How Did America’s Biggest Companies Survive the 2020 Pandemic Economic Crisis?

What Really Happened When COVID-19 Nearly Crashed the Global Economy in 2020?

Discover how corporate leaders navigated the 2020 economic crisis in Liz Hoffman’s Crash Landing. Learn what happened when COVID-19 shut down America’s economy and how Wall Street, airlines, and Fortune 500 companies survived through unprecedented government intervention and emergency borrowing.

Read on to discover the untold stories of corporate survival during the pandemic—from Hilton’s desperate cash grab to Delta’s billion-dollar employee promise, and how decisions made in those chaotic weeks of March 2020 permanently reshaped American capitalism.

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The World Economic Forum drew corporate, political, and economic leaders to its annual Davos, Switzerland, meeting in January 2020. Then-US Treasury Secretary Steven Mnuchin told the meeting that a virus had just locked down a Chinese city, but no one was concerned. Just two months later, a global pandemic loomed, proving a greater threat to the US economy than even the 2008 recession had been. As journalist Liz Hoffman reports, leaders had to act fast. Billions of dollars changed hands. Some companies made money, while others barely endured. The US economy survived, but its corporate and financial world permanently changed. Hoffman provides intimate portraits of leaders navigating a confusing and historic crisis as it unfolded.

Take-Aways

• As COVID-19 turned into a global pandemic, America’s financial elite were oblivious.
• America’s airline industry was thriving, but the virus from China was about to torch it.
• By March 2020, leaders realized they faced a major crisis.
• Eventually, the world’s greatest economy shut down.
• When money stopped flowing, US companies did the only thing they could: They borrowed.
• The 2020 financial meltdown differed from the 2008 financial meltdown.
• The US government threw its vast financial firepower at the COVID economic crisis.
• The economy that survived the pandemic isn’t the one that preceded it.

Summary

As COVID-19 turned into a global pandemic, America’s financial elite were oblivious.

In late January 2020, members of the financial elite and some of their top government facilitators gathered at the World Economic Forum in Davos, a luxurious resort in the Swiss Alps. American attendees included the then-US secretary of the treasury, Steven Mnuchin, Chevron’s CEO Mike Wirth, IBM’s Ginni Rometty, Facebook’s Sheryl Sandberg, and many others, including Wall Street investment bankers. The Davos attendees discussed climate change, global politics, and more. Mnuchin mentioned in passing that a Chinese city of more than 10 million people had locked down due to an unknown infectious disease.

“In late January 2020, a new virus had appeared. It didn’t yet have a name, much less a forensic footprint or treatment protocol. But to those global observers who knew what to look for, it had all the markings of a killer.”

As attendees at Davos were aware, viral diseases occasionally emerged from developing countries, especially China. These isolated illnesses had never before created a global problem – certainly not worldwide economic havoc. And at the time, the financial elite at the forum had plenty to celebrate. The US economy had enjoyed an unprecedented 10 consecutive years of growth, and 2019 corporate profits were close to $2 trillion, a record high. However, what the executives at Davos and US leaders didn’t acknowledge was that the American economy was especially vulnerable to a health crisis. Wages were flat, company policies had systematically reduced workers’ benefits, and many working people lacked the money for essentials – much less the surplus funds they would need to survive an emergency.

Meanwhile, the mysterious virus wasn’t staying in China. Highly contagious, it had already cropped up in Taiwan and Japan. Given modern society’s mobility, it would soon appear in Europe and North America.

America’s airline industry was thriving, but the virus from China was about to torch it.

Back in 2005, Delta Air Lines had filed for bankruptcy. In an effort to rebound, the company begged its employees to accept pay and pension cuts. Leaders promised to share profits once the airline recovered. By 2019, Delta Air Lines led the world with more than $4 billion in profits. CEO Ed Bastian told employees that the company would share more than $1 billion of the company’s profits with them. Flush with success at every level, Delta planned to pull out all the stops and make air travel a wonderful experience again.

“It wasn’t just Delta. The airline industry had enjoyed a champagne decade. The bankruptcies that swept the big US carriers in the mid-2000s were a distant memory.”

