WSJ US BusinessDisney to Lay Off 28,000 Employees as Disneyland’s Reopening Unclear

September 29, 20200
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Visitors at the Downtown Disney district in Anaheim, Calif., in July.

Photo: Jeff Gritchen/Orange County Register/Associated Press

Walt Disney Co. DIS -0.47% said it would lay off about 28,000 employees at its domestic theme parks, making the announcement shortly after the state of California signaled that Disneyland Resort would likely have to remain closed for the foreseeable future due to Covid-19 concerns.

The layoffs are the latest example of ongoing tension between governments trying to keep the new coronavirus in check and businesses struggling to make ends meet amid restrictions on the way they can operate.

The laid-off workers have been on furlough since April, the company said, collecting health benefits but not pay. About two-thirds of them are part-time employees, Disney said, adding it would soon enter discussions with unions about “next steps” for their members.

In announcing the layoffs Tuesday afternoon, Disney said the impact of the pandemic has been “exacerbated in California by the State’s unwillingness to lift restrictions that would allow Disneyland to reopen.”

A top state health official said Tuesday that Orange County, home to Disney’s flagship theme park, failed to meet guidelines that would have allowed easing restrictions on businesses. The county is currently in the second tier, which indicates the state still considers the spread of the coronavirus “substantial.” Local officials and business leaders had hoped the county, south of Los Angeles, would qualify for the third tier, a designation that the region has improved to a “moderate” spread level.

Reopening day of the Downtown Disney district in early July.

Photo: Jeff Gritchen/Orange County Register/Associated Press

The state’s color-coded system ranks contagion risk into four tiers, from the purple Tier 1, for “widespread,” to Tier 4, yellow, for “minimal.” Each tier spells out restrictions for about 20 industries or other public establishments, including playgrounds, family-entertainment centers, wineries and nail salons. There are no guidelines specific to theme parks, a source of frustration for the industry and some lawmakers.

Mark Ghaly, secretary of the California Health and Human Services Agency, said that the state is “getting very close” to unveiling theme park-specific guidelines.

“We know that a number of Californians are eager and wondering when [guidance on theme parks] is coming,” Mr. Ghaly said at a news conference. “We’re working with those industries to put out something that’s thoughtful.”

A move to the third tier would have allowed more indoor public spaces to reopen in Orange County, and some that are already open could have increased their maximum occupancy.

Disneyland closed its gates in March, along with most other such establishments around the world. But it remains the only one of the company’s theme parks yet to reopen at least at reduced capacity—including Walt Disney World in Orlando, Fla., which in July began allowing visitors to return in limited numbers. Disney has also reopened its parks in Japan, France and China.

The Disney division that includes theme parks and consumer products generated more revenue last year than any other business unit, making reopening a priority for the company.

At the Disney parks that are open again, customers are required to submit to temperature checks when entering and wear face coverings except when eating and drinking. They are operating at limited capacity

Disney said it lost $4.72 billion in the three months ended June 27, its first quarterly loss in nearly two decades. The previous year the company generated a profit of $1.43 billion during the same period.

Crowds at Downtown Disney when it reopened.

Photo: robyn beck/Agence France-Presse/Getty Images

The pandemic has burdened several parts of the company, whose chief executive, Bob Chapek, took the reins in late February, shortly before lockdowns went into effect in the U.S. and much of the world. Disney, like other movie studios, has been hobbled in its ability to produce and distribute films. Its cruise ships have been idled. And its ESPN sports network spent months filling programming hours with old footage and documentaries, until professional sports resumed. But the pandemic may have helped its Disney+ streaming service—a focus for investors thanks to its potential to drive future growth. Disney said in August that the new service had surpassed 60.5 million subscribers in less than nine months, a number it took Netflix Inc. about eight years to reach. Disney shares on Tuesday edged down about 1.5% in after-hours trading following the layoff announcement.

Disney had expected Disneyland to reopen in mid-July, but had to reverse plans in June as California struggled to curb the spread of the coronavirus. The company says nearly 80,000 local jobs are dependent on the theme park. The travel and tourism industry has been decimated by the pandemic as air travel and hotel occupancy have plummeted.

On Monday, a group of nearly 20 California legislators sent a letter to Gov. Gavin Newsom, urging him to consider allowing theme parks to reopen, noting that some indoor public spaces have already been cleared to reopen.

“In the city of Anaheim, there has been an increase of about 12% for the unemployment rate and the city could be facing a $100 million budget shortfall in large part because of lost tourism dollars that is created through Disneyland,” said Assemblywoman Sharon Quirk-Silva in an email to The Wall Street Journal. Ms. Quirk-Silva, who signed the letter to Gov. Newsom, represents a district that is part of Orange County.

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Last week Disney sent reporters a video in which it pleaded for California to allow theme parks to reopen.

At one point in the 25-minute video, Patrick Finnegan, a vice president at Disneyland resorts, politely lamented the lack of state guidance on theme parks while asserting the company’s readiness to resume operations.

“We are ready to open and we are hoping we will have guidance from the state soon,” he said.

Anaheim’s mayor and other elected officials have joined Orange County business leaders in lobbying for the state to provide clarity on when theme parks can reopen.

Orange County, Calif., where Disneyland is located, registered a 2.7% Covid-19 positivity rate during the most recent 14-day period, according to a state website, compared with 4.3% in Orange County, Fla., home of Walt Disney World, according to a county website.

Disney recently resumed partial operations at Downtown Disney, an outdoor shopping area with dining, as some indoor public spaces in Orange County, like restaurants, retailers and movie theaters, have been allowed to reopen at limited capacity,

Among the other Southern California parks that remain shut are Comcast Corp.’s Universal Studios Hollywood theme park, Knott’s Berry Farm and Six Flags Magic Mountain.

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the September 30, 2020, print edition as ‘Disney Lays Off 28,000 Staff At Parks in Latest Virus Blow.’

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