THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES

June 2020
Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
INTRODUCTION

Scope

▪ This report uses Euromonitor International’s Passport Travel and Travel Forecast Disclaimer
Model to assess the impact of COVID-19 on transportation modes. Data are given Much of the information in this
briefing is of a statistical nature and,
in US dollars at fixed 2019 exchange rates, at constant prices. All scenarios have while every attempt has been made to
been run for Q2 2020. ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
Travel modes errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
Airlines briefings may not totally reflect the
companies’ opinions, reader
discretion is advised.
Travel Rail
The travel and tourism
landscape has been completely
transformed by the impact of
Bus Coronavirus (COVID-19). The
sharp decline in global demand
has triggered huge financial
difficulties and liquidity problems,
Cruise forcing many transportation
operators to cut costs in an effort
▪ Forecast and scenario closing date: 4 May 2020 – the last update of data in the to preserve cash, lay off staff and
seek government financial
analytics tools. support. This reports reviews the
impact of the pandemic on key
▪ Report closing date: 5 June 2020 – the date the report writing stopped. transportation modes, and the
▪ Discussions and feedback from our clients are a vital part of all of our research at strategies adopted by the players
to overcome this crisis.
Euromonitor International. We welcome the chance to continue the conversation.
Full contact information for the author can be found at the end of this report.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 3

INTRODUCTION

Coronavirus (COVID-19)

▪ Travel and Tourism primary research was executed before COVID-19

became a global pandemic. As such, the impact of COVID-19 was not
considered in our forecast. The impact of COVID-19 will be considered
within the analysis of reports.

▪ Given the scale and impact of COVID-19, both at global and national levels,
the situation is continuously evolving. For the latest insight on COVID-19
and how it can be expected to impact demand across industries, economies
and consumers, you can access strategic analysis and regular updates on
www.euromonitor.com and via the Passport system, where new content is
being added on a systematic basis as the situation develops.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 4

INTRODUCTION

Key findings

Industry on its knees The travel and tourism industry will experience a long-lasting impact across the
whole value chain, with a full recovery likely to take 5-10 years in some
categories. With pockets of recovery in some regions, domestic and short haul
travel are expected to drive the initial rebound.

Airlines – among the hardest The impact of COVID-19 on the airlines category has been huge, with the
hit grounding of almost all the fleet as a result of nearly 90% decline in passenger
demand, increasing debt and worsening liquidity, poor aircraft occupancy and a
flood of cancellations and refund requests. Expectations are that the industry will
become much smaller by the end of the year, as many operators are faced with
bankruptcy and are forced to exit the industry.
Cruise – not far behind Plummeting passenger numbers and revenues, as well as negative consumer
perceptions as a result of health warnings and restrictions on cruise travel, in
addition to declining share prices and vast monthly cash burns, are severely
damaging the operations of cruise operators. Layoffs and restructuring are
characterising the category.
Consumer confidence Consumer confidence is very low regarding expenditure on tourism services.
plummets With high unemployment levels in many markets, the pandemic is directly
impacting the disposable income of households. Generation Z and millennial
households (ie those aged under 40 in 2020) will show the biggest declines in
terms of consumer expenditure in the short and medium term. Business travel
will suffer as companies tighten their budgets and opt for all-digital business
communication.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 5

INTRODUCTION

Airline industry hardest hit by COVID-19

▪ The transportation industry is very susceptible to external factors, and the global COVID-19 pandemic is
already having a detrimental impact. Although all modes of transportation have been affected, airlines has been
one of the hardest hit. Over the last five years, the aviation sector has been showing good growth globally, and
in 2019 recorded value sales of USD740 billion, according to Euromonitor International. It also accounts for
nearly 70 million jobs across the whole tourism chain, according to the International Air Transport Association
(IATA).
▪ The sharp decline in worldwide demand has triggered huge financial difficulties and liquidity problems for all
players, forcing many operators to suspend thousands of flights and services, whilst cutting capacity, frequency
and costs, including the introduction of wage reductions, the shortening of working hours, the temporary laying
off of staff and exploration of early retirement.
▪ The free movement of people has been halted by the impact of COVID-19, which has already had a more
widespread negative effect than events such as the SARS outbreak and 9/11, due to the higher number of flight
cancellations and the larger number of markets affected (meaning more far-reaching economic consequences).
With the epicentre the pandemic having shifted from Asia Pacific to Europe, then the US and Latin America, it is
uncertain how long recovery will take, but inevitably it will be slow.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 6

INTRODUCTION

COVID-19 in context

Infectious Diseases in Context ▪ Despite lower mortality rates than other

50%
recent epidemics, the impact of COVID-19 on
Ebola the global economy and consumer markets
45% has the potential to be significant for several
reasons:
40%
▪ Geographic spread – with transmission
MERS
35%
centres across most regions globally. The
impact globally is also likely to be protracted,
affecting different countries and regions at
Fatality rate

30%
different times;
25%
▪ Contagiousness, as COVID-19 is more
20%
transmissible than seasonal flu, for instance;
▪ The global economy was already weakened,
15% and many governments have limited room for
SARS manoeuvre fiscally (without incurring heavy
10%
debt) and in monetary policy, and the impact
5% Covid-19
of measures to combat COVID-19 is not clear;
Seasonal Flu Swine Flu Spanish Flu Zika ▪ The impact on China and therefore global
0% supply chains has been severe;
0.0 1.0 2.0 3.0 4.0 5.0
Contagiousness
▪ Currently, the seasonality of the virus is
Average number of people one person will infect unclear, as is the number of unreported cases,
Source: Centers for Disease Control, World Health Organization, CIDRAP meaning many uncertainties remain.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 7

Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
ECONOMIC OUTLOOK

Global baseline outlook

▪ As of May 2020, Euromonitor International further Global Real GDP Growth Baseline Forecast
downgraded the baseline global real GDP growth -10 -5 0 5 10
forecast for 2020 to a range of -4.0% to -1.5%, %

compared to 2.6-3.4% growth forecast in the last pre- World -3.2

COVID-19 pandemic forecast.
2014-2018 average
▪ Advanced economies are expected to be the hardest Advanced 2019
-5.9
hit in this recession, with real GDP contracting by Economies 2020
2021
around 6% in 2020. This reflects the strong spread of 2022
Developing
the pandemic in these economies, and the willingness and Emerging -1.1
of these countries to engage in costly social Economies

distancing and lockdown measures to reduce

-5.8
infection and death rates. US

▪ Emerging and developing economies are also likely to

be badly hit, with output contracting by around 1% in Eurozone -7.2
2020, due to both lockdown measures and stronger
financial and trade spill-over effects.
China 0.5
▪ The baseline forecast reflects the combined adverse
effects of COVID-19 social distancing restrictions, %
supply disruptions, significant tightening of financial -10 -5 0 5 10

conditions, a spike in private sector uncertainty,

Source: Euromonitor International Macro Model
falling household disposable incomes and sharp
drops in global trade and commodity prices.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 9

ECONOMIC OUTLOOK

Global baseline outlook subject to unusually high downside risks

▪ Social distancing restrictions have led to large Global Real GDP Index, Baseline and Alternative Scenarios
declines in business revenues, employment and 100=2019 Global Real GDP 100=2019 Global Real GDP
wages, with each month of strict 130 130

quarantine/lockdown estimated to cause a 25- Pre COVID-19

Euromonitor Baseline
45% decline in economic activity relative to 120 COVID-19 Pessimistic1 120
normal. The baseline forecasts assume that the COVID-19 Pessimistic2
COVID-19 Pessimistic3
strict social distancing measures successfully 110 110
contain the pandemic. This would allow for a
gradual relaxation in H2 2020 of the 100 100
quarantine/lockdown restrictions imposed in
many countries. 90 90
▪ There is substantial uncertainty about the 2019 2020 2021 2022 2023 2024
effectiveness and length of COVID-19-related 80 80
social distancing restrictions, the path of the Source: Euromonitor International Macro Model
pandemic, financial stability and the ability of
governments to contain the negative effects of ▪ Our baseline forecast for the global economy is a mixed V
lower disposable incomes and greater and L shaped recession a partial rebound in output relative
uncertainty regarding private sector spending. to the pre-recession forecast in 2021-2022 but leaving
global output 2-3% below the pre-recession trend over a
▪ To account for this uncertainty, we assign a 38- five-year horizon. Our pessimistic scenarios imply an L-
48% probability to our baseline forecast. The shaped recession relative to the pre-recession forecast
remaining probabilities are assigned to three over a five-year horizon, with bigger long-term declines in
COVID-19 pessimistic scenarios. economic activity.

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ECONOMIC OUTLOOK

COVID-19 scenarios
Baseline Forecast COVID-19 COVID-19 COVID-19
Pessimistic1 Pessimistic2 Pessimistic3
2020 Global GDP growth [-4%, -1.5%] [-6%, -4%] [-8%, -6%] [-11.5%, -8%]
2021 Global GDP growth [3.5%, 7%] [2.5%, 5.5%] [0.5%, 3.5%] [-2.5%, 2.5%]
Probability 38-48% 25-35% 15-25% 5-10%
Assumptions
Global infection rate 1-10% 5-25% 15-35% 20-50%
Mortality rate 0.3-1.3% 0.5-1.5% 1.0-3.0% 1.5-3.5%
COVID-19 social 1-3 quarters 2-4 quarters 3-5 quarters 3-7 quarters
distancing restrictions

Business and consumer 10-40th percentile 10-30th percentile 1-20th percentile of 1-10th percentile of
confidence indices fall to of historical values of historical values historical values historical values

Global stock prices Down by 15-30% Down by 10-30% Down by 25-45% Down by 40-70%
relative to pre Relative to baseline relative to baseline relative to baseline
COVID-19 forecast.
Rebound by 0-30%
in H2 2020
Private sector and 2-9 percentage Rise by 1-4 Rise by 2-7 Rise by 3-10
emerging markets points above pre- percentage points percentage points percentage points
borrowing risk COVID-19 forecast above baseline above baseline above baseline
premiums forecast forecast forecast

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ECONOMIC OUTLOOK

COVID-19 Pessimistic2 scenario: the main downside risk forecast

▪ The main downside risk is the COVID-19 Global Real GDP Growth COVID-19 Pessimistic2 Forecast
Pessimistic2 scenario (accounting for -15 -10 -5 0 5 10
the combined probability and economic %

impact). In this scenario, the COVID-19 -6.9

World
pandemic is deadlier and harder to
control than expected, causing 2014-2018 average
Advanced
significant social distancing restrictions Economies
-9.1
2019
to extend into the second half of 2020 2020
2021
and even early 2021. This causes more Developing
-5.2 2022
and Emerging
substantial supply disruptions, liquidity Economies
problems for businesses and
households, and a more severe decline US -8.6

in private sector confidence.

