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Westlake Legal Group > Posts tagged "Boeing Company"

Boeing, Expecting a Long Slump, Will Cut 16,000 Jobs

Westlake Legal Group 29virus-markets-briefing-boeing-facebookJumbo Boeing, Expecting a Long Slump, Will Cut 16,000 Jobs washington state Shutdowns (Institutional) Layoffs and Job Reductions International Trade and World Market Coronavirus (2019-nCoV) Company Reports Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

The breathtaking slowdown in global aviation is taking a huge toll on Boeing, which said on Wednesday that it would slash about 16,000 jobs after reporting that revenue tumbled by 26 percent in the first three months of the year.

“The global pandemic has changed the way we live and work,” said Boeing’s chief executive, David L. Calhoun, in a note to staff. “It is changing our industry. We are facing utterly unexpected challenges.”

Airlines around the world are trying to stay alive, with losses expected to total more than $300 billion by year’s end, according to an industry trade group. As a result, many carriers are delaying purchases, deliveries and maintenance.

Boeing said it was slowing aircraft production, including for the troubled 737 Max, the 787, 777 and 777x. The company is also exploring ways to raise more capital, either from the federal government or financial markets. The job cuts, about 10 percent of Boeing’s staff, will be even steeper for those employed in the divisions most exposed to the downturn, the commercial airplanes and services businesses. Those units will see staff cuts of about 15 percent.

“I know this news is a blow during an already challenging time,” Mr. Calhoun said in the note. “I regret the impact this will have on many of you. I sincerely wish there were some other way.”

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Boeing reported a net loss of $641 million in the first quarter, compared to $2.1 billion profit a year earlier.

The company has said that it does not expect air travel to recover to levels reached before the pandemic for three years and that it would likely take several years more for travel to return to its previous long-term growth rate.

Boeing’s commercial aircraft business was especially hard hit in the first quarter by the grounding of the Max and the pandemic, with revenues for that business down nearly 50 percent to $6.2 billion in the first quarter compared to the same period last year. Total revenue dropped to $16.9 billion. The company received just 49 new orders and had 196 cancellations between January and March.

On Tuesday, Southwest Airlines said it has been negotiating a reduction in the number of 737 Max jets it will accept this year. Southwest said it would now receive no more than 48 Max jets by the end of 2021, instead of the 107 it had previously expected to take.

Boeing said it hopes to reach its job cut targets through voluntary means, including buyouts and early retirement offers. Employees who take the buyout will receive three months of health care and one week of pay for every year they have worked at Boeing, up to 26 years, the company told workers last week. Employees have until Monday to signal their interest in buyouts. If approved, they would leave in early June.

Any cuts are likely to be disproportionately focused on Boeing’s facilities in Washington State and South Carolina, home to its three major commercial aircraft manufacturing facilities. A weekslong shutdown of operations at those facilities disrupted production of passenger planes, but also affected Boeing’s defense and space business.

While Boeing itself is struggling to manage the effect of the pandemic, the company this week also expressed concern for the health of its suppliers, who receive about 70 percent of the company’s revenues.

“Currently, our team is focused on the best ways to keep liquidity flowing through our industry and to our supply chain until our customers are buying airplanes and related services again,” Mr. Calhoun told shareholders on Monday.

To that end, the company has taken out a loan, cut costs and suspended dividend payments and stock buybacks, he said. Boeing has $15.5 billion in cash on hand, but plans to raise more capital soon. In an interview on CNBC on Wednesday, Mr. Calhoun did not specify whether some of that would be in the form of federal aid.

On Wednesday, Boeing also said that it had suffered more than $2 billion in one-off costs in the first quarter.

A slower than expected ramp up in production of the 737 Max, which was grounded last year after two fatal crashes, subtracted about $1 billion from its bottom line. And the company incurred a pretax charge of $827 million for the KC-46A Tanker, most of it stemming from repairs Boeing agreed to make this month following discussions with the U.S. Air Force.

The company took a $336 million charge for repairs on the 737 Next Generation aircraft and the four-week suspension of work at Boeing’s facilities in Washington State cost the company about $137 million.

Over the weekend, Boeing also announced that it was terminating its $4.2 billion deal to buy an 80 percent stake of Embraer’s commercial jet business. Embraer is contesting that move and said Monday it had begun arbitration proceedings.

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As States Push to Reopen, Business Leaders Say Not So Fast

Westlake Legal Group 24virus-reopening-1-facebookJumbo As States Push to Reopen, Business Leaders Say Not So Fast Workplace Hazards and Violations Shutdowns (Institutional) Shopping and Retail Protective Clothing and Gear McDonald's Corporation Hygiene and Cleanliness Factories and Manufacturing Dick's Sporting Goods Inc Coca-Cola Company Bolten, Joshua B Boeing Company Bezos, Jeffrey P banana republic Athleta AMC Entertainment Holding Inc. Amazon.com Inc

Companies in a handful of states have begun taking tentative steps to reopen stores, offices and factories that were closed by the coronavirus. Yet as the first employees and customers return, interviews with roughly 30 major employers show that businesses are confronting deep uncertainty, and many say it is simply too soon to come back.

Across the country, businesses are confronting a patchwork set of regulations that vary from state to state, and industry to industry. Government officials are sending mixed messages about who should open. The thousands of companies that never shut down — like pharmacies, grocery stores and auto repair shops — are using different techniques to promote social distancing and ensure good hygiene. And some businesses that could be getting back to work are declining to do so, fearful that reopening too soon could fuel a new wave of infections and lead to another round of closings.

“Shutting down was hard, but opening up is going to be harder,” said Rich Lesser, chief executive of the Boston Consulting Group. “This is the multi-trillion dollar question.”

Governors in states like South Carolina and Georgia have encouraged businesses to reopen in recent days. Dick’s Sporting Goods, which had shut all its locations around the country, reopened its 12 stores in South Carolina last week.

But others, both large and small, were more cautious. Coca-Cola, an influential mainstay of Atlanta’s business community, said last week that most of its office workers would continue to work remotely for the time being. Life Time, a chain of gyms that had planned to open its six locations in Georgia on Friday, reversed course.

