Business

3 warnings on travel that point to a slow economic recovery

The biggest question facing investors is how quickly the global economy can recover from the coronavirus pandemic.

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By
Charles Riley
, CNN Business
CNN — The biggest question facing investors is how quickly the global economy can recover from the coronavirus pandemic.

Longer than expected may be the answer, if new data and forecasts from the travel and energy sectors are any indication. (For the latest on America's recovery, check out our dashboard here.)

First, energy: The International Energy Agency on Thursday cut its forecast for global oil demand in 2020 by 140,000 barrels per day.

The agency said its first downgrade in several months reflected the stalling recovery in travel, the high number of coronavirus cases and weakness in the aviation sector. The demand outlook for next year was also slashed.

Consumption is bouncing back in China, the agency said, but transportation activity is falling in places where the virus is continuing to spread quickly such as India and Latin America.

"The virus continues to impact road transport as people avoid non-essential trips and working from home remains the norm in much of the West," the agency said in its monthly report.

When will things get back to normal? Not anytime soon, if ever.

"By December 2021, global oil consumption will still be 2% lower than at the end of 2019," said the IEA.

Major producers see the same trend. On Wednesday, OPEC said it expects global oil demand growth to decline by 9.1 million barrels per day in 2020, or 100,000 barrels per day more than its previous forecast.

Now, travel: Shares in TUI dropped as much as 6.3% on Thursday after the German tourism company said it lost €1.1 billion ($1.3 billion) in the three months ending in June.

The world's biggest tour operator has obtained a second credit line from the German government, a step needed to "secure our liquidity in the event of further long-lasting travel restrictions and disruptions through COVID-19."

The company operates cruise ships, five airlines and more than 400 hotels, employing about 70,000 people worldwide.

TUI already announced plans to scale back its global operations and cut up to 8,000 jobs. It's reducing the size of its German fleet, restructuring its business in France and closing 166 travel agencies in the United Kingdom.

While some travel activities have resumed, the company said it still cannot forecast its financial performance for this year due to the pandemic.

More bad news: With coronavirus cases on the rise again in Europe, and restrictions on travel being reimposed, the situation may get even worse. The International Air Transport Association warned Thursday that 7 million jobs in Europe supported by aviation are now at risk — that's a million more than it expected in June.

"It is desperately worrying to see a further decline in prospects for air travel this year, and the knock-on impact for employment and prosperity," said Rafael Schvartzman, IATA's regional vice president for Europe.

Alibaba could be the next target in the tech war

The United States has taken aim at some of China's biggest tech champions, from Huawei and ByteDance's TikTok to Tencent's WeChat. Alibaba, one of the world's largest retail and internet conglomerates, could be next.

My colleague Sherisse Pham reports from Hong Kong that Alibaba may be targeted as President Donald Trump seeks to undermine Beijing's rising tech prowess by forcing global players to chose between China and the United States.

Alibaba operates widely popular e-commerce platforms, mostly available in China and Southeast Asian markets. It also started Alipay, one of the most dominant payment apps in China alongside Tencent's WeChat Pay.

The company hasn't yet been threatened with the same kinds of sanctions that Trump has proposed or levied against other Chinese tech firms. But Secretary of State Mike Pompeo name-checked Alibaba last week when he urged American companies to remove "untrusted" Chinese-owned technology from their digital networks.

Any action by Washington would likely not affect the company's e-commerce and retail business in China, which accounts for nearly 80% of its 509.7 billion yuan ($73.5 billion) in annual revenue.

But the broadly worded executive order issued against WeChat last week indicates that Washington may be preparing to cast a wider net. That order could cut WeChat off from all US technologies including the software and semiconductors it needs to keep operating.

"If they do something like that with Alibaba, that would also be a pretty big blow," said Dan Wang, a Beijing-based technology analyst with research firm Gavekal Dragonomics. Alibaba has large cloud operations in China and "requires US semiconductors and software in order to continue these operations," he said.

Stores need to pay more attention to the air we breathe

During the coronavirus pandemic, supermarkets and retail stores have added a variety of safety features. Workers have been required to mask up and, more recently, most customers too. But most have yet to tackle what could be another important safety measure — changes to the systems that keep the stores hot and cold, and that can potentially recirculate air carrying the virus.

My colleague Nathaniel Meyersohn reports that the air in stores is now coming under closer scrutiny. Some epidemiologists, engineers and labor leaders hope that changing air filtration in stores during the pandemic will help protect against coronavirus spread.

Improved filtration in stores would be "an added layer" of protection for workers, Marc Perrone, president of the United Food and Commercial Workers union, said in an interview with CNN Business.

Some chains have already started to upgrade their filters.

"In light of COVID-19 and the latest CDC guidance, we are also upgrading to hospital-rated filtration systems of MERV 13 or higher wherever technically possible," said a spokesperson for German discount grocery chain Lidl, which has around 100 US stores.

Up next

Baidu is scheduled to report earnings after US markets close.

Also today:

Netease results are out ahead of the opening bell.US initial unemployment claims will be published at 8:30 a.m. ET.

Coming tomorrow: US retail sales data will give a sense of consumer activity in July. Industrial production and consumer sentiment data is also on tap.

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