▪ Financial market conditions also tighten Eurozone -10.6
considerably more than in the baseline
forecast. As a result, global economic
-3.1
activity contracts by 6-8% in 2020. The China

recovery is much weaker than in the

%
baseline forecast, with global real GDP -15 -10 -5 0 5 10
growth of 0.5-3.5% in 2021. We assign Source: Euromonitor International Macro Model
the COVID-19 Pessimistic2 scenario a
15-25% probability.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 12

ECONOMIC OUTLOOK

COVID-19 Pessimistic1 scenario: a moderately more pessimistic forecast

▪ The COVID-19 Pessimistic1 Global Real GDP Growth COVID-19 Pessimistic1 Forecast
scenario represents a moderate -15 -10 -5 0 5 10
negative deviation from the %

baseline forecast. It serves as an World -4.7

alternative to the baseline for
decision-makers who are more 2014-2018 average
Advanced
risk averse or more pessimistic Economies
-7.2
2019
than consensus views. Significant 2020
2021
social distancing restrictions last Developing
-2.7 2022
and Emerging
somewhat longer, and financial Economies
conditions are moderately tighter
than in the baseline. Global real US -6.9

GDP growth in 2020 is -6% to -

4%, while the recovery is weaker -8.6
Eurozone
in 2021, with output growth of
2.5-5.5%. We assign this scenario
a 25-35% probability. China -1.0

%
-15 -10 -5 0 5 10
Source: Euromonitor International Macro Model

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ECONOMIC OUTLOOK

COVID-19 Pessimistic3 scenario: a worst case forecast

▪ The COVID-19 Pessimistic3 Global Real GDP Growth COVID-19 Pessimistic3 Forecast
scenario represents a worst case -20 -15 -10 -5 0 5 10 15
global economic crisis on top of %

the epidemiological crisis. In this -9.7

World
scenario, the pandemic is much
deadlier and longer lasting than 2014-2018 average
Advanced
expected, with significant social Economies
-11.5
2019
distancing measures continuing 2020
2021
into 2021. Stock markets and Developing
-8.3 2022
and Emerging
confidence levels crash to Economies
unprecedented lows, and
business liquidations extend US -10.7

beyond the sectors most

vulnerable to social distancing. -13.2
Eurozone
▪ Global economic activity
contracts by 8-11.5% in 2020,
-5.9
and the economic recession China

continues in 2021. We assign this %

worst case scenario a 5-10% -20 -15 -10 -5 0 5 10 15
probability. Source: Euromonitor International Macro Model

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 14

ECONOMIC OUTLOOK

Real GDP annual % growth forecasts and revisions from last quarter

Country/Region 2019 2020 2021 2022 2023-2027 2020 2021

revision revision

Advanced, Emerging and

1.7 -5.9 4.2 3.2 1.7 -7.3 2.8
Developing Economies

US 2.3 -5.8 4.5 3.2 1.7 -7.5 2.9

Canada 1.6 -6.0 4.2 3.0 1.8 -7.6 2.6
Eurozone 1.2 -7.2 4.6 3.5 1.4 -8.3 3.3
China 6.3 0.5 8.3 6.4 4.9 -5.3 2.7
Brazil 1.1 -5.0 3.0 3.7 2.4 -7.1 0.7
Italy 0.3 -9.0 4.6 2.8 0.8 -9.4 4.1
Spain 2.0 -8.0 4.7 3.2 1.5 -9.5 3.2
UK 1.4 -6.7 4.2 3.6 1.7 -7.8 2.9
Japan 0.8 -5.4 2.8 1.8 0.7 -6.0 2.1
South Korea 2.0 -1.0 3.2 3.0 2.3 -3.0 1.1

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ECONOMIC OUTLOOK

China: general outlook

2020 Q2 Forecast 2019 2020 2021 2022 2023-2027 2020 2021

revision revision

Real GDP Growth (%) 6.3 0.5 8.3 6.4 4.9 -5.3 2.7
Inflation (%) 2.9 3.5 2.2 2.4 2.5 0.7 -0.3
Central Bank Policy
4.3 4.0 4.0 4.0 4.2 -0.2 -0.2
Rate (%)
▪ The Chinese economy contracted sharply at the ▪ Consumption per capita declined by 12.5% year-on-
beginning of 2020, due to the COVID-19 outbreak, year in Q1 2020, while fixed assets investment
but is now showing signs of recovery. Output growth contracted by 16.1%. Construction activity contracted
in the baseline forecast is expected to range from - by 17.5% year-on-year, while accommodation and
1.1% to 1.7% in 2020, followed by a 6.6% to 9.6% restaurants activity declined by 35.3% year-on-
rebound in 2021. However, this baseline forecast is year. Increasing government spending and a rise in
assigned just a 38-48% probability at this stage, with sectors such as IT services countered these
other adverse scenarios having a probability of 52- contractions to some extent, preventing a worse
62%. decline in output.
▪ Output is estimated to have declined by 6.8% in Q1 ▪ Preliminary Q2 data show some improvement in
2020. Manufacturing and construction sector output economic activity. Nominal retail sales in April were
declined by 9.6%, while services sector activity down by 7.5% year-on-year, compared to a 15.8% year-
contracted by 5.2% year-on-year. Nominal retail on-year decline in March. Industrial production is now
sales fell by 19% year-on-year (a contraction of 3.9% higher than one year ago (but still below the
around 24% in real terms). normal trend year-on-year growth of 4.5-5.5%).

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ECONOMIC OUTLOOK

China: COVID-19 and consumer spending by income segment

▪ The COVID-19 downturn has had an especially China Real Total Consumer Spending
strong effect on household consumption in 100=2019 Spending 100=2019 Spending
China. Real consumer spending is expected to 140 140
2017 2018 2019 2020 2021 2022 2023 2024
decline by around 1.5% in 2020; however, 130 130
consumption is expected to rebound in 2021 and 120 120

2022, with continuing robust long-term growth. 110 110

100 100
▪ Despite the pandemic, China’s real consumer 90 90
Euromonitor Baseline
spending is expected to be around 24% higher in 80 COVID-19 Pessimistic2 80
2024 than in 2019. The newly emerging high- 70 70
income middle class (the B income segment) is Source: Euromonitor International Macro Model and
Consumer Spending by Income Bands Model
expected to continue its rapid expansion, with
real spending in this segment expected to be China Real Total Consumer Spending, B Income Segment
almost 40% higher in 2024 than in 2019. 100=2019 Spending 100=2019 Spending
160 160
▪ Given the high level of uncertainty now 2017 2018 2019 2020 2021 2022 2023 2024
surrounding the baseline forecast, it is important 140 140

to examine the impact of more pessimistic 120 120

scenarios on these estimates. In our main
100 100
COVID-19 Pessimistic2 scenario, real consumer Euromonitor Baseline
spending would decline by around 5% in 2020, 80 COVID-19 Pessimistic2 80

but it would rebound in 2021 and 2022, rising by 60 60

more than 20% above the 2019 level by 2024. Source: Euromonitor International Macro Model and
Consumer Spending by Income Bands Model
Note: Income segments thresholds in constant PPP adjusted USD
E<5,000≤D<15,000≤C<45,000≤B<100,000≤A

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 17

Introduction
Economic Outlook
Global Forecast Update
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
GLOBAL FORECAST UPDATE

High infection rates impact the global economy and the tourism industry

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 19

GLOBAL FORECAST UPDATE

Air traffic closely correlated with GDP growth

▪ The correlation between air traffic growth and GDP Airlines vs Real GDP Growth Correlation By Region 2020
remains very strong, although air passenger flows
can be affected by a number of other factors, such as
demographics, competition and geography, as well
as unexpected external factors, such as pandemics.
▪ In a non-pandemic business environment, where
there are no global travel restrictions which further
aggravate the situation, a decrease in GDP, as seen in
Q1 of 2020, will lead directly to a drop in disposable
incomes and a consequent negative impact on travel
demand, with fewer air tickets being sold.
▪ This correlation will differ between economies
according to the specific market conditions and air
transportation supply, as well as the level of
development of the transportation category.
▪ In addition, private consumption as a component of
GDP can further tailor future traffic growth. For
example spending in time of the Covid-19 pandemic
can be limited, related to temporary business
closures, curfews and social distancing measures. Source: Euromonitor International

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GLOBAL FORECAST UPDATE

Challenging times ahead as tourism expenditure weakens

Source: Travel Forecast Model, Euromonitor International

Note: Travel IFM update 4 May 2020

▪ A substantial drop in global consumer expenditure as a result of tourism coming to a halt was observed in the
first quarter of 2020. According to the projections of the Euromonitor International Travel Forecast Model
COVID-19 Pessimistic1 scenario, expenditure will continue to weaken and reach USD0.9 billion for the whole
year, compared to the baseline of USD1.4 billion for the same period.
▪ Some of the biggest declines are forecast to be in Germany, the UK and India. Tourism spending is expected to
continue to plummet, due to tightened budgets, high levels of unemployment, changes in consumer behaviour
and the fear factor among would-be travellers.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 21

GLOBAL FORECAST UPDATE

Pandemic hitting disposable incomes across all segments

▪ The uncertainty generated by the pandemic is

creating downside risks to consumer demand and
business investment, which could lead to any
recovery in 2021 being only sluggish.
▪ With unemployment levels in the US expected to
reach 9.4% in 2020, with 26 million jobs having been
lost between 15 March and 18 April, the pandemic is
directly impacting the disposable incomes of
households across all segments.
▪ Heightened global uncertainty is set to persist for
longer than previously expected, based on
Pessimistic1 scenario and household income will
weaken even more. Income inequality is set to
increase, fuelled by the expansion of lower income
segments.
▪ Euromonitor International forecasts that young
people aged under 40 years in the US, the UK, Italy
and Spain will see substantial declines in their
average income in 2020.
▪ Significant declines in expenditure are forecast for
global Gen Z and millennial households (ie those aged
under 40 in 2020) in the short and medium term.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 22

GLOBAL FORECAST UPDATE

Crippled industry with long-lasting effects across all segments

▪ In addition to the immediate effects of COVID-19, among Potential Decline in World Outbound
which have been a lost summer season, the travel and Travel Categories 2020
tourism industry will experience a long-lasting impact 0
across the whole tourism value chain.
-5
▪ With a fall of over 20% in global tourism demand in Q1
2020 compared with Q1 2019, the projections for the year- -10

end results are for a substantial decline. The effects of this -15
will be felt across most of the transportation modes,
particularly those which are dependent on outbound travel. -20

