Oil goes negative
Unprecedented
For the first time in history, the price of US oil has entered negative territory. With lockdowns in place around the world, there is simply too much oil on offer and not enough demand. Producers are having to pay buyers to take the commodity off their hands. The US benchmark West Texas Intermediate (WTI) dropped to -$38 a barrel on 20 April. Brent crude – another oil benchmark – remained in the black, but did fall below $20 a barrel on 21 April – hitting an 18-year low. More in this week’s news pages and cover feature.
Airlines call for confidence
IATA survey
The International Air Transport Association (IATA) has called for governments to work with the industry on confidence-boosting measures, ahead of an expected slow recovery in demand for air travel. According to an IATA-commissioned survey of recent travellers, 40 per cent could wait six months or more before returning to travel after the containment of the Covid-19 pandemic, 60 per cent anticipate returning to travel within one to two months of containment and 69 per cent said that they could delay a return to travel until their personal financial situation stabilises.
Virgin Australia in admin
Appointed Deloitte
Virgin Australia (ASX:VAH) has entered voluntary administration. The airline group said that it had done so in a bid to recapitalise its business and ensure that it emerges in a stronger financial position after the coronavirus crisis. It had sought financial assistance from various parties, but had not yet secured what it needed. Chief executive Paul Scurrah said: “Australia needs a second airline and we are determined to keep flying. Virgin Australia will play a vital role in getting the Australian economy back on its feet after the Covid-19 pandemic by ensuring the country has access to competitive and high-quality air travel”.
Surge in food volumes
Premier Foods updates
Premier Foods (PFD) saw a strong surge in volumes in March as consumers stocked up. It expects to report a 3.6 per cent rise in fourth-quarter group sales, and a 10.5 per cent spike in March alone. In the UK, sales shot up by 15.1 per cent last month. Overall, the group is due to report trading profit for the full year at the top end of market forecasts. It has also agreed a segregated merger of its pension schemes, which will place all the UK defined benefit schemes under one trust.
Netflix sign-ups soar
More of us at home
Netflix (US:NFLX) saw almost 16m new sign-ups during the three months to March – a near doubling from the prior quarter. The video streaming platform ended the period with 183m paid memberships. Still, the group noted that such a spike in numbers would be temporary. It added that it is “acutely aware that we are fortunate to have a service that is even more meaningful to people confined at home, and which we can operate remotely with minimal disruption in the short to medium term”. On the production side, almost all filming has now stopped globally.
Shell ups climate goals
Net zero by 2050
Royal Dutch Shell (RDSB) has joined BP (BP.) in pledging to reach net zero carbon emissions by 2050. The supermajor will balance out emissions from its refineries and oil and gas operations, while it also made clear “the total amount of energy Shell contributes is likely to increase” in the coming decades. The net zero plan includes the company’s scope 1 and 2 emissions, those directly from its operations and the plants used to power them, but it has a different approach for its scope 3 emissions, which are from its products.
Summer rent drop for Unite
Students leave accommodation
Unite (UTG) expects to forgo rent representing between 62 and 65 per cent of managed beds this year after students left accommodation for the summer term. The landlord expects a shortfall in income for the 2019/20 academic year of 16-20 per cent – an improvement on its initial estimate. Forecasting a £90m-£125m reduction in cash flow in 2020, the group has initiated cost-saving plans, which together with deferring non-essential capital expenditure will retain an additional £95m-£105m in the business. With all revolving credit facilities now fully drawn, it is in discussions with lenders to secure additional debt.
UK inflation (CPI) slipped to 1.5 per cent in March, from 1.7 per cent in February.
This contraction stemmed from price declines in clothing and footwear, marking the first fall since 2015 – in a reflection of a higher number of items being on sale. The Office for National Statistics (ONS) noted that sales patterns this year are likely to have been impacted by the coronavirus pandemic, even though prices were collected around 17 March – before the formal government lockdown was introduced.
Motor fuel prices also sank, with petrol prices down by 5.1p per litre between February and March.
