The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Article by Beth Zheng (LLB Law student at the University of Durham)
Covid-19 has impacted our everyday lives, from shopping for groceries to the closure of schools and introduction of online summer exams. Whilst many employers are implementing structures to support their employees to enable remote working, this scheme is not possible for airlines and their employees. The aviation industry has fallen victim to the economic impacts of Covid-19. Airlines are struggling to mitigate the effects of coronavirus, with many around the world stopping their services for an indefinite period of time. This is due to the fact governments around the world are instructing their civilians to physically isolate and stay at home. Many countries are encouraging social distancing, a practice which is inherently in contrast to the function of aviation, serving to bring people together.
The emergence of Covid-19 in China triggered a catalytic effect around the world as countries such as the US immediately started closing their borders and banning those who had visited the epicentre of the outbreak. Whilst some airlines began cancelling their flights to Greater China, the dominance of Chinese airlines meant that globally, the impact was not detrimental. Yet as the virus began spreading from country to country including South Korea, Italy and subsequently the whole of Europe, more airlines began feeling the effects of the outbreak on their businesses. For example, the largest airlines in Europe such as Lufthansa, Air France-KLM and IAG (International Airlines Group) realised the demand for their services was no longer needed, resulting in many cancellations in an attempt to mitigate economic loss. In March alone, according to FlightStats.com, globally, 374,429 flights were cancelled, whilst 197,175 flights suffered delays.*
On Wednesday 11th March, President Trump laid out his administration’s response to the outbreak by enforcing a complete travel ban from all European countries. This ban had a devastating impact on the aviation industry as aircraft travels across the Atlantic 700 times a day and are the most profitable flights for airlines. In particular, Delta, United and American Airlines were affected most severely, having to refund more bookings than they had being made. Airlines such as United thus began offering waivers on all coronavirus-affected flights, giving customers flexibility to re-book in the future, in an attempt to ensure future business.
To show the virus’ impact in the aviation context, American Airlines, the largest airline operator in North American with 6,700 daily departures, currently only operates long-haul flights to and from four locations: Tokyo, Dallas, Miami and London. Moreover, the airline confirmed they were to seek £9.7billion of financial support from the US government to ensure the airline would be protected in the future and its employees would be shielded through enhanced voluntary leave and early retirement options.
Meanwhile in the UK, airline easyJet has grounded its entire fleet whilst British Airways have suspended all flights departing from London Gatwick. Even in Gatwick airport itself, the decline in demand has resulted in the closure of the North Terminal. More recently, Virgin Atlantic appealed to the UK Government for state intervention, a move which has been backed by companies such as Airbus and Rolls-Royce, who both work closely with the airline in its current manufacturing of the A330 aircraft. Similarly, Heathrow Airport has also written to the transport secretary to support Virgin Atlantic’s request, stating this bailout will ‘safeguard the future of the sector’. This need is highlighted further by the collapse of Flybe a month ago. Recently, Richard Branson has been criticised for the way Virgin have treated their employees, with all staff on 8 weeks of unpaid leave. The impacts of Covid-19 are devastating on businesses but also on employees and their families.
One way airlines are attempting to adapt their services is through carrying cargo with their unused, empty passenger aircraft. This is financially more feasible given the reduced number of pilots. Moreover, airlines have been able to benefit from the recent plummet in oil price due to the price war between Saudi Arabia and Russia, with Saudi Arabia attempting to buy Russia out through slashing their oil prices and increasing their production line. Oil prices were at their lowest in over 17 years, since November 2002. Although this discounted oil price is positive news for the industry, it seems that airlines are unable to truly benefit amongst this unprecedented situation.
The future seems bleak for the aviation industry, with the International Air Transport Association (IATA) predicting the industry may take an overall £87billion loss due to the pandemic. With more people working from home than ever, businesses are learning and developing more new technologies to work collaboratively over borders on cross-jurisdictional matters. Therefore, in the future, the commercial demand for flights may be even lower, meaning airlines have even more losses to anticipate after this global crisis.
You can find out more here, here and here
*at the time of writing
Article by Jamie Howarth (LLB Law student at ULaw)
The Coronavirus Business Interruption Loan Scheme (CBILS), introduced by chancellor Rishi Sunak two weeks ago (23rd March), was intended to assist SME’s in sustaining their businesses through the ongoing public health crisis. The scheme intends to provide finance of up to £5 million to SME’s consisting of loans, asset finance, invoice finance, and overdrafts. The loans are interest-free for 12 months. However, holes in the fundamentals of the scheme were quickly recognised – businesses with insufficient security and those who could access financial support on commercial terms were barred from accessing the scheme, and lenders were requesting personal security on the loans. Similarly, the Treasury announced that it had only been able to approve roughly 1,000 of the emergency loan enquiries it had received.
