Some of the biggest industries are being affected by COVID-19
With COVID-19 all over the world, there’s no doubt that everything is being affected. Now, what does COIVD-19 mean for global industries?
With the number of people infected reaching 332,900 people(WHO), there’s no doubt that COVID-19(the Coronavirus)has had a serious impact on every sector and industry in the world. In some of the biggest industries in the world, companies are struggling to get by with no profit and high costs, many of them expected to go bankrupt in the next couple of months. Some of these industries, known for their massive workforce and billions of dollars of revenue, are hanging on by a thread, with high debt looming over them.
Here are 8 industries that are being affected by COVID-19.
1.Banking & Financial Services Industry
Banks
The Federal Reserve System(US) and the European Central Bank cut lending rates between 0% and 0.25%. Banks in over 50 countries have cut interest rates.
With COVID-19 affecting the global economy, many people will have large debts, because they’ve either been laid off due to their work shutting down, or by simply losing more money than they’re making, like a small business right now. By lowering interest rates, people are more inclined to take loans, which in return, stimulates the economy.
Fortunately, most banks are still operational, since banks are finding ways to provide their service while minimizing human contact. For example, more ATM’s and the use of digital services. Since people need banks (a.k.a they’re an essential service), banks need to find ways that they can provide their services to their clients while minimizing human contact. For example, closing (some) branches, opening more ATMs (and making sure these ATMs are always clean) and encouraging customers to switch to their digital services. As of right now, banks can continue to provide their service without losing any money.
Unfortunately, in the next weeks and months, the livelihood of banks, and even the economy is threatened. 74% of Americans live paycheck to paycheck. The population of the US is 327.2 million people, meaning 241.98 million people are living paycheck to paycheck. If even half of these people get laid off from their work because their employer is trying to cut costs, these individuals will soon have a lot of debt, debt that they can’t pay back anytime soon. From March 20–27, 400,000 Americans are expected to be laid off, according to an analyst at JP Morgan. Because of this, banks will be continuously losing money because they aren’t getting paid back for loans. This could result in banks shutting down, and businesses going bankrupt. This would have serious consequences on the global economy.
Insurance
Some insurance companies are taking measures to protect their business while others are forced into helping their clients. COVID-19 is having devastating effects on the reputation of insurance companies, because many people are frustrated that their insurance plan doesn’t cover a global pandemic, with many people attempting to file lawsuits against these insurance companies.
Just like other industries, Insurance companies will be losing revenue. Insurers manage over 20 trillion dollars globally. Their bond holdings are becoming a problem due to the recent interest cuts. Bonds are like loans. A bondholder profits from the interest that the debtor pays. Since the Federal Reserve System lowered interest rates, insurers will be profiting less than they would have before.
Insurance companies are going to have to pay a lot of money during this crisis. $320 Billion of trade losses are expected to occur due to the Coronavirus, meaning that businesses will be flooding insurance companies for financial assistance, resulting in millions, even billions of losses in money.
To predict the future impact, we can use past disease outbreaks. The SARS outbreak wiped off $40 billion from equity markets, resulting in a decrease in insurance company shares. It’s safe to say that in the current outbreak, shares of insurance companies can drop upwards to 40%. Some insurance companies right now have suffered a 32.6% decrease in company shares, something absolutely devastating.
The Finance industry as a whole is getting punched in the face. We’re seeing a similar situation to the 2008 financial crisis, and it’s only going to worsen.
2.Transportation Industry
Airlines
With Air travel being one of the main causes why COVID-19 was transported all over the world, airlines took a massive hit in reputation and revenue.
With the Asian market completely closed after the COVID-19 outbreak, airlines instantly had a 23% decrease in demand. Last week, the United States put a travel ban on the Schengen area, which is an open area zone, covering 26 countries in Europe, allowing for unrestricted travel. 40% of American airlines are affected by this travel ban, like Delta Airlines and United. This resulted in billions of dollars decreased in revenue.
With new countries going into lockdown in the upcoming days and weeks as the virus is spreading faster, airlines will continue to be affected, constantly going through cash.
The International Air Transport Association, an association that represents airlines over the world, predicts losses of 63 billion to 113 billion in 2020.
Because of this, American airlines are asking the U.S senate for a bailout of 200 billion dollars in order to stay afloat and keep employees
American airlines employ close to 750,000 people. If the airlines don’t receive the bailouts, many of these employees will be laid off, negatively impacting the economy.
If airlines stay on this trajectory without any financial aid, most airlines will be bankrupt before May 2020.
Fortunately, the situation is improving each day. The US senate is prepared to give 59 billion dollars as a bailout to American airliners, in exchange for keeping their employees. Many other governments are giving bailouts to airlines, because they are deemed as an essential service, meaning they are essential to the country’s well-being.
On top of that, most airlines are contracting and halting all activities.
United Airlines announced that it would reduce domestic flight capacity by 10% and international flight capacity by 20% in April 2020. United Airlines announced they were halting 50% of their local flying capacity( amount of planes available).
Ironically, because the COVID-19 outbreak caused oil prices to drop, Many airlines like Delta Airlines will be saving 2 billion dollars in 2020.
Airlines are taking a big hit at the moment, losing billions of dollars. However, with government support and contracting, airlines have a chance to survive this crisis.
Logistics
When the coronavirus outbreak was publicized, and a massive shutdown on China’s ports happened, the industry took a punch to the face. China alone makes up 65% of container imports, meaning shipping companies were and are losing money because of this main source of revenue. With more and more countries locking down every week, logistics companies will eventually not be able to import anything. In a worst case scenario, logistic companies will be put in a position where they will have to cut costs everywhere, by laying off workers and halting all operations. When this happens, the global economy will plummet, due to no new goods and services being imported and exported.
