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Impact of Covid-19 on global transportation market

Both the number of confirmed infection cases and deaths caused by coronavirus disease COVID-19 are still growing rapidly across the world. As of Oct 10, 2020 the total infection cases stood at 36.8 million and total deaths at 1.07 million. The total recovered cases are 25.6 million. The USA is still suffering most, but the recent cases in India has increased remarkably. While some countries have shown a declining trend in both new cases and deaths, a second wave is expected. COVID-19 is expected to significantly affect the global society in various ways, from both short-term and long-term perspectives.

The responses to COVID-19, from implementing social distancing to lockdown policies for affected areas, have huge implications for the mobility and connectivity of people and goods, the continuity of transport services, and therefore the entire sector. This will also have cumulative impacts on the economic activity of cities, regions, freight logistics, as well as related industries, markets and supply chains.

This crisis is being felt primarily in public transport and commercial aviation; and, as city, regional and country borders close, the impact on goods, services and production nodes will become more apparent with shortages of products, made worse by stock-piling. This negative demand shock is affecting all modes of transport whether mass transit or maritime transport or air transportation.

The negative demand-shock on transport demand is visible and devastating. The International Road Union estimates the decline in global road transport activity of up to 20 percent in 2020, depending on how long the situation continues, and the impacts on aviation, public transport and maritime are even higher. The most conspicuous impacts are being seen in aviation, public transport and logistics. This crisis is being felt firstly in public transport and commercial aviation; and then as city, regional and country borders close, the impact on goods, services and production nodes are also starting to become apparent.

The critical impacts on the transport sector

Public Transport: In metropolitan areas, the responses to COVID-19, from implementing social distancing to lockdown policies, are having a very large impact on passenger transport services and particularly mass transit systems that are designed to move a large number of people in dense urban areas. Transit ridership is plummeting, putting transit authorities in financial distress. In developing countries, public transport is largely informal and privately owned. Bus owners and drivers earn income only if they carry passengers. These groups are, therefore, very vulnerable.

Shared Mobility: Shared mobility has also been heavily impacted. This is bringing to light the risks associated with the ‘gig economy’, where the workers do not have any benefits to fall back upon and often do not have the resources needed to weather such shocks on their livelihood. Ridership for major shared mobility platforms has halved and many are cancelling/reducing service. Several transit agencies are cutting down service frequency to reduce the spread of the virus and in response to the dwindling demand. In addition, many are also introducing measures to respond to threat of virus spread.

Logistics: The global logistics market (transport, inventory management, warehousing, order processing, and other supply chain activities) accounts for roughly 12 percent of global GDP, with a turnover of about USD 8-12 trillion. The spread of the virus is revealing the vulnerability of the global supply chain for goods. There is significant disruption in the supply chain and demand is fast outpacing supply capacity. Food supply chains could collapse due to the lack of transport to take products from farm to table. Food will continue to be produced in the short term, but might not be delivered on time, particularly to urban dwellers. At the same time, the demand for some health supplies is already overpassing the available supply. The supply producers will be (in many instances) in geographic locations far apart from where the goods are needed.

Aviation: Aviation has been the hardest hit segment of the transport industry with plenty of evidence of collapsing demand. The International Air Transport Association (IATA) estimates that airlines could lose passenger revenues of $113 billion globally, if the virus spreads further. Despite the challenges that the aviation sector is facing, it remains a critical part of the solution for the keeping the supply chain of critical supplies unbroken.

The aviation sector outlook is bleak overall; tourism and travel face an ‘existential threat’ from COVID-19. However, the challenges for emerging markets will be higher, especially in Africa where the sector has not been profitable for more than two decades. Globally, many carriers may face bankruptcy (some of which are state-owned airlines). Such bailouts will require substantial public funds. Many world airlines may be technically bankrupt, if no action is taken. This resulting in layoffs of airlines workers, airport workers, and other related sectors, which needs to be managed to the extent possible to limit these negative impacts. The impact of the virus on air transport services is staggering and many airlines and countries have cut operations.

When the transport and logistics services are interrupted by a public health pandemic, the daily life activities of millions of individuals are affected. Therefore, contingency planning to respond to such disruptions is required. However, the largest share (44.7%) of experts reported that they did not know about the existence of such contingency plans, while 31.3% reported no such plans existed in their residence cities. The percentages of cities with such contingency plans were 21.1% for bus systems, 18.3% for rail transit systems, 14.8% for aviation systems, 11.3% for taxi, 8.5% for expressways/motorways/highways, 8.5% for logistics facilities, 7.7% for maritime systems for passenger transport, 4.9% for maritime systems for freight transport, 4.2% for paratransit modes, and 3.5% for river/canal transport systems.

Measures for developing countries

More attention should be paid to the growth of COVID-19 infection in developing countries, which has shown a much more rapid growth rate in recent months. Including the USA, all developed countries have shown a diminishing trend of growth in both infections and deaths. However, more and more developing countries are showing a remarkable increase. For example, within the last month (April 24-May 24), the number of infections in India increased by 5.1 times, Brazil by 4.6 times, Mexico by 3.1 times, and Pakistan by 2.5 times. It is expected to become worse especially considering dense and poorly-equipped buses, informal transport (e.g. paratransit), and over-concentration of population in large-sized developing cities, particularly in slums. More and more low-income and vulnerable people in developing countries will be at risk of being infected, because they cannot keep proper physical distances and have no available medical services.

The COVID-19 pandemic is an unprecedented global crisis and similar crises will occur in future. Now is the time when our human society needs to take collective actions by breaking borders of countries, sectors, laws, and disciplines. To design effective measures against public health pandemics, information sharing (governments, firms, experts, and individuals, etc.) is extremely crucial, because we have to uncover the unknowns in terms of COVID-19 and its consequences as much as possible. Such information should be regarded as global public goods. For effective information sharing, consensus building is essential, but it must be speedy. To make this possible, preparedness drawing on lessons from history, and mutual learning among countries of the world, are key. To prepare well for future public health pandemics, world-wide, interdisciplinary and across-sectoral collaborations are urgently required.

Every cloud has a silver lining

Post COVID-19, the global logistics market size is projected to grow from USD 2,734 billion in 2020 to USD 3,215 billion by 2021, at a YoY of 17.6%. The major drivers of this market are increasing focus on the continued supply of essential commodities, creation of supply chain stabilization task force to fight COVID-19, and growing demand and distribution of personal protective equipment. The factors that restrain the market are labor shortage and a shortage of COVID-19 testing kits. The projection for 2021 is estimated to be down by over 10-15% as compared to the pre-COVID-19 estimation.

The author, Nazir Ahmed Shaikh, is a freelance columnist. He is an educationist by profession and writes articles on diversified topics. He could be reached at [email protected]

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