% growth
▪ In the months immediately following the outbreak of the -25
pandemic, the travel and tourism landscape has been -30
completely transformed. Across the board, travel
companies are attempting to preserve their cash whilst -35

maximising liquidity and suppressing company anxieties -40

about the legacy of COVID-19.
-45
▪ During any crisis, whether economic, natural disaster or
terrorism-related, the airlines are typically the first to feel -50
the impact, especially if travel restrictions and bans are put
in place, such as closing borders or withdrawing visas. The
current crisis has deeply affected the airline and cruise
businesses, and weakened investors’ confidence, making
these segments the largest casualties of the pandemic. Source: Euromonitor International
Note: Growth relative to 2019

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GLOBAL FORECAST UPDATE

COVID-19 impact at a glance

Immediate
Immediate drop
Immediate spike in Immediate spike in drop followed followed by
growth followed by growth followed by by long-term
normalisation long-term shift No impact normalisation shift

Airlines 

Rail 

Cruise 

Bus 

Ferry 

Other Transport

Types

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 24

Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
AIR, RAIL AND OTHER TRANSPORTATION

Cloudy skies for the airline category

Airlines Performance 2019-2020

0 0

Absolute growth in passenger revenue

-5
-20
-10
-40

(USD million)
-15
% growth (RPKs)

-20 -60

-25
-80
-30
-100
-35

-40 -120
Asia Pacific North America Europe Middle East Africa Latin America

Passenger Revenue Growth 2019/2020 (USD million) Year-on-year growth in RPKs 2020
Source: IATA
Note: RPKs = Revenue Passenger Kilometres

▪ According to the International Air Transport Association (IATA), the airlines category took a major hit in the
first quarter of 2020, with projections for a fall in revenue of USD314 billion in 2020, representing a 55%
decline in comparison to 2019. An industry which has seen operations halted for more than three months is on
the verge of a complete collapse, as a result of huge liquidity problems, suspended operations, low demand and
an uncertain business landscape following the mandatory quarantines imposed by governments in many
countries where international travel is now permitted. As a result, many carriers are facing insolvency
problems in what could potentially become a completely reconstituted industry.

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AIR, RAIL AND OTHER TRANSPORTATION

Global departures drop to hit strongly the aviation

Global Departures 2017-2022

Source: Travel Forecast Model, Euromonitor International

Note: Travel IFM update 4 May 2020
Departures are in terms of number of trips

▪ The future progress of the airlines sector is closely linked to the recovery timelines of global flows, in particular
departures, in the post-lockdown environment. The assessment of the data is therefore based on the latest
update of the Euromonitor International Travel Forecast Model, with potential for global departures to decline
further if the situation worsens globally.
▪ The volatility of the jobs market and rapidly rising unemployment will hugely impact disposable incomes,
which in turn will translate into reduced leisure and business travel, as consumers will be trading down and
focusing on savings, while limiting expenditure on non-essential products and services, and businesses will be
seeking to reduce expenses. While there will not be a complete halt in consumer demand and travel services,
there are likely to be substantial changes in the way people travel, and their behaviour, preferences and
attitudes.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 27

AIR, RAIL AND OTHER TRANSPORTATION

Low crude oil prices do not benefit all airlines

World Crude Oil (Europe Brent) Spot Price ▪ Many airlines have hedged their fuel prices already
2019-2020 in a bid to mitigate any future fluctuations, but in
80 March 2020, the industry saw one of the sharpest
declines in crude oil prices since 1991, with prices
70
falling to USD20 a barrel in April. This has the
potential to disadvantage those airlines which
bought fuel in advance at a higher price relative to
60
those which do not use such a hedging strategy.
▪ Fuel prices are one of the biggest costs for carriers,
50
but the decline is not expected to have a positive
USD per barrel

impact on many airlines’ operations. In fact, it is

40 likely to lead to hedging losses, as some operators,
especially those in Europe, tend to hedge a
30 substantial proportion of their fuel for the year. For
example, according to company sources, Air France-
20 KLM Group is projected to record a hedging loss of
USD1 billion at current prices 2020, due to the fact it
10
hedged over 50% of its fuel needs for the year at
USD65/barrel. At the same time, there are operators
in China, India and North America which prefer not
0
to hedge their prices and, as a result, a decline in fuel
prices can help help them reduce costs in the short
term.

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AIR, RAIL AND OTHER TRANSPORTATION

Mass unemployment in aviation

Globally aviation supports 65.5 million people

COVID-19 could lead to 25 million job losses¹

11.2 million 5.6 million 4.9 million 2.0 million

jobs in Asia jobs in jobs in the jobs in
Pacific Europe Americas Africa
Source: IATA
Note: ¹ Airlines category and related sectors

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AIR, RAIL AND OTHER TRANSPORTATION

Fleet downsizing on the way

▪ The pandemic is expected to have a significant impact on the fleet size of airline players. Many operators have
already started to retire or permanently reduce their fleets as a result of the depressed demand and their
expectations that poor consumer sentiment will continue beyond the current crisis. This is part of the cost
restructuring schemes airlines are adopting in order to minimise the effects of COVID-19. For example,
Lufthansa is taking 32 aircraft out of operation, Emirates Airlines plans to decrease its fleet by 40%, specifically
its A380 model, according to corporate sources, while American Airlines will not be flying its A330-200s until
2022 – all in a bid to prevent deeper losses.
▪ Similar strategies will be adopted for existing orders from aircraft manufacturers, which are expected to be
postponed or cancelled altogether. In February 2020, Boeing recorded a decline of almost 30% in airplane
orders, and has suspended operations in South Carolina and Washington, while Airbus, in addition to a long list
of cancellations, is adjusting its production rates as a result of the new business dynamics.

Single aisle, 74%

Source: Boeing Commercial Market Outlook

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Scheduled carriers at a disadvantage compared to low-cost airlines

▪ Airlines is the biggest transportation sector globally in terms of

retail value sales, ahead of other modes such as rail, bus, cruise
and ferry. Asia Pacific is the leading region for air
transportation.
▪ The COVID-19 pandemic is expected to have far-reaching
effects on both scheduled and low-cost carriers, although their
recovery timelines are expected to differ. One of the reasons for
this is that budget operators are typically more cash rich, which
allows them to maintain liquidity for much longer until
international borders are open for international travel. In
addition, these airlines do not fly long-haul (with some
exceptions, such as Norwegian) and in many cases have strong
market shares on domestic routes in destinations where
domestic travel is important. This category is therefore,
expected to rebound first.
▪ The point-to-point carrier Ryanair has large cash reserves and
little debt, owing to strong cost cutting strategies and
aggressive negotiating over the years, especially concerning
airport charges. With additional financial support from the UK
government of over USD700 million, the airline will able to
minimise cash outlay, and once operations resume will be able
to compete strongly on price with its rivals.
Source: Euromonitor International

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Nobody is out of the woods

Weekly Global Scheduled Flights Change for Select Markets Jan – April 2020
20%

0%

-20%
% weekly growth

-40%

-60%

-80%

-100%

-120%
January February 02-Mar 09-Mar 16-Mar 23-Mar 30-Mar 06-Apr 13-Apr 20-Apr 27-Apr

Spain Hong Kong Germany Singapore Italy France UK Australia

Sweden UAE South Korea USA India China Japan

Source: OAG

▪ Air travel demand remains severely impacted by the pandemic, with all regions recording sharp declines. As of
the end of April 2020, some of the worst hit markets in terms of scheduled flights changes were Singapore,
Spain, India, the UK and Germany.
▪ Singapore’s air transportation market is entirely reliant on international tourism flows, which will affect its
recovery timeframe. According to corporate sources, in April 2020, the national carrier Singapore Airlines
recorded a decline of 99.5% in terms of passengers carried, with Singapore’s Changi Airport registering a
similar drop in passenger traffic.

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AIR, RAIL AND OTHER TRANSPORTATION

Slow rebound in May brings some hope

Airline Capacity by Region May 2020 ▪ As markets such as China, South Korea and Hong Kong
16 started to emerge from the crisis, a restoration of
capacity was seen in their airlines markets in May 2020.
14 ▪ Strict bans regarding international travel are still
mostly in place in the region, and it is thus the
12
reopening of domestic routes that has been behind the
10
rebound in Asia Pacific. According to the Civil Aviation
Administration of China (CAAC) on 15 May 2020, there
Seats (million)

8 were 10,262 flights, representing 60% of the number

compared to the same day pre-pandemic, and compared
6 to average daily flights of 6,538 in March.
4
▪ India was another market which contributed to the
capacity increase when it opened its domestic air
2 market in late May 2020.
▪ Latin America has been increasingly affected by COVID-
0
19, with Brazil and Mexico being among the worst hit
markets. Airline capacity in this region was among the
lowest in May 2020. In addition, some of the biggest
carriers, such as LATAM Airlines Group and Avianca,
announced bankruptcy and entered Chapter 11 in the
04-May 11-May 18-May
US (ie a financial reorganisation process) which further
Source: OAG, June 2020 aggravated capacity levels.

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AIR, RAIL AND OTHER TRANSPORTATION

Major lessons from a previous crisis

▪ The 2008-2009 global financial crisis impacted Global Financial Crisis Recovery Times vs
scheduled airlines in Western Europe and the Middle Outlook Post COVID-19
East and Africa most severely, with recovery 8
timelines of seven and six years, respectively, 7
whereas low-cost carriers (LCCs) fared much better,
struggling most in North America, where it took 6

three years for LCCs to rebound to pre-crisis levels. 5

Number of Years
▪ The COVID-19 outbreak has, however, brought a 4
different type of turbulence for aviation, as the
3
demand-induced shock is entirely driven by the
global pandemic rather than macroeconomic factors, 2
as was the case in 2008. Domestic air transportation 1
and the LCCs category are expected to play an
0
important role in the recovery of the airlines sector,
although such airlines will be operating with fewer
routes and hugely reduced frequencies.
▪ The situation is complicated as there is continuing
uncertainty because the pandemic is still ongoing,
with social distancing and quarantine measures in Outbound trips Airlines Schedule Low-cost carriers
place in a large number of markets globally. This will
curb demand, leading to a significant reduction in Source: Euromonitor International
Note: Where data for a specific category are absent from the graph, this suggests
revenue passenger kilometres (RPKs) for airlines. no impact

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AIR, RAIL AND OTHER TRANSPORTATION

Domestic market will drive the transportation recovery

▪ The domestic market is seen by many players in the Size of the Domestic Market by Region vs
transportation category as the key to the recovery of Domestic Leisure Travel 2019
their operations, in addition to the financial relief
1,400
they are receiving from their respective
governments. Importantly, however, not all
1,200
companies have a presence in this category, which is
especially relevant for the airline operators, as this
1,000
will prevent them from rebuilding some important
capacity. 800
▪ With large domestic airline markets, Asia Pacific is

Trips (million)
already seeing something of a rebound, albeit weak, 600
especially in China, South Korea and Vietnam.
Domestic travel is projected to rebound more 400
quickly as internal travel restrictions in many
countries have already been lifted, giving an 200

important boost to the sector.

