The massive shock of the COVID-19 pandemic that has shaken the strongest economies around the world is expected to cost the global economy $8.5 trillion over the next two years. The staggering economic impact of the crisis has been felt across industries, but it has been particularly devastating for the following industrial sectors:
Aviation: Ground to a halt
According to global airlines body International Air Transport Association (IATA), airlines would face $252 billion loss of passenger revenue in 2020. Likewise, the Indian aviation industry is also feeling the repercussions of the pandemic and is expected to incur a revenue loss of INR 24,000-25,000 crore. Travel restrictions brought the world to a standstill, severely impacting not only aviation but also the related airport retail and travel and tourism sectors. Smaller carriers like the British regional airline Flybe filed for bankruptcy, and even Virgin Australia collapsed due to a debt crisis worsened by COVID-19.
While the aviation industry is not new to external shocks, such as oil crises, terrorist attacks and economic recessions, the unprecedented challenge from the novel coronavirus pandemic, literally ground it to a halt. Falling share prices, loss of revenue from lucrative transatlantic routes and a drop in the holiday travellers are just some ill-effects of COVID-19 on the industry.
COVID-19 has changed the future of travel. Health protocols and touchless travel, enabled by digital strategies, such as biometrics, voice commands and face identity will become the new norm. Enhanced global collaboration between governments, industry and other stakeholders, is needed to build a more resilient aviation industry that will encourage travellers to fly again.
Oil and Energy: A record collapse
According to a report released by The International Energy Agency (IEA), countries in full lockdown have witnessed an average decline of 25 per cent in energy demand per week. In contrast, those with a partial lockdown have seen about 18 per cent fall per week. The report also estimates that the pandemic has created an unprecedented situation where the global demand for oil could drop by an average of nine per cent this year.
Further, COVID-19 is expected to wipe out 9.6 million barrels per day of oil demand in 2020. The plummeting price of oil and gas due to OPEC and Russia failing to agree on production cuts is one of the major shock waves experienced by the global economy in the era of COVID-19.
The dampened demand for oil has resulted in less demand for chemicals and refined products, impacting high-cost producers and oil field service companies. According to industry experts, large oil and gas companies may face liquidity crises, prompting diversification and reassessment of their business model.
The energy sector as a whole needs to rethink its digital capabilities, primarily to mitigate the negative effects of the crisis. For instance, Europe’s energy regulators have ensured a reliable energy supply during the COVID-19 crisis and eased payment terms for the more vulnerable section of their customer base.
Not only during COVID-19 but even beyond, policymakers must support the oil industry and rectify the operational inefficiencies to enable the sector gain stability in the long run. The industry would also have to adopt new technologies to support the economic recovery that will stabilise oil demand and bring it back to the pre-pandemic 2019 levels.
Retail: Shopping interrupted
According to a Forrester report, global retail sales in 2020 will register a loss of $2.1 trillion, and it will take four years for retailers to overtake pre-pandemic levels. Though essential consumables have gained, categories, such as beauty and cosmetics, have seen a marked decline in consumer spending.
A sharp decline in discretionary consumer spending, the need for social distancing, lockdown movement limitations and widespread health concerns caused by COVID-19 has resulted in multiple challenges for the retail sector. Liquidity, supply chain disruptions, ensuring proper hygiene practices to safeguard the interests of employees and customers alike, are some issues the sector has faced in the COVID-19 era.
Retailers must adopt speed and agility to mitigate the disruption caused by the pandemic and emerge stronger from the crisis. They would also need to reimagine their supply chains by automating operations and ushering in omnichannel delivery models.
The industry at large should devise strategies for building financial resilience, optimising costs and staying engaged with employees and customers to meet the demands of the new normal.
Manufacturing: Reimagining supply chains
The novel coronavirus has shaken up the global supply chain, prompting multinationals to stall operations temporarily. The magnitude of the impact of COVID-19 on global manufacturing has put to the test the fragility of existing supply chains. The crisis has accelerated the need to optimise supply chain networks and prepare manufacturers for potential future economic shocks.
Due to the over-dependence on China by sectors across the spectrum, such as automobiles, retail, high-tech, pharma, chemical and consumer electronics, business leaders have started identifying other countries and supply chain systems that are a viable alternative to China.
Further, the magnitude of the impact of COVID-19 on the global supply chain has compelled several organisations to rethink their business models. Lean manufacturing, offshoring and outsourcing are the new buzzwords that will rebuild a more resilient global supply chain network.
To thrive in a post-COVID world, it is critical for manufacturers to streamline their supply chain and ensure the availability of sufficient stock and inventory to prevent disruption to goods and services in the wake of any future crisis.
Undoubtedly, the pandemic has forced organisations to reassess and re-evaluate their business model and future strategy. The silver lining to the impact of COVID-19 is the realisation that to retain their competitive advantage, organisations should be agile, flexible and swift to respond to any crisis that may be around the corner.
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