Daily Business Briefing
June 21, 2021Updated
June 21, 2021, 5:37 p.m. ET
June 21, 2021, 5:37 p.m. ETCredit…Kamil Krzaczynski/Agence France-Presse — Getty Images
Summer getaways are testing the limits of the country’s air travel system as airlines and airports try to restore operations that were decimated by the pandemic.
Nearly 10,000 flights were delayed in the United States on Sunday, as travel surged and airlines contended with bad weather and other disruptions.
Among the nation’s largest airlines, Southwest Airlines had the most delays, with 30 percent of flights running late, according to FlightAware, a flight tracking service. At American Airlines, 25 percent of flights were delayed, compared with 23 percent for United Airlines and 21 percent for Delta Air Lines.
The slowdowns occurred as travel reached new pandemic heights: The Transportation Security Administration screened 2.1 million people at its airport security checkpoints on Sunday, the most since early March 2020.
Several airlines, including Southwest, blamed bad weather for the delays. Thunderstorms affected operations at Delta’s hub airports in Atlanta, Minneapolis-St. Paul and Detroit and complicated efforts to get flight crews in place, a spokesman said. At American, the problems had been building since earlier in the month.
“The first few weeks of June have brought unprecedented weather to our largest hubs, heavily impacting our operation and causing delays, canceled flights, and disruptions to crew member schedules and our customers’ plans,” American said in a statement.
Each of the nation’s major airlines faced significant delays on Sunday, but only American also had substantial cancellations, which affected about 6 percent of flights, according to FlightAware. Citing the bad weather, vendor labor shortages and the rapid rise in travel, American said it would cut back its schedule over the next few weeks to minimize last-minute disruptions.
“Our focus this summer — and always — is on delivering for our customers no matter the circumstance,” the airline said in a statement. “We never want to disappoint, and feel these schedule adjustments will help ensure we can take good care of our customers and team members and minimize surprises at the airport.”
All told, American cut about a thousand flights in July, more than 0.5 percent of its schedule that month, according to Cirium, a flight data provider. Most of the cuts are concentrated in the first half of the month, the airline said.
The situation seemed to improve on Monday, with only about 5 percent of flights delayed for Delta and United by early afternoon. Virtually no flights run by those airlines had been canceled. About 10 percent of American’s flights were delayed, while a slightly higher percentage were delayed at Southwest. About 5 percent of flights run by American and Southwest had been canceled.
Despite the complications, the rebound is welcome news across the industry, which has suffered devastating financial losses. Only one large airline, Southwest, has reported a quarterly profit since the pandemic began.
But the resurgence hasn’t come without difficulties. Reports of disruptive and sometimes violent passenger behavior are on the rise — so much so that a group of major airlines and unions asked the Justice Department on Monday to crack down on such conduct.
“These incidents pose a safety and security threat to our passengers and employees, and we respectfully request that the Department of Justice commit to the full and public prosecution of onboard acts of violence,” the group said in a letter to the attorney general, Merrick Garland.
The recovery is far from complete. T.S.A. screenings over the past week are down more than 25 percent from the same period in 2019, and corporate travel and international travel, two moneymakers for the airlines, have yet to pick up in any meaningful way.
Read moreCredit…Lucas Jackson/Reuters
John C. Williams, president of the Federal Reserve Bank of New York, said on Monday that he expects the recent acceleration in price gains to prove temporary, and offered an optimistic view of the nation’s economic outlook as widespread vaccines and business reopenings drive growth.
Still, Mr. Williams cautioned “the data and conditions have not progressed enough” for the Fed’s policymaking committee “to shift its monetary policy stance of strong support for the economic recovery.” Mr. Williams was delivering remarks before the Midsize Bank Coalition of America.
“There is a lot of uncertainty out there,” Mr. Williams later said, while speaking to reporters following the event. “I see risk management as just part of any reasonable policy strategy. I do think there are risks to both sides.”
