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How United Airlines Is Trying to Plan Around a Pandemic

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When the coronavirus pandemic wiped out travel in the spring, United Airlines slashed its flight schedule, salted away aircraft in the New Mexico desert and parked planes at hangars around the country.

That was the easy part.

Now, with what is normally the peak summer season behind it and travel proceeding in fits and starts, the airline is continuing to fine-tune every facet of its business, from maintenance to flight planning, as it tries to predict where a wary public will fly, a challenge even in the best of times.

“We can really throw away the crystal ball, which was hazy to begin with,” said Ankit Gupta, United’s vice president for domestic network planning.

Credit…Lucy Hewett for The New York Times
Credit…Lucy Hewett for The New York Times

Passenger volumes for U.S. airlines are down about 65 percent, according to an industry group, and major carriers have taken on enormous debt as they lose billions of dollars each month. After hopes for a second congressional rescue package faded last month, United furloughed more than 13,000 workers and American Airlines furloughed 19,000.

But while every airline is struggling, each struggles in its own way. United relies far more than its rivals on international travel, which is deeply depressed and is expected to take far longer than domestic travel to bounce back. Lucrative business travel will be slow to return, too, and the airline said this week that it had amassed more than $19 billion in cash and other available funds to cope with the downturn.

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“We’ve got 12 to 15 months of pain, sacrifice and difficulty ahead,” United’s chief executive, Scott Kirby, said on an earnings conference call on Thursday. “But we have done what it takes in the initial phases to have confidence — it’s really about confidence — in getting through the crisis and to the other side.”

In navigating that path, the airline has focused on finding savings while positioning itself to serve the few passengers who still want to fly. When the virus devastated travel in March and April, the airline took hundreds of planes out of circulation. Among the first to go were twin-aisle jets used for international flights, which dropped early as countries closed borders. Single-aisle planes — the kind used for domestic routes — followed soon after.

ImageAs the virus devastated travel in March and April, United took hundreds of planes out of circulation.
Credit…Lucy Hewett for The New York Times

About 150 planes were sent to long-term storage in Roswell, N.M. — yes, that Roswell — where the dry conditions are better suited for long-term aircraft preservation. Many others were parked at United’s hub airports in and near cities including Chicago, Washington and Newark, where technicians could more easily get them back into service if needed.

Since July, United has brought back more than 150 of the planes that the airline or its regional carriers had grounded, it said on Thursday. About 450 are still stashed away, but must be maintained in a way that allows flexibility.

To get it right, Tom Doxey, United’s senior vice president for technical operations, and his team consult models created by computer scientists and solicit guidance from maintenance crews. Generally, two considerations loom large: how soon a plane will need substantial maintenance and the likelihood that it will be among the first to start flying again.

“If you have an aircraft that maybe is less likely to come back soon, you kind of want it at the back of the parking lot,” Mr. Doxey said. “It goes into prolonged storage and it probably goes to a desert location.”

Credit…Lucy Hewett for The New York Times

As demand for domestic flights picks up, United will most likely put single-aisle Airbus A320s or Boeing 737s to use, so it keeps many at the ready, he said. The same goes for the Boeing 777s or 767s, which can be used for international travel, whenever it rebounds. Planes that recently underwent intensive maintenance are kept closer at hand, too, than those that may soon be due for a deeper examination.

Fortunately for Mr. Doxey and United, some travel trends have started to emerge, making his job easier. Most of the people still flying are staying within the country, visiting friends and relatives or vacationing outdoors. If airline planners are right, travel to powdery ski slopes in the West may pick up soon, too. Those flights would put United’s smaller single-aisle planes to use.

Planning routes in such lean times can be incredibly complex, with airlines weighing a range of variables on limited resources. Not only do the right planes need to be in the right places, but planners must be sure that they have the gate agents, baggage handlers, flight attendants and pilots needed for each flight — out and back — all while trying to accommodate erratic travel trends.

To predict winter demand, Mr. Gupta and his domestic planning team consulted with resort operators and staff members near ski towns to gauge how many flights the company should add to snowy destinations. Based on recent and historical trends, they also added an unusual mix of direct flights to Florida this winter from the Northeast and the Midwest. On Thursday, United began offering preflight coronavirus tests to customers headed from San Francisco to Hawaii to help them avoid the state’s quarantine requirements and hopefully increase sales. It is also planning to expand service on dozens of routes to tropical destinations near and within the United States and resuming flights on nearly 30 international routes.

Credit…Lucy Hewett for The New York Times

With few people flying internationally, though, United has less need for its wide-body jets, which account for a quarter of its fleet. But it has found a use for some of those bigger planes: When demand for air cargo spiked, United put its larger, fuel-efficient 787s to work hauling goods.

Before the pandemic, the airline operated more than 300 daily flights abroad, but that figure dipped to 11 during the depths of the crisis. Next month, the airline plans to operate more than 150 international departures each day. To understand when and how that demand might recover, Patrick Quayle, who oversees international network planning for United, and his team track a range of indicators, including national travel restrictions, the travel habits of dual citizens and the economic ties between countries.

Credit…Lucy Hewett for The New York Times
Credit…Lucy Hewett for The New York Times

“It’s a bit of playing United Nations and looking at alliances and looking at passport data, and it’s a bit of gut feeling, to be quite candid,” he said.

As difficult as planning has been, it is becoming even harder. The federal stimulus passed in March, the CARES Act, gave passenger airlines $25 billion to help keep tens of thousands employed. It also made life a little easier for network planners, allowing them to worry less about whether a flight would cover labor costs, a major expense, and freeing them up to make last-minute changes knowing that there were far more employees available to work than needed. The aid expired last month, though, and prospects of another round of funding have largely faded.

There may be some reason for hope, though. The Transportation Security Administration screened nearly one million people at airport checkpoints on Sunday, the highest number since mid-March, though it was still less than 40 percent of the number screened on the same weekday last year. Whatever happens in the months to come, Mr. Doxey said, United is prepared: “We have a plan in place.”

Credit…Lucy Hewett for The New York Times

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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