COVID-19 Outbreak and the transportation industry: Effects, challenges and prospects

 

By Victor O. Oyejide & Gaza Gideon

 

The transport industry like every other sector has been hit by the dreaded diseases called Coronavirus which is now declared a pandemic by the World Health Organization (WHO).

Amongst every other industry, the transport industry through its various forms is the biggest platform for the spread of the virus globally. The virus can only be transmitted when people, move from one point to another either by land (road, rail), Water (marine industry) or Air transport. Some states in Nigeria would probably have no record of coronavirus if not for visits from people who traveled, spreading the virus to friends and associates around them ignorantly. Till now, the best method to contain the virus is enforcing restriction on movement (transport) by staying at home.

After the oil & gas sector, the transport industry is the second highest contributor to the gross domestic product (GDP) of Nigeria and after the basic necessity of life (food, clothing and shelter), freedom of movement is the next important activity to man for social interaction and facilitation of trade. Thus, the travel industry is pivotal to the needs of man and the growth of the economy.

In a bid to reduce the spread of COVID-19 several nations lockdown their cities and impose measures that will limit transmission of the disease. Thus, has resulted in suspension of flight operations which significantly brought down air traffic levels throughout the world.

 

In Nigeria, flight operations, other than those who obtain approval from the Honourable Minister of Aviation, were suspended between March 21st 2020 and March 23rd, 2020, (for international flights) and out right suspension of all flights on April 7th, 2020. Flight movements in Nigerian airspace was reduced to almost zero.

 

Air navigation service provision has been impacted by the measures of containing the pandemic. The attendant very low traffic volume resulted in skeletal service provision. To this end, whenever the pandemic is contained and flight operations gradually begin to pick up changes accompanied by the pandemic need to managed. It is therefore imperative to have a plan for the management of change.

 

The effect of the virus on the travel industry is enormous not only for tourist but also on travel operator. Arguably, the industry is one of the worst hit as it facilitates movement around the world. Currently, airports across the world are empty, aircrafts are grounded. Airlines and Ancillary service providers (travel agencies, cargo handling, cleaning, catering, fueling companies, bureau de change) in the value chain are closed while some laying off workers to reduce cost.

The extent of revenue and job loss in the transport industry cannot be fully quantified yet as travel companies keep losing daily until the end of the pandemic, though estimate from international bodies reads in billions of dollars.
It is evident that the devastating effect of the outbreak of the Corona virus is global. The economy of nations has been hit hard and the human casualties are on the increase every day. According to Brown (2020) in economic terms, there is no industry more severely affected than aviation.

Air transport is a very significant indicator and contributor to globalization as the industry is one of the most important that drives economic and social progress globally. Bozicevic et al (2010), the global economic income of aviation is estimated to be 7.5% of the World Gross Domestic Product. Through the evolution of air transportation of worldwide level, it is visible how economic prosperity can bring along greater demand for mobility and with it an increased willingness for air travel. However, the synergy between the global economy and demand for air transportation means that in any global crisis the aviation industry suffers and suffer more than most.

The impact on global tourism has made buzzling tourist destinations become a shadow of themselves compared to previous years. The Disney world, the Dubai malls, Sentosa Island and others are not receiving patronage but rather tourist are cancelling bookings and seeking for refund. The travel calendar for the year has also been affected as we are not likely to have the usual summer holidays. This is adversely affecting states & countries that generates high revenue from the tourism & hospitality business. The maintenance of parked vehicles, locomotives or coaches, aircrafts is another major issue for travel operators as they protect the major compartment of the aircraft from wear and tear.

 

Most production companies like Boeing, Airbus (for aircraft), Toyota, Ford (Vehicles) are reducing production as demand for new vehicles, aircraft across the world will drop as propensity to travel reduces.

The first case of coronavirus recorded in Nigeria was on the 27th of February from an Italian citizen who returned through air transport from Italy to Lagos. This has affected various economic and industrial activities of man and in the country at large. As a way of reducing the spread of the virus into various states & the country, the Federal Government (FG) issued travel ban to countries closing the airspace to commercial flight operation except for special passenger flights that fly critical routes. Amidst the Covid-19 spread, about four thousand (4000) nationals from other countries have been repatriated from our Lagos and Abuja International airports. These are expatriate who are contributing to the growth of the Nigerian economy and will lead to brain-drain of foreign expertise who might not return to Nigeria.

Considering the seaport, which is strategic to the Nigeria economy as 80% of the worlds volume of goods comes in by sea and whoever commands the sea, commands the trade. Despite the nationwide lockdown, the president instructed that ports remains operational to keep fueling the economy. Thus, vessels still berth allowing essential cargoes like Medicine, food, factory raw materials for the running of the country from the various terminals. The waves of the virus did not spare the industry, as there are six confirmed cases of Covid-19 on a vessel in the Nigeria seaport. Thus, as much as its important to leave port open, its operation must be in line with recommendations of Health Authorities.

