Sector focus: Ground transport

The transportation sector has been grappling with many challenges over the years, but the pandemic has compounded them – and brought a new set of issues to the fore.

A global pandemic and country-wide lockdowns are probably the worst operating conditions for most sectors, but particularly sting for ground transportation. Cities coming to a grinding halt and restrictions on movement have reduced activity to almost zero in the overall transport sector and especially in public transportation.

Deloitte estimates by year-end 2020 up to 45 percent ($30 billion) of the transportation industry’s operating profits will have been destroyed. That’s the equivalent of one-quarter of its companies’ operating profits. But the transportation industry was under pressure well before covid-19; the pandemic has simply exposed longstanding challenges.

Core concerns

According to another report by Deloitte, “the pressure on organisations during this coronavirus pandemic has shifted from moving citizens to keeping a core transportation system operational with a skeleton workforce to ensure freight and key essential workers can continue to move”.

The report adds that, “a secondary effect of this shift is the sudden change in sources of revenue for transportation operators, with many experiencing an unexpected shortfall in their finances. Organisations will need to plan ahead to ensure that the transportation network will be ready for a return to normal operations when the coronavirus pandemic lockdown measures are lifted”.

Stories of the year

Revenues are down, but deals continue

March 2020
The South Korean government waives toll road tolls for at least one month to lessen the economic impact of the pandemic

Cube Highways adds nine Indian roads to its portfolio for $681m

Brookfield Asset Management offloads a 51 percent stake in the Dalrymple Bay Coal Terminal via an IPO

What is unfortunate is that all of this has emerged at a time when discussions around smart mobility were gathering pace as both public authorities and private players were beginning to embrace changing consumer needs and advancing technology.

2020 has proved to be a proper lull for the sector due to the raging pandemic and it is not certain when recovery might take place.

Freight and logistics have also suffered, as lockdown measures have reduced economic activity and movement of goods and people. Logistics sectors such as trucking witnessed a volatile year; volume was up led by panic-buying and demand for goods, then declined, and is now picking up again.

Keep on moving

Both the public and private transport operators will need to find ways to continue to operate amid lockdown measures, balancing reduced operations with providing enough capacity for key workers to be able to practice social distancing.

Commuting and travelling patterns may not recover to their pre-covid-19 state once lockdowns are lifted, so public transportation will need to realign revenue mechanisms.

Authorities will need to determine the cost and revenue impacts of low ridership and figure ways to protect their core assets.

While transportation is key for any economy, the sector will now need to reorientate itself after a world-changing pandemic, and how it does so will be key.