“I can’t risk the health of the members at the risk of the community for the sake of them pumping some iron,” Bahram Akradi, Life Time’s chief executive, said.

But in Tennessee, which is loosening restrictions, Volkswagen has called 3,800 employees back to work at its plant in Chattanooga starting May 3 after spending weeks putting new health and safety measures in place, making the company one of the first major automakers to restart manufacturing since much of the industry shut down.

And in Washington State, Boeing reopened a factory that had closed after several workers fell ill with the virus. About 27,000 Boeing employees returned to their jobs last week, working in staggered shifts in facilities outfitted with hand washing stations, cleaning supplies and signs and floor markings reminding them to keep their distance from one another. Some employees were being asked to submit to voluntary temperature checks, and those who need it will be provided with protective gear.

Many companies that could have workers in the office are choosing to keep them at home. At Morgan Stanley, which as a bank is designated an essential service, more than 90 percent of employees are working remotely. Gap Inc., which also owns Banana Republic, Athleta and Old Navy, said that it did not have plans to reopen stores in South Carolina, Georgia and Tennessee in coming days.

“Taking care takes time,” Gap’s spokeswoman, Sandy Goldberg, said in an email. “We are closely monitoring the situation and will open our stores when we feel it is safe to do.”

A chief concern among corporations is that in reopening too soon, they could contribute to the spread of the virus, potentially triggering another round of business closures in the weeks or months ahead.

“It’s hard enough to shut an economy down once,” Mr. Lesser said. “Having to do it twice carries far greater damage.”

For companies considering reopening locations that have been closed, the complications are daunting and complex. They need only look at businesses that have remained open for a glimpse of the challenges they would face.

Home Depot distributed thermometers to its store workers and is asking them to take their temperature before they arrive for work, and to stay home if they have a fever. McDonald’s is having restaurant workers sign waivers certifying that they are healthy before starting a shift. CVS and Goldman Sachs said they were looking into screening their employees for the virus, but couldn’t get access to tests, and didn’t want to jump ahead of health care workers.

“As keen as companies are to reopen, they are quick to say that if their employees don’t feel safe, they are not going to come back in to work,” said Josh Bolten, chief executive of the Business Roundtable. “And if customers don’t feel safe, they’re not going to come back into stores.”

Among the biggest hurdles to a broader reopening of the economy was the continued need for more testing. On a call this month between Mr. Trump and business leaders, several chief executives, including Jeffrey P. Bezos of Amazon, said that more testing was needed before the economy could reopen.

With the availability of tests still badly lagging, many of the country’s largest employers are declining to restart operations even when they can. General Motors, Ford Motor and Fiat Chrysler — which voluntarily closed factories — have not yet called factory workers back, and continue to negotiate with the United Automobile Workers union over safety measures.

Macy’s and other department stores remain closed, with no immediate plans to reopen in states that are lifting restrictions. Movie theater chains like AMC have no intention of opening soon in those states, either. At JPMorgan Chase, deemed an essential service provider, executives have not yet set a timetable for returning remote workers to corporate offices in New York and other affected cities.

Virtually every restaurant owner in the United States — from Michelin star chefs to fast food executives — is wrestling with how to make dining rooms safe when they do eventually reopen.

Some owners are planning to install plexiglass barriers between booths. Others are focused on creating safe passageways through their restaurants, separating the exit from the entrance so that customers do not brush past each other on the way in or out. Still others are turning to paper menus and disposable cutlery.

“It’s a heavy lift to open back up,” said Larry Lynch, senior vice president of science and industry at the National Restaurant Association. “It’s not just flip the switch and we’re open.”

McDonald’s has shut its dining rooms across the country and had no immediate plans to open them in states where governors are calling on businesses to reopen. Instead, the company is sticking with drive through, delivery and take-out service for now.

McDonald’s said it was distributing more than 100 million masks to employees, and is having workers wear gloves, wash their hands more frequently and monitor their own health. Senior executives are meeting “three times a day to evaluate policies and procedures,” and the company has formed “a task force with franchisees to evaluate the reopening of the dining rooms.”

Restarting operations is likely to be a monthslong process for most companies that will proceed in fits and starts.

Having delayed plans to reopen his six Atlanta-area locations in Georgia, Mr. Akradi, the chief executive of Life Time, is planning to distribute questionnaires to its members to get a better sense of their interest in returning to the gym.

“We want to do it when it’s totally safe, when the customers feel safe,” Mr. Akradi said. “If they feel like we’re being irresponsible, then we have damaged our brand.”

To prepare for locations to reopen, Mr. Akradi is equipping employees with masks, rags, and cleaning products. In addition, he is awaiting the arrival of 12,000 antibody tests to offer to the company’s 38,000 employees.

“The worst thing we can do is reopen without a plan and have to go through another phase of shutdown,” Mr. Akradi said. “The economy cannot withstand another phase of shutdown.”

Niraj Chokshi, Sapna Maheshwari, Neal E. Boudette and Kim Severson contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Take Government Aid? We’ll See, Some Businesses Say

Westlake Legal Group 02virus-bailoutstrings2-facebookJumbo Take Government Aid? We’ll See, Some Businesses Say United States Politics and Government United States Economy United Airlines Stocks and Bonds Southwest Airlines Company Mnuchin, Steven T Law and Legislation Kelly, Gary C Federal Aid (US) Delta Air Lines Inc Credit and Debt Coronavirus Aid, Relief, and Economic Security Act (2020) Coronavirus (2019-nCoV) Calhoun, David L Boeing Company American Airlines Airlines and Airplanes

Grants, low-interest loans and other government support might seem like manna for businesses under financial strain. But some chief executives and corporate boards might balk at the offer of billions of dollars in aid to help them ride out the coronavirus pandemic and keep the economy from sliding into a deep recession.

Already, some corporate leaders are bristling at the potential terms of the grants and loans authorized by the stimulus legislation President Trump signed last week. Boeing’s chief executive, David Calhoun, for one has suggested that the aerospace company could raise money elsewhere if it found the government’s terms too onerous.