0
▪ The carriers Korean Air, Vietnam Airlines and
AirAsia have already started the operation of
domestic flights, albeit with much lower capacity
compared to the same period in 2019. This does,
however, represent green shoots of recovery for the
industry.

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AIR, RAIL AND OTHER TRANSPORTATION

Regulation changes

Changes to regulation 95/93 governing European Flight vouchers/reimbursement

airports
▪ As of 1 April 2020, the European Commission ▪ According to the European passenger rights
suspended the 80-20 rule for airport slots until October regulations, all EU carriers and those operating
2020, which means airlines will not be required to from airports in the region must compensate each
operate an airport slot for at least 80% of the time. passenger when there is a flight cancellation, or
Airport slots are highly sought after in the industry, and offer travellers the opportunity to book another
can cost millions of dollars as carriers seek market flight within seven days.
growth opportunities, especially at big and congested ▪ Following the COVID-19 outbreak, many
airport hubs. operators opted to offer only travel vouchers as a
▪ This new measure is providing necessary breathing way to reimburse their passengers; however, the
space and permitting airlines to adjust capacity as new European Commission published new guidelines
developments in relation to COVID-19 emerge. For in March 2020 stating that “If the carrier proposes
example, at the time of writing of this report, a voucher, this offer cannot affect the passenger’s
Eurocontrol (European Organisation for the Safety of right to opt for reimbursement instead”.
Air Navigation) reported an 89.2% decline in air traffic ▪ This has been seen by many carriers as a huge
as of 17 May 2020 compared to the same day in 2019. hurdle which prevents them from easing the
▪ These changes also allow carriers to achieve cost cuts impact of the pandemic on the aviation industry,
and prevent the operation of so-called “ghost flights” (ie but it nevertheless represents an important
empty flights which are operated solely to protect clarification regarding the rights of travellers in
allocated airport slots). Similar actions have been uncertain times.
implemented in the US by the Federal Aviation
Administration.

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AIR, RAIL AND OTHER TRANSPORTATION

IATA leading on issuing new recovery principles

In May 2020, the International Air Transport Association (IATA) published five
key principles regarding the recovery of the airline category. These are:

“Aviation will always put safety and security first; Aviation will respond
flexibly as the crisis and science evolve; Aviation will be a key driver of
the economic recovery; Aviation will meet its environmental targets;
Aviation will operate to global standards which are harmonised and
mutually recognised by governments”.

Increased collaboration between airlines, as well as heightened use of

technological advances and solutions, are among the priorities embraced by
IATA. A focus on carbon offsetting and the introduction of standards which are
aligned with those of the Civil Aviation Organization (ICAO) and the World
Health Organization (WHO) are considered vital steps for the restarting of the
industry, according to IATA.

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AIR, RAIL AND OTHER TRANSPORTATION

Flight protocols changing

Immediate Safety Measures On Board ▪ The COVID-19 pandemic has decimated air passenger demand
Aircraft and hit all airline players hard, plunging the sector into chaos,
with expected long recovery timelines.
▪ As travel restrictions ease and social distancing measures become
more relaxed, many operators have started to rethink their safety
practices on board their aircraft. Stringent sanitising, including
electrostatic spraying (eg United Airlines), new boarding
protocols and compulsory protective gear, such as masks and
gloves, are being put in place as a requirement for travellers.
Minimum
Service
Masks ▪ “Immunity passports” featuring COVID-19 test results, as well as
infrared body temperature checks (eg Korean Air) are some of the
additional actions expected to be introduced by operators.
Improved filtration systems and disinfectant fogging is another
layer of protection discussed by the industry.
Middle Seat ▪ Middle seat booking restrictions are also being widely adopted,
for example by Qantas, American and Alaska Airlines, while others
(eg EasyJet) are contemplating introducing such restrictions as
part of their new health and safety measures.
▪ Other players, such as Ryanair, EasyJet, Singapore Airlines and
American Airlines, are waiving their change and cancellation fees
in a bid to stimulate bookings. Emirates Airlines, for example,
offers travellers vouchers that can be used within 24 months to
travel to any country in the same region if a ticket has been
purchased before 30 June 2020.

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AIR, RAIL AND OTHER TRANSPORTATION

For some, it is the end of the road

Airline Country Bankruptc Fleet ▪ Travel restrictions, empty aircraft, grounded fleets, lack of
y in 2020 Size consumer demand and very low capacity have been putting
huge pressure on global and regional carriers.
Flybe UK March 63
▪ COVID-19 has had a particularly significant impact on those
Avianca airlines with tight profit margins and fragile and ongoing
Colombia May 102
Airlines financial woes and debt, leading to their collapse. This was the
case with Flybe in the UK. The pandemic also poses a
South African South Africa April 39
substantial threat to relatively new airline entrants.
Virgin
Australia April 130 ▪ Many operators have been repurposing their aircraft for cargo
Australia services, with operators such as Wizz Air, Delta Air Lines,
Cathay Pacific and United Airlines, among many others, jumping
Air Mauritius Mauritius April 14
on the bandwagon in order to stay in business. Virgin Australia
has battled for many years with fluctuating profitability and
Thai Airways Thailand May 100
limited cash reserves. It also failed to get a government financial
bailout following the impact of the pandemic, contributing to its
Ravn Airlines US April 73 demise.
Compass ▪ Avianca Airlines saw the same fate as a result of the widespread
US April 56
Airlines travel restrictions, which affected 88% of the markets it
operated in. Its financial situation was weak long before the
LGW Germany April 15
pandemic, as a result of aggressive competition from LCCs,
Miami Air social unrest in Latin America and huge debt. LATAM followed
US March 6 suit and became another victim of the pandemic, filing for US
International
Chapter 11 bankruptcy. In Q1 2020, the airline registered a loss
Note: As of 18 May 2020 of over USD2 billion, and laid off 1,400 employees.

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AIR, RAIL AND OTHER TRANSPORTATION

Debt-ridden industry

Confirmed Financial Support by Governments

Total Airline Segment 2020
USD123 billion

North America Europe

USD66 billion USD30 billion

Asia Pacific Africa and Middle East Latin America

USD26 billion USD0.8 billion USD0.3 billion

Source: IATA, as of May 2020

Note: Airline debt refers only to confirmed government support

▪ Without financial support from governments, many airline players would have been unable to withstand the
economic effects of the pandemic. IATA predicts that by the end of 2020, the industry will be facing a
cumulative debt of USD550 billion, with this figure comprising government subsidies, deferred taxes and loan
guarantees.
▪ Higher debt-to-equity ratios will place substantial pressure on airline balance sheets, given their reliance on
external funding, with higher interest rates and longer repayment periods long after the crisis has subdued.
Although many operators see debt as a cheaper option for financing than the equity markets, it is still a
somewhat risky move, as the industry is highly capital intensive and seasonal, which leads to fluctuating cash
flows. Therefore, borrowing must entail thorough planning to prevent further financial strain.

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AIR, RAIL AND OTHER TRANSPORTATION

Governments stepping in to bail out key brands

▪ The airline industry will need support in the form of government bailouts, emergency financial help and loan
guarantees, as well as waivers from stringent local regulatory requirements for airport slots in order to avert a
complete collapse.
▪ In the US, the aviation industry has received financial rescue support of USD25 billion from the government, as
part of the USD2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
▪ Among the airlines set to receive financial support are American, Delta, United and Southwest, and it is hoped
that this will help prevent layoffs and financial collapse. American Airlines, which is debt-ridden and
performing very poorly in terms of profit margins, is one of the hardest hit players. It is set to receive USD5.8
billion from the government’s Payroll Support Program, and, according to trade sources, plans to apply for an
additional USD4.75 billion loan from the treasury.

▪ Lufthansa – the German national carrier – is another ▪ Emirates Airlines began gradually to resume some of
leading airline which has been severely affected, its flights in May, but the company, which is one of the
operating with mere 1% of flight capacity. It biggest carriers in the world, has been struggling amid
negotiated a EUR9 billion bailout from the German the pandemic and the sharp fall in business travel.
government in exchange for a 20% stake in the According to trade sources, it is considering
company, which it plans to sell in 2023. implementing strict cost cutting measures, including as
▪ The gravity of the pandemic is such that it is leading many as 30,000 job cuts, as well as the full
to a EUR1 million loss per hour for Lufthansa, decommissioning of its A380 fleet.
according to trade sources. At the time of writing, the ▪ The government in Dubai has agreed to provide
airline had more than 700 of its fleet grounded, while financial support for the struggling operator, although
80,000 of its 130,000 employees were working part- an exact figure has not been confirmed.
time.

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AIR, RAIL AND OTHER TRANSPORTATION

Capacity reduction and low fares

▪ With projections that the recovery of the airline Flight Search and Booking Changes
industry will take at least 5 years, as a result of low January – June 2020
demand and ongoing travel restrictions, many
airlines are starting to consider huge capacity
reductions, as well as shifts towards their major
hubs, prompting a review of those routes that are
not profitable due to low passenger volumes.
▪ With the aim of achieving significant cost savings,
carriers are expected to reduce flight frequencies
and shift towards domestic air travel, as traffic
related to visiting friends and family is expected to
recover fairly quick as part of leisure travel.
▪ To stimulate demand, many carriers are expected
to lower their fares in order to lure more travellers
on board, but also due to relatively high
overcapacity on the market and aggressive
Source: Sojern
competition on key routes.
▪ Data from the Sojern COVID-19 Travel dashboard
showcase the huge dip and fluctuations in terms of
flight search and bookings in March and April 2020,
highlighting the worst decline in demand in the
history of the aviation industry.

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AIR, RAIL AND OTHER TRANSPORTATION

Rail category: derailing on the horizon?

