The post-covid world of transportation without safe harbours

Over the first calendar quarter of 2020, the world of transportation has been profoundly shaken by the public health crisis engulfing nearly every corner of the world. Losses revealed so far paint a grim picture. Maritime container transport lost an estimated $1.5 billion in revenues with potential losses optimistically estimated to add up to around $20 billion may be off by 100%. That number still pales in comparison with the airline industry, which is estimated to lose between $60 billion and $130 billion in revenues. Road transport revenue losses are impossible to predict, as the industry is too fragmented, but by no means invincible. What will be the impact on the infrastructure companies behind the transportation companies, the airports and ports, is yet to be determined.

Planet has literally shut down. In the struggle to get a grip on covid-19, country after country demanded sacrifices from their businesses and citizens. What is happening and what should be done to keep transportation companies alive and operating through the current crisis s a matter of countless disputes. The most readily used proxy for impacts on GDP growth, policy actions and economies’ responses is the GFC crisis of 2008-2009. That comparison would be the most unfortunate mistake. What we were facing then, crisis of the financial system, has never produced deep shock to the real economy. While the shock to banking systems was deep, consumer confidence has not been erased and companies found footing in alternative sources of funding. Various industries recovered to pre-crisis levels in due time. Most importantly, transportation industries functioned unperturbed by any form of restrictions.

The thinking and actions that allowed transportation companies to function during and after the financial crisis are useless in current situation. In the present, containment measures compounded by the psychological element clamped down on every aspect of transport operations. Governments’ lockdown measures cut people off from their jobs, either stranding them on the jobs, like the case of ships’ crews that cannot be changed over in previously accessible ports, or making difficult for staff to show up to work, as is the case of staff in terminals and airports. The fear of getting exposed and dying as a result of the virus, fanned by constant barrage of news increased staff absenteeism, is leaving transportation facilities shorthanded.

The impacts on GDP and trade during and post 2009 crisis will be different and much more severe from this crisis. Throwing tons of new cash at both the companies and the people is not going to solve the problem of lockdowns, transportation bans and bans on movement of people. Swelling ranks of unemployed will damage any consumer confidence needed to quickly restart the businesses and the trade. This spells big trouble for the transportation industry, which should not hope for things and behaviors to go back to “normal” as it happened post GFC. Less confident demand from consumers and businesses will reduce the need for trade recovering right away, and the pace of recovery will be gradual, not explosive. Combination of domestic and international polarization and now truly ingrained trade protectionism fueled by trade wars of various proportions will reduce the certainty of recovery and push the return to “normal” even further.

The shrunk size of the global trade pie will most likely result in more mergers and disappearance of transportation brands.

• No amount of national pride will save all of the airlines, that is certain.
• Mergers will definitely reduce number of trucking companies.
• The container shipping sector will be set for a few mergers of its own. Unfortunately, the tonnage will not disappear, so a rates war between remaining players will follow, as the recovery slowly gathers speed.
• The bulk fleets and tankers will see wild fluctuations in demand for type and tonnage as national economies reprioritize their needs.
• The airports will live to see another day
• I would be less certain about the ports and their terminal concessions. Until the cargo volumes pick up again, the carriers will prefer to stick to a few large, strategically located ports. Smaller ports which used to see mainline calls will have to work very hard to attract and keep feeder services that will replace the mainlines.

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