The airline, automobile, and rail industries—as well as the energy industry that powers them all— were hit hard by the coronavirus pandemic, as stay-at-home orders and social distancing guidance sharply reduced travel demand. Though the Coronavirus Aid, Relief, and Economic Security (CARES) Act attempted to address the pandemic’s impact on transportation, experts say key subsectors will face continued challenges.
At the onset of the pandemic, countries worked to limit international travel in hopes of confining the virus, leading to a weekly year-over-year drop in airline sales of almost 17 percent for the week of February 26, 2020. By way of comparison, the industry had been enjoying 5 percent year-over-year growth in late January. On March 19, the State Departmentissued a “Do Not Travel” advisory, urging U.S. citizens to avoid traveling internationally, and by May 15, airport traffic had dipped a staggering 90 percent year-over-year.
In response, Congress allocated $61 billion in assistance to the airline industry. The CARES Act provided:
- $25 billion in passenger airline payroll assistance and passenger airline loans or loan guarantees
- $4 billion in cargo carrier payroll assistance and cargo carrier loans and loan guarantees
- $3 billion in airline contractor assistance.
Democratic lawmakers had hoped to pair airline assistance with mandated emissions cuts and, while these provisions were not included in the final bill, the airline industry does have to fulfill some non-climate-related obligations as part of the CARES Act.
Initially, airlines had to retain at least some flights to any city they had previously served in order to receive federal assistance. At least 10 airlines requested exemptions from this requirement, stating that it would force them to run flights with few to no passengers. After denying initial requests, in May 2020 the Department of Transportation began allowing airlines to suspend service to either five total markets or five percent of their total markets served, whichever was greater. The legislation also includes restrictions on executive pay and stock buybacks, and airlines must eventually repay 30 percent of federal payroll assistance grants.
The automobile fuel industry also felt the effects of coronavirus. Oil demand decreased significantly amid travel restrictions and a price dispute between Saudi Arabia and Russia, and producers have struggled with limited storage capacity. As a result, the West Texas Intermediate (WTI) oil price index dropped to negative $37.63 on April 20. The negative price meant that, in some cases, companies paid for others to take oil contracts off their hands. Experts predict annual oil demand in 2020 will be over nine percent lower than demand in 2019. Though automobile fuel producers requested $3 billion in funding to purchase oil for the Strategic Petroleum Reserve (SPR), the CARES Act did not include this provision. Instead, the oil industry was allowed to participate in the CARES Act’s corporate assistance program and the US purchased one million barrels for the SPR.
Like airlines, passenger rail travelhas seen significantly decreased ridership. In March 2020, Amtrak bookings year-over-year declined by 85 percent and Amtrak cancellations year-over-year increased by 400 percent. Amid the outbreak, Amtrak suspended service on select routes, including its most popular Northeast Corridor trains, and local agencies followed suit. California’s Bay Area Rapid Transit system drew money from its $50 million reserve fund, and in April, reduced service to two trains each hour. New York City’s Metropolitan Transportation Authority experienced decreases in ridership up to 87 percent year-over-year and cut NYC subway system service by a quarter in March 2020.
Congressional funding for the rail industry was less than half of the airline industry’s total. The CARES Act allocated $25 billion to public transportation agencies such as commuter rail, and Amtrak received $1 billion in grants. Furthermore, the bill allocated more than $31 million for the Transportation Department’s preparation for and response to the COVID-19 outbreak, which will in part go towards the Federal Transit Administration and Federal Railroad Administration.
Despite some subsectors receiving relief, challenges still abound for the transportation sector. Most airlines have waived fees associated with rescheduled flights as a result of COVID-19, but some have been sued over their flight refund policies and practices. Due to cancelled travel plans, airline stocks have faltered and the International Air Transport Association predicts the sector will not see profitability until 2022 at the earliest.
The rail industry will face continued financial struggles as demand remains depressed, and will incur new expenses to protect drivers and passengers. The Centers for Disease Control and Prevention (CDC) recommends frequent cleanings of high-touch areas, instituting touch-free payment systems, using decals or tape to mark off six-foot distances, and providing hand sanitizing opportunities at all stations—all of which adds costs at a time when revenue is down.
Though the automobile fuel industry has struggled during the pandemic, and received little targeted stimulus funding, its near-term outlooks are brighter than those for rail and airlines. Experts predict that more people may rely on driving post-coronavirus, allowing the automobile and fuel industries to bounce back more quickly.
As some states roll back reopening plans and experts prepare for a second COVID-19 wave in the fall, transportation providers will likely institute plans to stay afloat, to the best of their ability. They’ll also have their eyes on the must-pass highway-authorization bill, which Congress must approve by September 30, and the broader infrastructure package that Democrats sent to an unreceptive Senate late last month. Both contain a slew of pandemic-related provisions.
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