 

The disruption in international logistics chain, the slump in demands for goods and its cancellation especially from China (the epicenter of the virus) are challenges of the maritime industry. Oil vessels are on the sea across the world looking for buyers as oil prices continue to dwindle, and factories that need them are closed even to their demanded raw-materials thus causing cargo congestion at the ports. Thus, it is a challenging time for trade despite falling oil revenue for government.
In the rail transport industry, the Nigeria Railway Corporation has suspended operation as at Monday, 23rd of March amidst the spread of the coronavirus. This led to the suspension of the operation of train and passenger movement across the various train stations in Nigeria especially the Abuja/Kaduna and the Lagos/Kano rail track.

The 150 kilometer rail gauge, which is the major railway project linking Lagos to Ibadan has also been delayed due to coronavirus outbreak as workers from china had not returned to the country ever since the outbreak of the virus in china which is the epicenter of the diseases and the Nigerians who also work on site are at home observing the compulsory stay-at-home of the Federal Government. The Minister of transport Rotimi Amaechi had earlier announced that the project will be completed by May, 2020 but this is not feasible. The project worth $1.5billion has been on-going by the China Civil Engineering Corporation (CCEC) for some months and close to completion.

Airports Council International (ACI) is the trade association of the world’s airports.  It has in her latest advisory for April 1, 2020 stated that two – fifths of passenger traffic and almost half of revenues will be wiped out in 2020.  This is a revised impact assessment of Covid-19 on airport traffic and airport revenues.  This revision became necessary due to the scale of travel restrictions, global quarantine measures and other major events that were not foreseen.

 

ACI had forecast that global passenger traffic would reach 9.5 billion passenger target in 2020, an unattainable target as the events in recent months have virtually grounded air traffic. ACI estimates that the decline in global passenger traffic for first quarter 2020 is equivalent to a reduction of 620 million passengers. Airports in all regions of the world are expected by the global body to lose passenger traffic at double digit rates. An 11.2% decline is expected for Africa region based on the forecast losing up to 80 million passengers. International Air Transport Association (IATA), the airline association expects that Nigeria will have 3.5million fewer passengers resulting in a $0.76 billion revenue loss, putting 91,380 jobs at risk and losing $0.65 billion contribution to the Nigerian economy.

 

As social distancing will be a major priority, effect of covid-19 might lead to seat re-configuration in aircrafts, whereby more spacing will be factored in-between seats to reduce human contact as some airlines may be closing their middle seats. Thus, a Boeing 737 aircraft that has an average of two hundred (200) seat capacity might reduce it to hundred (100) or lower. If seat re-configuration is not considered, mass transit buses or taxis, aircrafts, trains might have to operate at 40% – 50% capacity to meet social distancing requirement. Despite this, the transport operators need to cover operational cost, statutory tax payments and still not make loss. Thus, burden will be passed to passengers who should be willing to pay more for travel service. While those who have earlier bought their flight tickets before the outbreak will need to request for “date change” as they pay little additional fees and those canceling their bookings will request for a total refund. Transportation might gradually become a luxury (especially for air transport) as patronage will drop and also reduce non-essential trips as more people embrace the digital space (cloud) for meetings, trainings and conferences.

Airports do not only make money from passengers and airlines. There is a lot of commercial activity that goes on in an airport due to footfalls – people moving through the airport. These are usually classified as non-aeronautical revenues. Commercial activities are for now stifled and seriously weakening. Loan covenants by concessionaires, car hire operators and other businesses that rely on air transport for their passengers will be difficult to meet with. ACI posits that the industry will lose about $76 billion revenues by end of 2020 with Africa region accounting for about $1.6 billion.

 

Losses suffered will be proportionate to size and market position. Indeed the entire industry value chain will be impacted by the stifling of activities in the industry. This of course includes travel agents and hospitality and tourism that rely on air travel.

 

Airports have high fixed and unavoidable costs. They will respond to contracting revenues by reducing their variable costs and will also close some portions of their infrastructure, postpone capital expenditure / delay some ongoing projects and take a more serious look at staff costs. A stronger advocacy for the airports will be required for them to be able to absorb the losses coming from this pandemic. So, also, will other industry stakeholders who will be impacted by this pandemic. Indeed, this is time for all stakeholders across the industry value chain to collaboratively restart aviation business and reposition domestic flights that are likely to fully commence before international flights.

In the face of the current reality, travel operators in the industry are expected to focus more on survival strategies to rear their head above the storm as it channels its focus more into local tourism. Travel operators and the governments must consolidate plans to address the several challenges the industry face by conducting an impact assessment of the pandemic.

Many international groups are exploring possible pathways to facilitate a “restart” of international airline aviation. The resumption of international flights will require a number of hurdles to be crossed in order for Governments to allow travel, and further hurdles in terms of the passenger journey, which includes the airports of departure and arrival, the flights themselves, and other elements.

