Just two months after toll roads across the US hit bottom in terms of traffic and revenues, they had recovered roughly half their losses by June. By September, they were back to around 80 to 85 percent of 2019 levels, Scott Monroe, a senior director at Fitch Ratings told Infrastructure Investor in late October.
Fast forward to January, and data from the fourth quarter of 2020 show “backsliding due to the worsening pandemic situation with tightening lockdowns”, Monroe tells us.
“October was essentially treading water and data from November, and a small trickle of data from December, show further deterioration,” he says.
Fitch Ratings projects passenger traffic to return to 93 percent of 2019 levels this year, and forecasts it will only reach 100 percent in 2022.
“In a sense, we’re never going to be truly recovered because we’ve now lost out on three years of growth,”
“In a sense, we’re never going to be truly recovered because we’ve now lost out on three years of growth,” Monroe says. “Toll roads, whose traffic volumes annually might grow by 3 percent, would have grown by nearly 10 percent cumulatively over that three-year period, which is now gone. We don’t project that that will be made up. We’re going through a major economic event and, just like in the Great Recession, what that did is it permanently reduced economic output. So, that’s going to be an element here too.”
Covid’s greater impact
Speaking of the Great Recession, Monroe offers the following figures to put things in perspective. “During that economic event, traffic on small toll roads was down 14 percent and large toll roads were down about 7 percent.” With toll roads losing 50-60 percent of traffic volume last April – managed lanes fared even worse, losing 60-75 percent – covid’s impact on these assets was five times as bad as the global financial crisis.
Aside from lost economic output, there is also the issue of remote working, a trend likely to continue post-pandemic.
“We actually take that into consideration when making our projections,” Monroe says. “But you also have to drill down to each individual toll road to see what type of traffic these roads have and what type of commuter they serve with regards to their occupation.”
“But even amongst commuter facilities, traffic volumes vary depending on the types of commuters they serve,” says Monroe. “One of the things we looked at is data from the Bureau of Labor Statistics, which show which jobs can be performed remotely and to what extent.An area faring better during covid have been those that cater to commercial and freight traffic.
“Financial services, for example, are at the top of that list, with 80 percent of those jobs being suitable for remote work. But once you get to jobs in sectors such as agriculture, hospitality, construction, transportation and utilities – that percentage drops to between 10 and 20 percent.
“So, in metropolitan areas such as New York, northern Virginia, San Francisco, these types of urban areas, you’re going to have a lot more jobs that can be performed remotely and these are the areas where we see the biggest drops.”
Despite the backsliding in recovery, toll roads remain one of transport’s more resilient sub-sectors. Cargo ports are among the infra sub-sectors to have been least impacted by covid. Traffic there is expected to return to 2019 levels by 2022.
Another bright spot for toll roads is that they maintain strong financial positions, according to Fitch.
“Most toll roads did not need to draw on cash balances to pay debt service or balance financial operations, thus leaving them with solid liquidity positions well into the crisis,” the agency said in its 2021 outlook for the US transport sector. “The combination of healthy debt service coverage ratios, a rapid traffic recovery and solid liquidity leave toll roads well-positioned to withstand another potential time-limited shock, such as a period of weaker-than-expected economic growth or a second wave of lockdowns.”