Governments are once again splurging to keep big companies afloat

MANAGERS ARE encouraged to set enough aside for a rainy day. The covid-19 cloudburst means even the most prudent companies are rapidly exhausting their cash. Many will need a bigger umbrella that only the state can proffer.

The size of antiviral economic measures agreed so far is breathtaking. On March 27th President Donald Trump signed off on a record $2trn stimulus, which includes loan guarantees that could fund more than twice as much in corporate borrowing. Britain, France, Germany, Italy and Spain have their own “bazookas”, worth hundreds of billions. Who exactly will need help, how much and in what form is not yet entirely clear. But the contours of arguably the biggest corporate rescue in history are taking shape.

Some industries are seeking bespoke packages. First up, airlines. Those with stronger balance-sheets, such as Australia’s Qantas and IAG, owner of British Airways, would be just as happy if weaker rivals disappeared. But the International Air Transport Association, the global trade body, warns the pandemic will cut industry revenues in 2020 by $252bn, or 44%, relative to last year’s. Its members have cancelled 2m flights. Roughly 35-45% of airline costs are fixed, and so cannot be cut quickly, reckon analysts at Citigroup, a bank. Delta, an American carrier, says it is losing around $50m a day.


via Business Feeds

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