U.S. passenger railroad Amtrak to furlough 2,000 workers

By David Shepardson

WASHINGTON (Reuters) – U.S. passenger railroad Amtrak will furlough more than 2,000 workers as a result of the steep decline in travel demand from the coronavirus pandemic.

Amtrak said in a statement that despite other cuts, “significant reductions remain necessary due to the slow recovery of ridership and revenue. Approximately 1,950 agreement team members will be furloughed” and 100 management jobs will be cut in the coming weeks.

In May, Amtrak said it needed a new $1.475 billion bailout and disclosed plans to cut its workforce by up to 20% in the coming budget year.

The company, which has been hit hard by the coronavirus pandemic, received $1 billion in emergency funding from Congress in April. Amtrak, a government-owned corporation that gets annual subsidies from Congress, has said previously it employs about 20,000 workers.

Ridership and revenue levels are down 95% year over year since the pandemic began, Amtrak has said.

U.S. House of Representatives Transportation Committee Chairman Peter DeFazio said the committee’s panel overseeing rail issues would hold a hearing on Sept. 9 with Amtrak Chief Executive Bill Flynn.

“It’s time for Republicans in the Senate to stop sitting on these important bills and do their job to protect Amtrak employees and so many others currently in need,” DeFazio, a Democrat, said.

Much of the U.S. transportation sector has been battered by COVID-19.

Transit agencies are urging Congress to approve $32 billion to $36 billion on top of a $25 billion bailout approved by Congress in March. Urban transit systems have been devastated by millions of workers staying home rather than commuting and a sharp decline in tourism.

Private U.S. bus companies are seeking $15 billion in government assistance.

U.S. airports want another $10 billion in government assistance on top of an earlier $10 billion bailout, while passenger airlines want a further $25 billion in payroll assistance.

United Airlines said on Wednesday it planned to cut 16,370 jobs as early as Oct. 1 without new government assistance.

(Reporting by David Shepardson; Editing by Peter Cooney)

United Airlines to cut 16,370 jobs as the pandemic rages

By Tracy Rucinski

CHICAGO (Reuters) – United Airlines is preparing to furlough 16,370 workers when federal aid expires on Oct. 1 as the coronavirus pandemic continues to devastate the airline industry, it said on Wednesday.

Chicago-based United had over 90,000 employees before the pandemic brought the industry to a near standstill in March. It warned in July that 36,000 jobs were at risk of involuntary furloughs as demand remained weak.

Some 7,400 employees have opted to take early retirement or departure packages and the company is working through several other voluntary temporary leave programs to further reduce the number of furloughs, United officials said.

The leaves would give the company flexibility to call back staff once travel returns, they said.

Airlines received $25 billion in U.S. government stimulus funds in March meant to cover payrolls and protect jobs through September, when the industry had hoped for a rebound.

As bailout money runs out without a travel recovery in sight, airlines and unions have lobbied Washington for another $25 billion but talks have stalled as Congress has struggled to reach agreement on a broader coronavirus assistance package.

U.S. passenger airlines are still collectively losing more than $5 billion a month as 30% of planes remain parked. Passenger travel demand is down about 70% and, on average, planes that are flying are half-full.

United’s schedule for September is 63% smaller than a year ago.

United’s cuts will affect around 2,850 pilots, 6,920 flight attendants, 2,010 mechanics and 1,400 management and administrative positions, among others, though negotiations continue with pilots to reduce the final number.

Rival American Airlines last week said it would lay off 19,000 workers without federal aid. Including voluntary departures or leaves, its 140,000 pre-pandemic workforce will shrink by 30%.

Delta Air Lines plans to lay off nearly 2,000 pilots without wage concessions, but has not said how many jobs for workers including flight attendants and mechanics are at risk.

President Donald Trump has said his administration would help U.S. airlines but has not given any details.

Congress also approved another $25 billion in loans for airlines under the first stimulus package, but not all of them are tapping the funds.

(Reporting by Tracy Rucinski in Chicago; Editing by Matthew Lewis and Richard Chang)

Coffee, ketchup and Nike Air Max: it’s the COVID consumer economy

By Nick Carey, Richa Naidu and Siddharth Cavale

(Reuters) – Instant coffee, ketchup, Lululemon yoga pants and Nike Air Max sneakers are all in. Bottled water, pricey diapers and Burberry luxury trench coats are out.