The Treasury Department, led by Steven Mnuchin, a former investment banker, might try to avoid imposing conditions that companies find burdensome. But if the aid appears too lenient, popular support for the rescue could evaporate as it did with the bailout of banks and other businesses after the 2008 financial crisis. And some lawmakers and experts argue that Mr. Mnuchin ought to resist the temptation to cut businesses too sweet a deal to prevent them from walking away from the government’s offer.

“Either they don’t need money, which means they shouldn’t get the money,” Senator Elizabeth Warren, Democrat of Massachusetts, said in an interview. “Or maybe they really do need it, in which case they should agree to some restrictions on how the money is spent.”

Taking a tougher line with companies could bolster the overall economic impact of the aid. Demanding that companies maintain hiring levels, for example, might mean that more people have money coming into their bank accounts, allowing them to spend on necessities and pay the rent or mortgage, said Phil Angelides, a former treasurer of California and chairman of the Financial Crisis Inquiry Commission, which was created by Congress in 2009.

“It is more important to keep workers on the payroll, even if they’re at home — that needs to be the pre-eminent condition,” Mr. Angelides said.

Of course, with revenues falling off a cliff and losses piling up, some companies may be so desperate that their chief executives happily accept terms like a temporary ban on companies buying their own shares, a condition that airline executives have said they are willing to accept. Others may accept aid simply because the public wants them to.


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One big difference between the economic problems of today and the 2008 financial crisis is that most of the companies in need of relief are not suffering from self-inflicted wounds. “That’s obvious to most people, and a C.E.O. will have this defense at his or her disposal,” said Tony Fratto, a former assistant secretary of the Treasury and a former deputy press secretary for President George W. Bush.

Right now, policymakers are keenly watching how airlines and Boeing might respond.

Congress’s rescue legislation identified airlines as eligible for federal aid and earmarked up to $25 billion in grants and another $25 billion in loans for the industry; cargo carriers have been offered $8 billion in grants and loans. Boeing is expected to be the biggest recipient of up to $17 billion lawmakers set aside for businesses considered crucial to national security. The act also authorizes the Treasury to provide $454 billion to back loans made by the Federal Reserve, which would enable the central bank to extend an additional $4 trillion of credit to businesses in all industries.

Some of the restrictions set out by the legislation, like a temporary halt on companies using their own money to buy back stock, appear to apply to all company loans. But a commitment by companies to maintain hiring at or close to recent levels is not required across the board. It would apply to the aid for airlines and companies deemed important to national security, but only through the end of September. On Friday, United management told staff that the federal aid would prevent any substantial reductions in staff or pay through September, but suggested that layoffs may come if the recovery was as slow as the company expected.

Treasury could also demand stock in exchange for supporting airlines and companies like Boeing.

For some executives, giving the government shares in their company could be a big sticking point. In a TV interview last week, Mr. Calhoun, the Boeing chief executive, suggested he would not be interested in a rescue package that gave the federal government stock in the company.

“I don’t have a need for an equity stake,” he told Fox Business. “If they force it, we just look at all the other options, and we’ve got plenty of them.”

While the government has laid out initial guidance on terms for the $17 billion available to companies deemed essential to national security, it is expected to release more specific terms in the coming days. Until those terms are clear, Boeing is holding off on making a decision, two people briefed on the company’s deliberations said.

The airlines have not set out a clear position on giving the taxpayer stock.

On Thursday, the chief executive of Southwest Airlines, Gary Kelly, told employees that the airline planned to apply for the grants to pay workers, but a spokesman declined to say whether the airline would be willing to give the government an equity stake in exchange for the assistance. Last week, Mr. Kelly said that the legislation only “gives us another option” and that the company could also “raise capital in the private markets.”

American, which has said it would seek aid from the government, referred questions about whether the government should take a stake in airlines to Airlines for America, an industry group. The group and United Airlines declined to comment. Delta Air Lines did not respond to a request for comment.

But on Wednesday, the unions that represent flight attendants at several major airlines urged Mr. Mnuchin not to exercise his power to take stock in the airlines. They argued that if he did so, he could scare off executives from accepting the aid, which would, in turn, mean more layoffs.

Congress did not make the rules surrounding equity stakes particularly onerous. In addition to giving Mr. Mnuchin discretion about whether Treasury takes any stake at all, the legislation prohibits the Treasury from exercising “voting power with respect to any shares of common stock acquired.” That means companies don’t have to worry about the government’s participating in important shareholder decisions. And the act says the Treasury can accept senior debt instead of equity.

Of course, companies that are running low on cash don’t have much time to negotiate with the government.

Without the federal aid, three big airlines — American, Delta and United — have only about four to five months before they would have to start making deep cuts or take out new loans, Moody’s Investor Service said in a report published on Wednesday. With it, they have an estimated eight months of financial cushion.

“The federal grant money will be the most significant relief valve for alleviating pressure on the airlines,” Moody’s said.

Large retailers, in a frantic effort to conserve cash, have drawn down credit lines and are laying off or idling thousands of employees. Macy’s, which announced this week that it was furloughing the majority of its 125,000 employees, said in a statement, “We are also working both directly and through our retail associations to assess any government relief bill and advocate for Macy’s Inc. and the industry.”

Congress required fewer restrictions on the loan programs that will be set up with the $454 billion of Treasury backing. The legislation does not demand that companies taking out loans from these programs maintain hiring levels.

It is unclear how hard a line Mr. Mnuchin will take with chief executives. One approach might be to tell reluctant executives that their participation is needed for the whole effort to work. Henry M. Paulson Jr., who was Treasury secretary in 2008, told chief executives of large banks that they needed to take billions of dollars in taxpayer funds regardless of whether they agreed with the government’s terms, which many people across the political spectrum criticized. His goal, in part, was to avoid having investors consider banks that took the money as weak if stronger financial institutions did not accept the cash, too.

The executives, after some objections, quickly agreed. “This is the right thing to do for the country,” Mr. Paulson told them.

Michael Corkery contributed reporting.

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Coronavirus relief bill: What it means for business

Westlake Legal Group merlin_170977653_b9f99360-056c-4f8a-b2d5-8e508d418402-facebookJumbo Coronavirus relief bill: What it means for business Wages and Salaries United States Economy United States Unemployment Treasury Department Small Business Senate Layoffs and Job Reductions Federal Reserve System Federal Aid (US) Executive Compensation Energy and Power Credit and Debt Carnival Corporation Boeing Company

The $2 trillion coronavirus rescue package that the Senate passed on Wednesday will fundamentally transform the U.S. government by placing thousands of businesses and millions of workers on federally funded life support.

