The Coronavirus is the most recent in a list of global pandemics – and it is the most impactful. The human and economic costs of Covid-19 go far beyond those of Sars, the Swine flu or Ebola. Its immediate impact on transport activity has been nothing short of dramatic. Will it also change human mobility and freight transport in the long run?
By Francisco Furtado
It is still early in the cycle of this global pandemic and care needs to be taken not to draw rash conclusions. But some of the striking effects of the Coronavirus on transport and related sectors are evident.
Air travel demand decreased for the first time in a decade from mid-February, according to estimates by IATA, the global association of airlines. In the Asia-Pacific region, air travel is forecast to fall by 8.2% in 2020 compared to 2019. Worldwide, the sector will shrink by 0.6%.
The bulk of this reduction is associated with the domestic Chinese aviation market, which is set to contract by USD 12.8 billion in 2020. Foreign airlines reduced capacity for flights to and from China by 80%, and Chinese airlines by 40%, according to ICAO, the UN aviation body.
More container ship tonnage is idle now than during the global financial crisis. Port operators in China say that volumes for container shipping were 20 to 40% less than last year. On the land side, warehouses and factories are unable to receive or send goods as imposed quarantine exacerbates the existing shortage of truck drivers.
Cancelled and postponed
Supply chain disruptions have led to factory closures and the shutting down of assembly lines – from Hyundai in South Korea to JCB in the United Kingdom – mainly because of the cessation of activity in China and the lack of components sourced from there.
Tourism is another highly visible victim of the Coronavirus. Up to 90% of tourism-related bookings for March are cancelled in some parts of Italy. Preliminary estimates for France point to a 30 to 40% drop in the number of tourists compared to what would be expected for this time of the year. The practically complete absence of Chinese tourists in Europe since the outbreak of Covid-19 points to lost revenue in the order of EUR 1 billion per month.
The cancellation and postponement of events worldwide has hit big-ticket meetings from the Mobile World Congress in Barcelona, the Paris and Milan Fashion Weeks, or the US-ASEAN summit in Las Vegas. The cancellation of the Berlin Tourism Fair ITB, scheduled for early March, meant 160 000 expected visitors did not travel, use their hotel rooms, or visit the German capital’ s restaurants. Where organisers maintain events, attendance drops dramatically as big employers like Amazon take steps to limit staff travel.
Will things get worse?
Much of this activity should pick up towards the end of the year. To what extent that probable resurgence can make up for the first-quarter plunge is an open question. Some of the above figures, for instance for the aviation sector, were published before the virus reached Europe and other regions outside China. So while they take into account the impact on China, the effects of the global spread of Covid-19 are not yet included. Worse may be to come.
The economic impact was most vividly reflected on the stock markets. The week of 24-28 February was the worst week for stocks since the 2008 crisis. Covid-19 could shave 0.5 percentage points to 1.5% of GDP growth in 2020 compared to previous estimates according to the OECD’s Interim Economic Outlook published on 2 March. In a more severe “downside scenario” global economic growth would halve.
Nasa images show the dramatic extent to which transport activity and industrial production came to a grinding halt across China – not just in Wuhan province – as drastic anti-virus measures were put in place. The levels of nitrogen dioxide (NO2) in the air were 10 to 30% lower in January and February 2020 than the average of the same period for 2005-19. Such a dramatic drop across such a vast area has never been registered before – an indication to how much drastically reducing transport and industrial activity can impact emissions.
Figure 2. Pollutants in early January 2020 across eastern and central China compared to mid-February
Are telework and virtual meetings the new normal?
The contraction of transport activity is twofold: Right now, restrictions on travel and voluntary cancellations of trips compound the impact of reduced economic activity that is beginning to be seen. Later, when transport activity resumes towards the second half of 2020 – which is not a given – the bounce back to compensate for the earlier stoppage might lead to congestion on certain nodes of the transport networks, with increased costs and travel times as a result.
Most likely, Covid-19 will also have more long-term effects on transport systems and the demand for their services. Widespread cancellations of business trips and global events could drive the wider adoption of remote meetings and virtual conferences. Rather than an exception, virtual attendance might become a standard practice or even the norm. Improved digital connectivity and changing corporate cultures could work in the same direction.
The same is true for teleworking. The cost to organisations of having staff members in quarantine to contain the spread of Covid-19, is being considerably softened where those concerned can telework. The likely effect is that this form of work will become more widely accepted, reinforcing an already existent trend.
A boost for re-shoring and resilience?
The tendency for nations to trade relatively more with countries of the same region than with the rest of the world is another trend this health crisis could reinforce. The disruption caused to supply chains by events on the other side of the world highlights security, safety and strategic concerns associated with off-shoring industrial production. The 2008 crisis triggered a rise in protectionism and the regionalisation of trade. In recent years, shutdowns of factories resulted in shortages of components “Made in China”, resulting in a push for the diversification of supply sources, including re-shoring.
A third relevant issue for which the pandemic could become a turbo-charger is resilience. The interest in strengthening transport networks’ ability to absorb shocks, deal with slumps and peaks, or to adapt to shifting trade flows was originally stimulated by extreme climate events, such as the 2004 Indian Ocean earthquake and tsunami. The rise of global trade disputes in recent years further nourished it.
Resilient transport networks feature different transport modes that can be used alternatively, they offer multiple route options to circumvent stoppages, and possess built-in flexibility – for instance to easily mobilise resources to deal with activity peaks and repurpose them for other needs during slumps. More resilience reduces the costs of shocks to the system and increase safety and security of supply – but it also comes with a price tag.
There is still a great degree of uncertainty about this pandemic’s long-term legacy with regard to the mobility of people and the transport of goods. What emerges more and more as the situation evolves is that it could be significant and long-lasting.
Francisco Furtado is an Analyst and Modeller at the International Transport Forum. He is currently working on a project on Decarbonising Transport in Emerging Economies.
Read more about disruptions to the transport system in the ITF Transport Outlook 2019
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