Global recession fears loom over markets; easyJet cuts summer flights – business live | Business

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EasyJet cuts flights until end of September

Budget airline easyJet is cutting more flights in an attempt to avoid a repeat of the travel chaos suffered by passengers in recent months.

EasyJet has announced it is reducing capacity until the end of September, after flight caps were announced at London Gatwick and Amsterdam.

The airline — one of the worst hit by recent disruption — is “proactively consolidating” a number of flights across affected airports. This will give customers advance notice and the potential to rebook onto alternative flights, it says.

EasyJet points to problems such as air traffic control delays and staff shortages in ground handling and at airports, shortages of staff including cabin crew, and delays getting IDs approved so new hires can start.

These problems have prompted flight caps at Gatwick and Schiphol in the last few days.

EasyJet says expects to to rebook the majority of customers on alternative flights, with “many” being on the same day as originally booked for.

The cuts mean EasyJet will run at around 90% of its pre-pandemic flights (2019) in July to September, down from a previous target of 97% of pre-Covid flights.

Capacity in April-June will be around 87% of pre-Covid levels, below the 90% previously expected.

Heathrow asks airlines to cancel 10% of flights today amid baggage backlog

Airport workers stand next to lines of passenger luggage arranged outside Terminal 2 at Heathrow Airport yesterday
Airport workers stand next to lines of passenger luggage arranged outside Terminal 2 at Heathrow Airport yesterday Photograph: Henry Nicholls/Reuters

Heathrow has asked airlines operating at Terminals 2 and 3 to cancel 10% of their flights today as it tries to work its way through a huge backlog of luggage, Sky News reports.

It comes after hundreds of passengers were left waiting for over three hours during the weekend to retrieve their luggage with no explanation from staff.

Airlines have been given the option of consolidating their flights at Heathrow – meaning that instead of cancelling 10% of services they could move passengers on to other flights to ensure they get away.

Lines of passenger luggage lie arranged outside Terminal 2 .
Lines of passenger luggage lie arranged outside Terminal 2 . Photograph: Henry Nicholls/Reuters

It is only a request at this stage so it is up to carriers to decide whether they will comply.

More here: Heathrow asks airlines to cancel 10% of flights today as airport faces baggage backlog

A Heathrow spokesperson says cancelling some flights should help reduce the disruption:

“We apologise unreservedly for the disruption passengers have faced over the course of this weekend.

“The technical issues affecting baggage systems have led to us making the decision to request airlines operating in Terminals 2 and 3 to consolidate their schedules on Monday 20th June.

A flight information board shows cancelled flights at the Brussels airport as passenger planes will not take off due to a security guards strike.
A flight information board shows cancelled flights at the Brussels airport as passenger planes will not take off due to a security guards strike. Photograph: Anadolu Agency/Getty Images

A day of strikes in Belgium over the cost of living forced Brussels Airport to cancel all departing flights on Monday and halted many bus services across the country.

Unions said they expected tens of thousands of people to attend a protest in Brussels.

Brussels Airport said it could not allow passenger flights to depart because security personnel were taking part in the industrial action.

The demonstration itself is expected to heavily disrupt traffic in and around Brussels, but will also impact public transport in the city – while railway operator SNCB is scheduling extra trains to Brussels.

Inflation hit 9% in June in Belgium, as Russia’s invasion of Ukraine drove up costs of energy and food.

Prime minister Alexander De Croo said Belgian workers were better protected than counterparts in most other European Union countries because wages were indexed to inflation.

He told public broadcaster RTBF the government had extended measures to reduce sales tax on gas, electricity and fuel until the end of the year.

Activity across the eurozone’s construction sector shrunk, adding to concerns over the strength of the recovery.

Production across the eurozone’s construction sector decreased by 1.1% in April, compared with March, data from Eurostat shows.

Civil engineering work dropped most sharply (decreasing by 5.5%), while building construction increased by 0.1%.

Stock markets in emerging economies have hit their lowest level in over five weeks, on concerns that higher interest rates could trigger recessions.