The Fed has held its policy interest rate at near-zero since March 2020 and is buying $120 billion in government-backed bonds each month, policies that are meant to keep many kinds of borrowing cheap, pushing money through the economy and bolstering demand. Jerome H. Powell, the Fed’s chair, indicated after the central bank’s June meeting last week that officials are beginning to talk about their plan for slowing those bond purchases as the economy recovers from a sharp pandemic hit.
Fed policymakers at that meeting also predicted they might lift interest rates earlier than they had expected, with more than half estimating two rate increases in 2023. Previously, officials hadn’t anticipated moving interest rates away from rock bottom until 2024, at the earliest.
Investors are now trying to parse that change and figure out what it says about how the Fed is thinking about its inflation goal. The Fed, which updated its inflation target last year, now aims for 2 percent inflation on average over time, meaning it will welcome periods of slightly-higher inflation to offset periods of weak price gains.
Mr. Powell played down the importance of individual Fed official forecasts for rate increases when he spoke last week. Mr. Williams, who is one of the Fed’s other most powerful and influential officials, joined him on Monday, highlighting that the committee does not discuss or vote on their economic projections.
The New York Fed president also shot down an idea that has taken hold among many Wall Street analysts since last week’s meeting — that the upgraded path for interest rates means the Fed is going to judge that its average inflation goal is satisfied by a big, but short lived burst in price gains this year.
“We chose consciously, and carefully chose, not to have a formula for the average inflation rate,” Mr. Williams said. “It’s not a specific formula.”
The Fed will be watching price gains over an unspecified time period and aiming for stable, well-placed inflation expectations, Mr. Williams said. He personally does not expect the current bout of higher inflation to last.
“My view is that the spike in inflation mostly reflects the temporary effects of the surprisingly rapid opening of the economy,” he said. There are risks both that inflation will be higher than wanted and that it could fall below the Fed’s goal, he added.
“You could see inflation coming in lower than expected,” he said, if supply chain disruptions reverse rapidly or if the global economic recovery lags. But that’s a possibility — not his forecast.
“I have a very positive baseline,” Mr. Williams said.
Read moreCredit…Megan Jelinger/Agence France-Presse — Getty Images
LORDSTOWN, Ohio — Lordstown Motors, a troubled electric-vehicle start-up, began a push to win back the confidence of investors on Monday by demonstrating the capabilities of four working prototypes at its Ohio factory.
In a rain-soaked parking lot, Lordstown engineers gave analysts, reporters and other visitors brief test rides to show off the acceleration and handling of the four Endurance pickup trucks.
Company officials said they were confident that production would begin in the next several months and that they expected to make about 1,000 trucks by the end of the year.
“We want you to see it — we want you to experience it,” said Angela Strand, a director who was appointed executive chairwoman last week when the company ousted its two top executives. “We are committed to being first to market with an all-electric, full-size pickup truck.”
Ms. Strand also said the company was looking for additional sources of funding and was “evaluating multiple partners.”
The presentation came after the company delivered a series of contradictory statements in the last week about its outlook.
Lordstown has attracted attention because it was once hailed by President Donald J. Trump for its bid to revive an Ohio plant closed by General Motors. The plant, in Lordstown, near Ohio’s border with Pennsylvania, was closed in 2019 and purchased by Lordstown Motors for $20 million.
The start-up is one of a dozen or more electric vehicle companies that skipped the typical route for becoming publicly traded, instead gaining a stock listing and raising hundreds of millions of dollars with relatively little scrutiny by merging with a special purpose acquisition company, DiamondPeak Holdings.
Soon after the merger closed in October, Lordstown’s market value jumped to more than $4 billion. Its rise was helped by a series of announcements it made publicizing tens of thousands of “pre-orders” for its electric truck.
Its fortunes took a turn this year when a small investment firm, Hindenburg Research, issued a report noting that almost none of the pre-orders were firm commitments to buy trucks, and some had come from small companies not currently operating truck fleets.