In early 2020, the airline industry’s main concern was environmental sustainability, not a pandemic. Yet it was weeks away from being undermined by a disease it played a role in spreading. The globalized world was not interconnected by land or sea, but by air. In 2020, direct flights reached twice as many cities around the world as they had 20 years earlier.

A 35-year-old man who had returned to the United States on a flight from China in mid-January ended up becoming America’s first reported case of COVID-19. He had landed in Washington state, strolling through the Seattle-Tacoma International Airport with no idea he carried a potentially deadly virus.

By March 2020, leaders realized they faced a major crisis.

Constant international travel was part of the job for 21st-century corporate CEOs and Wall Street bankers. They met with clients and courted investors. They advised government officials, and they put out feelers to gather a broader sense of global trends. Yet even after the first US COVID death in February, American executives and leaders didn’t take it seriously. Businesses in other countries did. Security personnel scanned office building visitors for fevers, and people practiced social distancing.

“[This could be] The Big One. Pharmaceutical executives and public health experts had been warning for years of a deadly pathogen, a superbug perfectly evolved in ways big and small, conniving and accidental, to do maximum damage.”

Certain diseases like Ebola don’t spread easily and don’t kill people quickly enough to go global. The COVID-19 coronavirus, by contrast, spreads through the air. In most people, it begins with symptoms that resemble an ordinary flu. Despite rigorously policed lockdowns, COVID was quickly crossing out of China, and with the number of cases and the death toll there rising, many believed the Chinese government was suppressing information about it. In response, Disney closed its park in Shanghai. McDonald’s and Starbucks shut their China locations. Delta and two other US airlines suspended flights to China, and more than half of Hilton’s hotels there temporarily closed.

Eventually, the world’s greatest economy shut down.

In February, Wall Street’s financial markets had been humming along, with the S&P 500 index hitting a record high. For many Wall Streeters, 2019 had been a spectacular year. However, Bill Ackman, founder and CEO of the Pershing Square Capital Management hedge fund, was anxious about the persistent coronavirus news from China. Given Americans’ iconoclastic mindset, he thought the virus might be especially difficult to control in the United States.

“The market, lulled into complacency and trading near all-time high prices, would tank. Unemployment would be massive. Ultimately…it could end in civil unrest.”

Ackman concluded that his fund either should sell everything, including its shares in Hilton hotels, or stake a giant hedge. In the meantime, with more than 500 confirmed US cases, COVID was starting to affect domestic life. Investors started feeling spooked. Stock values were falling.

At first, the market was wobbly but rational. But by mid-March, panic more or less set in. Nervous investors withdrew 30% of publicly traded money-market funds. Wall Street was in chaos, and people there recognized that their chaos might spread to the rest of the country. Some suggested the markets might close altogether, or at least maintain shorter hours. In an attempt to restore calm, the Federal Reserve stepped in with an interest rate cut. The markets remained open, but no one knew what might happen next.

On March 11, 2020, the World Health Organization officially announced that COVID-19 had reached the level of a global pandemic. Stocks fell 20%. The NBA and other sports leagues ended their seasons. Broadway shuttered its theaters, and Disney parks closed. The world – at least, in America – truly shut down.

When money stopped flowing, US companies did the only thing they could: They borrowed.

COVID was a disaster for the travel industry. By early March, people were canceling Hilton reservations at a rapid pace. Spring bookings evaporated. Big conferences in cities such as Las Vegas, Washington, DC, and Atlanta were called off. Hilton’s chief financial officer estimated that revenue per available room, a crucial financial metric in the hotel industry, would most likely drop as much as 30%. This would be similar to its showing during the 2008 financial collapse. Hilton had barely survived that crisis, and its executives weren’t sure it would survive this one.

“The coronavirus’s spread – slow at first and then seemingly all at once in March of 2020 – exposed the dangers of a financial playbook that had become the default in corporate boardrooms over the previous two decades.”