The MSCI’s index for emerging market equities has dropped 0.4%, led by losses in Asia-Pacific bourses.

Higher rates in the developed world negatively impact emerging market assets, while a stronger US dollar makes it harder to repay debt issued in dollars.

Emerging market stocks have lost over 18% so far in 2022, and are down around 7% since the start of June.

Housebuilders’ shares drop in London

In the City, the blue-chip FTSE 100 share index has gained 40 points to 7057, despite global recession worries.

That lifts the Footsie by 0.6% from Friday night’s three-month lows. Banks, oil companies and travel companies are among the risers.

But UK housebuilders are leading the fallers, with Barratt (-4%) and Persimmon (-3.6%), amid speculation that rising interest rates could puncture the housing bubble.

Rightmove has predicted that prices are likely to start falling from their record highs during the next few months as five interest rate rises and a worsening cost of living crisis hit.

Mining companies are lower too, on concerns that slow growth means less demand for commodities.

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, explains:

Investors sense there is trouble ahead for the world economy, given that the priority of the powerful US Federal Reserve is to stamp out the flames of inflation even if that means extinguishing growth.

Although US Treasury Secretary Janet Yellen said yesterday a recession is not at all inevitable, she cautioned that the economy would slow, indicating that the price spiral will take time to reverse, given that inflation’s causes were global.

Uncertainty about the global outlook is also weighing on miners and commodity firms with Rio Tinto, Anglo American, Antofagasta and Glencore among the fallers in early trade on the FTSE 100.

EasyJet has not said how many flights will be scrapped under the new cancellations announced this morning

CEO Johan Lundgren told reporters he could not provide a figure for the number or proportion of flights that will be cancelled as “we need to work this through”.

“I can’t tell you how many flights will be impacted.”

“It would be misleading for me to give any numbers today because we simply don’t know.”

Simon Clarke, chief secretary to the Treasury, has also declared that workers can’t expect pay rises that will match inflation.

Stressing that this was a message for people in the private sector as well as in public sector, Clarke told the Today programme:

In the current landscape of inflation at 9, bordering 10%, it is not a sustainable expectation that inflation can be matched in pay offers.

That is not something that’s going to be seen – across, frankly, the private sector as well as the public sector.

We cannot get into a world where we are chasing inflation expectations in that way because that is the surest way I can think of to bake in the repeat of the 1970s which this government is determined to prevent.

My colleague Andy Sparrow has more details:

Back in February, the governor of the Bank of England was rebuked by 10 Downing Street for suggesting workers should not ask for big pay rises to help control inflation.

Four months on, that call for wage restraint now appears to be government policy…..

Train strikes could carry on into the autumn

Unions have warned that the train strikes could stretch into the autumn, adding to the UK’s transport chaos.

Mick Lynch, general secretary of the Rail, Maritime and Transport union (RMT), told the i newspaper that the public may have to accept disruption stretching beyond the summer.

Lynch warned that there “doesn’t seem to be much evidence at the moment that it’s going to go any other way”.

“The TSSA [union], which represents about 6000 Network Rail staff is balloting, Aslef, which along with us organises train drivers has about six or seven ballots being returned on July 11 – just a few weeks away.

If there’s no settlement I can only see this escalating.”

UK faces biggest rail strike in 30 years

Passengers board a train at Hunts Cross Station, Liverpool.
Passengers board a train at Hunts Cross Station, Liverpool. Photograph: Peter Byrne/PA

Britain is hours away from its biggest rail strikes in three decades, with widespread disrution expected for most of this week as trains are cancelled across the country.

Passengers are being warned that disruption will start tonight, ahead of the first of three 24-hour walkouts by 40,000 RMT members, including signallers, maintenance and train staff, on Tuesday.

Walkouts are also planned on Thursday and Saturday, as part of an ongoing dispute over pay and pensions.

Last-minute talks between union chiefs and rail operators were set to get underway today, but unless there is a dramtic breakthough, the rail network will see its biggest industrial action since the mid-1990s.