The government will pay the wages of some workers who remain on their companies’ payrolls. It will sustain other workers who have lost their jobs with checks that are as large as — or even larger than — what they were earning before they were laid off. And it will cushion some of the country’s largest corporations from bankruptcy, with taxpayers taking shares in those companies as collateral.

Rarely before has the government involved itself so deeply in the business of business. Amid a historic drop-off in economic activity, the bill temporarily transfers financial responsibility from private industry to the federal government, allowing the United States to control the levers of capitalism and potentially decide who wins and who loses. The level of intervention this week far outstrips the financial scope and breadth of recovery efforts during the 2008 financial crisis.

That is a controversial proposition in normal times but one lawmakers deemed necessary now, as companies large and small, from airlines and big banks to nail salons and brew pubs, face unprecedented hardship. The ripple effects have already sent millions of Americans into unemployment.

“We went to bed as America and woke up the next morning looking like social democratic Europe,” Erik Gordon, professor at the Ross School of Business at the University of Michigan, said. “We’ve made fun of Europe propping up their failing steel companies and car companies, and when push comes to shove we’re going to outdo them.”

The government’s intervention will come in a variety of ways, including direct payments to individuals and businesses, generous loans in which the government agrees to backstop losses and equity stakes in companies. But there are strings attached, such as limits on executive pay and provisions that require companies receiving assistance to maintain employment levels at 90 percent of what they were.

Midsize companies, or those with between 500 and 10,000 employees, get to borrow at an interest rate that is not higher than 2 percent annually, and don’t have to repay principal or interest for six months. The midsize companies cannot “outsource or offshore” jobs from the start of the loan until two years after it has been repaid.

Businesses with 500 or fewer employees will get loans directly from banks to cover more than two months of payrolls and some other operating expenses, with the government paying off the balance so long as the companies either do not lay off workers or rehire ones they’ve already let go.

The government will inject more than $60 billion into the airline industry, including $25 billion in grants to pay employees of passenger airlines and $4 billion for those who work at cargo airlines. About $17 billion has been set aside largely for Boeing, which, because of two deadly crashes, was troubled before the virus brought many commercial flights to a standstill.

Not all businesses will be eligible for help, and not every eligible company will agree to the government’s terms. And some industries, including cruise lines and energy companies, were left on the sidelines.

The major cruise companies appear not to qualify for loans because they are domiciled outside the United States and their employees are spread across the world.

“We didn’t seek or expect a cash bailout, and it doesn’t appear anyway that we would qualify under the terms,” said Roger Frizzell, a spokesman for Carnival Corporation. “We have a significant employee presence in the U.S., but a majority of our employees are on ships, not in any location, certainly not based in the U.S.”

The legislation also does not include $3 billion that the Trump administration requested to buy crude oil for the Strategic Petroleum Reserve. Such a purchase could have helped lift demand for oil, and thus its price, which in the United States has tumbled to less than $25 a barrel in recent weeks. Solar and wind businesses were upset that lawmakers did not make it easier for them to benefit from tax credits for renewable energy.

The epicenter of the intervention will be the Treasury Department, where Secretary Steven Mnuchin will oversee nearly a third of the $2 trillion in economic relief funds that Congress is approving.

The money will be held in two pots: $350 billion will be devoted to loans and loan guarantees for small businesses. And $500 billion will be divided among airlines and companies that are critical to national security, including Boeing, and will prop up the Federal Reserve’s new emergency lending facilities, which are intended to inject nearly $4 trillion into the economy.

Mr. Mnuchin said on Thursday that the distribution of the money would be fully transparent. “When we do take actions, either through our direct program or throughout programs with the Fed, there will be disclosures to the American public much faster than they would normally occur,” he said on CNBC.

Businesses will also have to cede some control to the federal government in exchange for lifelines. Companies that borrow money are forbidden to repurchase their stock or pay dividends during the loan and for a year after it is repaid. They must not cut staffing by more than 10 percent through the end of September.

Loans to small businesses, with 500 employees or fewer, are limited to $10 million. Loans to cover salaries of over $100,000 wouldn’t qualify for forgiveness, and businesses must demonstrate that they had not recently laid off employees, or a smaller amount of the loan would be subject to forgiveness.

Businesses would not have to repay loans covering up to eight weeks’ worth of payroll expenses. That means that once businesses receive their loans, a new clock will begin to tick: They’ll have to use the money within two months to avoid repaying it; they also can’t pay any employee more than $10,000 in those two months if they want that amount to be forgiven.

Lawmakers also placed restrictions on compensation and pay increases for executives, moves intended to address one of the criticisms about bailouts during the 2008 crisis. But pay limits will not necessarily do away with multimillion-dollar paydays for corporate bosses.

Executives who made more than $3 million in 2019 could be awarded $3 million, plus half of any sum in excess of $3 million. As a result, a chief executive who earned $20 million in 2019 would be allowed compensation of $11.5 million. The restrictions would apply from the time the federal support began to one year after it ended.

Even as the government takes on an outsize role in overseeing companies, Mr. Mnuchin maintained that it should not be in the business of dictating what private companies did.

“We don’t believe in mandating and regulating certain big businesses,” he said.

And big business, despite its need for help, has seemed unwilling to cede too much control to the government. On Tuesday, Boeing’s chief executive, David Calhoun, suggested that he wasn’t interested in the government’s taking an equity stake in the company, despite the beleaguered state of the aerospace giant.

“I don’t have a need for an equity stake,” Mr. Calhoun said in an interview on Fox Business Network. “If they forced it, we’d just look at all the other options, and we have got plenty.”

Boeing, which had lobbied for government aid, was not specifically named in the bill. It nonetheless signaled its approval of the stimulus package on Wednesday night. “The bill’s access to public and private liquidity, including loans and loan guarantees, is critical for airlines, airports, suppliers and manufacturers to bridge to recovery,” Boeing said in a statement.