Welcome to America’s pandemic consumer economy. And it’s like nothing we’ve seen before.

“Everything we knew about supply and demand, we can essentially throw out the window because consumer behavior has changed completely,” said Piotr Dworczak, assistant professor of economics at Northwestern University.

A Reuters analysis of a varied basket of goods shows how the COVID-19 crisis has upturned a decades-old consumer model for everything from clothing to food. This has given some companies surprising power to raise prices or withdraw discounts.

Many of the new trends can be attributed to one factor, according to retail specialists: working from home.

Almost overnight, a consumer-driven economy with clearly delineated work and home spending, changed profoundly. Rising demand for certain items, as well as global supply-chain disruptions, has driven up prices.

Americans are now shelling out significantly more than a year before for coffee, eggs, sliced ham, ketchup and cheese, for example, according to the Reuters analysis of the latest pricing data from Nielsen Co, the Brewers Association and StyleSage Co.

Yet it’s a complex picture, and some of the changes in behavior seem counter-intuitive during a time of deep economic uncertainty.

Demand and prices have also increased for more expensive, or “splurge”, items like $106 men’s Nike Air Max sneakers, $105 Lululemon yoga pants and even a $1,500 Louis Vuitton handbag.

Economists put this apparent discrepancy in behavior down to the fact that many people, unable to spend outside, have more cash in hand. Even many workers on furlough are receiving jobless benefits that match their wages under a federal stimulus plan.

“If I were to consider the consumer situation right now, in a strange way, they may have more disposable income, if they kept their job,” said Nirupama Rao, an assistant professor of business economics and public policy at the University of Michigan. “Of course we’re facing mass layoffs, but the bulk of people have maintained their wages and earnings.”

‘UNPRECEDENTED PRESSURE’

Shoppers paid roughly 8% more on average for JM Smucker’s instant coffees, including Folger’s and Dunkin’, at bricks-and-mortar stores in the four weeks to Aug. 8 versus a year before, according to Nielsen data analyzed by Bernstein.

They shelled out nearly 10% more for Kraft Heinz sauces and about 5% extra for Tyson Foods’ sliced hams.

Such inflation might make commercial sense, given the bump in demand for home staples. But some consumer experts complain retailers and big brands are cutting back on promotions and using their power to shore up profits during a health crisis that has led to millions losing their livelihoods.

“Brand manufacturers have been fattening their pockets with profits while putting unprecedented pressure on the consumer who has to pay those higher prices,” said Burt Flickinger, retail consultant at Strategic Resource Group.

JM Smucker said it did not raise prices of its instant coffees in the four weeks to Aug. 8, but did cut back on some promotions for in-demand products. Kraft Heinz declined to comment, but said during earnings in July that second-quarter prices went up as it pulled some offers and discounts for scarce products. Tyson did not respond to a request for comment.

Other industry experts point out that companies have had to grapple with costly production shifts to adapt to the new landscape. They note that before the pandemic, when costs were lower and there were more promotions and discounts, prices of Heinz sauces were declining.

Pre-COVID-19, tens of millions of commuters grabbed a coffee to-go en route to work. Suddenly, instead of 20-pound (9.1 kg) bags of coffee for restaurants, or large containers of ketchup, producers have had to switch to smaller, home-use packaging.

As ketchup, mayonnaise and vinegar sales surged, Kraft Heinz diverted resources to running these production lines around the clock, while suspending others. It added extra shifts for factory workers to make grocery-sized bottles.

Egg suppliers, like market leader Cal-Maine Foods Inc., have had to overcome a shortage of cartons.

“If you look at eggs, before they’d be powdered to send to restaurants and now they have to be put in cardboard containers to go to supermarkets,” said Daniel Bachman, senior U.S. economist at Deloitte. “It took a high price to induce the change.”

Yet consumer companies cannot take demand for granted and can be burnt by raising prices.

Prices for bottled water and disposable diapers have gone up, while demand has fallen for most of the pandemic. People are unwilling to pay out extra when they can drink their own water at home, and can opt for reusable or cheaper generic diapers at a time when there’s a lack of child daycare, some economists say.

“You’re at home anyway so you’re not sending your child off somewhere in a diaper that fails,” said Rao.

A $2,245 COAT, ANYONE?