Just one in five trains will run on strike days, with services halted altogether in much of northern and south-west England, Wales and Scotland, meaning millions of people facing a week of cancelled trains.

There will also be disruption on the days between strikes, as our transport correspondent Gwyn Topham explains:

The strikes, over pay and attempts to reform the rail industry with post-Covid work patterns hitting commuter revenues, will cause six days of disruption, with trains limited to one an hour between 7.30am and 6.30pm on major intercity and urban routes. Services will start later and be reduced on subsequent days.

The action is being taken by Network Rail employees and onboard and station staff working for 13 train operators in England. The RMT said thousands of jobs were at risk in maintenance roles and that ticket office closures were planned, on top of pay freezes during a time of high inflation.

The walkout by signallers will have most impact, particularly in rural areas, leading to line closures in places such as Wales, where there is no direct dispute with the train operator. Most operators have told passengers to travel only if necessary on strike days. Northern Rail has advised passengers not to travel for the whole week.

The strikes will affect a number of events including school exams and the first Glastonbury Festival for three years, as well as meaning heavy disruption for commuters.

The government has been criticised for not joining last-ditch talks, but Labour demanded ministers drop their boycott of talks, while the Trades Union Congress (TUC) also called on the government to adopt a positive role in the rail dispute instead of “inflaming tensions”.

Frances O’Grady, the TUC general secretary, said:

“The government has the power to help end this dispute.”

But Treasury chief secretary Simon Clarke said the Government’s involvement in talks over the rail dispute would “confuse things” as he called for industry reforms.

He told BBC Radio 4’s Today programme this morning:

“Ultimately, it will only confuse things if we add a third party to these negotiations.

“The train operating companies and Network Rail are working to deliver a sensible programme of reform and a sensible and fair pay deal with the trade unions.”

Inflationary pressures in Germany are continuing to hit the roof.

German manufacturers and other produers hiked their prices by a startling 33.6% in May, compared with the previous year, as they passed on soaring commodity prices, and rising costs from supply chain disruption.

That’s the highest increase in producer prices on record, going back to 1949.

Prices rose 1.6% in May alone.

Statistics body Destatis reports that German energy prices were 87.1% higher than a year ago, while metal prices jumped 38.1% (including a 51% jump in pig iron, steel and ferro-alloys).

But prices rises went much further. Fertilizers and nitrogen compounds more than doubled over the last year, costing 110.9% more, while livestock feed prices increased by 48.7% — all bad news for farmers. And that’s pushing up food prices, with cereal flour prices were 44.8% higher than in May 2021.

The report also shows how industrial costs have jumped; industrial gas prices are up 68.8% more a year, packaging made of wood was up 67.4%, while softwood lumber was 41.9% more expensive.

Global airlines to narrow losses as outlook improves

You might not expect it, given easyJet’s flight cancellations today, but the outlook for global airlines is improving.

Industry body IATA has predicted that airline losses will narrow this year thanks to a rebound in demand for air travel, as it upgrades its forecasts.

Global airlines are now expected to post a $9.7bn loss in 2022, much better than the $42.1bn loss racked up in 2021, and almost $2bn better than previously forecast.

And the industry could return to profit next year.

IATA director general Willie Walsh told the gathering of airline chiefs that the industry was “leaner, tougher, and nimbler”, declaring:

“Industry-wide profit should be on the horizon in 2023”

“We are rebounding. By next year, most markets should see traffic reach or exceed pre-pandemic levels.”

The airline industry will return to profit next year as pent-up demand for travel sustains bookings even as the global economy tightens, trade group IATA predicts https://t.co/W3LMYjaNSQ

— Bloomberg Asia (@BloombergAsia) June 20, 2022

In an interview with Reuters, Walsh played down concerns of a so-called ‘demand cliff’ that would spell a short-lived recovery.

“I don’t think it’s a flash in the pan. I think there is some pent-up demand being fulfilled at the moment, but you’ve got to remember we’re still well below where we were in 2019.