The House is now expected to take up the legislation, and President Trump has signaled that he would sign it quickly into law.

Many of the provisions are intended to offer lifelines to companies and workers over the coming months, as the country struggles to contain the pandemic and braces for a recession. But the long-term consequences of a $2 trillion bailout of the American economy are unknown.

“This is going to be hard to unravel,” said Mr. Ross, the University of Michigan professor. “Industries that are propped up stay propped up for a long time.”

Reporting was contributed by Niraj Chokshi, Jesse Drucker, Emily Flitter, Clifford Krauss and Ivan Penn.

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Boeing Faces $20 Million Fine by F.A.A.

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The Federal Aviation Administration recommended on Friday that Boeing be fined nearly $20 million for installing equipment in the 737 Max and other aircraft before its approval.

The announcement came hours after Democrats on the House Transportation Committee slammed both the company and the agency for failing to ensure the safety of the Max jets. Two of the planes crashed in 2018 and 2019, killing 346 people and leading to the model’s worldwide grounding.

The F.A.A. accused Boeing of installing the equipment, the Head-Up Guidance System from Rockwell Collins, on nearly 800 jetliners from June 2015 to April 2019. The systems included sensors that had not been tested or approved when they were installed, though Rockwell Collins later conducted the necessary testing and risk analysis, the agency said in a statement.

In response, Boeing noted that the proposed $19.68 million fine did not involve a safety issue and said a review had found that the systems “met or exceeded” the original requirements.

“We understand the critical importance of compliance with all documentation requirements of the F.A.A.’s certifications,” the company said. “We are committed to doing better.”

The agency accused Boeing of installing the systems in 618 Boeing 737 NGs and 173 Max planes. Boeing has 30 days to respond to the recommendation. Typically, the final details of such penalties are worked out in legal negotiations between the agency and the offending party.

The F.A.A. proposed a $5.4 million fine in January after it accused Boeing of installing substandard components in the Max and other aircraft. That fine has not yet been made final.

Earlier in the day, the House Transportation Committee’s Democratic majority issued preliminary findings from a yearlong investigation into the Max disasters. The majority staff accused Boeing of overlooking safety in the interest of meeting production goals, making misguided assumptions about flight-control software known as MCAS and hiding information from the F.A.A., the public and Boeing customers, among other things. The report also accused F.A.A. management of yielding to Boeing’s influence and rejecting the safety concerns of its own experts.

“Our committee’s investigation will continue for the foreseeable future, as there are a number of leads we continue to chase down to better understand how the system failed so horribly,” the committee’s Democratic chairman, Representative Peter DeFazio of Oregon, said in a statement.

The Democrats also argued that Congress should change the F.A.A.’s aircraft certification process. The committee’s Republican minority agreed that there were problems with the process and said it was open to bipartisan legislation, but dismissed the idea that the system was “broken or in need of wholesale dismantlement.”

The report was released just before the March 10 anniversary of the crash of a Max jet, Ethiopian Airlines Flight 302, that killed all 157 people on board.

“We have cooperated extensively for the past year with the committee’s investigation,” Boeing said in a statement about the findings. “We will review this preliminary report.”

Also on Friday, David L. Calhoun, Boeing’s chief executive, emailed senior leaders at the company to apologize for remarks he made in a New York Times article published on Thursday.

In the interview, Mr. Calhoun sharply criticized Boeing’s former chief executive, Dennis Muilenburg, saying he ramped up production rates before the supply chain was ready and angered regulators with overly optimistic projections about the return of the 737 Max.

“I am both embarrassed and regretful about the article,” Mr. Calhoun wrote in the email. “It suggests I broke my promise to former CEO Dennis Muilenburg, the executive team and our people that I would have their back when it counted most. I want to reassure you that my promise remains intact.”

Mr. Calhoun, who was on Boeing’s board for the duration of Mr. Muilenburg’s tenure as chief executive, sought to soften his criticism of his predecessor. He added that he did the interview “in the interest of demonstrating transparency and straight talk about our leadership point of view and current situation.”

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‘Almost Without Precedent’: Airline Industry Hit Hard by Coronavirus

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The coronavirus could wipe out between $63 billion and $113 billion in worldwide airline revenues this year, an industry trade group said on Thursday, as carriers around the world ground planes, waive fees and announce substantial reductions in service as demand for flights spirals downward.

“In little over two months, the industry’s prospects in much of the world have taken a dramatic turn for the worse,” said Alexandre de Juniac, president of the trade group, the International Air Transport Association. The rapid shift in fortune is “almost without precedent,” he said.

The effect of the coronavirus is hitting an industry that has already been roiled in the past year by the grounding of Boeing’s 737 Max plane worldwide.

The group’s lower $63 billion figure is more than double the estimate that it put out just two weeks ago. Since the outbreak began, industry share prices have fallen almost 25 percent, or about five times more than during the 2003 SARS crisis, according to the group.

That conservative scenario assumes a sharp downturn in countries with more than 100 confirmed virus infections and an erosion of consumer confidence elsewhere, resulting in an 11 percent drop in global passenger demand for the year. Passenger traffic would fall 24 percent in Italy and 23 percent in China; Japan, Singapore, South Korea, France, Germany and Iran would all also see steep drop-offs.

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The more severe possibility, which assumes a sharp downturn in any country with at least 10 coronavirus cases, would result in a 19 percent global decline in passenger revenues, on par with the global financial crisis. About two dozen countries would see passenger traffic decline by more than 20 percent. The United States and Canada would see traffic fall 10 percent and revenue decrease by more than $21 billion.

While the outbreak has drawn comparisons with previous moments of upheaval, including following the Sept. 11 terrorist attacks, the airline industry is in better shape today, analysts for Credit Suisse said in a note on Thursday.

“The structure of the industry in the U.S. (and generally outside Asia) is drastically different today than in any prior crisis, with fewer players and balance sheet strength in particular offering significant comfort as airlines look to weather a very challenging few months,” they said.

On Thursday, Lufthansa Group, whose airlines include Lufthansa German Airlines, Swiss Air and Austrian Airlines, started putting in place a widespread reduction in service that will cut capacity by about 25 percent. As a result, the carrier will ground 150 planes out of a fleet of 770. It will also cancel 7,100 flights in Europe in March.

