The Effects of COVID-19 Outbreak on Transportation Industry| By Omolola Lipede

Our world is changing very fast; businesses are locked down; people are compelled to stay indoors. Nobody had ever imagined this just six months ago. It appears the new normal is here, even the blind can see it, and the deaf can hear it – no thanks to a microscopic organism called Coronavirus. In March 2020, the World Health Organization (WHO) declared COVID-19 a global pandemic, forcing a global lockdown, restrictions of movements, and closing of businesses across the affected countries around the world.

As of this writing, the disease continued to increase exponentially. According to WHO, global there are 3,917,366 and 274,361 confirmed cases and deaths respectively. In Africa, the number of confirmed cases is now 46,626 while the deaths are put at 1,369. Particularly, in Nigeria the cases were 4151 (8.9% of Africa) and 128 deaths. Following the rest of the world, the Federal Government of Nigeria pronounced a lockdown in these cities as well as Ogun state as a measure to stop the spread of the pandemic.

The lockdown included restriction of movement, ban on both international and domestic flights in and out of the country, shutting down of financial institutions as well as small and medium scale businesses. Apparently, one of the sectors that have been severely affected by the lockdown is the transport sector.

The pandemic resulted in a sharp decline in the global airlines, national railways systems, and road networks patronage. Consequently, the operations of the transport companies have been deferred with International flights being suspended, collection of transport document cancelled, the refund of ticket fee paid in advance and international transport logistics cancelled indefinitely. Also, conferences, sporting events, concerts, funfairs among other gatherings that require a mode of transportation which will add a token to the purses of the motorists have been suspended. In a similar vein, automobile companies especially the assemblage part in Nigeria were shut and also halting the 24/7 busy road transportation.

Effect of the Pandemic on the Transport Industry

Road transport

Road TransportThe demand for public transport has dropped, commuters instead pick a drop or trek a bearable distance, this however reduced the number of passengers a motorist can carry per time, and ultimately reduced the overall fee to be collected by the motorist. The fall in the passengers’ demand for public transport pushed by the stay-at-home order of the government may have a long term effect on people’s travel behaviour.

As the pandemic worsens, the lockdown and stay- at- home rule has denied the common motorist temporal opportunity to earn a daily income. This led to the depletion of savings (if they have any) to meet the family needs, especially in a situation where such an individual is the breadwinner of the family.

Besides, the crash in the global oil market contributed to the crash in the domestic pump price of the PMS to N123-125 per litre from N143-145 per litre. This serves as a piece of good news to the motorists. The impact of the reduction in the PMS per litre will be magnified at the post-pandemic era wherein the motorist purchased the PMS at a lower price, with no variation in the amount charged by the motorist, the income per day will rise.

Railway Transport

In the same vein, the railway project planned to be completed in 2020 especially the Lagos-Ibadan railway project set for completion in June 2020 has been suspended due to the outbreak. As the Chinese contractors involved in the project were tracked down in their countries as a result of lockdown. This delay may cost the federal government more in terms of the high cost of raw materials to use in completion.

Rail TransportAlso, the N67.17b set aside in the 2020 budget in the execution of a significant project in the transport industry by the federal government has been jeopardized by the pandemic. The consistent downward trajectory of the crude oil price harms the total revenue and may allow for a delay in the completion of projects, especially the rail projects. With this, the pandemic has, in a way contributed to the infrastructural deficit by widening its gap since the monies to be allocated to the projects are being diverted to saving lives affected by the COVID-19.

Airline

Nigerian Civil Aviation Authority issued a directive on the restriction on an international flight to Nigeria starting from March 23, 2020, to curtail the pandemic. Following this restriction, international travels for conferences, educational purposes, tourism and other engagement were placed on hold. The lockdown and restrictions order has led to the grounding of about 120 domestic airlines nationwide, leaving operators with no income but recurrent expenses. With nothing generated in the last month, the Federal Airports Authority of Nigeria (FAAN) will require the federal government to pay the monthly overhead cost, which is in billions.

AirportGlobally, the COVID-19 pandemic has led to flight cancellation, aircraft groundings, border closure, and travel bans. These led to fewer flight travels across nations infected with the virus and nations that are COVID- 19 free are taking precautions by limiting the flight onboard. Thus, the airline experienced a decline in the lower load factor, and this led to unit revenue loss and reduction in yield for the airline industry.

According to ICAO estimate, International passenger seat capacity declined in February by 11% and an estimate of about 24% decline in March from the benchmark set globally. This indicates about $6.6m revenue loss by airlines in February and about $31.6m in March. In March 2020, the seat capacity estimate for African airport for both domestic and international travel by air declined by an average of 41% due to the pandemic. This may require a quick readjustment by the airline authorities, through budget cuts and revision in terms of cost and operations.

Transport IndustryIATA opined that about 25 million jobs supported by air transport are at risk due to COVID-19. The agency (IATA) concluded that disruption of air travel due to the spread of the

COVID-19 pandemic will cost Nigeria $434m in revenue and 22,200 job loss. With the 8,000 direct employees in the Nigerian airline, Arik Air slashed the April Salaries of its workers by 80% and has sent over 90% of its 1,500 employees on compulsory leave without pay. Azman Air and Max Air followed the same pattern by directing over 1000 workers on mandatory leave without compensation as a result of the effect of the COVID-19 on business. Other airlines in Nigeria will undoubtedly follow the same or close to the same pattern. Although, the decision is hard but compulsorily taken to limit the adverse effect on cost and operations.

Prospects

According to ICAO, the longer the pandemic persists, the more the revenue decline in the airline industry. However, comparing the original baseline to the current happening, if recovery starts by May 2020, this may lead to the overall reduction of 37% of seats offered by airlines amounting to a decrease of 411 million passengers and USD 90 billion potential loss of gross operating revenues of airlines with Africa losing up to $4.61bn. The situation gets compounded if the recovery starts by June 2020, it may mean a reduction of 48% of seats offered by the airline, with 535 million passengers reduction and ultimately will lose $118 billion potential loss of gross operating revenues of airlines and Africa losing about $6.43bn. Due to the effect of the pandemic, it has been estimated that the airports will lose close to $76bn in 2020.

Many airlines in Nigeria may go bankrupt in the sense that the pandemic might modify the demand pattern of airline customers. One of the unavoidable costs to the airline industry is the massive refund of the booked tickets as a result of massive cancellations which was a result of government restriction on travels.

According to the IMF forecast, Nigeria’s economy may shrink by 3% in 2020, this indicates that all sectors, including the transport sector contribution to GDP in 2020, will decline. This may take 2 to 3 years for the economy to recover.

Conclusion

The pandemic has impacted the transport sector both locally and internationally, and this disruption will cause restructuring in its operations. The sub-sector, especially the airline, may experience changes in demand patterns by its consumers.

Also, many business trips by air, long-distance journeys by rail, and road are vulnerable to being replaced by video-conferencing, as business operations take a new look at post-pandemic. This will be a big hit on the transport industry as the public transport operators may need to take precautions by providing face masks in their vehicle, hand sanitizers just to reassure passengers that they will not be infected. This is the high time for the transport industry in Nigeria to start looking at a way to review the entire idea of public transport model and how the sector may meet the changing demand brought by the pandemic.

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