“So I think there’s still a lot of ground to make up before we can get into the debate as to whether we’ll see that taper off.”

A worker at the Codelco Ventanas copper smelter in Ventanas, Chile
A worker at the Codelco Ventanas copper smelter in Ventanas, Chile Photograph: Rodrigo Garrido/Reuters

Back in the markets, recession fears have dragged copper down to its lowest level this year.

Copper, seen as a barometer of economic health dipped to $8,955 a tonne in London trading, after hitting its lowest since early October.

Economic slowdown fears are hitting metal prices, on concerns that demand will weaken — especially if Covid-19 lockdown in China keep hitting factory operations.

ANZ commodity strategists said in a note.

“This comes amid uncertainty around the demand outlook in China. Renewed outbreaks of COVID-19 have cast doubt on the recovery from lockdowns that have slowed down industrial activity.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, says:

“This year’s summer season was meant to be a festival of resilience for airlines, a chance to show off their strength at getting through the pandemic, and successfully ferrying customers on their seriously long-awaited holidays.

Instead, the industry has been hit by a PR firestorm, as scaled back workforces buckle under the weight of returning demand, leading to last minute cancellations. easyJet has now announced plans to consolidate its planned departure list, with hopes most customers will be able to rebook without changing their leaving date.

From a financial perspective, these plans are going to prolong total recovery for easyJet. The costs that come with ramping operations back up are huge. So while it’s a customer apology being dolled out today, any deviation from the new plan will mean the same courtesy would be due to shareholders.

Underneath all the noise, trends are positive. Crucially, demand for travel is there. Not being able to service that demand fully is a crying shame, but it does bode well for the future.”

Shares in easyJet have dropped 3.3% in early trading, to the bottom of the FTSE 250 index of medium-sized companies traded in London.

It told the City this morning that costs will be higher than previously guided, due to travel disruption and the ‘enhanced resilience’ it is putting into place.

People waiting in lines at Schiphol Airport in Amsterdam, Netherlands, last week.
People waiting in lines at Schiphol Airport in Amsterdam, Netherlands, last week. Photograph: Piroschka van de Wouw/Reuters

Easyjet intends to cut an unspecified number of flights at Amsterdam’s Schiphol airport this summer, Dutch news agency ANP is reporting, citing a spokesperson.

Easyjet is one of the larger customers at the airport, behind the Dutch arm of Air France-KLM.

The move follows a decision last week by Schiphol to cap the number of passengers allowed at the airport during peak season, leading to a 16% reduction in planned flights, due to a lack of security and other workers at the airport (via Reuters).

EasyJet: We’re sorry some customers didn’t get service expected

Johan Lundgren, easyJet Chief Executive, says cutting flights will ‘increase resilience’ over the summer, after the airline fell short for some passengers.

“Delivering a safe and reliable operation for our customers in this challenging environment is easyJet’s highest priority and we are sorry that for some customers we have not been able to deliver the service they have come to expect from us.

“While in recent weeks the action we have taken to build in further resilience has seen us continue to operate up to 1700 flights and carry up to a quarter of a million customers a day, the ongoing challenging operating environment has unfortunately continued to have an impact which has resulted in cancellations.

“Coupled with airport caps, we are taking pre-emptive actions to increase resilience over the balance of summer, including a range of further flight consolidations in the affected airports, giving advance notice to customers and we expect the vast majority to be rebooked on alternative flights within 24 hours.

“We believe this is the right action for us to take so we can deliver for all of our customers over the peak summer period in this challenging environment.”

EasyJet cuts flights until end of September

Budget airline easyJet is cutting more flights in an attempt to avoid a repeat of the travel chaos suffered by passengers in recent months.

EasyJet has announced it is reducing capacity until the end of September, after flight caps were announced at London Gatwick and Amsterdam.

The airline — one of the worst hit by recent disruption — is “proactively consolidating” a number of flights across affected airports. This will give customers advance notice and the potential to rebook onto alternative flights, it says.