In the United States, airlines are starting to make similar reductions in response to a recent rapid decline in demand, even for domestic travel. In a securities filing on Thursday, Southwest Airlines, which offers little international service, said that it had seen “healthy” revenue increases in the first two months of the year, but its position has swiftly changed.

“In recent days, the company has experienced a significant decline in customer demand, as well as an increase in trip cancellations,” the airline said, attributing it to fear over the virus.

As a result, the airline updated its earnings estimate for the first quarter and said it expected the plunging demand to cost $200 million to $300 million in the first quarter of this year. At best, it now projects revenue to rise 1 percent compared to the first quarter of last year; at worst, it will fall 2 percent. The airline had previously said it expected revenue for the quarter to climb between 3.5 and 5.5 percent.

Some of the virus’s effects will be offset by lower-than-expected fuel prices and a mild winter, Southwest said. As a result, it expects first-quarter operating costs to rise only 5 to 7 percent, compared to a previous estimate of 6 to 8 percent, with much of that cost driven by the grounding of Boeing’s 737 MAX jet.

On Wednesday, United Airlines announced plans to cut international service in April by about 20 percent and domestic service by about 10 percent, while JetBlue said it would reduce service temporarily by about 5 percent. Both airlines also announced moves like hiring freezes that were intended to shore up cash.

During the SARS crisis of 2003 and the MERS outbreak a decade later, airlines were able to entice hesitant travelers by reducing fares, but that doesn’t appear to be working as well this time, said Bill Franke, the founder and managing partner of Indigo Partners, a private equity firm invested in several low-cost airlines around the world.

“The traveling public has essentially taken the view that they don’t know enough to know that they should travel or shouldn’t travel,” he said at the U.S. Chamber of Commerce’s annual Aviation Summit on Thursday.

In the United States, many major airlines have waived change or cancellation fees on any bookings made in the coming weeks.

“These are extraordinary times,” Mr. de Juniac said in the statement.

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‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges

FLORISSANT, Mo. — In his eight weeks on the job, Boeing’s chief executive, David L. Calhoun, has come to one overriding conclusion: things inside the aerospace giant were even worse than he thought.

In a wide-ranging interview this week, Mr. Calhoun criticized his predecessor in blunt terms and said he was focused on transforming the internal culture of a company mired in crisis following two crashes that killed 346 people.

To get Boeing back on track, Mr. Calhoun said he was working to mend relationships with angry airlines, win back the confidence of international regulators and appease an anxious President Trump — all while moving as quickly as possible to get the grounded 737 Max back in the air.

“It’s more than I imagined it would be, honestly,” Mr. Calhoun said, describing the problems he is confronting. “And it speaks to the weaknesses of our leadership.”

Boeing’s previous chief executive, Dennis A. Muilenburg, was fired in December after presiding over a series of embarrassing setbacks that culminated in the shutdown of the 737 factory this year.

Mr. Calhoun formally took over in January, but he has been involved in this mess from the beginning. A protégé of Jack Welch from his time at General Electric, Mr. Calhoun has been on Boeing’s board since 2009, and was elevated to chairman late last year.

Before becoming the chief executive, he had vigorously defended Mr. Muilenburg, saying in a CNBC appearance in November that Mr. Muilenburg “has done everything right” and should not resign. One month later, the board ousted Mr. Muilenburg and announced Mr. Calhoun as his replacement.

“Boards are invested in their C.E.O.s until they’re not,” said Mr. Calhoun, sitting in a dim conference room at the Boeing Leadership Center, a corporate campus outside St. Louis where Mr. Muilenburg’s photo is still displayed prominently.

“We had a backup plan,” he added. “I am the backup plan.”

ImageWestlake Legal Group merlin_163519638_8218926c-95ea-4e8d-9b71-4d201d31311a-articleLarge ‘It’s More Than I Imagined’: Boeing’s New C.E.O. Confronts Its Challenges Muilenburg, Dennis A Calhoun, David L Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Aviation Accidents, Safety and Disasters Airlines and Airplanes

Dennis Muilenberg, the former Boeing president and chief executive, at a hearing last year on Capitol Hill.Credit…Mandel Ngan/Agence France-Presse — Getty Images

Now that he’s in charge, Mr. Calhoun has become more willing to openly criticize Mr. Muilenburg. He said the former chief executive turbocharged Boeing’s production rates before the supply chain was ready, a move that sent Boeing shares to an all-time high but compromised quality.

“I’ll never be able to judge what motivated Dennis, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase,” he said, adding later, “If anybody ran over the rainbow for the pot of gold on stock, it would have been him.”

Mr. Muilenburg declined to comment.

Mr. Calhoun and the rest of Boeing’s board never seriously questioned that strategy, in part because before the first Max crash off the coast of Indonesia in October 2018, the company was enjoying its best run in years. What’s more, the board believed that Mr. Muilenburg, an engineer who had been at Boeing for his entire career, was so deeply informed about the business that he was a good judge of the risks involved in ramping up production.

“If we were complacent in any way, maybe, maybe not, I don’t know,” Mr. Calhoun said. “We supported a C.E.O. who was willing and whose history would suggest that he might be really good at taking a few more risks.”

It was only after the Max was grounded last March following a crash in Ethiopia that Mr. Muilenburg’s optimistic approach became viewed as a liability. Airlines grew livid after he repeatedly voiced overly optimistic timetables about when the Max would return to service. The head of the Federal Aviation Administration, Stephen Dickson, was so frustrated that he reprimanded Mr. Muilenburg in a private meeting and publicly told F.A.A. employees to resist pressure from the company.

“They felt like they were being pushed into a timeline,” Mr. Calhoun said of the F.A.A., adding that the “regulator was never there alongside of us, but apparently our team didn’t quite come up to grips with that.”

One of Mr. Calhoun’s initial tasks as chief executive was to go on an apology tour, holding a series of what he called “greet-and-mend opportunities.” The first stop was the White House.

