror (The Mirror, Luke Matthews). Oh dear 😱😱😱!

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)