Hard hit by virus, airlines push for tests over quarantines

Passengers wearing masks as they walk through a quieter than usual Heathrow Airport Terminal 2, in London. One thing most airlines believe could help to restore international travel is to have rapid virus tests of all passengers before departure. (AFP)
Short Url
Updated 19 October 2020

Hard hit by virus, airlines push for tests over quarantines

  • International air traffic is down 92 percent this year due to the coronavirus disease pandemic

FRANKFURT: International air traffic is down 92 percent this year as travelers worry about catching coronavirus disease (COVID-19) and government travel bans and quarantine rules make planning difficult. One thing airlines believe could help is to have rapid virus tests of all passengers before departure.

Scattered experiments on improving safety are under way around the world, and a UN organization is leading talks to set guidelines. There is a lot at stake. With no end in sight to the pandemic, the near-total halt to international travel will hinder economies as they try to bounce back from recession and return to normal levels of business activity. Millions of jobs — at airlines, airports and travel-related businesses such as hotels and restaurants — are affected.

Here’s a look at some of the key issues.

Why is the focus on testing?

One major factor keeping people from taking long-haul flights is the fear they will be seated next to someone with COVID-19, according to a survey by the International Air Transport Association (IATA). While flying helped carry the virus around the world initially, airplanes themselves have so far not been proven to be super-spreader locations the way business conferences and meat-packing plants have been.

Most people are also reluctant to fly into a quarantine that restricts their activities for up to two weeks after arrival. Quarantines themselves are not perfect in terms of stopping the virus from spreading, as in some cases they are not strictly enforced.

“Testing all passengers will give people back their freedom to travel with confidence. And that will put millions of people back to work,” said Alexandre de Juniac, IATA’s director general and CEO.

How would testing work?

Initial trials focus on testing passengers before departure, either at the airport or remotely. Information about the test result could be documented through a smartphone app. Newer tests can give results in less than an hour.

What do health authorities say?

They are open to the idea but are still assessing how effective it would be.

The US Centers for Disease Control noted that testing technology, capacity and access to testing is improving. It added: “Efforts are currently ongoing internationally to assess the risk reduction, determine what a feasible testing regime for air travel may look like, and gain some level of agreement on standards for a harmonized approach to testing globally in air transportation.”

Who’s going to decide this?

The IATA is calling for rapid, accurate and scalable testing for all passengers. After airline executives appealed for help on this from the EU and the White House’s COVID-19 task force, the issue appears to have moved to a UN forum, the International Civil Aviation Organization (ICAO) based in Montreal.

The ICAO is working on guidelines based on scientific advice that countries could use in establishing testing regimes.

What trials are underway?

Various forms of testing have been tried for weeks in different places. What airlines want is a larger-scale international approach.

For instance, China requires a time-consuming negative polymerase chain reaction test before departure.

The Switzerland-based Commons Project Foundation and the World Economic Forum are holding trials this month for CommonPass, a digital health pass that lets travelers securely document compliance with COVID-19 test requirements through a QR code on their smartphones or on paper. The idea is to get around the problems posed by printed test results, which may be from unfamiliar labs or in a language that those inspecting them don’t know.

What’s the holdup?

There are a lot of moving parts to any testing regime. First off, the test must be accurate, fast and cheap enough to deploy on a large scale. Governments must agree to accept the results; while
governments are represented in the ICAO, the organization’s guidelines will not be mandatory. There has to be a way of certifying the result, while at the same time protecting privacy of passenger medical information, and a procedure for handling people who test positive.

Scientists warn there are concerns about the accuracy of some rapid tests. People can test negative for a couple of days after being infected. People can be infectious before they show symptoms, and these people may also test negative.

Is testing the only solution?

The International Air Transport Association advocates a layered approach. In addition to testing, that means: Social distancing at the airport, touchless check-in, wearing masks in flight, and limiting passenger movement in the cabin.


Penny-pincher or deal king? Arnault gets his discount in $16bn Tiffany takeover

LVMH boss Bernard Arnault is known for his aggressive business tactics. (AFP)
Updated 31 October 2020

Penny-pincher or deal king? Arnault gets his discount in $16bn Tiffany takeover

  • End to bitter legal dispute opens the door for cut-price luxury merger

PARIS: In the world of corporate mega mergers, a $425 million discount on a $16 billion deal is small change.