Passengers Carried Globally By Rail ▪ With lockdown measures still in place, impacting long-
2013-2019 distance train travel, many rail companies have been
struggling to survive due to falling traffic. In Europe, for

Railway passenger traffic

Passengers carried by rail

60,000 5,000
50,000 4,000
example, Eurostar recorded a drop of 20% in traffic in
40,000 Q1 2020, as a result of COVID-19.
3,000
30,000
2,000
▪ Rail transportation has, nevertheless, been faring much
20,000 better than the airline industry, as it has continued to
1,000
10,000 operate during the crisis as an essential business in
0 0 several markets. In addition, many rail operators have
2013 2014 2015 2016 2017 2018 2019
some experience in social distancing compliance. This
Passengers Carried by Rail (million)
transportation mode is expected to be a very popular
Railway Passenger Traffic (billion passenger-kilometres) way to travel internally, as domestic travel picks up in a
number of countries around the world.
▪ Rail travel is an increasingly significant competitor to air
transportation, in light of the consumer concerns
regarding sustainability. As a result, the high-speed rail
market could see a boost in the coming years, despite the
current turbulent business environment and the impact
of COVID-19.
▪ In addition, with liberalisation of the sector on domestic
routes by the end of 2020 in such countries as France
and Spain, further opportunities are expected to be
opened up, especially in Europe, which has one of the
Source: Euromonitor International
Note: Pre-COVID-19 data most developed rail networks globally.

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Bus and road travel dwindling

▪ Similarly to the other transportation modes, bus travel

has seen immense financial pressure, on the back of travel
restrictions and booking cancellations for tours and
excursions from hotels and other suppliers. The close
proximity of people on buses, in addition to the fact that
their loyal consumer base – baby boomers – are at higher
risk from the pandemic, will further increase the impact
on this category.
▪ As this category is very fragmented, smaller bus
operators in many markets have already ceased trading.
In the UK, for example, Specialist Leisure Group, which
specialises in bus travel packages, and which includes the
Shearings and National holiday brands, went into
administration.
▪ Many operators have started preparing to alter their in-
bus layouts to make them ready for social distancing
measures, as is the case in Germany, and it is expected
that the sector will be boosted by pent-up demand, with
growth in domestic travel in the second half of 2020.
▪ Travelling by car is expected to benefit most from the
current situation, although domestic trips will be made
Source: Euromonitor International with consumers' own cars, rather than taxis or hire cars.
Note: Pre-COVID-19 data

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Cruise industry in stormy waters

▪ The cruise industry is very consolidated, with three key players dominating the category. Carnival Corp, Royal
Caribbean Cruises and Norwegian Cruise Line Holdings Ltd account for 70% of global cruise revenues. Pre-
COVID-19 industry projections by the Cruise Lines International Association (CLIA) were for 32 million cruise
passengers in 2020. Over recent years, the industry has faced a series of setbacks, such as collisions, fires,
gastrointestinal illnesses, infections, norovirus and floods, as well as the sinking of the Costa Concordia in 2012.
▪ The current pandemic is another huge challenge which will have a long-lasting impact not only in terms of
plummeting passenger numbers but also revenues and negative consumer perceptions. The problems it has
caused include health warnings and restrictions on all cruise travel, for example those in the US market issued
by the Centers for Disease Control and Prevention until 24 July, and extended port quarantines. In addition,
mounting debts and the inability of key operators to benefit from the US stimulus package, which supports only
US-incorporated companies, is further intensifying the gravity of the crisis. Lost revenues from cancelled
sailings, reduced demand and huge liquidity problems bring more clouds over the industry. In early May 2020,
Norwegian warned that it may file for bankruptcy protection as a result of COVID-19 and plummeting share
values.
▪ The cruise industry is expected to see only a slow rebound, following a sharp decline in sales in some regions of
over 50% in 2020. The rebound will be dependent on when travel restrictions are fully lifted and the extent to
which cruise companies are able to adhere to new health protocols and the measures they need to adopt to
maintain social distancing on board. Because of this, river and lake cruises that rely on domestic demand are
expected to recover first, rather than those that rely on international traveller flows.
▪ In terms of recovery timeframes, the impact of the 2008 global financial crisis on this category was such that
Asia Pacific took six years to recover and Eastern Europe 10 years to recover. The COVID-19 pandemic will,
however, have much greater ramifications across the board, with recovery for the sector not expected to occur
until after 2025.

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AIR, RAIL AND OTHER TRANSPORTATION

The status quo

Carnival Royal Caribbean Norwegian

▪ Carnival, with such brands as ▪ Royal Caribbean is the second biggest ▪ Norwegian Cruise Line is
Cunard, P&O and Costa Cruise, is player in the market in terms of incorporated in Bermuda and
the biggest player in the cruise passenger numbers, and operates also operates out of Miami,
market. In Q1 2020, it saw a huge from Miami. Florida, with USD6.5 billion in
drop in its share price of more than ▪ According to corporate sources, it has revenues in 2019.
77%. Its main markets are North been bleeding over USD250 million ▪ Facing bankruptcy, the operator
America and Europe. per month since the start of the also looked to the financial
▪ Similarly to its rivals, it is pandemic, as a result of huge fixed markets and succeeded in raising
experiencing severe problems, costs, which directly affect its bottom USD2 billion to help with its
which led to its decision to raise line. serious liquidity problems.
loans of USD6 billion in stocks and ▪ With some markets, such as Australia, ▪ It is considered that the player is
notes, which are due in 2023. extending the cruise ship ban to one of the worst hit among the
▪ With 150,000 employees globally, September 2020, the company will key cruise operators, with its
the company has introduced job feel further financial burns. Similarly share price falling more than
and pay cuts in order to weather to other market players, the company 83% from the beginning of 2020.
the storm. secured an injection of over USD3 ▪ Norwegian reported a revenue
▪ The company plans to restart billion in order to maintain solvency decline of 11.2% and an increase
operations in August, following which adds to its existing debt of in operating expenses of 20.3%
some relaxations in travel USD11 billion. The company has also in Q1 2020.
restrictions, especially in Western been driving stringent cost
Europe. restructuring and expense reduction.

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AIR, RAIL AND OTHER TRANSPORTATION

Regional performance of cruise category before COVID-19

Source: Euromonitor International

Note: Pre-COVID-19 data

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AIR, RAIL AND OTHER TRANSPORTATION

Recovery timelines of all transportation modes

Recovery Timelines after Previous Crises and Outlook for COVID-19

World
Category 9/11 Great Recession 2008/2009 COVID-19 Outlook
Outbound Trips 2 years 2 years 3 years
Outbound
Expenditure 2 years 2 years 3 years
Domestic Trips No impact No impact 2 years
Airlines Value 3 years 4 years 5 years
Cruise Value 2 years 4 years 10+ years
Rail Value No impact No impact 3 years
Bus Value No impact 3 years 4.5 years
Ferry Value No recovery No recovery No recovery
Source: Euromonitor International
▪ Uncertainty related to the duration of the pandemic has led to huge declines in employment and a contraction in
GDP, making the outlook for the transportation category very difficult. Social distancing, self-isolation and the
closure of all nonessential businesses are further intensifying the severity of the crisis.
▪ Although during past crises, such as the 2008-2009 recession and 9/11, most transportation categories showed
some resilience, the COVID-19 pandemic is expected to bring more long-term repercussions for airlines, cruise
operators and ferry travel. With airlines relying heavily on low margins and high volumes, the crisis is putting many
operators in danger of financial collapse. Inactive ships, reduced crews and transportation only of goods is shaking
the seasonal ferry sector to its core, with expectations that it will not recover to its pre-crisis level in the long term,
as it is highly dependent on passenger flows as its financial lifeblood. Cruise is equally at a disadvantage, as
consumers and local authorities see cruise ships as potential breeding grounds for COVID-19, leading to a record
number of cancellations and serious dents in companies’ cash flow.

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Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
REGIONAL FORECAST UPDATE

Regional overview

▪ Unlike previous crises, such as the

2008-2009 financial crisis, 9/11 and
SARS, the COVID-19 pandemic has far-
reaching repercussions across all
regions.
▪ Years of growth have been wiped out,
especially for the airline industry, with
recovery not expected before 2024.
▪ Countries which are heavily
dependent on tourism are struggling
to mitigate the impact of COVID-19 on
their tourism sectors, with calls for
new Marshall Plans to be introduced.
▪ Countries where tourism makes a
substantial contribution to GDP, such
as Thailand, Mexico, Spain, Italy and
Turkey, have been particularly hard
hit. In terms of absolute growth in
tourism expenditure, the US, Germany
and China will see huge losses, while
island destinations likes Maldives,
Aruba and the Seychelles are having to
fight the complete destruction of their
Source: Travel Forecast Model, Euromonitor International
industries.

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REGIONAL FORECAST UPDATE

Intra-regional and domestic travel will drive demand

▪ Global outbound flows are projected to Intra-regional

reach 1.1 billion trips in 2020 according to Trips (%) for
baseline data from the Travel IFM as of Select Markets
May 2020, with global expenditure of
US 11.8%
USD1.4 billion. By 2025, the top markets
for global departures are expected to be Germany 71.2%
the US, Germany, China and the UK.
▪ Post-pandemic travel will favour domestic China 75.1%
and intra-regional travel, which will be the
main pillars of recovery worldwide, UK 69.7%
especially as some markets (particularly
France 62.7%
in Asia Pacific) are starting to ease their
travel bans and consumers are looking to Canada 52.8%
trade down, focusing on hyper-local
services and avoiding long-haul travel. Russia 26.1%
Europe and Asia Pacific will be able to
benefit from traditionally strong Hong Kong 96.4%
consumer preferences for intra-regional
travel. Carriers that have smaller aircraft South Korea 76.0%
will aim to gain higher yields in order to
Netherlands 76.2%
achieve lower total trip costs, especially
when operating intra-regional or domestic Source: Euromonitor International
Note: Intra-regional trips represent percentage of inbound arrivals derived from the same
flights. geographic region as the destination country.

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REGIONAL FORECAST UPDATE

Green shoots of recovery in China

Daily Traffic of Key Transportation Modes in ▪ The first signs of a rebound in transportation
China January-April 2020 modes have been seen in China, as the pandemic is
considered to be under control in the country,
30,000
which is stimulating demand for travel.
▪ Already, some airline operators, such as the low-
25,000 cost carrier Spring Airlines, servicing domestic
flights, have recorded improving load factors for the
month of April, although it is a long way to a
20,000
complete recovery for the industry. There are also
‘000 passengers

still concerns regarding a possible second wave of

15,000 infections.
▪ A sharp rebound has been seen in road
transportation and high-speed rail in the country,
10,000 as travellers view self-driving or car rental options
as much safer than other modes of transport.
5,000
According to the Chinese OTA Ctrip, booking of car
rental during the Labour Day holiday in May 2020
increased by 70% compared to the same period in
0 2019.
29/01/2020 29/02/2020 31/03/2020 30/04/2020
▪ Discounts and offers on intercity high-speed
By Rail By Road By Water By Air Total railway lines, as well as concessions for second-
class seats, have been further boosting interest in
Source: Ministry of Transport of the People's Republic of China
Note: Refers to total number of passengers and not only tourists rail travel among consumers.

