Aviation and shipping to "bear brunt of economic downturn"
The aviation and shipping industries will suffer the most in the transport sector as the downturn sees demand for airline seats and cargo drop, says Dr Ashley Steel the Global Chair for Transport and Infrastructure at KPMG LLP.
Dr Ashley Steel says the economic problems will intensify the need for airlines to merge to survive. But given the distraction a tie-up will create, she says that airlines will need to consider whether the benefits will be sufficient.
Dr Steel urges carriers to cut capacity where possible, force through cost reduction as quickly as possible and manage their cash effectively - actions many airlines are already taking. "Low-cost carriers are at an advantage as their business model is better positioned to manage costs," she says.
"Traditional airlines are already moving closer to the low-cost model, but they will need to do so even more rapidly. In the long run the current downturn will squeeze the gap between low-cost carriers and traditional ones."
Dr Steel argues that the effects on shipping firms will be equally dramatic. In recent months freight rates have rapidly declined amid a sharp downturn in cargo from China to the west.
This is happening just as increased capacity comes on to the market. The cost of debt to finance ordered ships will further add to the cost burden of the shippers. Meanwhile, bus and rail firms have so far benefited from the economic woes as cash-strapped travellers switch to public transport.
But Dr Steel warns that as redundancies mount, especially in high-density commuter areas, bus and rail companies will also struggle. "In general, though, the sector is better positioned as it is partially underpinned by government contracts - in contrast to shipping or aviation," she says.
Transport infrastructure, such as airports and seaports, are also likely to see a drop in funds as fees and user charges fall, while costs remain static or increase and the government diverts resources to shore up the banking sector.
Outside the UK, Dr Steel considers that there could be an acceleration of the privatisation of public sector assets to raise finance, creating opportunities for pension funds to move to infrastructure as they seek safe havens from the volatile equity markets.
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