But for LVMH boss and French billionaire Bernard Arnault, every penny counted to end a bitter legal dispute with US jeweler Tiffany and clinch a new takeover deal at a slightly lower price, according to interviews with five people close to the deal.
For the 71-year-old Arnault, dubbed “the wolf in cashmere” for his aggressive business tactics even in his earliest deals, getting a discount in itself would have been worth it, several people who know him said, even if it amounted to less than 3 percent of the original price.
“He did this out of principle. A franc is a franc for him,” one of the people, who is familiar with the latest discussions around the deal, noted. “He doesn’t overpay for things, because he is Bernard Arnault.”
The takeover, the luxury industry’s biggest-ever deal and a major feather in LVMH’s cap, was struck before the coronavirus pandemic forced the industry to temporarily shut shops and idle manufacturing sites.
LVMH said last month it could no longer complete the deal by the Nov. 24 deadline, citing a letter by the French foreign minister asking it to delay the purchase because of the threat of new US tariffs on French products.
Government sources have since insisted that the letter was not binding, and the foreign minister has said it followed an inquiry from the French luxury goods group, leading Tiffany to accuse LVMH of using it as a pretext to walk away from the deal.
Several sources close to the matter told Reuters that Arnault was particularly irked by Tiffany’s decision to pay regular quarterly dividends of $0.58 per share in May and August, at a time when other luxury groups suspended or cut their dividend payout because of the health crisis.
It was then that he became hell-bent on not doing the deal under the original terms, the sources said.

FASTFACT

The planned takeover of Tiffany by LVMH would be the luxury industry’s biggest-ever deal.

“The price discount is ridiculous, but you have to look at it from Arnault’s perspective,” a banking source familiar with the deal said. “He’s the kind of penny-pinching billionaire.”
In legal filings by LVMH, which countersued Tiffany in a Delaware court in September, the French conglomerate emphasised the financial argument, alleging the US jeweller’s management of the pandemic was “catastrophic” and its prospects “dismal.”
The dividend payments, totalling around $70 million per quarter, were allowed by the original deal and Tiffany says it only acted in the best interest of its shareholders.


The revised takeover agreement allows the US group to declare another dividend in November, bringing the total payout for this year to $280 million, which is less than the money Arnault has saved by getting Tiffany back to the negotiating table.
“I think Arnault wanted to make the point that he doesn’t like being taken for a ride just because he is a billionaire, and pay for things that he does not think he should be paying for, such as Tiffany’s dividends,” said Luca Solca, an analyst at Bernstein.
Settling now also keeps a lid on mounting legal fees, which could have grown to about $50 million for both companies if the Delaware court battle had gone all the way, according to one banking source.
Tiffany declined to comment on the legal costs. The French conglomerate LVMH had no comment on Arnault’s motivations.
Still, Arnault went to extraordinary lengths to renegotiate the deal, and some industry observers say the whole saga could dent his reputation.
“If he were the kind of person who cared about public image, he would realize it probably wasn’t worth it for the amount of money saved,” a former LVMH insider said.
Though he is France’s richest man, and owns newspapers including financial daily Les Echos, Arnault keeps a relatively low profile, rarely making appearances at conferences or giving interviews.
Scrutiny in France surrounding the Aug. 31 letter sent by the foreign ministry to LVMH, which led to speculation Arnault had pulled strings to obtain, took on proportions the group had not expected, people familiar with the matter said.
Reuters reported on Sept. 22 that French President Emmanuel Macron had asked the foreign ministry to send the letter.
Pressure to reach a settlement arose on several fronts, due to the legal tussle and as the COVID-19 pandemic worsened. Had the Delaware court case gone ahead, Arnault could have been called to testify next month. Two people close to the matter said Arnault was keen to avoid this step, though a third source close to LVMH said this was a “wacky hypothesis.”
Some observers said Arnault’s determination to win a discount from his pre-COVID offer price may cost LVMH, which has built an empire now comprising 76 brands, the ability to court future takeover targets in a highly fragmented sector boasting a large percentage of family-controlled companies.
However, others disagreed, saying Arnault — who is betting the French giant can restore Tiffany’s lustre by investing in stores and new collections — had still managed to get what he wanted. Tiffany also did not want to get bogged down in a potentially drawn-out judicial process whose outcome remained uncertain.
“It’s love between LVMH and Tiffany again,” one person close to the situation said, adding that a settlement now meant Tiffany “could sell diamonds at Christmas rather than spending it talking to lawyers.”