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CNN NEWSROOM

J.Crew Files for Bankruptcy; Treasury Plans to Borrow Record $3 Trillion in Second Quarter; United Airlines Urges Employees to Consider Voluntary Separation; Lufthansa Seeking Government Bailout Funds; Mask Debate Devolves into Violence in U.S.; Americans Ignore Rules, Gather in Public as Cases Rise; Spanish Holiday Island Reopens in Limited Capacity. Aired 4:30-5a ET

Aired May 5, 2020 - 04:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[04:30:00]

ROSEMARY CHURCH, CNN ANCHOR: Welcome back, everyone. Well some major U.S. retailers are suffering even as states start to reopen and a few of them allow people to begin shopping in stores again. The first major casualty is J.Crew, which has filed for bankruptcy. And there's speculation other major companies may not survive. Our Christine Romans joins us now from New York. Good to see you, Christine.

CHRISTINE ROMANS, CNN BUSINESS, CHIEF BUSINESS CORRESPONDENT: Hi there.

CHURCH: So J.Crew filing for bankruptcy. What are the ramifications of this and who might be next?

ROMANS: Well, I mean, there's lots of speculation that that will be more names that will have trouble coming out of this COVID crisis here. I mean, even before this pandemic, some of these really well- known American retailers were struggling with online competition, with shoppers changing their behaviors and their tastes, quite frankly. And some of these chains have been really saddled with an awful lot of debt. So when you close the doors and when you have six weeks of no one shopping, that can be unsurmountable.

It's fascinating because you're seeing Macy's opening up some stores starting this week. Simon properties, it's a big mall operator, also opening for business in some states. So as you're slowly seeing retail thaw a little bit here, you're seeing which companies are going to be able to come out on the other side. I think it's fair to say, safe to say that the retail experience, Rosemary, is going to be an awful lot different in the COVID world than it was before.

CHURCH: Yes, I think you're right. And, Christine, not surprisingly government spending is very high right now, will continue to be. What's this going to mean in terms of debt levels for the second quarter. What's Treasury saying about that?

ROMANS: You know, really eye-popping numbers from the Treasury Department announcing how much money it will have to borrow to just keep -- you know, keep the oxygen going in the American economy -- some $3 trillion. It's just almost -- it's almost astonishing some of these numbers. And of course what happens is the United States government spends so much more money than it brings in, especially now with all of this rescue funding for the American economy.

But it routinely spends so much more than it brings in. It runs a deficit and it has to sell securities to fund that. And so you're just seeing the record levels of borrowing here. And I'll say there's really hardly anybody saying we shouldn't be borrowing so much money in Washington right now. What they're saying is the price is no object. We've to get the American economy back on its feet.

CHURCH: And meantime of course, you've got people out there across America really suffering. They're excited about some of the states opening up, but the problem is it's going to be a slow process, isn't it? I mean, we're not going to see --

ROMANS: Yes.

CHURCH: -- the economy suddenly gets back to where it was. In actual effect that is going to take a very long time. What are the estimates of all of that?

ROMANS: Well you know, it's interesting because in the beginning of this pandemic you had people saying, oh, we're going to flip the switch of the economy again and everything is going to be fine by the end of the year. And now the governors talk about it's more like a dial. Turn the dial on the economy to turn it back on.

And I think that the person -- the people who hold that dial are American consumers and American employees. You know, are people going to feel safe going back to work? Are people going to feel safe going out into the world? I think it's going to be a very slow and careful re-entry and it should be. Because as soon as you get any snap backs of the disease, right, you know, crowded ERs again, that really will zap confidence. So I think you're looking at recovery.

The President is very confident about a snap back economy in the second half of the year. But you're going to see crushing, crushing economic numbers for the next couple of months at least here. Mind blowing numbers that we've never seen before and then you'll start to build on a slow, I think, recovery after that.

CHURCH: Yes, absolutely right. I mean, people are very wary about going into restaurants and sitting there for an hour or so and putting themselves at risk. It is a real problem. And some of these businesses will survive, as you say, and some will not. Christine Romans, always great to chat with you. Thank you so much.