Just before the 2008 crash, Hilton had essentially stopped being a real estate company. Instead of owning its hotel buildings, it charged fees for displaying its brand and for managing the hotels. It made money by extracting a percentage of each hotel’s daily revenues. Most days, Hilton brought in $25 million and had to pay $20 million in overhead. At the start of the COVID pandemic, Hilton had around $500 million in cash. But with some 60 hotels incurring payroll obligations and operating costs, that wasn’t going to last long enough – not with booking numbers in steep decline. It needed to borrow money. Hilton’s leaders decided to call in its $1.75 billion line of credit right away. They didn’t only need the cash – they worried that banks themselves could go under. Hilton wasn’t alone. Soon, companies all over the world would make the same desperate move.

The 2020 financial meltdown differed from the 2008 financial meltdown.

By mid-March, Wall Street was in turmoil, but 2020 wasn’t quite the same as 2008. Reforms from 2010 had led to a lot of change. For example, banks couldn’t take on as much debt as they could before and, thus, they proved more resilient to crises. But banking policy didn’t cause the 2020 problems – COVID did. Wall Street traders were uneasy, at the least, and the sudden need to work from home worsened volatility. It didn’t help that remote work was instituted unevenly. For example, while Ford, GM, and Fiat Chrysler sent their corporate employees home starting on March 13, the union’s 150,000 factory workers didn’t enjoy that luxury.

In 2008, Lehman Brothers had collapsed because it didn’t have enough cash, despite billions in assets. Bank reforms that were among the responses to 2008 meant controls on available cash in 2020. The reforms also limited Wall Street’s activities – and its freedoms. Once health officials had proclaimed that it was risky to work on trading floors, traders’ productivity declined significantly. A high-end executive at Morgan Stanley came down with COVID and told his board to start planning who would govern the company if he died.

Between February and March, the S&P 500 had fallen dramatically and, despite earlier reforms, some government officials saw economic similarities between COVID and 2008.

The US government threw its vast financial firepower at the COVID economic crisis.

Meanwhile, airline executives were deeply worried about the prospect of bankruptcy. Executives were in emergency mode, trying to steer their organizations to avoid financial collapse. They understood that the airline industry was at risk of a complete meltdown. For consumers, getting any flight proved difficult, and most people were observing social distancing restrictions.

“Airline CEOs are no strangers to union strife, but negotiations are usually handled by lawyers and government affairs staffers.”

After elaborate negotiations, Congress pursued a multibillion-dollar payroll relief package. In the end, major hedge funds sold billions of bonds. Airbnb spent billions on COVID refunds to travelers who were stuck at home.

Meanwhile, the number of Americans with COVID was going up exponentially. No one was traveling, going out to eat, or spending. People worried about massive defaults. Banks borrowed billions.

The economy that survived the pandemic isn’t the one that preceded it.

Pandemics are hardly new. In the 14th century, England lost nearly half its population to the bubonic plague. The 1918 flu, in combination with World War I, proved to be an international calamity.

“What is clear is that the economy that emerges from the pandemic is not the one that crashed headlong into it.”

While some of the COVID experience reflects earlier pandemics, it also has important differences. Eventually, most Americans were able to return to their normal lives – going out for dinner, traveling by air again, and returning to their offices. The American economy didn’t fall into depression as it had after the high times of the 1920s. In fact, the pandemic ultimately created value: The telecommunications infrastructure moved forward, and America’s essential workers earned more recognition and, in some cases, higher pay. By 2022, American stocks had rebounded to high prices. But inflation and interest rates rose, making life hard for ordinary people.

COVID affected both business executives and everyday consumers. During the pandemic, corporate leaders responded, making an effort to communicate more clearly than ever before with their employees. Nevertheless, COVID has left a legacy of unrest. Health issues have become divisive, with people continuing to disagree on mask and vaccine requirements. Corporations that faced up to COVID’s challenges well, like Delta Air Lines and Disney, have found themselves in their states’ political crosshairs since.

But economically, the pandemic wasn’t a total disaster in the United States. Perhaps people in need should have received more money. Leaders of commerce, particularly in the airline industry, may have gained rewards for poor foresight and strategy. Some blame the Federal Reserve’s $6 trillion injection into the economy for an uneven post-pandemic recovery. But responding to a crisis like COVID requires a careful balance between taking swift action and making the right choices. Overall, America’s response helped the country escape a complete economic implosion.

About the Author

Former Wall Street Journal senior reporter Liz Hoffman is the business and finance editor at Semafor.