The company has promised to start production of the Endurance in September, but it has run into development difficulties. A prototype caught fire and burned up in a Detroit suburb in February, and another that was entered in a 280-mile off-road race in Baja California dropped out of the event after just 40 miles.
Then Lordstown’s board acknowledged some of the company’s statements about pre-orders were inaccurate, and the company filed a statement with securities regulators that it did not have enough money to start production and that it might not survive. That was followed by the resignations of its founder and chief executive, Steve Burns, and its chief financial officer, Julio Rodriguez.
Last week, Lordstown’s new president, Rich Schmidt, presented a more upbeat outlook, saying the company had enough money to last until May 2022 and that many of its pre-orders were binding agreements. Two days later, Lordstown filed another statement with the Securities and Exchange Commission saying, in effect, that Mr. Schmidt had erred and that it did not have binding orders for the truck.
In February, shortly before the Hindenburg report, a handful of executives sold about $8 million worth of stock. A few months earlier, insiders had sold $3 million worth of shares.
After a special committee of Lordstown’s board reviewed the stock sales, the company said in a statement that they “were made for reasons unrelated to the performance of the company or viability of the Endurance.”
The Wall Street Journal on Monday raised questions about the timing of the stock trades, in particular Mr. Schmidt’s sale of about $4.6 million worth of shares in early February. The Journal said Mr. Schmidt had used some of the proceeds to finance a Tennessee farm offering deer and turkey hunting, beef cattle and blueberries.
The sales took place before the company said the S.E.C. first requested information about its pre-order claims and other issues surrounding its merger with DiamondPeak.
Despite his departure from the company, Mr. Burns remains one of Lordstown’s biggest shareholders. A recent regulatory filing showed that he owned about 26 percent of the voting shares and had not sold any.
On Monday, Lordstown shares were trading slightly above $10, down from a peak of more than $31 reached in February.
If Lordstown manages to make Endurance trucks, it will probably face serious competition. Ford Motor has introduced an electric version of its F-150 pickup that is supposed to go into production this year. G.M. is working on an electric version of its Chevrolet Silverado.
Read moreCredit…Pool photo by Al Drago
Jerome H. Powell, the Federal Reserve chair, will offer an optimistic take on the United States economy but little hint at what comes next for monetary policy in prepared remarks set for delivery before House lawmakers on Tuesday afternoon.
Economic growth this year “appears to be on track to post its fastest rate of increase in decades,” Mr. Powell is scheduled to say, while noting that the strength marks recovery from very low levels.
His testimony comes on the heels of the Fed’s meeting last week, in which officials held interest rates steady but suggested they were expected to rise modestly from near-zero levels by the end of 2023.
Mr. Powell will tell lawmakers that “conditions in the labor market have continued to improve, although the pace has been uneven,” and that “job gains should pick up in coming months as vaccinations rise, easing some of the pandemic-related factors currently weighing them down.”
While inflation has picked up sharply — fueling debate in Washington and on Wall Street over whether the government has overdone its pandemic response — the Fed chair will say that the recent pace of price gains is unlikely to last. But he will give little guidance about what the combination of a strengthening economy and stabilizing prices will mean for central bank policy.
“The Fed’s policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people, along with our responsibilities to promote the stability of the financial system,” Mr. Powell will say, without getting into much further detail.
The Fed has held its policy interest rate close to rock bottom since March 2020 and is buying $120 billion in government-backed bonds each month, policies that are meant to keep many kinds of borrowing cheap, pushing money through the economy and bolstering demand.
Mr. Powell’s testimony comes after the Fed’s June policy meeting fueled days of selling in the stock market. Policymakers released an optimistic set of economic projections, and more than half penciled in rate increases in 2023 — earlier than they had previously expected. Mr. Powell downplayed the significance of those projections, but did offer a sunny economic outlook, and signaled that the Fed was beginning to talk about when and how to slow down its asset purchases.