Well a top executive at United Airlines is warning employees about the future of the company and their jobs. In a memo to some airline staffers obtained by CNN, United's Chief Operations Officer Greg Hart said this -- in the coming weeks and months we expect to be faced with the need to right size our frontline work force to match demand. In light of these reductions, you may want to seriously consider if you're in a position to take a voluntary separation. Well Hart also says that executive salaries have been cut and the airline is trying to be transparent with its work force about what the future holds.

And Europe's largest airlines group Lufthansa is asking the German government for aid.

[04:35:00]

Like other airlines travel restrictions due to the pandemic have left most of its passenger fleet standing idol. Let's turn to our Frederick Pleitgen who joins us now live from Berlin with more on this. So what's the latest, Fred?

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well when you look at the airline sector, not just in Germany but around the world, Rosemary, you really never run out of superlatives. Lufthansa is now saying that it's currently running operations at the same pace as it did in 1955. That was the first year that the airline was allowed to start operations again after World War II. They say they are currently losing about $1 million every single hour. And they gave us access to their hub in Frankfurt where a lot of their fleet is currently standing around not making money but losing money. Here's what we saw.

(BEGIN VIDEOTAPE)

PLEITGEN (voice-over): While most of Lufthansa's passenger fleet stands idol at the company's hub in Frankfurt, grounded due to the coronavirus pandemic, the cargo wing is still humming. This plane carrying medical gear, among other things, getting ready to depart for the U.S. The pilots saying they constantly have to adapt to new rules for international travel in times of the pandemic.

JENS PIOTTER, CAPTAIN, LUFTHANSA CARGO: We have longer duty periods, but we need more pilots in the cockpit. We are flying with four pilots, for example, then flying through China.

PLEITGEN: Lufthansa has even had to convert some passenger planes into cargo planes to meet demand. Those weren't hard to find as Lufthansa Group says it's only flying about 1 percent of its usual passenger load.

Management saying Europe's largest airlines group need billions in bailout money from the German and other European governments.

(on camera): The Lufthansa Group says at least 760 planes that they own, about 700 are currently on the ground. Many of them don't look like they're going to be taking off any time soon. Now Lufthansa says it needs government assistance to get through this crisis but also to be competitive in the future.

(voice-over): European competitors like Air France KLM have already secured state assistance and the Trump administration says it will prop up struggling U.S. carriers with billions of dollars. Lufthansa says it believes the market for international air travel will remain volatile and Lufthansa Cargo CEO is telling me the company is currently adapting to an ever-changing business environment. PETER GERBER, CEO, LUFTHANSA CARGO: This is clearly a change because

we have all of these assets we have to plan. We meet with the pilots. We need the traffic rights, all that service needs, of course, some days but sometimes we have to adapt really and hours.

PLEITGEN: For now Lufthansa continues to bleed money as its planes stand still with only the occasional one taking off from what is normally one of Europe's busiest airports.

(END VIDEOTAPE)

PLEITGEN: And, Rosemary, Lufthansa's annual shareholder meeting, of course, getting underway today. As you can imagine, the numbers that are being presented there are absolutely dire. But of course, the main thing that's on people's minds right now, certainly management's minds, is the fact that Germany is or that Lufthansa is asking for the giant bailout from the German government and actually could make the German government one of the company's largest shareholders pretty soon if that does come through -- Rosemary.

CHURCH: Well, it's pretty interesting there. Fred Pleitgen, many thanks for bringing us that report. Appreciate it. Live from Berlin.

Well coming up next on CNN NEWSROOM, public servants enforcing social distancing and mask wearing in the U.S. are getting a lot of pushback. And we will tell you about that after the break.

[04:40:00]

(COMMERCIAL BREAK)

CHURCH: As U.S. states open against medical advice, some community leaders have mandated masks in public to slow the spread of the coronavirus. The orders are meant to keep people safe, but in some cases the people who enforce them find themselves in danger. The city manager of Stillwater, Oklahoma, explains.

(BEGIN VIDEO CLIP)

NORMAN MCNICKLE, STILLWATER, OKLAHOMA CITY MANAGER: When businesses opened, they began receiving verbal abuse and threats of physical violence for being -- from patrons being asked to put on a facemask. And it got to the point where the managers of those businesses felt that it was putting their employees in a dangerous situation to try to enforce that and that they simply could not.

