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Corona Capital

10 Sep 2020 By Breakingviews columnists

Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.


– Quest Diagnostics



Need for speed. Quest Diagnostics has come under fire for delivering Covid-19 test results slowly, but the U.S. laboratory-testing company’s financial figures and stock price are speeding ahead. Quest said on Thursday that revenue and earnings per share for the year would top estimates thanks to a recovery in medical procedures.

The $50 billion Quest and rival Laboratory Corporation of America dominate the United States’ testing market. Earlier this year high-margin non-essential tests were postponed as doctors’ offices closed for fear of spreading the coronavirus. That market is recovering, while Covid-19 testing continues – as of August, Quest had performed over 13 million molecular tests.

The company was swamped, admitting in July that non-essential Covid-19 tests were taking “at least seven days”. Such delays render a test nearly useless, but Quest’s market power means insurers were still paying up. If the turnaround time doesn’t improve while the company continues to reap financial benefits, that could easily become a political problem. (By Robert Cyran)

Trouble ahead. International Consolidated Airlines’ brave face is not without cracks. While asking shareholders for 2.5 billion pounds in additional Covid-19 buffers, the British Airways owner is pointing to surprisingly gloomy horizons, with travel restrictions and quarantines playing havoc with its revival plans. In the last three months of the year, IAG reckons capacity will be down 60% from 2019 levels. Previously, it only foresaw a 46% decline. That’s equally worrying for engineers like Rolls-Royce, whose fate is also tied to planes spending time in the air.

The silver lining for investors, including 25% shareholder Qatar Airways, is that costs are also plummeting. IAG says its operations should break even in the fourth quarter. By contrast, in the early stages of the crisis, it was burning through a million pounds an hour. That means steady-state, low-level flying can last for longer – as long as timetable restrictions don’t get any worse. (By Ed Cropley)

Are you ready for some football? The National Football League’s 101st season kicks off on Thursday as the Kansas City Chiefs, the reigning Super Bowl champions, take on the Houston Texans. When the Chiefs’ superstar quarterback Patrick Mahomes takes the field at Arrowhead Stadium, he’ll be surrounded by around 16,000 fans. True, that’s roughly a quarter of the over 62,000 who watched him in the stadium for Super Bowl LIV on Feb. 2 – just days after the United States declared a public health emergency over the coronavirus. Yet it’s still a big break with other major U.S. professional sports venues that are still barring spectators.

And it’s a gamble. It’s unclear if fans are excited to head back into even a partially filled stadium – Yahoo Sports cited multiple sources reporting lackluster demand for tickets. And even a few positive cases could prove disastrous to the league’s reputation and future sales. This drive to fast-track normalcy feels like a Hail Mary. (By Anna Szymanski)

Abstract value. Covid-19 is testing the limits of creative purchases. Sales of art by galleries around the world contracted by an average of 36% in the first half of this year, a new survey by Art Basel and Swiss bank UBS found. It might have been worse: even as some of the world’s blockbuster art fairs, including Art Basel and Frieze London, have been cancelled, many sellers have moved to online-only viewing rooms.

Digital sales made up 37% of the total in the first six months of this year, up from 10% in 2019. New online buyers with whom the gallery had never had personal contact, meanwhile, accounted for over a quarter of online sales. Still, an overwhelming 70% of collectors reported that they still prefer physical in-person sales. It’s difficult enough to create the trendy high-brow gallery experience in real life. Trying to create a virtual alternative will test the palette. (By Sharon Lam)

Grocer woes. UK supermarkets’ pandemic boom is now turning to empty tills. WM Morrison, one of Britain’s top four grocers, revealed on Thursday that its first-half pre-tax profit fell 25.3% to 148 million pounds as the extra costs of hand sanitiser and staff dampened the benefits of a near 9% surge in sales, excluding fuel.

The situation could get worse. Supermarkets had a captive customer base during lockdown when restaurants and bars were closed. As the economy reopens, grocers are likely to see a slump in sales, while Covid-19-related costs linger. Tesco, for example, is hiring 16,000 extra staff to satisfy customers’ new desire to buy goods online. Morrisons’ share price is down 8% since the beginning of the year. The grim outlook may also hurt Walmart’s chances of attracting a juicy price for its planned sale of UK grocer Asda. The supermarket party looks well and truly over. (By Aimee Donnellan)

Buyer’s market. Advent International is shopping in the retail bargain bin. On Thursday Basel-based Dufry said that the private equity firm had pledged to purchase up to 415 million Swiss francs of a planned 500 million Swiss francs rights issue from existing investors who do not take up their shares. That could net Advent a stake of up to one-fifth in the duty-free vendor it exited in 2013, whose stock price has fallen 69% this year as lockdowns grounded planes.

Dufry Chief Executive Julian Diaz is in the value aisle too: he wants the money to buy the rest of beleaguered New York-listed Hudson, the travel shop chain Dufry floated in 2018. Still, bargains can be deceptively dear. Dufry suffered an 82% annual decline in passenger flows during July, and a return to 2019 levels is not expected until 2022. At least no one can accuse Advent of being out for a quick buck. (By Christopher Thompson)


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