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REGIONAL FORECAST UPDATE

Airlines recovery to take years in the US

% Growth in Passenger Numbers in the ▪ Like the cruise category, airlines are seeing a substantial
US: Scheduled vs LCCs 2018-2025 revenue hit. Scheduled airlines are expected to experience
a larger negative effect on revenue than low-cost carriers,
as they rely more on international travel, which is expected
to be more impacted than domestic travel in 2020.
▪ Both scheduled airlines and low-cost carriers are, however,
Scheduled Airlines
projected to see higher sales per person, as route
reductions will cut the supply of flights throughout the
year.
▪ For most of the transportation modes (excluding cruises),
revenue recovery is expected by 2022, although that might
not reflect similar trends for passenger numbers, which in
some cases are not expected to recover before 2023. This
difference will reflect an increase in sales per person,
Low-cost Airlines which will accelerate the recovery in revenue compared to
the recovery in passenger numbers.
▪ An additional factor which is expected to have a substantial
impact on the category is the CARES Act, under which US
airlines are barred from any staff layoffs over the period to
-60% -40% -20% 0% 20% 40% 60% the end of September 2020. After that period, however,
2025 2024 2023 2022 2021 2020 2019 2018 many operators could review unprofitable routes and
Note: Travel 2021 preliminary research data as of May 2020
frequencies, and impose layoffs.

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REGIONAL FORECAST UPDATE

Cruise category the hardest hit in the US

US: Key Transportation Modes Year-on-Year % Growth 2005-2025

120%

100%

80%

60%

40%
% growth

20%

0%

-20%

-40%

-60%

-80%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Bus, total value sales Cruise, total value sales Rail, total value sales

Source: Euromonitor International

Note: Travel 2021 preliminary research data as of May 2020

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 54

REGIONAL FORECAST UPDATE

Airlines resume operations in South Korea amid threats of capital erosion

South Korea: Key Transportation Modes Year-on-Year % Growth 2014-2025

% growth in passenger numbers

50% 40%
40% 30%
30%
% value growth

20% 20%
10% 10%
0% 0%
-10%
-20% -10%
-30% -20%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Bus, total value sales Rail, total value sales LCCs, total value sales
Schedule Airlines, total value sales LCCs, number of people Schedule Airlines, number of people
Source: Euromonitor International
Note: Travel 2021 preliminary research data as of May 2020

▪ With contained infection rates and social distancing measures being lifted, South Korea is ahead in its recovery
efforts. With restrictions removed, domestic demand is starting to pick up, as there are no pandemic-related
border controls, and many airlines and other transportation operators are resuming activity.
▪ Korean air has been re-opening some of its suspended domestic routes, while adding more capacity. According
to corporate sources, it plans to start international flights on 1 June, with Asiana Airlines and Jeju Air following
suit. According to information from the Korean Air Association, the number of passengers between 18 and 22
May increased by 66.2% compared to the same period in 2019, indicating the extent of pent-up demand. The
South Korean government has been actively promoting domestic travel, such as walking trails and other
outdoor activities.

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REGIONAL FORECAST UPDATE

Domestic air travel to rescue the aviation sector in India

India: Trips Year-on-Year % Growth 2017-2024 ▪ With a strong domestic market, Indian tourism
has the opportunity to recover more quickly than
90%
some other countries in the Asia Pacific region.
40%
▪ With domestic travel restrictions lifted after only
% growth

two months of lockdown, and domestic flights

-10%
resuming on 25 May 2020, domestic short-haul
travel is expected to drive this recovery. Also,
-60% once international travel bans are lifted, VFR
2017 2018 2019 2020 2021 2022 2023 2024 (visiting friends and family) travel is expected to
Domestic Trips Arrivals to India Departures from India help boost the sector. According to India’s
Note: Travel 2021 preliminary research data as of May 2020
Ministry of External Affairs, there are 32 million
Indian people living outside the country, which
India: Transportation Modes Year-on-Year % will be an important factor in the return to
Growth 2017-2024 growth.
45%
▪ Preliminary research data show that cruise will
25% be the most impacted transportation mode, due to
leisure travel taking a hit, although the category
% growth

5%
does not have a huge market share in the country.
-15%
▪ As many of India’s bus services are operated by
-35% private entities, restrictions will be slow to be
-55%
lifted, as it will be difficult for the government to
2017 2018 2019 2020 2021 2022 2023 2024 monitor social distancing.
Airlines Bus Rail Cruise ▪ Driving holidays, as well as staycations and
Source: Euromonitor International daycations, are expected to grow in demand.

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REGIONAL FORECAST UPDATE

UK quarantine to further hurt transportation category

UK: Total Value Sales of Transportation ▪ The COVID-19 pandemic has impacted the UK
Modes Year-on-Year % Growth 2018-2025 transportation industry particularly strongly, as the
country has been among the most affected in Europe,
0.6
which in turn has prolonged travel restrictions, with
less than 10% of the usual air traffic in the market. In
0.4
addition, a 14-day quarantine period, effective from 8
June, imposed by the government on all arrivals to
0.2 the UK, apart from the Republic of Ireland and
France, has created further setbacks for the market.
0.0 ▪ The UK airlines industry is expected to see a slow
% growth

rebound in 2021, as a result of industry

-0.2 consolidation, due to higher prices, as well as a
rebound in visiting friends and relatives flows within
-0.4
Europe. Lower load factors of 40-50% are expected,
as many carriers cut unprofitable routes and
frequencies.
-0.6
▪ Ryanair plans to start 40% of its service as of 1 July,
while International Airlines Group (IAG) hopes to
-0.8
2018 2019 2020 2021 2022 2023 2024 2025 operate around 1,000 flights in the same month. IAG
faced a GBP1.5 billion loss in Q1 2020, and was
Bus Cruise Ferry
Rail Airlines
heavily impacted by the drop in fuel prices, as its
Source: Euromonitor International hedging strategy meant that it had already purchased
Note: Travel 2021 preliminary research data as of May 2020 a significant proportion of its fuel at higher prices.

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REGIONAL FORECAST UPDATE

More uncertainty in Brazil amid coronavirus

Scheduled vs Low-Cost Carriers in Brazil Key Transportation Modes in Brazil

Total Value Sales (BRL million )

2006-2025 2006-2025
80
Million passengers

8,000
60 6,000
40
4,000
20
2,000
0
0
2008

2019
2006
2007

2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

2020
2021
2022
2023
2024
2025

2015
2006
2007
2008
2009
2010
2011
2012
2013
2014

2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Low-Cost Carriers Scheduled Airlines Bus Cruise Ferry Rail
Note: Travel 2021 preliminary research data as of May 2020 Source: Euromonitor International
▪ Brazil is the largest economy in Latin America, accounting for more than a third of the region’s entire consumer
market. It is expected that the country will go into recession as a result of the impact of COVID-19, with a strong
GDP contraction of 5% projected for 2020. The fast increasing infection and death rate in the country, which as
of June had the second highest death rate globally, is expected to have a profound impact on the transportation
category if financial relief packages are not agreed between the government and local carriers.
▪ GOL Linhas Aéreas Inteligentes SA, Azul Linhas Aéreas Brasileiras SA and LATAM are the three big airlines in
the country, and have suffered huge drops in demand. As a result of the pandemic, the government has imposed
maximum weekly domestic flights by brand – GOL (353 weekly flights), LATAM (483 weekly flights) and Azul
(405 weekly flights). According to trade sources, GOL, the leader in the aviation category, reported a 93%
decline in domestic flights for April 2020 and a net loss of over USD400 million for Q1 2020, although it has
relatively strong liquidity compared to its rivals. Azul has reported a increase in net debt of USD3 billion for Q1
2020, as a result of a combination of currency fluctuations and the pandemic. In addition, the US currently bans
travel to and from Brazil, which will further increase uncertainty for the country’s airline industry.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 58

Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
CORPORATE RESPONSE

American Airlines: rising financial volatility

▪ American Airlines was the leading carrier globally in 2019

in terms of retail value sales. Like other market players, the
company has been struggling as a result of the impact of the
COVID-19 pandemic, with decreased demand, as well as its
poor financial position before the crisis hit.
▪ The company recorded a loss of over USD2 billion in Q1
2020. It also has one of the biggest net long-term debts
among its rivals, totalling over USD20 billion, and a daily
cash burn of USD45 million, according to corporate sources.
▪ As part of its cost restructuring programme, the carrier
retired 99 aircraft and plans to cut 30% of jobs in July 2020,
although in order to adhere to the CARES Act it will continue
to pay these employees through to September 2020.
▪ In an effort to stimulate demand, American has been
offering its frequent flyer members double miles for travel
between June and September 2020. It also signed a strategic
partnership with Qatar Airways to operate more than 1,000
domestic and international routes through codeshare.
▪ As the company does not hedge its fuel, the decrease in
crude oil prices is expected to provide some breathing
space. In May 2020, the airline also saw some changes in its
low load factor figures, which jumped to 56%, indicating
some small green shoots of recovery.
Source: Euromonitor International

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CORPORATE RESPONSE

“Preighter”: a temporary solution but a key area of resilience

▪ Against the backdrop of passenger cancellations and ▪ IATA also issued a guideline document giving
travel bans, airline operators have intensified their detailed instructions regarding such aspects as the
cargo activity and adjusted their cabin seat layouts in weight of the cargo, loading procedures and
order to maximise load efficiency and boost their remodelling of aircraft – all aimed to facilitate cargo
revenues. movement.
▪ Many operators are jumping on the bandwagon ▪ In addition to transporting medical supplies,
termed by the industry “preighter”, when passenger personal protective equipment, etc from countries
aircraft become hybrid operations with cargo services such as China as part of the cargo services, many
as a way to benefit from the disrupted supply chain. airlines have been operating repatriation flights and
▪ Passenger-cargo services have been embraced by such transportation of medical staff (eg Delta Air Lines)
players as Lufthansa, Emirates Airlines, Cathay Pacific, free of charge to those areas most affected by the
Japan Airlines, All Nippon Airways, Air Canada, Wizz pandemic. In Africa, Ethiopian Airlines has been
Air and IAG, among others. working very closely with Alibaba Group (a leading
Chinese e-commerce and retail operator) to
▪ In order to help support local carriers, many civil
transport medical equipment on the continent, and
aviation authorities introduced changes to their
has strong ambitions to become Alibaba’s official
regulations regarding on-board configuration for cargo
company in this part of the world.
purposes.
▪ Although not tracked as part of Euromonitor
▪ The European Union Aviation Safety Agency, the
International’s Travel research, some cargo
Federal Aviation Authority in Germany and the Federal
operators, such as Amazon Air and Atlas Air
Aviation Administration in US, among others, have
Worldwide Holdings, recorded growing revenues in
been revisiting practices in light of requests from
Q1 2020 on the back of increased interest in e-
carriers.
commerce and demand for home deliveries.

