The Covid-19 pandemic has dominated the global economy for many months. Supply chains are disrupted, factories have had to suspend production, and companies are placing their employees on furlough. What do these developments mean for the transport and logistics sector? What challenges are companies currently facing and what is being done to prepare for the post-crisis period?
Within the transport and logistics industry, three sectors have been particularly hard hit by the pandemic: the aviation, automotive and shipping industries. With fleets of aircraft almost entirely grounded for some time now, the aviation sector has come to a near complete standstill. Most airlines have had to rely on some form of state support – even the German airline Lufthansa is talking to the German government about state financial aid. Indeed, since most airlines are also of strategic importance to their country, at least some airlines are likely to receive this much-needed support.
Since the beginning of the Covid-19 crisis, the automotive sector has also been struggling with plant closures and interruptions to supply chains. Although production is starting to resume, the sector is suffering from poor sales of new cars, which have plummeted during the crisis. In this sector, too, the larger players with sufficient financial reserves have an advantage in coping with the crisis.
In shipping, on the other hand, the picture is mixed: companies operating in the tanker sector are making record profits due to the dramatic decline in oil prices and the lack of oil storage. Companies operating in the dry bulk market and container shipping are experiencing much more difficult times. "A small consolation is that the shipping sector has always been subject to major fluctuations. Our customers' experience in dealing with difficult situations is now paying off", says Gerlach Jacobs, Global Sector Head Transport & Logistics at ING.
Overall, drastic measures have been taken in the aviation, automotive and shipping sectors to ensure that there is sufficient liquidity to see companies through the crisis. It’s not just state aid that is playing a decisive role is this area, but banks too. "We have been involved in several Covid-related loan facilities to provide our customers with additional liquidity", says Jacobs. "Our goal is to be there for our existing customers and to support them in the best possible way through this challenging situation."
Sectors in transition: trends are continuing or accelerating
In addition to all the challenges, the current situation also offers opportunities, especially as we emerge from the crisis. The automotive sector has been undergoing a profound transformation, and not just as a result of the pandemic. For some time now, automotive companies have been investing increasingly in the electrification of vehicles and concepts such as "Mobility-as-a-Service". Depending on the incentives and framework conditions that politicians will set for the future, this development is poised to continue after the pandemic.
In the aviation sector, on the other hand, a number of fundamental structural changes are to be expected. In the future, for example, aviation could focus even more on the topic of sustainability. Even now, injections of liquidity support may be linked to sustainability obligations. In the medium term, regulation could be further tightened to ensure more sustainability in certain regions in relation to short-haul flights. The shipping sector had begun to develop more sustainably, even before the Covid-19 crisis. In early 2020, for example, the IMO 2020 came into force, a global regulation that provides for the use of clean, low-sulphur bunker fuel or, alternatively, retrofitting ships to reduce emissions.
Initiatives for greater sustainability could be a way for the transport and logistics sector to become more resilient to future crises. In addition to investing in the future, however, the question arises as to how much of a liquidity buffer companies in the sector should be able to provide for possible future crises. This is significantly influenced by the duration of the crisis and how it is managed. However, both variables are now as uncertain as ever and will occupy companies and banks more and more in the future.
You can find more information in our current Automotive Report