Consequently, it seemed only a matter of time before the scheme received a much-needed overhaul. On 2 April, Sunak announced that lenders would be banned from requesting personal security on loans under £250,000 and that the scope would be widened to cover all small companies. A further restriction on the requisition of personal guarantees is that loans over £250,000 will have their recoveries capped at 20% of the outstanding CBILS facility amount. The new measures are retrospective, so businesses that previously did not qualify will be able to reapply for this financial support. These changes have been welcomed by struggling SME’s across the country, though the chief executive of the British Retail Consortium said that businesses need to be able to see the details of the scheme in order to receive the funding required, ‘otherwise we risk losing many otherwise viable businesses and the jobs that they provide for hundreds of thousands of people across the UK’.
On top of these more positive measures, Sunak introduced the Coronavirus Large Business Interruption Loan Scheme (CLBILS), which can provide government guarantees of 80% on loans of up to £25 million for companies with an average turnover of between £45-500 million. More details on this scheme are set to be announced in the coming weeks and businesses can expect for loans to be made more readily available in order to survive the pandemic.
Article by Francis Louis (1st year LLB student at a London University)
The past months have seen a huge surge in the infected rate of Covid-19 around the world. As the virus spread, the world’s economy is facing a downturn with the manufacturing and hospitality industries taking the biggest hit. The United States and the United Kingdom has seen a surge in the infected count. The leaders are preparing for the economic repercussions that comes with it as individuals avoid the streets and businesses shutdown. What are the steps being taken to overcome this?
In the United States, the infected count surged from 8,000 to 80,000 in a week. The huge spiked has sent Trump’s administration to step up responses by stimulating the economy. The US Congress passed a bill that approved a $2 trillion economic stimulus deal. It includes direct payments of up to $1200 to individuals, an increase in unemployment benefits, roughly $500 billion in loans and grants for businesses and support for the healthcare industry. However, House Speaker Nancy Pelosi said, ‘This is not going to be the last bill’. The US is now facing calls to place the country under lockdown to contain the spread of the virus. If the virus were to continue spreading at the rate seen as of today, the US should anticipate a greater economic impact as it will continue to drag many industries into decline. Thus, the US could face a high unemployment rate by the end of the year. In the coming weeks, we will watch the steps taken not only to safeguard the economy but the well-being of its people.
In the United Kingdom, The Bank of England announced that it was lowering the interest rate to 0.1% which is an all-time low to stimulate spending in the economy. Furthermore, it has pledged to increase its holding in the UK government bond and corporate bond by £200 billion as it aimed to increase liquidity in the economy and boost consumer confidence. The UK government announced three stimulus package from March 11 to March 20. This includes $379 billion in business loan guarantees and deferring the quarter of Value Added Tax. The treasury has also pledged to pay 80% of worker’s salaries for several months to keep companies from resorting to huge layoffs. The UK government is now seen to be taking an aggressive stance with implementing stricter rules to tackle the rise in infected rate. In the coming weeks, we will watch whether the steps taken by the UK is adequate to reduce the infected rate or an even more aggressive stance should be taken such as a lockdown.
Article by Tofunmi Oluwatobello (Corporate and Commercial Law LLM , University of Sheffield)
Coronavirus is currently the forefront pandemic of 2020. The world is dealing with rising cases of coronavirus daily as it is currently affecting industries, shutting down businesses and revolutionizing work as more employees work for home and leading to an increase in panic buying.
However, a leading problem with this pandemic remains that the general public cannot diagnose themselves as negative or positive – thereby contributing to the anxiety surrounding the virus. Those with COVID-19 and who report symptoms such as a high fever or dry cough are advised to stay home by the NHS.
A recent creation developed by Abbott Lab’s, (a portable, 5-minute coronavirus test named the ID NOW COVID-19) aims at fixing this. The FDA approved the company, Abbot Labs for a coronavirus test that delivers positive results in a little as five minutes and negative results in 13 minutes. They are estimated to produce 50,00 tests a day.
The importance of testing kits goes further than COVID-19 as other strains of coronavirus are spreading across the world and the test can be used to identify other and test other viruses such as Influenza A and B and Strep A. The same company, Abbott, has also being approved on another coronavirus test the m2000 Realtime SARS CoV-2 EUA test, which is used in large batches such as at universities. Between these two platforms; Abbott is estimated to produce 5 million tests every month.
This is a great accomplishment for the company; Abbott as a leading face for the coronavirus pandemic for the rapid test kit which surged their market prices by 13 percent after their FDA approval.
The urgency of testing still leaves other questions opened as Abbott Labs is an Illinois based company they may struggle with international testing kits as the coronavirus cases rise up each day with other companies such as companies such as Moderna and Johnson and Johnson are in a 2 billion race to find an effective vaccine and most importantly to do so as quickly as possible.