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CORPORATE RESPONSE

Contactless flights and pre-flight blood testing

Etihad Airways Cebu Pacific Emirates Airlines

▪ Etihad Airways has been trialling ▪ Another company which has ▪ Emirates Airline has embraced
contactless, self-service increased its health and safety rapid pre-flight blood testing,
technologies, which, in addition to measures is Cebu Pacific. The which provides results in only 10
processing travellers’ details, can airline is, according to trade minutes, according to the
help conduct health screening of sources, introducing “contactless operator.
airline passengers. Powered by flight measures” across all areas ▪ Initially rolled out on the Dubai –
Elenium Automation, this of the service to help protect not Tunisia route, the carrier is keen
technology can, according to trade only passengers but crews as to provide this service on all its
sources, check body temperature, well. flights. The initiative is being
heart rate and respiratory rate, ▪ From self-check-in kiosks, undertaken in cooperation with
which can help detect any early mandatory masks, bag drop Dubai Health Authority, and is
symptoms of COVID-19. counters and cabin crew aimed to support travellers by
▪ The airline is embracing complete antibody testing to orderly ensuring increased safety for
digitalisation of the check-in, deplaning, the airline has been their journey.
security and baggage drop-off preparing for the new air travel ▪ Similarly to other airlines, the
processes in order to ensure normal. carrier also has put strict policies
travellers on board its aircraft not ▪ The carrier plans to start in place for obligatory protective
only have a frictionless travel domestic flights as of 3 June masks for passengers, as well as
experience but, importantly, adhere 2020, as it combats falling removing some of the cabin
to health and safety procedures in revenues as a result of the items, such as in-flight magazines
light of the pandemic. COVID-19 pandemic. and bulkier cabin luggage.

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CORPORATE RESPONSE

How viable is social distancing for airlines?

▪ The airline industry has been very vocal with

regards to social distancing on-board aircraft,
with many calling this initiative unsustainable in
the long run.
▪ For example, Sir Tim Clark, the soon retiring
CEO of Emirates Airlines, characterises social
distancing on-board as “not economically and
environmentally practical because it would
mean flying aircraft half empty”.
▪ Looking at the revenue performance of the top
three global airlines, which are all based in the
US, in order for them to stay afloat, their load
factors must not be below 75-80%, with
estimates for such brands as American and
Delta being of the order of 79% and 75%,
respectively.
▪ Given the social distancing requirements and
consequently half empty aircraft, the losses
incurred in operating flights could be substantial
if fares are not increased. In addition, half empty
aircraft will contribute to an increased
environmental impact per passenger.

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CORPORATE RESPONSE

Controversies regarding social distancing on-board

▪ Frontier Airlines has been toying with the idea of

using social distancing measures as part of its
ancillary revenue stream. The airline wanted to
introduce a “more room” service, which would
allow travellers the option to book the middle seat
of their seating row and keep it unoccupied, for a
fee starting at USD39.
▪ However, after a strong backlash from legislators
the airline scrapped this initiative. Currently, major
airlines in North America, including Delta Air Lines,
American Airlines and Alaska Airlines, are blocking
the middle seats on their aircraft to ensure more
space between passengers and thus maintain social
distancing to improve safety.
▪ The International Air Transport Association has,
however, opposed social distancing measure on-
board aircraft, claiming that the risk of contracting
COVID-19 is very low. In addition, according to the
organisation, if such measures were implemented it
could lead to an increase in airfares of more than
50%.

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CORPORATE RESPONSE

Distribution platforms adjusting to address consumer sentiment

▪ The meta search provider Kayak has introduced a

“flexible option filter” on its website, which helps
travellers identify providers that offer free
cancellations, such as travel credits, as well as those
removing this type of fee as part of their pricing.
▪ In the context of a constantly changing business
environment and new airline policies as a result of the
COVID-19 pandemic, this new filter provides travellers
with better information regarding their airline
bookings, which can then help them plan their travel.
▪ Farelogix is another airline distribution platform
adjusting its services in light of the social distancing
requirements. Through its FLX Merchandise engine, the
operator is able to help airline players by dynamically
changing seat maps to allow the necessary distance
between passengers on aircraft, based on information
such as load factor and inventory. According to
company sources, with the help of this platform, airlines
are also provided with the flexibility to adjust and set
the necessary requirements in the system in real time,
and thus have the flexibility to respond quickly to fast-
Source: Kayak.co.uk moving developments in the category.

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CORPORATE RESPONSE

Subscription model back on the agenda?

▪ Many carriers have been reluctant to adopt the subscription model as

part of their service propositions, due to the complexity it can cause in
terms of revenue management and network development, but the
COVID-19 pandemic has demonstrated the opportunities such models
can bring for retaining passengers, whilst boosting revenue streams
and cash flows.
▪ During the last couple of years, many airline operators have been
looking at the activity and best practices of such companies as Amazon,
Netflix, Zoom, Spotify and Uber, which have been spearheading the
subscription model and capitalising on improved personalisation
Image source: EasyJet.com practices.
▪ The subscription revenue model is nothing new in the airline business,
and it is one which can help accumulate revenues provided the
company is increasing the number of its subscribers. Many private jet
operators are also relying on this model, where customised
memberships are the backbone of their businesses.
▪ Some low-cost carriers have already introduced subscriptions as part
of their business models – eg Volaris (ie v.pass) and EasyJet (EasyJet
Plus) – while Lufthansa Innovation is looking into a Flightpass offer, all
with the aim to boost customer-centric strategies as well as increase
Image source: Volaris ancillary revenues.
▪ Predictability and fixed prices are hoped to entice consumers in these
turbulent times, when uncertainty is a major problem for the travel
industry.

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CORPORATE RESPONSE

Crisis takes its toll on airports too

▪ Airports are an integral part of the air transportation Top Markets by Airport Passengers 2019
category and, similarly to the airlines industry, have US
been hit particularly hard by the pandemic lockdowns. China
According to Airports Council International (ACI) India
Japan
more than 4.7 billion passengers will be lost in 2020, UK
with Europe and Asia Pacific seeing the largest falls, Turkey
Germany
whilst airport revenues will decline by over USD97 Spain
billion by the end of 2020. Indonesia
France
▪ With commercial activities paralysed, duty-free retail
at a very low level and minimal income from airport 0 200 400 600 800
Million people
charges, many operators are fighting for survival. Source: Euromonitor International
▪ Adhering to new health protocols and social
distancing measures, whilst ensuring a seamless Leading Airports Worldwide 2019
120
customer experience at the airport, will be a major 100
challenge.

Million people
80
60
▪ Contactless technologies, AI, biometrics, thermal
40
sensing, electronic bag tagging, as well as real-time 20
management of passenger and baggage flows, and 0
increased sanitation will be essential for airport
operations post COVID-19.
▪ This will require substantial investment to enable
airport players to become fully digitalised entities that
can have full control of the whole passenger journey at
the airport. Source: Euromonitor International

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CORPORATE RESPONSE

All digital to drive ancillary revenues

▪ Ancillary revenues have been one of the major focus areas ▪ Mobile cashless payment solutions, online duty-
of airlines in the last couple of years, in their efforts to free shops, on-demand foodservice, e-library
diversify revenue streams and embrace omnichannel services and baggage loading notification
retailing practices. According to IdeaWorksCompany, systems are just some of the propositions that
ancillary revenues reached an estimated USD109.5 billion the industry is introducing through apps, with
worldwide in 2019, compared to USD92.9 billion in 2018. the aim to help bring more value to passengers
These à la carte services have been spearheaded by low- and offer a real-time response in these difficult
cost airlines but very quickly embraced by scheduled times when demand is low and flight travel is
operators. predominantly on domestic and short-haul
▪ Ancillaries are high margin revenues, and accounted for routes.
45% of total operating revenues for Wizz Air and 32% for ▪ Plusgrade is a technology company which
Ryanair in fiscal year 2019. They are seen as the main tools launched the Travel Again programme, with the
to help bring financial stability for airlines post COVID-19, aim to boost interest in air travel and give
but equally can help increase consumer interest in airlines’ passengers flexibility with travel dates. The
direct channels of distribution. programme offers travellers a prepaid certificate
▪ Operators such as Lufthansa (Worldshop), Singapore for a flight, which can grow in value, and which
Airlines (Krishop) and AirAsia (Ourshop.com), among can be redeemed whenever the client needs to
others, have their own e-marketplaces and retail platforms, travel.
which have been functioning during the months of ▪ This business model is nothing new in other
complete lockdown and thus bringing a small but tourism sectors, such as lodging, but is relatively
continuous revenue. This approach can help airlines new in the airline sector. It aims to help carriers
operate as retailers by seizing more commercial work smarter in turbulent times, whilst helping
opportunities in the market. them offset their rapid cash burns.

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CORPORATE RESPONSE

Wizz Air defies the odds

In the midst of the pandemic crisis and turbulence in the airline industry,
Wizz Air (a leading low-cost operator in Eastern Europe) is thinking big
and plans to expand its market share in the Middle East and operate out
of Abu Dhabi. In March 2020, the airline signed a joint-venture
agreement with Abu Dhabi Developmental Holding Company for the
launch of Wizz Air Abu Dhabi, which will target the vast GCC region. Like
other market operators, the cash rich airline will scale back its capacity
but, according to corporate sources, does not plan to close routes or even
hubs. Indeed, in 2020 it opened new bases in Italy, Cyprus, Albania and
Ukraine, among others.

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CORPORATE RESPONSE

Is a “green recovery” at all possible?