EasyJet points to problems such as air traffic control delays and staff shortages in ground handling and at airports, shortages of staff including cabin crew, and delays getting IDs approved so new hires can start.

These problems have prompted flight caps at Gatwick and Schiphol in the last few days.

EasyJet says expects to to rebook the majority of customers on alternative flights, with “many” being on the same day as originally booked for.

The cuts mean EasyJet will run at around 90% of its pre-pandemic flights (2019) in July to September, down from a previous target of 97% of pre-Covid flights.

Capacity in April-June will be around 87% of pre-Covid levels, below the 90% previously expected.

Introduction: Markets fear global recession

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Fears of a possible global recession weigh over global stock markets today, as economic data sours and inflation continued to climb.

Last week, stock markets posted their biggest percentage decline in two years, as investors worry that global central banks will push economies into recession as they try to subdue rising prices.

And there’s no argument that economies are losing pace.

Joe Biden’s treasury secretary Janet Yellen says she expects “the economy to slow” but continued insisting that a full-blown recession is not “at all inevitable”.

Yellen told ABC’s This Week host George Stephanopoulous that her financial outlook results from how the economy has “been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment”.

“It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”

Some Asia-Pacific markets are racking up further losses today, with Japan’s Nikkei dropping another 1% and South Korea’s KOSPI tumbling 2.4%.

That takes global markets further into a bear market (more than 20% off their recent peak).

Hebe Chen, market analyst at IG, says that everyone is talking about a recession now, but the official definition of ‘two consecutive quarters of decline’ may sound pale and dry:

Chen explains:

The market last week just painted a typical recession picture that ticked almost all the boxes: inflation is flying to the roof, interest rates are non-stop rising, two major US stock indices [S&P 500 and Nasdaq] are trapped in the bear market (with the 3rd one on the way) and investors are selling shares of the best companies.

Last but not least, commodity prices start to drop.

Stocks slumped last week as the US Federal Reserve announced its biggest interest rate rise in 15 years, the Bank of England raised rates to a 15-year high, and Switzerland made a surprise rate hike.

Despite this market turbulence, central bankers continue to signal that they will squeeze price pressures out of their economies.

Federal Reserve Governor Christopher Waller on Saturday vowed to pursue a whatever-it-takes approach to fighting inflation, signalling that the Fed could repeat last week’s three-quarter-point rate hike next month.

“If the data comes in as I expect, I will support a similar-sized move at our July meeting,” Waller told a Society for Computational Economics conference in Dallas.

“The Fed is ‘all in’ on re-establishing price stability.”

The crypto crash continued over the weekend, with Bitcoin tumbling below $20,000 on Saturday before a Sunday rebound., which still left it 70% down from its record highs

Massacre in the crypto sphere continued as major cryptocurrencies crashed through several closely watched price levels not seen since 2020. #Bitcoin, the flagship of DeFi, failed to pull the handbrake at $20,000 psychological level and finished the week at $19,047.20. #trading pic.twitter.com/Jy2Rq5P2IA

— accapitalmarket (@accapitalmarket) June 20, 2022

Also coming up today:

Wall Street will be closed as America celebrates Juneteenth National Independence Day.

We’ll hear from Bank of England policymaker Catherine Mann, when she gives a speech on ‘Monetary Policy in the Global Context’ to an event run by MNI Market News.

Fellow Monetary Policy Committee member Jonathan Haskel is giving the keynote speech at TechUK Policy Leadership Conference.

Mann and Haskel both wanted to raise UK interest rates from 1% to 1.5% last week, while the majority of MPC members pushed for a smaller rise to 1.25%. With other central banks also tightening policy hard, some economists think the BoE could plump for a 50bp hike in August.

The agenda

  • 7am BST: German PPI index of producer prices for May
  • 9am BST: MPC member Jonathan Haskel speech: ‘Restarting the future: how to fix the intangible economy’.
  • 10am BST: Eurozone construction output report for April
  • 11am BST: German Bundesbank’s monthly report
  • 2pm BST: MPC member Catherine Mann speech: ‘Monetary Policy in the Global Context’

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