(END VIDEO CLIP)

CHURCH: Well authorities say one such conflict turned deadly. Police in Flint, Michigan, say a security guard had been telling customers at this store to wear facemasks as required by the state. He got into a verbal confrontation with a woman who left. Two men arrived later. One accused the guard of disrespecting his wife. The other allegedly fatally shot him. The woman, her husband, and her son have been charged with murder. Police are still looking for the two men. Well not all mask altercations are violent, some are just repulsive.

On this Holly, Michigan surveillance footage you can see an employee turn to tell a customer about the statewide mandate. He walks over to the clerk and wipes his nose on her shirt saying, here, I'll use this as a mask. Police are looking for help in identifying this man.

Well now a look at a park ranger trying to tell people to practice social distancing.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Six feet out here, just brace yourselves. You're not maintaining that six feet of distancing.

UNIDENTIFIED MALE: I gotcha, man. Got you.

UNIDENTIFIED FEMALE: Bad.

UNIDENTIFIED FEMALE: Whew.

CROWD: Oh!

(END VIDEO CLIP)

CHURCH: And that is the thanks he got. The man accused of shoving that ranger faces a charge of attempted assault and possible jail time.

Well thousands of Americans crowded public spaces this weekend ignoring social distancing guidelines and not bothering to wear masks. Experts say we could see more of this as temperatures rise and patience wears thin. CNN's Brian Todd reports.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice-over): The iconic Blue Angels and Thunderbirds staging flyovers over Baltimore, Washington, and Atlanta Saturday to pay tribute to healthcare workers. Thousands flocked to landmarks, large city parks and other public spaces to catch them, some calling it a relief from corona fatigue.

UNIDENTIFIED MALE: I've been cooped up for the last seven weeks, and what a better opportunity to come down and visit the nation's capital, than when you have the Blue Angels and the Thunderbirds flying over.

UNIDENTIFIED FEMALE: It was really nice. It really makes me feel really good.

UNIDENTIFIED FEMALE: Yes, united. Especially seeing other people out here.

[04:45:00]

TODD: But that much-needed respite, experts say, is also a big part of the problem. ANNE RIMOIN, EPIDEMIOLOGIST, UCLA SCHOOL OF PUBLIC HEALTH: The problem is that the virus is still circulating in the population. We still need to have all of the social distancing measures in place, all of the personal hygiene measures in place.

TODD: But that didn't happen this weekend. Scenes like this, at the National Mall, show that hundreds of people at a time were defying requests from public officials to stay home to watch the flyovers. Same for Central Park and other parks in New York. Hundreds not distancing enough, not wearing face masks.

ANDREW CUOMO, NEW YORK GOVERNOR: I said that I think it's disrespectful of people not to wear masks.

You could literally kill someone because you didn't want to wear a mask. I mean, how -- how cruel and irresponsible would that be?

TODD: In New York, New Jersey, and Florida over the past few days, thousands of people were given warnings, summons and citations for not distancing enough or failing to wear face mask coverings in public spaces. Parks and beaches that had been reopened, closed again.

A noted psychiatrist says what we've seen over the past few days is a release. People letting up pent-up feelings of enclosure and anxiety.

DR. LISE VAN SUSTEREN, PSYCHIATRIST: What we are releasing now is simply the notion that we need to continue to worry at such a feverish pitch. People can't focus for a long period of time at really high anxiety. After a certain amount of time, we get worn out.

TODD: Public health experts say this could grow more dangerous as the weather gets warmer, as more people clamor to get out. Even those who do engage in distancing at parks may not be doing it the right way. Gathering in groups of six to eight people defeats the purpose, experts say, and there are other nuances people are missing.

RIMOIN: It's very difficult to navigate that an open setting, where you have lots of people coming in contact with each other. And it's not just necessarily a direct line, my face to your face. When we talk about 6 feet of distance, we're talking about it all -- at all angles here.

TODD (on camera): But there's clearly growing tension between officials enforcing face masks and distancing and members of the public who want to go out.

In Michigan, recently, a security guard at a Dollar Store was shot and killed after telling someone to wear a state-mandated face mask. And in one town in Oklahoma, officials there were compelled to relax their face mask requirements after members of a Walmart store were threatened with physical violence for trying to enforce face mask rules.

Brian Todd, CNN, Washington.