The Fed chair is likely to face questions about the central bank’s vast coronavirus rescue package, which saw it backstopping corporate bond markets, municipal debt and even mid-sized businesses amid market turmoil last year. He is scheduled to speak before the Select Subcommittee on the Coronavirus Crisis.
Read moreCredit…Chris Pizzello/Invision, via Chris Pizzello, via Invision, via Associated Press
Netflix has scooped up one of the biggest proponents of the theatrical movie business: Steven Spielberg.
Mr. Spielberg’s Amblin Partners has signed a multiyear deal to make multiple feature films annually for the streaming giant. Details of the deal were scant, but it will not take the place of Amblin’s current pact with Universal Pictures.
Universal has had a long history with Amblin and distributed its last few movies, including the Oscar-winning films “Green Book” and “1917.” The studio will also distribute “Jurassic World: Dominion,” which Amblin also produced, in June 2022. (Mr. Spielberg’s next directorial effort, the upcoming remake of “West Side Story,” will be released by Disney in December.)
“At Amblin, storytelling will forever be at the center of everything we do, and from the minute Ted and I started discussing a partnership, it was abundantly clear that we had an amazing opportunity to tell new stories together and reach audiences in new ways,” Mr. Spielberg said in a statement on Monday, referring to Ted Sarandos, one of Netflix’s co-chief executives.
In 2020, Amblin re-upped with Universal Pictures for another five-year term that involved supplying three to five movies a year to the studio and its subsidiary Focus Features. When that deal was announced, the companies said the new agreement would “provide Amblin with new opportunities in the streaming film marketplace,” suggesting the production company would shop for a deal with a separate streaming service.
Netflix nabbed Amblin, in part, because of its enormous reach of more than 200 million global subscribers.
In 2019, there was chatter in Hollywood that Mr. Spielberg was gunning for Netflix and intended to propose a rule change at the Academy of Motion Picture Arts & Sciences that would prevent films that primarily debuted on streaming services from being considered for the Oscars. That turned out not to be true. “I want people to find their entertainment in any form or fashion that suits them,” Mr. Spielberg said in a statement at the time. “Big screen, small screen — what really matters to me is a great story and everyone should have access to great stories.”
But he also made sure to reaffirm his commitment to the theatrical business: “I want to see the survival of movie theaters. I want the theatrical experience to remain relevant in our culture.”
Read moreCredit…Martin Pollard/Reuters
SHANGHAI — Dozens of huge container ships have been forced to drop anchor and wait. Freight rates have surged. Stores in the United States and Europe find themselves with understocked shelves, higher prices or both.
The blockage of the Suez Canal in March? No, there is another disruption in global shipping. This time, the problem lies in Shenzhen, a metropolis adjacent to Hong Kong in southeastern China.
Global shipping has been disrupted by the pandemic for months, as Western demand for goods made in Asia has outstripped the ability of exporters to get their containers onto outbound vessels. But the latest problem in Shenzhen, the world’s third-largest container port after Shanghai and Singapore, is making the difficulties even worse.
The shipping delays are related to the Chinese government’s stringent response to a recent outbreak of the virus. Shenzhen, with a population of more than 12 million, has had fewer than two dozen locally transmitted coronavirus cases; city health officials have linked them to the Alpha variant, which was first identified in Britain.
Shenzhen has responded by ordering five rounds of coronavirus testing of all 230,000 people who live anywhere near the Yantian container port, where the first case was detected on May 21. All further contact between port employees and sailors has been banned. The city has required port employees to live in 216 hastily erected, prefabricated buildings at the docks instead of going home to their families every day.
The port’s capacity to handle containers plummeted early this month. It was still running at 30 percent below capacity last week, the port announced, and state-controlled media said on Monday that full recovery might require the rest of June.
“A few weeks into a very substantial port congestion in Yantian caused by a Covid-19 outbreak, supply chain disruptions continue to be very present in global trade,” Maersk, the world’s largest container shipping line, said in a statement on Thursday.