At a private meeting with Mr. Trump on Mr. Calhoun’s third day on the job, the president told him that he liked Mr. Muilenburg, but believed a leadership change was needed. The president said he hoped Boeing was investing all of its resources into getting the plane back in the air.

“He wants us to get back on our horse,” Mr. Calhoun said. “He wants us to get the Max flying again, safely.”

Mr. Calhoun said he recently asked Boeing employees to “lay out in gory detail what needed to be done” to get the plane certified. “And then when they told me exactly what that was, I added a day or two to it,” he said.

His conclusion was that the Max might be approved some time this summer, pushing back again the likely return of the plane by six months.

“Restoring credibility with the F.A.A. was not as hard as people think,” he said, “They just didn’t want to be boxed in anymore. They were sick of it.”

While he has been contrite about damaging internal messages released in January, Mr. Calhoun stopped short of saying that the company has systemic cultural problems. He called the messages, in which Boeing employees ridiculed the F.A.A. and denigrated their own colleagues, “totally unacceptable,” but said they were not representative of Boeing more broadly. “I see a couple of people who wrote horrible emails,” he said.

He also delicately maneuvered between accepting responsibility for the two crashes and pointing the finger elsewhere.

When designing the Max, the company made a “fatal mistake” by assuming pilots would immediately counteract a failure of new software on the plane that played a role in the Lion Air and Ethiopian Airlines accidents. But he implied that the pilots from Indonesia and Ethiopia, “where pilots don’t have anywhere near the experience that they have here in the U.S.,” were part of the problem, too.

Asked whether he believed American pilots would have been able to handle a malfunction of the software, Mr. Calhoun asked to speak off the record. The Times declined to do so.

“Forget it,” Mr. Calhoun then said. “You can guess the answer.”

He dismissed concerns about the board’s decision to give him a $7 million bonus based in part on whether the Max returned to service. “The objective is to get the Max up safely,” he said. “Period.”

When asked why he didn’t elect to forgo his salary altogether, he said, “Cause I’m not sure I would have done it.”

Pulling Boeing out of the hole it has dug will take years, Mr. Calhoun said. At a meeting with his senior leadership team on Tuesday, Mr. Calhoun introduced a new set of values intended to guide the company, which he hopes will inspire employees still working on getting the 737 Max back in service.

“You don’t just win this one,” he said. “You don’t just go out and fight and win and now you’re a hero. One airplane at a time.”

In the meantime, Mr. Calhoun is focused on the basics: producing jets at a pace the factory can handle, instilling discipline up and down the company, and hunting for bad news and acting on it.

“If I don’t accomplish all that,” he said, “then you can throw me out.”

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Three U.S. Airlines Extend Halt on Boeing 737 Max Flights

Westlake Legal Group 14max1-facebookJumbo Three U.S. Airlines Extend Halt on Boeing 737 Max Flights United Continental Holdings Inc United Airlines Southwest Airlines Company Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

All three U.S. carriers that use Boeing’s 737 Max jetliner have again put off returning the plane to their schedules.

On Friday, United Airlines said it would operate without the jet until Sept. 4, while American Airlines said it would do so through Aug. 17. Southwest Airlines said Thursday that it would do likewise through Aug. 10.

The three airlines had previously said they expected to bring the 737 Max back in June, but none had provided a formal update since Boeing said last month that it did not expect regulatory approval to fly the jet until June or July. Once approval is granted, airlines will have to prepare the planes and train pilots, which would take weeks.

United said Friday that its decision allowed it to plan service during the peak summer travel season with greater certainty, even if regulators clear the 737 Max to fly sooner.

After it reported quarterly earnings call last month, Andrew Nocella, United’s chief commercial officer, said the company did not expect to fly the Max this summer. United has 14 of the 737 Max jets in its fleet. Sixteen more have been produced for the airline, with 155 on order.

Southwest said Thursday that it had chosen to extend its suspension of 737 Max flights in light of “continued uncertainty around the timing” of the jet’s return to service. American said it would formally change its schedule later this month and notify customers whose trips were affected.

The Max has been grounded worldwide after two crashes, in late 2018 and early 2019, killed a total of 346 people. An automated anti-stall system called MCAS was identified as a common factor in the disasters.

To fly again, the 737 Max must overcome a series of hurdles. Boeing will have to resolve several issues in collaboration with regulators, including fixing the problems associated with MCAS and determining whether the company needs to separate wire bundles that could, in rare cases, short circuit and possibly lead to catastrophic failure. Regulators will then have to test the plane and determine how pilots should be trained to fly it.

The problems with the 737 Max have created an opportunity for Airbus, Boeing’s European rival, but Airbus has such a lengthy backlog that it cannot immediately benefit from Boeing’s troubles.

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Three U.S. Airlines Extend Halt on Boeing 737 Max Flights

Westlake Legal Group 14max1-facebookJumbo Three U.S. Airlines Extend Halt on Boeing 737 Max Flights United Continental Holdings Inc United Airlines Southwest Airlines Company Boeing Company Boeing 737 Max Groundings and Safety Concerns (2019) Airlines and Airplanes

All three U.S. carriers that use Boeing’s 737 Max jetliner have again put off returning the plane to their schedules.

On Friday, United Airlines said it would operate without the jet until Sept. 4, while American Airlines said it would do so through Aug. 17. Southwest Airlines said Thursday that it would do likewise through Aug. 10.

The three airlines had previously said they expected to bring the 737 Max back in June, but none had provided a formal update since Boeing said last month that it did not expect regulatory approval to fly the jet until June or July. Once approval is granted, airlines will have to prepare the planes and train pilots, which would take weeks.

United said Friday that its decision allowed it to plan service during the peak summer travel season with greater certainty, even if regulators clear the 737 Max to fly sooner.

After it reported quarterly earnings call last month, Andrew Nocella, United’s chief commercial officer, said the company did not expect to fly the Max this summer. United has 14 of the 737 Max jets in its fleet. Sixteen more have been produced for the airline, with 155 on order.

Southwest said Thursday that it had chosen to extend its suspension of 737 Max flights in light of “continued uncertainty around the timing” of the jet’s return to service. American said it would formally change its schedule later this month and notify customers whose trips were affected.