(END VIDEOTAPE) CHURCH: And you are watching CNN NEWSROOM. Still to come, hotels on Spain's holiday islands have permission to reopen but will tourists come back? We will have a live report form Formentera just ahead.

[04:50:00]

(COMMERCIAL BREAK)

CHURCH: Well Spain has recorded its lowest increase in new coronavirus cases in two months. The country has started its transition out of a strict lockdown towards what it calls a new normal. A health official says the government is working on an early detection system to find new infections quickly.

CNN's Scott McLean joins me now from the Spanish holiday island of Formentera near Ibiza. Scott, what's the situation there given tourism, of course, is so very important for the island?

SCOTT, MCLEAN, CNN CORRESPONDENT: Hey, Rosemary. So this island relies almost entirely on tourism. And it's pretty easy to see why. I am struggling to think of a better place to sit and have a beer on a patio on a hot day. The good news is that as of yesterday churches, stores and restaurants terraces are all allowed to reopen. But across the island we found plenty of businesses opting to stay closed.

(BEGIN VIDEOTAPE)

MCLEAN (voice-over): In the Mediterranean Sea, Formentera is an unspoiled paradise with beautiful beaches, crystal clear water and almost no sign of the coronavirus. But good luck getting there.

UNIDENTIFIED FEMALE: We're just being told that we have to go to the main port again to get some kind of test.

MCLEAN: 15 minutes before a 7 a.m. ferry from nearby Ibiza, we were told we had to take a rapid test for the virus before being allowed to board. Almost an hour and a lot of confusion later, our fingers were pricked, our blood drawn, then the results.

(on camera): Negative? Perfecto, gracias.

(voice-over): Negative and clear to sail. Formentera has had only seven confirmed coronavirus cases and a single death according to the local government. Because of that, it and three other islands were given special permission to reopen a week earlier than the rest of Spain. Churches, stores and restaurant patios are all allowed to open with limited capacity. There's just one thing missing, tourists. By and large Spaniards aren't allowed to travel and Spain's borders are shut to almost everyone. On the island, tourism accounts for almost 100 percent of the economy. Alejandra Ferrer, the President of the Formentera Island Council says it went from 7 or 800,000 tourists every year, down to zero.

(on camera): How do you come back from this?

ALEJANDRA FERRER, PRESIDENT, FORMENTERA ISLAND COUNCIL (through translator): It's complicated. It's been a month and a half since all establishments had to close and now, they have a lot of new rules to put in place -- she says.

MCLEAN: New rules but no new customers. Palo Marmions (ph), doesn't see much point in opening his prime ocean view patio this week, maybe not even this month.

If there's no mobility between islands, there are no tourists, he says. He's banking on domestic tourists this summer but maybe no foreign ones at all.

Juanma Costa is in the same boat. He opened the island's first five- star hotel last year. This year the pool is still green. There's been no reason to open it.

(on camera): Can Formentera survive without tourists?

JUANMA COSTA, OPENED 5-STAR HOTEL ON FORMENTERA ISLAND: No. Impossible. Without tourists Formentera we have nothing. We have only sun and one of the best beaches in the world. No more.

[04:55:00]

MCLEAN (voice-over): A tourist free island paradise might sound nice, just not to anyone here.

(END VIDEOTAPE)

MCLEAN: And, Rosemary, new economic data was released today in Spain. And it's not surprising to know that places that rely heavily on tourism were the hardest hit. Spain had a high unemployment rate even before the coronavirus came along, and today there are more than twice as many people on jobless benefits than there were last year. One in every ten Spaniards, man, woman or child is now on some form of government income support -- Rosemary.

CHURCH: Wow, those numbers are tough, but that location is beautiful. Scott McLean on the island of Formentera. Many thanks.

And finally, Nike is donating 30,000 pairs of shoes specifically designed for health care workers to hospitals and health systems around the United States. The sportswear company says it studied professionals at an Oregon hospital and took into account the challenge of their jobs like long hours on their feet and liquid spills and it came up with this. The shoes will be given out to health care workers on the front lines of the crisis, places like New York, Chicago, Memphis, Los Angeles, and the Veterans Health Administration. What a wonderful gesture there.

And thank you so much for your company. Stay safe, stay strong. I'm Rosemary Church. CNN NEWSROOM continues next with Robyn Curnow.

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END