Long lines of container ships awaiting cargo bound for North America, Europe and elsewhere have had to anchor off Shenzhen and Hong Kong as captains now wait as long as 16 days to dock at Yantian. Small vessels mounted with their own cranes have been ferrying many containers straight from riverfront factory docks in the Pearl River Delta to container ships near Hong Kong, as exporters try to bypass delays at Yantian.
“It looks like rush hour — there’s a lot of ships waiting,” said Tim Huxley, the chairman of Mandarin Shipping, a container shipping line based in Hong Kong. He predicted that sorting out all of the shipping delays at Yantian and elsewhere could take the rest of this year.
The Suez Canal was blocked for almost a week by the Ever Given container ship in March, while Yantian coincidentally halted all loading of export containers for six days early this month. But Yantian’s problems have now dragged on much longer. Simon Heaney, the senior manager for container shipping research at Drewry Maritime Research in London, said the global transportation disruption caused by the Yantian port problems was similar to the Suez Canal blockage, although differences between the two incidents make any statistical comparison difficult.
The average cost of shipping a 40-foot container from East Asia to Europe or North America has roughly quadrupled in the past year. Rates have soared this month with the Yantian difficulties.
Read moreCredit…Nitashia Johnson for The New York Times
Airline ticket sales fell a little in May after rising steadily in the first four months of the year, according to a firm that tracks bookings, suggesting that demand for tickets for summer travel might not be quite as strong as airlines had hoped.
Consumers spent more than $5 billion for flights within the United States in May, a 4 percent drop from April and 20 percent lower than the same month in 2019, according to an analysis based on the Adobe Digital Economy Index. The estimates are drawn from website tracking data from six of the top 10 U.S. airlines. The airlines sold more than $21 billion in domestic tickets from January through May.
It is not clear why bookings were lower in May and whether the trend has continued into June. But analysts and airline executives have expressed optimism in recent weeks that demand for travel is strong. The number of people flying has risen relatively steadily since January, according to the Transportation Security Administration. On Sunday, the agency screened 2.1 million passengers at airport checkpoints, the most in a single day since the pandemic began.
Other countries are increasingly opening up, too. United Airlines said it set booking records each of the past three weeks for flights across the Atlantic Ocean, and the European Union urged its member states on Friday to lift a ban on nonessential travel for Americans.
People are also buying more tickets for later in the year than they were this time in 2019, the year before the pandemic took hold. Bookings for travel in November and December are up 30 percent from this time in 2019.
In a securities filing this month, American Airlines said strong summer sales helped it generate a cash profit in May for the first time in more than a year. Delta Air Lines has said it expected leisure travel within the United States to be fully restored this month.
Several of the most popular destinations this summer are in Hawaii, according to Adobe. Other popular stops include Bozeman, Mont.; Nantucket, Mass.; Las Vegas; Richmond, Va.; and Orlando and Fort Myers in Florida.
Most analysts and airline executives expect that a full recovery will take years — airport traffic is still down about 20 percent from 2019 — but hotels are faring much better. Slightly more people booked hotel rooms in April and May than in the same months in 2019, according to the index, which is based on data from eight of the top 10 U.S. hotel chains.
People are also spending more on travel related goods. Luggage sales in May, for example, were up 9 percent from the same month in 2019, and sales of camping gear were up 130 percent.
Read moreCredit…John Taggart for The New York Times
The parent company of Soho House filed for an initial public offering on Monday, setting the stage for the operator of upscale members clubs to begin trading on the New York Stock Exchange.
The effort by the company, Membership Collective Group, will test investor appetite for an unusual business for the public markets: a members club built around exclusivity, even as it promises steady growth to prospective shareholders.
Founded 25 years ago as a modern update on traditional London gentlemen’s clubs, Soho House has become famous for its series of sleekly designed redoubts for young professionals, originally drawn largely from industries like the arts, fashion and media. The average annual fee for its main membership tier in the United States is about $3,400.
