Massive layoffs, bankruptcies, complete closures, billions in lost revenue… Since the beginning of the coronavirus outbreak, global sectors and industries have been facing overwhelming challenges. Travel and transportation, automotive, manufacturing, electronics, retail, oil, and gas — the spread of the virus have forced many industries to stop or slow down their physical operations, and while each of these industries is juggling with its own specific set of struggles, many of their challenges are shared ones. What is more, as the number of infections in different countries is beginning to rise again, businesses and industries are facing some more bad news and uncertainties about the future. Let’s take a closer look.
Few industries have fallen as far and as fast as tourism. Before the pandemic, the industry counted as much as billion trips per year. But the coronavirus outbreak managed to erase more than a decade of growth, returning the industry to 2006 levels.
The International Air Transport Association (IATA), which has 290 member airlines, predicts a global loss of $84,3 billion this year. The global industry group expects airline revenues to plunge as much as 50 percent, to $419 billion this year from $838 billion in 2019. Alexandre de Juniac, CEO of the group noted that “Financially, 2020 will go down as the worst year in the history of aviation. There is no comparison. On average, every day of this year will add $230 million to industry losses.“
To illustrate this even better, we have one more impressive number for you right here: about 17,000 aircraft — or more than 60 percent of all planes — are currently grounded due to the coronavirus pandemic. The passenger numbers are also in decline by 50 percent — to 2,25 billion — in 2020, roughly matching the level seen in 2006. Roger Dow, president and CEO of the US Travel Association, said that “The impact on travel is 6 or 7 times greater than the 9/11 attacks.“
Many airlines haven’t survived the coronavirus pandemic: Virgin Australia, LATAM, Thai Airways, Flybe, Miami Air International, SunExpress Deutschland, Level Europe, South African Airways, Compass Airlines, RavnAir… And others are facing uncertainties about the future: for example, the Middle Eastern operator Emirates Group noted that they “expect it will take 18 months at least before travel demand returns to a semblance of normality.“ Those airlines that managed to survive the coronavirus pandemic, on the other hand, did it mostly because of the ability to access government support. In May, IATA estimated governments had provided around $123 billion in financial aid to airlines during the crisis, which $67 billion has to be repaid.
Hoping to take the first steps towards jumpstarting air travel and tourism, a growing number of countries have allowed the travel industry to promote the so-called ‘travel bubbles’ and ‘corona corridors’. Basically, these agreements with neighboring regions allow travel across borders for non-essential trips without having to stay in quarantine once arrived. Peter Cerda, the Regional Vice President in the Americas for IATA, says that “We are at a period of time where we need to learn how to co-exist with the virus. We are confident we can transport passengers safely, efficiently, and ensure we are not a vector of the virus.” However, passengers are not so eager to come back to planes just yet: IATA released public opinion research, which showed that 55 percent of passengers say they’ll wait at least 6 months before traveling again, and 66 percent noted that they would travel less for leisure and business in the post-pandemic world. Despite these numbers, commenting on the current situation, Cerda noted that “We have to slowly start reopening air travel. It’s not only about people but about helping to generate economic prosperity again and getting the economic engines going in each country.”
Speaking about the future, IATA says that the worst of the coronavirus crisis may be over for the airline industry, provided that another and more damaging wave of COVID-19 infections is prevented. However, even under its most positive outlook, IATA still projects passenger traffic in 2025 will remain 10 percent below the levels originally anticipated before the crisis. The revenues are projected to rise to $598 billion in 2021, reducing the industry’s net loss that year to $15,8 billion.
Another industry that has been hit extremely hard by the coronavirus pandemic is energy, specifically oil and gas. With demand falling off the cliff, the markets have been thrown into turmoil, with a barrel of crude dropping to just over $22, it’s lowest level in almost 18 years. To compare, at the beginning of 2020, crude indices were trading at $60-$70 per barrel. The spread of the virus has forced many oil and gas companies to either stop or slow down their physical operations, and the impact of the pandemic is still very real in this sector, as companies are struggling with declining demand, ensuring employee safety and business stability, as well as oil price war between Russia and Saudi Arabia.
Speaking about the future, the International Energy Agency (IEA) says that it did not expect oil demand to return to pre-pandemic levels before 2022 due to a slump in air travel. Fatih Birol, the head of the IEA, noted that “In a few years’ time when we look back on 2020, we may well see that it was the worst year in the history of global oil markets.“
However, Ben van Beurden, Royal Dutch Shell’s CEO, has a different view on the current situation. In April, in the very midst of the coronavirus pandemic, the company set an ambition of becoming ‘a net-zero emissions energy business’ by 2050. Van Beurden noted that such a crisis was “a moment of opportunity“ for people to re-evaluate what was important in their lives, “and emerge more united in tackling the urgent challenge of climate change.“ He also added that “Society must remain focused on the longer-term challenge of climate change. Because it hasn’t gone away. It still needs urgent action.”
But just like with every industry, the pandemic did not hurt every player in this field equally. Smaller companies are struggling to survive and many of them are deeply indebted after years of producing oil at a loss. Analysts estimate that many of those small companies could go bankrupt even with prices at $20 per barrel. At the same time, bigger players may emerge with greater market share and greater profitability, as some of their biggest competitors will be gone. Mark Haefele, a chief investment officer of UBS, a Swiss multinational investment bank and financial services company, noted that “Current low prices will force some companies out of business, but we are also convinced that the global oil industry will survive this crisis.“
One of the most interesting aspects when it comes to the coronavirus impact on different industries is the fact that the effects of the pandemic can vary significantly from sector to sector, product to product and service to service. This is what’s been happening in the retail industry lately.
For example, some companies are reporting negative trends in one branch of their business, while reporting positive numbers in the other. John Frigo, an affiliate manager for My Supplement Store, noted that “While traditional sports nutrition supplements like fat burners, prohormones and pre-workouts are down in sales, vitamins and immune-boosting supplements are up, we’re having some of our biggest sales weeks ever.“
According to data from IMRG, UK’s online retail association, a few sectors that have recorded impressive online growth in the retail industry are the beauty sector, followed by electricals, home and garden, and alcohol. In the meantime, the clothing market saw online sales drop 20 percent year-on-year.
While we’re speaking numbers, Emarketer, an independent market research company that provides insights and trends related to digital marketing, media, and e-commerce, estimates that worldwide retail sales are expected to hit $23,4 trillion in 2020, down 5,7 percent from 2019, noting that both the magnitude of the downturn and the pace of the recovery will be harder on the retail market than the 2008 financial crisis. Recovery of the industry is expected to be slower not only because consumers have changed their habits, but also because of disrupted supply chains, slow exports, and high unemployment. Richard Lim, chief executive of Retail Economics, an independent economics research consultancy firm, noted that “Clothing retailers were the hardest hit as the absence of social interaction, whether that’s going to work, seeing friends or heading off on holiday, decimated demand for new outfits.“ For example, in China, physical retail locations have already reopened, but consumer spending is nowhere near where it was before. One case study shows that nearly 90 percent of H&M locations in China were open by mid-March, but sales were still down 79 percent year-over-year, according to Inside Retail Asia, Asia’s leading authority on retail industry news and trends. And when demand does rebound, it might be too late for some retailers, keeping in mind that many of them were already struggling even before the pandemic, mostly because of a long-term shift to online sales.
When you think about it, the challenges caused by the impact of the coronavirus pandemic are unprecedented. Different industries are put under abnormous pressure by the current crisis and have to find new ways to cope with the upcoming uncertainties. Some of them will probably bounce back more easily than others, but, as Machiavelli once said, we should “Never waste the opportunities offered by a good crisis.“