Hold on to your hats. It’s going to be a wild ride.
As global markets continue to witness fast-paced downward spiralling, a group of prominent Canadian CEOs released an open letter early this morning urging businesses to focus on curbing the spread of the COVID-19 virus.
“We urge every leader in the country to immediately shift focus to the singular objective of slowing the pace of transmission of this coronavirus,” the CEOs said.
And they advocate for immediate action to help promote social distancing practices.
“While this will have significant economic impact on our businesses in the short term, it is critical to weathering this storm and will hasten the recovery,” the letter continues.
“Governments across the country have acted yet these measures will only be effective if all employers step up and do their part to protect the nation’s health and welfare.”
The letter is signed by 30 executives of Canadian companies in every sector – from banking to resources, food processors to insurance firms.
BoC Emergency Rate Cut
Last Friday’s emergency move by the Bank of Canada to cut another half-point off its key interest rate while the federal government unveiled a $10-billion economic stimulus plan to support funding markets for small- and medium-size businesses were offered to help the economy absorb the financial impact of the coronavirus pandemic.
The BoC’s overnight interest rate is now 0.75%.
Federal Finance Minister Bill Morneau joined BoC Governor Stephen Poloz and Jeremy Rudin, the head of Canada’s banking regulator, to make the announcement in a show of support for the economic needs as the country battles the spread of the virus.
Morneau and Poloz noted the Canadian economy is suffering a double blow – dealing with the impact of COVID-19 and the drop in oil prices.
“It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank of Canada said in a statement. “In addition, lower prices for oil, even since our last scheduled rate decision on March 4, will weigh heavily on the economy, particularly in energy intensive regions.”
Bars, Theatres Ordered Shut, Retail Outlets Scale Back Opening Hours
Adding to the weight of the drag on the economy are the added measures being imposed by provincial governments. For example, on Sunday, the Quebec provincial government ordered shut a number of businesses, including ski resorts, gyms, bars, theatres, sugar shacks and pools.
In addition, a number of retailers have announced reduced opening hours at their stores. Shopping mall operators, including Cadillac Fairview, have announced reduced opening hours.
Layoffs Expected At WestJet
In other sectors, including airlines, the concern is the possibility of imminent layoffs.
According to an internal memo from the union representing WestJet Airlines Ltd (TSX:WJA) flight attendants obtained by Canadian Press, layoffs are expected. The memo sent to union officials says up to 50% of staff could be laid off as the number of flight cancellations mount. The gravity of the situation threatens the airline’s financial viability, the memo claims.
Travelers (NYSE:TRV) are rebooking “in such massive numbers that the airline operations are quickly becoming unsustainable.”
Layoffs are just one of a list of scenarios being considered. Asking cabin crew members to consider taking voluntary leaves and unpaid vacation are being discussed.
At Air Canada (TSX:AC), talk of layoffs have not been broached. The country’s largest airline, however, has seen its stock price drop by more than half in the last two months as it scaled back the destinations it flies to as well as the number of flights offered.