The Max has been grounded worldwide after two crashes, in late 2018 and early 2019, killed a total of 346 people. An automated anti-stall system called MCAS was identified as a common factor in the disasters.

To fly again, the 737 Max must overcome a series of hurdles. Boeing will have to resolve several issues in collaboration with regulators, including fixing the problems associated with MCAS and determining whether the company needs to separate wire bundles that could, in rare cases, short circuit and possibly lead to catastrophic failure. Regulators will then have to test the plane and determine how pilots should be trained to fly it.

The problems with the 737 Max have created an opportunity for Airbus, Boeing’s European rival, but Airbus has such a lengthy backlog that it cannot immediately benefit from Boeing’s troubles.

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As Boeing Jets Sit Idle, Airbus Can’t Make Planes Fast Enough

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PARIS — The troubles plaguing Boeing after the yearlong grounding of its 737 Max plane have created an unusual opening for its chief rival, Airbus, to swoop in and grab business. There’s just one hitch: Airbus is in no position to benefit.

The European aerospace giant, which last year took the title from Boeing as the world’s biggest plane maker, has such a large backlog of orders to fill that it cannot immediately produce more of its popular narrow-body jets that airlines view as an alternative to the Max.

“It might look like a paradox, but in the short term, we don’t benefit from the situation with our competitor,” Airbus’s chief executive, Guillaume Faury, said Thursday at a news conference in Toulouse, France, announcing the company’s 2019 annual results.

Airbus has been unable to take advantage of the shortfall at Boeing partly because it can’t build planes fast enough. Production of Airbus’s A320 jets — the main competitor to the 737 Max and the bulk of Airbus’s commercial business — is months behind schedule because of slowdowns at some of its European factories.

As it is, the company’s A320 jets are sold out through 2025, Mr. Faury said, making it “difficult if not impossible” to make new planes quickly for airlines that have been left scrambling to find an alternative since Boeing stopped producing the Max.

Even so, in the long-running duel between the two rivals for the top spot in commercial aviation, Airbus is riding high.

In the year since Boeing’s most important plane was grounded after two deadly crashes killed 346 people, orders for the Max have dried up, and Boeing has been unable to deliver the roughly 400 Max planes it built since the grounding began in March.

Last month, Boeing said the costs associated with the Max grounding were likely to exceed $18 billion. Those costs may rise further, with airlines that were counting on the Max continuing to lose money and the 737 factory in Renton, Wash., still shut down.

Boeing said this week that it did not record any new orders for commercial airplanes in January, and that it delivered just 13 planes in the month. Though the start of the year is usually a slow time for orders, and the deliveries were dented by the Max grounding, the dismal numbers were a reminder of the depths of Boeing’s problems. It was the first time in decades that Boeing failed to record any commercial orders in January.

Airbus has won several competitive orders in recent months. In December, Qantas picked Airbus over Boeing to supply jets for what will be the world’s longest nonstop commercial routes, from Australia to the New York area. Also last year, United Airlines ordered 50 Airbus jets.

Still, on Thursday, Airbus reported an overall loss of 1.36 billion euros, or $1.48 billion, for 2019. The main reason for the shortfall was an agreement to pay $4 billion in fines to France, Britain and the United States to settle a lengthy global corruption investigation, removing a legal cloud as it sought to keep ahead of Boeing.

Despite the hit, Airbus reported record deliveries in 2019 of 863 commercial aircraft, up from 800 in the year before, and an increase in orders to 768 jets, from 747, as Boeing stumbled. With the Max grounded, Airbus also sought to shore up its advantage in the narrow-body market by raising its stake in the A220, a jet developed by Bombardier, a Canadian plane maker.

Delivering on orders is Airbus’s biggest challenge. Mr. Faury said the company planned to ramp up production of the A320neo, its best-selling single-aisle jet and an alternative to the Max, to around 67 a month in 2023, up from a target of 63 a month in 2021. Suppliers had balked when Airbus sought to accelerate the timetable further, he noted.

But analysts said splashing money on increasing production might be a problem if it made the planes more expensive, or if Airbus had to slow production again.

“They’re going to end up effectively over-geared,” said Andrew Charlton, the managing director at the consulting firm Aviation Advocacy. “They’re going to have all these people, factory lines that they’re going to have to shut down again.”

For now, however, even if Airbus continued to produce planes at the same rate, it is likely to stay ahead of Boeing, said Richard Aboulafia, vice president for analysis at Teal Group. “By doing nothing, they’re doing a great deal,” he said. “Market trends are benefiting them hugely.”

Airlines have focused on flying point to point, rather than routing through giant hubs, a shift that led to the sunsetting of the Airbus A380, one of the world’s largest jets. For these sorts of flights, airlines prefer to use planes from the Airbus A320 family or the Boeing 737 Max 8 — and at the moment, all the orders are for Airbus A320-type planes, Mr. Aboulafia said.

“This is the best of all worlds for Airbus,” he said. “It’s an enviable position.”

The Max crisis is also affecting Boeing in ways that go beyond immediate costs, lost orders and delayed deliveries. Plans for the company’s next major commercial airplane have effectively been put off.

“There is a benefit to Airbus from the Max grounding,” said Scott Hamilton, managing director of Leeham, an aviation consultancy. “It has delayed any decision by Boeing for a new midmarket airplane.”

Still, the Max could be flying soon. The head of the Federal Aviation Administration said last week that a critical test flight could happen in the next few weeks, setting in motion the complex process of clearing the plane’s return to service. If no other major problems with the Max are found, airlines could be using the plane for commercial flights this summer.

And when that happens, Boeing can start delivering its stockpiled jets, and could start logging new orders for the Max again.

“When the 737 Max is released and cleared for flying, it’s going to be the safest airplane in the world,” Mr. Charlton said, pointing out that British Airways placed an order for 200 Max planes in June after the second fatal crash. “There’s going to be no bit of that airplane that hasn’t been crawled over a million times.”

If Boeing then opts to offer heavy discounts, Airbus could be forced to do the same. Airlines can seek discounts after their planes have been ordered.

“Suddenly, their order book becomes a burden, not an asset,” he said.

Liz Alderman reported from Paris, and David Gelles from New York. Amie Tsang contributed reporting from London.

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