Understanding COVID-19’s Impact on the Transportation Industry

Originally published by MehaffyWeber.

The outbreak of the novel coronavirus Sars-Cov-2, also known as COVID-19, has brought profound changes and disruptions to nearly every aspect of transportation in the United States. The airline, automobile, and rail industries, as well as the energy companies that support them all, have been hit hard by the virus itself, stay-at-home orders, and even social distancing. With the demand for travel plummeting to a modern all-time low, the transportation industry is having to shift its focus of moving citizens and goods around the country to keeping a core transportation system operational with a smaller workforce. Keeping the country’s transportation infrastructure operating ensures freight and key essential workers can continue to travel. As many transportation companies are making these appropriate shifts in operations, they are also experiencing a sudden change in their sources of revenue leading to financial shortfalls. While these changes may not be permanent once COVID-19 restrictions are loosened, the transportation industry needs to plan ahead to keep its network ready to return to normal, pre-COVID-19, operations.

How Has Passenger Travel Been Affected?

At the beginning of the pandemic, many countries agreed to limit international travel in hopes of stopping the spread of the virus. These restrictions resulted in a significant decrease in air travel this year with airline sales nearly stopping and cancellations with refunds being requested. By May of 2020, airport traffic dropped by 90 percent. While the airline industry received some aid through the CARES Act – including payroll assistance for airlines, cargo carriers, and contractors – the significant restrictions imposed by the Department of Transportation have continued to keep airline passenger numbers down by about half.

Similar to the airline industry, passenger travel by railway significantly decreased due to COVID-19 restrictions. Amtrak saw cancellations increase by 400 percent and bookings decline by 85 percent in March. Amtrak suspended service on most of its routes and only kept the most essential lines running. New York and California both saw significant decreases in rail travel as lockdown restrictions kept many workers at home.

With more Americans working from home, the demand for oil products – including fuel – decreased significantly. Workers do not have to drive into the office and are filling up their gas tanks significantly less often. Oil prices dropped in the Spring of 2020, and the oil industry has already started to see a large number of layoffs in the workforce.

How Has The Transportation of Goods Been Affected?

COVID-19 not only affected passenger travel, but also, the shipping and movement of goods across the country. Throughout the pandemic, consumer demands changed dramatically. Essential commodities saw a staggering increase in demand, including the need for disinfectant products, medical supplies, groceries, and paper goods. Manufacturers were not able to keep up with demand right away, which slowed down the entire freight industry. Planes were ready to fly and truck drivers ready to haul freight across the country, but the goods were not there to transport.

Once manufacturers were able to catch up, and those essential goods started to become available, long-haul truck fleet managers, dispatchers, and big rig drivers had to work longer hours to deliver those essential items. However, cargo needs in other areas, including the restaurant and entertainment industries, practically ceased altogether. This constant shift in consumer needs will continue to affect the trucking industry for the foreseeable future.

Air-cargo has seen an overall increase in use during the pandemic as essential goods are transported across the world. Some passenger planes, not in use by the public at this time, have been able to be retrofitted to carry even more cargo inside the cabin. These planes were able to ship lighter-weight items – including masks and other personal protective equipment – in the passenger cabin by removing the seats and securing the boxes with nets. When the FDA approves vaccines for distribution, the air-cargo industry will play a critical role in getting vaccines where they need to be.

Long-Term Effects of COVID-19 on the Transportation Industry

COVID-19 has changed the way the transportation industry is viewed, as well as how it is utilized. Following a successful vaccine and lifts of all travel restrictions, a long-term shift in mobility patterns might emerge. There may be an increase in private vehicle, scooter, motorcycle, and bicycle sales to avoid public transportation or shared methods of transportation. Rideshare services may not be used as frequently. As many workers continue to work from home, there will be a net decrease in travel from the workplace to home and vice-versa. Tourism may decrease, especially trips planned by planes.

The transportation industry will need to adjust and plan for these potential long-term shifts while continuing to maintain its network that is moving essential freight and providing worker travel. Maintaining enough capacity to ensure that workers can practice social distancing will be key to transitioning to a long-term plan. Companies will also need to plan for the availability of key workers to ensure that there is always a person on staff with the critical skills and training needed to keep networks operational. This may mean creating a new skill set based training program for key roles in the organization.

Executives and board members will need to remain aware of changes occurring throughout the pandemic. There are many key questions they should be asking that can help keep their business on track, including:

• How can we work with the government and our stakeholders to safeguard the long-term financial viability of our transportation network?
• How do we protect our essential workers to ensure they are available to work and keep the network up and running?
• Is the company’s supply chain exposed to COVID-19 risk? Where does this risk come from and what effects will it have on operations?
• Do we need to reorganize capital investments as a result of the unexpected decrease in revenue and potentially make permanent changes to the use of our transportation network?
• Are there ways to make the company more cost-efficient?

What Are the Next Steps?

Employees and stakeholders will look to company leadership for a response to the COVID-19 pandemic. The fate of each company will be defined by the responses it takes to the changes happening in the transportation industry. Can the company recover from financial losses and thrive?

Some important steps for staying afloat during this crisis include:

• Determining the cost and revenue implications of consistently decreased ridership;
• Maintaining core assets;
• Prioritizing protecting essential personnel with appropriate protective equipment and training
• Building a larger pool of available workers for mission-critical roles;
• Engaging with government officials and leadership to remain in compliance with all regulations, restrictions, and safety measures; and
• Creating a contingency plan that includes a potential rapid surge in demand – the return to normal travel again.

The coronavirus has impacted all forms of travel in some way this year. Staying aware of rapid changes in travel restrictions, monitoring changes in traveler behavior, and ensuring supply chains remain as functional as possible will be essential to navigating through this time.

The post Understanding COVID-19’s Impact on the Transportation Industry appeared first on MehaffyWeber.

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