In its filing, Membership Collective disclosed a hit from pandemic lockdowns. It lost $235.3 million for its most recent fiscal year, nearly double what it lost the previous year. (The company has lost money for at least the past three years.)
Its membership revenue actually increased during that time — its retention rate was 92 percent, the company said — although in-person sales from restaurants, spas and other club services dropped 60 percent. Membership applications also rose during that time, and its waiting list is at 48,000.
Membership Collective now has more than 119,000 members across its properties, including its 28 mainstay Soho Houses in major cities around the world. The company has also expanded to other types of membership properties, including the Ned, a bigger club popular with London’s financial crowd, and the Scorpios Beach Club in Greece. The company hopes to open three to five new clubs each year.
More important to the company’s future is its branching out into newer businesses. Membership Collective said it had opened nine Soho Works co-working spaces since 2015, drawing more than 1,000 members.
And it has increasingly focused on digital offerings, including the planned rollout of a digital membership aimed at people in parts of Asia, Africa and South America, where the company has not yet opened a physical club. Its digital app also features a curated lineup of creative works by its members.
Its biggest existing shareholders include Yucaipa, the investment vehicle of the billionaire Ron Burkle; Nick Jones, Soho House’s founder; and the hospitality mogul Richard Caring.
Stocks on Wall Street rallied on Monday, making a comeback after the S&P 500’s worst week since February. Stocks tumbled last week as the Federal Reserve said on Wednesday that a majority of its officials expect two see two interest rate hikes by the end of 2023.
“Investors got the first hints of the punch bowl being taken away in the post-COVID world last Wednesday, and they haven’t taken it well,” Paul Hickey, an analyst at Bespoke Investment Group, wrote in a note.
The S&P 500 ended with a 1.4 percent gain, while the Nasdaq composite rose 0.8 percent. The S&P 500 fell 1.3 percent on Friday, and the Nasdaq composite dropped 0.9 percent.
The yield on 10-year U.S. Treasury notes climbed to 1.49 percent on Monday.
Bitcoin was down more than 8= percent to $32,517 as the call from Chinese authorities to crack down on mining and trading of the cryptocurrency continues.
Asian stocks closed sharply lower on Monday, following losses in European and American indexes on Friday. The Nikkei 225 closed 3.3 percent lower and the Hang Seng in Hong Kong dropped 1.1 percent.
European stock indexes rose, with the Stoxx Europe 600 climbing 0.7 percent.
Oil prices rose, with West Texas Intermediate crude, the U.S. benchmark, climbing 2.7 percent to about $73.62. Brent crude, the global benchmark, was also up 1.4 percent, to $74.92.
Eshe Nelson contributed reporting.
Read moreCredit…Scott McIntyre for The New York Times
The Federal Trade Commission is warning travelers about schemes that lure them into booking phony car rental reservations through fake customer service numbers and websites, Ann Carrns reports for The New York Times.
Rental cars have gotten scarce and prices have risen. That may leave customers vulnerable to bogus offers that appear to provide the car they want at a seemingly more reasonable rate, said Emily Wu, a lawyer with the commission’s division of consumer and business education.
The sequence may start when a shopper searches online for a general term like “cheap rental cars,” said Amy Nofziger, director of victim support for the AARP Fraud Watch Network.
They call the number that shows up in the search, thinking it belongs to a legitimate rental company.
The fake rental agency typically will insist that the caller reserve by paying with a gift card or prepaid debit card, saying there is a discount associated with the card.
Once the caller buys a card and relays its PIN to the bogus agency, the criminal can quickly convert the card to cash, and the consumer is left without the money or a car.
“A website that requires payment or asks for the purchase of a gift card, and to provide the card number and PIN, should cause alarm,” said Lisa Martini, a spokeswoman for Enterprise Holdings, which includes the Enterprise, Alamo and National brands.
Read moreVideoCreditCredit…By Timo Lenzen
Today in the On Tech newsletter, Shira Ovide writes that turning to the internet for financial help didn’t work very well in a pandemic.