▪ Travel transportation is one of the industries which contributes significant CO 2 to the environment. According
to the International Energy Agency, the sector accounted for 24% of global direct CO2 emissions in 2018, with
airlines accounting for 2.5% of the total. Emissions are expected to continue to rise in the face of global
population growth and wealth. Among the other worst offenders are land (ie bus and car) as well as water
transportation.
▪ “Responsible flying”, bio fuel, carbon offsetting schemes and eco-taxation are among the tools proposed and
adopted by the airline industry to combat CO2 emissions. Undeniably, however, controversy surrounds all of
them, as they are not able rapidly to deliver the results needed, due in large part to the lack of a unified policy
introduced across all carriers. Bio fuels are considered by many in the industry as the main solution to offset the
impact of fossil fuel, with the potential to reduce usage by 60-80%, according to trade sources. However, the
amount of bio fuel produced to date is insufficient to be able to fully compete on price and scale with the
widely-used fossil fuels, due to technical, financial and regulatory factors that will delay the use of bio fuels for
passenger flights.
▪ The COVID-19 pandemic and the strict travel bans have achieved the previously unimaginable, with a dramatic
reduction in CO2 emissions on the back of 90% drop in passenger traffic worldwide, which in turn has triggered
calls for a “green recovery” and increased decarbonisation goals.
▪ Fuel tax reforms and eco-taxes on flights (eg in France) are some of the measures being considered to help
boost these efforts, especially as the category is the lowest taxed. Some governments which have stepped in to
bail out their national airlines from the financial crisis are demanding that carriers must in return cut their
emissions. An example is Air France-KLM, which, in return for the EUR7 billion financial aid from its
government, is required to halve total passenger carbon emissions by 2030, and those on its domestic flights by
2024.

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CORPORATE RESPONSE

Advocates call for cleaner skies

▪ The Carbon Offset and Reduction Scheme for

International Aviation (CORSIA), under the International
Civil Aviation Organization (ICAO), stipulates that airlines
can expand their operations, only if growth above a 2020
baseline is “net-neutral” in terms of emissions.
▪ This baseline was set to be calculated on 2019-20 figures;
however, COVID-19 has led to a dramatic drop in
passenger numbers, which in turn will impact the
baseline, with emissions expected to rise dramatically
after the crisis. This in turn will force carriers to obtain
more carbon offset credits and will lead to a further
increase in their expenditure, which is likely to provoke a
backlash from airlines. As of June 2020, EU and IATA
voiced their support for the amendment of the CORSIA
baseline to 2019.
▪ Changing consumer attitudes are also driving a bigger
shift towards more sustainable transportation modes, as
well as predicted post-pandemic preferences for more
short-term air travel. Radical and permanent changes are
needed if COVID-19 is to be a game-changer for
sustainable transportation. Already, the airline JetBlue
has announced its intention to become a fully carbon-
neutral carrier.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 71

Introduction
Economic Outlook
Global Forecast Update
Air, Rail and Other Transportation
Regional Forecast Update
Corporate Response
Conclusion
About our Analytic Capabilities
CONCLUSION

The road to recovery: four key stages

▪ Four key stages of recovery –

containment, stabilisation,
Containment normalisation and growth – will be of
importance for all transportation
modes before each of these categories
returns to pre-crisis levels.
▪ The industry will come out of the
pandemic completely transformed,
with fewer operators in the market, as
they seek operational efficiencies, fight
Transportation shrinking cash flows whilst driving a
Growth Modes Stabilisation wide range of cost cuts and substantial
restructuring programmes.
▪ Pent-up demand will be seen, although
growth will be from a low base, but it
will take a long time for the industry to
recover completely as it emerges from
a complete suspension of leisure travel
and plunging corporate travel.
Normalisation ▪ The recovery will also be dependent
on how fast consumer perceptions
change regarding the safety of travel.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 73

CONCLUSION

Huge structural changes in the airline industry

▪ Uncertainty is one of the biggest enemies of the ▪ Cheaper air fares within the next 6-12 months
airline industry at the moment, given that ▪ Low-cost airlines faring better due to greater
quarantine requirements, health protocols and liquidity and consumers trading down
passenger operations at airports vary by market,
▪ Domestic routes and VFR to drive demand
which will make any recovery protracted and

WINNERS
uneven. ▪ Retiring older, less fuel efficient aircraft which
will boost sustainability
▪ Structural changes are going to be required to help
mitigate the impact of the crisis. Huge job cuts, ▪ Opportunities to introduce essential changes
capacity reductions and fleet streamlining will lead for the long-term viability of companies
this process towards increased efficiency and ▪ Short-haul travel recovering more quickly
optimisation of operating costs, which could lead to ▪ Point-to-point services preferred
monopolies on many routes.
▪ Operation of smaller aircraft, negotiation of code- ▪ Reductions in work hours and heightened
share agreements and renegotiation of ground labour tensions, layoffs
handling contracts will be further explored. ▪ Network, capacity and fleet redesigns
▪ With normality expected to come no earlier than ▪ Operations cost burns
2023, according to trade projections, many airlines ▪ Financially weaker airlines exiting the market
LOSERS
are focusing on cash generation through
government and private financing options. This ▪ Economic recession to decimate business class
will, however, further intensify restructuring and ▪ Assets sales to boost cash reserves
downscaling of oversupply, leaving a smaller pool ▪ Soaring company shares and indebted capital
of better capitalised airlines. structures
▪ Some regions, such as Europe, could experience ▪ Aircraft purchasing deferrals
increased consolidation. ▪ International long-haul travel

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 74

CONCLUSION

Demand factors and the “new normal”

COVID-19 Pandemic

Regulatory and Macroeconomic Factors

Consumer Sentiment

Business vs Leisure Travel

Strategic Development Planning of Carriers

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 75

CONCLUSION

The key factors

COVID-19 Regulatory framework and economic development

▪ The mortality rate as a result of the pandemic, as ▪ The economic consequences of COVID-19 are far
well as infection rates, will continue to require social reaching, as the economic output for production,
distancing measures and international travel construction and services has fallen dramatically,
restrictions until a vaccine is discovered. leading to a downgrading of overall GDP growth.
▪ This in turn will determine the recovery timelines of ▪ Consumer demand and real disposable incomes are
airlines, rail, bus and cruise transportation, and how being squeezed, caused by a slowdown in the rate of
the travel and tourism industry as a whole evolves in nominal wage growth and high unemployent.
the aftermath of COVID-19. ▪ New regulatory frameworks and health protocols
will further shape the activities of transportation
players.
Consumer sentiment Strategic direction

▪ The airline industry has been one of the hardest hit, ▪ Aggressive price competition among players will be
and many consumers are expected to shift their essential to stimulate demand and protect market
preferences long-term to alternative transportation share, although not in the long term, as this will not
modes as a result of safety concerns and social be financially sustainable for airlines. Those
distancing restrictions. operators that have higher ownership of their fleet,
▪ A permanent reduction in business travel will such as LCCs, will be able to withstand further
further be observed in light of new, remote and more market pressures. In addition, omnichannel
flexible working practices. distribution strategies will be vital to inject more
revenue and widen the customer pool.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 76

CONCLUSION

New consumer attitudes

New and improved Trading down on Demand for contactless Behavioural changes – the
sanitation practices products and – facial recognition; fear factor will trigger
and protocols to build services/shorter check-in and payments demand for small-group
consumer trust and booking via mobile and self- tours and self-guided
confidence windows/shorter service solutions experiences to prevent
itineraries/value travel overcrowding until a
experiences vaccine is discovered

Safety guarantees Virtual travel and live Digital assistance/AI, Shift towards domestic
essential/more streams an important chatbots with a human- and sustainable
bookings with travel part of the planning interface to instil travel/staycations
advisors/importance process for confidence among Putting the social
of refunds and flexible destinations/Destinatio travellers and “human” factor at the
cancellation ns’ “health” essential centre of the brand service
policies/subscription offer
services for airlines

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 77

INTRODUCTION
ECONOMIC OUTLOOK
INDUSTRY IMPACT
CORPORATE RESPONSE
PRICING IMPACT
CONCLUSION
ABOUT OUR ANALYTIC CAPABILITIES
ABOUT OUR ANALYTIC CAPABILITIES

About Euromonitor International’s Macro Model

▪ The Macro Model allows us to regularly update key macro indicators like real GDP growth, as well as create
hypothetical scenarios that simulate potential macro shocks. In turn, this ability to change macro forecasts like
GDP growth allows us to create multiple retail category or income/wealth band forecasts.

▪ Our macro forecasts are produced as a combination of:

1. A global macroeconomic model (Euromonitor International Macro Model) that uses data from multiple
sources on GDP growth, inflation, interest rates, exchange rates and unemployment rates to forecast those
variables.
2. Further adjustments via model shocks/scenarios to reflect other variables and information that is not
taken into account directly by the pure model forecast. For example, other credit market or confidence
measures, as well as the macro views of policy institutions and other private sector forecasters.

▪ The Macro Model itself is an extended version of one of the main forecasting and scenario analysis models of
the IMF. The benchmark model has five observable variables for each economy. These are real GDP, the
consumer price index, the short-term interest rate, the unemployment rate, and the exchange rate against the
US dollar.

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 79

ABOUT OUR ANALYTIC CAPABILITIES

About Via Pricing from Euromonitor International

▪ Via Pricing is a new price and assortment intelligence solution built from web data extraction. Every day we
capture data for more than 10 million SKUs from 1,500 e-commerce websites across 40 countries, providing
daily updates to online retail pricing, assortment size and key product attributes.
▪ Via Pricing is built using a combination of our longstanding research expertise and web data extraction
technology. Using Artificial Intelligence (AI), text and image recognition technology, we match the same product
(SKU) across multiple websites and also map each SKU to our existing product taxonomy.
▪ Our global team of fmcg industry analysts help train the AI to accurately match SKUs to the correct product
category, brand owner and brand family, and then spot check product matching and taxonomy mapping to
guarantee Via Pricing’s continued accuracy. Their industry expertise and fluency in local languages ensures the
right products are being correctly matched across markets and retailer websites.
▪ Our ability to match millions of SKUs to their corresponding category, brand owner and brand allows us to
impose structure on a vast data set. In addition to viewing SKUs one-by-one, Via Pricing provides
comprehensive price data by category, brand owner, brand and retailer directly built from individual SKUs.

▪ Optimise pricing strategies

Applications for Via Pricing ▪ Build and maintain price corridors
▪ Plan promotional calendars
▪ Analyse online product assortment
▪ Pick where to play
▪ Track product trends

© Euromonitor International TRAVEL: THE IMPACT OF CORONAVIRUS ON TRANSPORTATION MODES PASSPORT 80

FOR FURTHER INSIGHT PLEASE CONTACT
Nadejda Popova
Senior Project Manager: Travel
nadejda.popova@euromonitor.com
Experience more...
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