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Breakingviews - Corona Capital: Euro-flyers, Air India, Heineken

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LONDON/MUMBAI (Reuters Breakingviews) - Corona Capital is a daily column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.

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- Grounded airports

– Indian wings

– Dutch courage

BRACE POSITION. Ending lockdowns hasn’t prompted the boost in plane travel airlines hoped for. Monthly passenger volumes at $10.5 billion Aeroports de Paris, which manages 24 airports worldwide including Paris-Charles de Gaulle and Orly, more than quadrupled in June to 2.8 million compared to May, as countries in Europe and Asia eased travel restrictions. But that still represented a bone-shuddering 88% decline from the same month a year earlier. Package holiday companies’ hopes of a boon in sun-starved tourists from northern Europe also appear to have been misplaced: excluding domestic flights in France, ADP reported a 95% yearly decline in continental traffic.

Little wonder that French President Emmanuel Macron has deferred selling down the state’s 51% stake. ADP shares, which rebounded by 31% since their nadir in March, remain down by nearly half this year, underperforming the Refinitiv Europe Airlines Price Return index. Macron’s delay may end up being indefinite. (By Christopher Thompson)

REDEFINING COST-CUTTING. Air India may allow some of its 11,000-plus employees to go on unpaid leave for up to five years to trim expenses during the pandemic, reports Mint newspaper. It’s a radical way to keep costs in check, but it might help the state-owned airline to secure a new owner. Prime Minister Narendra Modi’s government wants to wash its financial hands of the indebted, globe-trotting reminder of India’s inefficiencies.

Perversely, it might soon look more attractive. Indian airlines face losses of up to $4 billion this year, and the industry may consolidate into two or three players absent an urgent recapitalisation, aviation consultancy CAPA reckons. Air India’s recognisable brand and state-backing mean it’s likely to survive. But if balance sheets aren’t repaired, those that fly out of the crisis won’t be well-fuelled to connect the fifth-largest economy to the rest of the world. (By Una Galani)

RAISING THE BAR. Heineken’s first-half net revenue fell 16% organically, the world’s second-biggest brewer said on Thursday. Danish rival Carlsberg managed a slightly better 12% decline, it said last week, thanks to a China bounce.

Yet it’s profitability that really separates the wheat from the, er, barley. Heineken’s operating profit more than halved in the first half while Carlsberg expects an organic decline of just 9%. Part of that is the Dutch brewer’s stronger, and higher-margin position in pubs and bars in Europe. Still, with punters returning to the boozer gradually, Heineken’s new Chief Executive Dolf van den Brink will need to boost revenue from home drinking, perhaps with a focus on the Heineken brand, which declined just 2.5%. He’ll also need to slash costs to get the profit taps flowing again. (By Dasha Afanasieva)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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