Lockdowns have meant many Americans do not travel, eat out, or go to movie theaters. As they have not been commuting or taking kids to school, many are using less gas in their cars.

So they can now splash out on other things, perhaps.

Michael Collins, a professor at the University of Wisconsin’s consumer science department, calls this a “substitution effect.”

“It’s pretty clear people behave as if they have different pots of money,” he said. “Now I don’t eat out at all, so I have a couple of hundred dollars of new income not allocated to anything. I can substitute that money away from eating out and treat myself to other things.”

This effect could help explain the rise in demand and prices for the Air Max. Nike sold about 63% of their online stocks of the shoes in July, compared with only 10% a year earlier, according to apparel data company StyleSage which collects sales information from brand websites.

Air Max prices surged 10.5% on average versus a year before.

Prices for Lululemon’s yoga pants rose 7.2%, and about 45% of stocks were sold in July versus 15% the year before.

Meanwhile, the price of Louis Vuitton’s Neverfull MM Monogram handbag has risen 5% on its website since the start of May. In July, Louis Vuitton owner LVMH said sales momentum had picked up since June, even as its star label raised prices for a third time during the pandemic.

There are some limits, though.

Demand for a Burberry woman’s trench coat has declined, with only 3% of online stocks sold in July versus 14% a year earlier.

It’s a snip at $2,245, down 3.5%.

Nike and Burberry did not respond to requests for comment, while LVMH declined to comment beyond its July remarks. Lululemon said it hadn’t raised prices on some of its core yoga pant styles, including Align and Wunder Under, but had seen a significant rise in demand for yoga products since April. The strong July sales reflected its “Warehouse Sale” offer that month, it added.

HOW LONG WILL IT LAST?

Much remains uncertain.

The U.S. epidemic and its economic consequences are moving targets, and it is unclear when – or even if – American life and consumer behavior will revert to “normal”.

The University of Michigan’s Rao said food producers had been reluctant to invest in permanent changes to retool factories. “They’re hindered by the fact there’s so much uncertainty as to how long this will last.”

Indeed, consumer demand, as well as brands’ pricing power, could change in the coming weeks and months as many Americans feel more financial pain.

The government’s first round of COVID-19-related benefits expired on July 31, leaving about 30 million unemployed Americans without the $600 weekly boost that sustained their households and promoted some discretionary spending.

With the money spigot turned off, analysts say recessionary spending behavior should take hold, with consumers cutting back.

The University of Wisconsin’s Collins said loan forbearance on mortgages, credit cards and student loans since the spring had also helped consumers.

“Eventually that will all end, and people could start to tighten up again.”

(Reporting By Nick Carey, Richa Naidu and Siddharth Cavale; Additional reporting by Silvia Aloisi; Editing by Vanessa O’Connell and Pravin Char)

MGM Resorts to lay off 18,000 furloughed U.S. employees

(Reuters) – Casino operator MGM Resorts International informed its staff on Friday it would lay off 18,000 furloughed employees in the United States as the coronavirus-induced travel curbs hurt its operations.

The company will start the process on Monday, according to a letter from Chief Executive Officer Bill Hornbuckle to employees and seen by Reuters. MGM employed nearly 52,000 full time and 18,000 part-time people in the United States as of Dec. 31.

“Federal law requires companies to provide a date of separation for furloughed employees who are not recalled within six months. Regrettably, August 31, marks (that) date,” Hornbuckle said in the letter.

Many companies have decided to cut jobs as the U.S. economy recorded its sharpest contraction in at least 73 years in the second quarter due to pandemic-led disruptions, with corporate profits sinking deeper.

MGM was forced to close all of its casinos and furlough about 62,000 of its workforce in the United States in March due to the lockdowns.

It brought back tens of thousands of employees when many of its casinos opened for business as the restrictions eased, but it still had to leave out 18,000 of them.

Hornbuckle said that employees who will be laid off will remain in the company’s recall list and if hired back by the end of 2021, they shall retain their seniority and benefits.

Earlier in the day, Coca-Cola said it would cut thousands of jobs as sales had slumped, while United Airlines confirmed it was preparing for the biggest pilot furloughs and will need to remove 2,850 pilots this year.

(Reporting by Ankit Ajmera and Sanjana Shivdas in Bengaluru; Editing by Sherry Jacob-Phillips and Arun Koyyur)