The International Air Transport Association (IATA) predicts the effect of the COVID-19 to be much more far reaching with a slower recovery, as there will inevitably be economic recession in its wake.

As airlines resume passenger services during the ongoing Covid-19 crisis, there are likely to be multiple health, regulatory, training, operational, crew and consumer confidence challenges.

Airlines should consider the following when preparing for cabin operations during and post pandemic, in order to determine effective risk mitigations, which support their workforce and passenger confidence:
1)  The routes to be operated, local infection rates and whether they are considered high, medium or low risk;
2)  Any Health Authority restrictions at point of departure and destination;
3)  Cabin crew health/quarantine restrictions at point of arrival, including any restrictions imposed on those who have recovered from infection;
4)  Hotel availability, meals and crew transport arrangements;
5)  Inflight Services products which can be delivered safely, appropriate to the level of risk;
6)  Health Authority requirements for Personal Protective Equipment for cabincrew, its availability and the associated procedures for its use and disposal.

As time progresses, Health Authorities and regulators will determine which measures can be alleviated. Airlines should be prepared to review their cabin operations regularly to ensure compliance with regulations and facilitate a gradual return to more normal operations.

IATA is calling for a mix of responses from governments to help the industry back to its feet namely: direct financial support, loans, loan guarantees, support for corporate bond market and tax relief. Also, key priorities to be addressed are: to provide a package of measures to ensure air cargo operations, put in place fast track procedures for overflight and landing permits, exempt flight crew members from 14 day quarantine, remove economic impediments (overflight charges, parking fees and slot restrictions), provide financial relief on Airport and Air Traffic Control charges and taxes and ensuring aeronautical information is published, timely, accurately, and without ambiguity, so the airlines can plan and execute their flights.

Today’s challenge of working remotely from the airport makes it important for heads of IT in the airport community to work together to ensure that security is not compromised and connectivity bottlenecks are minimized or eliminated. Going forward chief information officers will need to build a business continuity plan collectively that will be incorporated into the organisational IT strategic plans of both the airport operator and other members of the airport community for positive customer experience.

We need to embrace technology and divorce from primitive methods in our operations; automating the ports to clear cargo faster, ability to purchase train and bus tickets online to reduce physical contact. Federal Government should also extend bailout to the transport sector to Cushing part of the challenges the industry is facing currently. Relationship building & training for travel operator is strategic as a post-coronavirus sales point as passengers need confidence to travel again.
The latest estimates indicate that the possible COVID-19 impact on scheduled international passenger traffic for the full year 2020, would be an overall reduction ranging from 48% to 71% of seats offered by airlines, an approximate USD 194 to 269 billion potential loss of gross operating revenues of airlines and overall reduction of 1,108 to 1,524 million passengers
The impacts depend on duration and magnitude of the outbreak and containment measures, the degree of consumer confidence for air travel, and economic conditions, etc.

An overall reduction of international passengers ranging from 44% to 80% in 2020 compared to 2019 as been predicted by ICAO.
An estimated loss of over 50% of passenger traffic and 57% or over USD97 billion airport revenues in 2020 compared to business as usual is estimated by ACI.

Alexandre de Juniac, IATA’s Director General and CEO.

A 48% decline of revenue passenger kilometres (RPKs, both international and domestic) in 2020 compared to 2019 is estimated by IATA.
A decline in international tourism receipts of between USD 910 to 1,170 billion in 2020, compared to the USD 1.5 trillion generated in 2019, with 96% of worldwide destinations having travel restrictions is estimated by United nations world tourism organization (UNWTO).
A fall of global merchandise trade volume by between 13 and 32% in 2020 compared to 2019 is estimated by World tourism organization (WTO).

A projected ‐3% contraction in world GDP in 2020, far worse than during the 2008–09 financial crisis (by IMF).

Health is another concern now. After international passport, your health certificate to affirm that you are physically and mentally fit might be required before you can board a train or an aircraft into any country. No country or state will want to risk having a passenger with any form of diseases through their border. It is expected that our Health authority put in place series of safety measures which includes use of face masks, temperature checks, filling health declaration forms (for contact tracing), hand-sanitization at boarding gates and other travel advisory in case a passenger falls ill at their destination. With this, it will not be business as usual after the lock-down as the process of checking in till the stage of boarding will take longer hours. Thus, a passenger cannot afford to get to an airport or train station late and still hope to board.

The digital space is revolving into every sector as a result of the pandemic. During and after the pandemic, tourist and tour operators will gradually tilt towards virtual travel to reduce physical interactions, by attending meetings in space or cloud via zoom or webinar, thus affect the demand for tourism globally as virtual reality gradually become a part of life.

 

Victor Oluwadamilare Oyejide is a Travel consultant and Transport geographer. He writes from Ibadan, Oyo State.

Gaza Gideon is an Air Traffic controller with the Nigerian Airspace Management Agency Ikeja, Lagos.

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