Even worse, some of the Chinese ports shut down are some of the biggest ports in the world, like the Shanghai port, the biggest port in the world, goes through 38 million containers per year.
Fortunately, China is slowly recovering from the outbreak. The Shanghai port is expected to reopen with 95% capacity, meaning shipping companies have a chance at continuing operations and making money.
Logistics companies are being severely impacted by the COVID-10 outbreak, due to country lockdowns. Logistics companies can potentially stay afloat as China, their main source of income, starts to recover.
Marine
Imagine you’re on a cruise, you’re having the time of your life, and then the captain announces that they have nowhere to land because each port is denying your cruise entry.
This is what at least 30 cruise ships are going through right now because of the COVID-19 outbreak.
Because countries are locking down, cruise ships can’t go to their destinations.
The Cruise Lines International Association, an organisation that represents cruises all over the world, has suspended operations from U.S ports, which makes up 95% of cruises around the world. This has already resulted in massive losses as cruises have to pay back the passengers who bought tickets in advance.
Unfortunately, the only solution for cruises is to travel to different ports, hoping one will let them board. For example, the Norwegian Jewel, which has traveled from Fiji to New Zealand, and is now on it’s way to Honolulu, in Hawaii, not even knowing whether they’ll even let them in.
Fortunately, the U.S government is actively trying to find solutions to dock these cruises around the world, with the support of other countries.
As soon as the COVID-19 outbreak was made public, there was a decrease of 14.9% in yearly sales.
Shares of the world’s largest cruise companies; Carnival Corp., Royal Caribbean International, and Norwegian Cruise Lines have dropped as much as 26%.
Unfortunately, demand for cruises will continue to decrease, and the costs to run the company will increase, as new cleaning procedures are mandatory and the rise of lawsuits from trapped passengers. By analyzing past events, we can estimate the future of demand for cruises. When the Costa Concordia, a cruise ship sank with 33 deaths, it resulted in a decrease in demand by 2%. With an event as serious as the COVID-19 outbreak, demand in the future will significantly decrease, potentially a 10% decrease. On top of that, the reputation of these cruise companies will be impacted, with the numerous scandals appearing online.
All these industries have been impacted negatively and severely. While some have the ability to conserve costs and get bailed/get government support, others are in deep trouble, which will cause massive impacts on the global economy.
3. The Retail Industry
E-Commerce
The COVID-19 outbreak is a turning point for e-commerce, where more and more people are trusting this evolving industry.
Because almost everything is shut down, most people have isolated themselves in their homes. Since more people are at home, they are more inclined to shop online, because it’s a safer alternative than going to a store in person.
Sales for categories like groceries, product goods (fashion, tech, things..), and staple items (non-perishable foods, canned foods, dehydrated foods) which we’re before bought in stores are replaced with e-commerce, dramatically increasing the demand for e-commerce.
Instacart, an online grocery shopping platform, saw a 218% increase in downloads and sales increase by 10 times because of this increase in demand.
Now that people are forced to use e-commerce, there will be a higher demand in the e-commerce space, leading to more sales and more people trusting the platform. The trust issue is one of the biggest reasons people don’t shop online. In fact, 58.3% of people say they don’t shop online because they don’t trust online sites with their credit card info.
Since people are forced to remain indoors and isolated from traditional stores, people turn to e-commerce. This could mean people get more familiar with the platform and the online experience and they start to trust e-commerce more than they used to. COVID could be the turning point for the next generation of shopping!
Brick-And-Mortar(physical stores)
With more than 80 US retailers currently closing stores and many more in the upcoming days, retailers are losing millions, even billions of dollars. As of right now, Adidas has lost 1 billion dollars due to COVID-19.
Here’s how major retailers are addressing COVID-19:
Walmart: Giving employees infected with COVID-19 up to 2 weeks pay. If they’re still unable to work, they’re eligible for up to 26 weeks of pay.
Burberry: Closed 24 of 64 locations in China, with 40 remaining locations have employees on reduced hours.
Macy’s: Continuing with normal hours, but instead giving flexible schedules to employees
Home Depot: Giving employees over 80 hours of paid sick leave.
Fast-food restaurants are emphasizing drive-thru, to minimize personal contact.
As of right now, physical retailers are slowing down operations, by shutting down stores and paying sick employees. With major retailers losing millions every week, the future looks grim for physical retailers.
The American Retail Industry (and associated industries) contain 52 million employees. According to GAP’s CEO Sonia Syngal, tens of millions of these jobs will be lost, it will be a massive blow to the economy due to people not having the spending power to stimulate the economy.
With stores closing downs, retailers are losing potential revenue and assets. In a letter written to President Trump by over 90 trade organizations and retailers, they state that “liquidity is the biggest issue facing the retail industry” (liquidity is the ability to pay off all current liabilities using its assets.) It’s very likely that many of these retailers won’t be able to pay off liabilities, resulting in mass debt and cutting costs like mass layoffs.
We can see this issue already arising with Danny Meyer, CEO of Union Square Hospitality Group, a company that owns several high-end restaurants(Union Square Cafe, Shake Shack, e.t.c), laid off 80% of his workforce, approximately 2000employees.
With the Republicans and Democrats in the senate fighting with each other, it doesn’t seem like retailers will receive bailouts before it’s too late.
The future for physical retailers doesn’t look too good. Many of these companies will face issues with liquidity, causing mass debt. They might have to lay off employees to stay afloat, something that will destroy the American economy.
4.The Energy Industry
Oil and Gas
When the COVID-19 outbreak was made public and China shut down the majority of the country, oil prices plummeted. With China being the world’s primary oil and gas consumer, oil and gas companies lost a lot of money when the demand decreased.
The demand for oil at the beginning of 2020 was 99.9 million dollars per barrel, according to the International Energy Agency. It’s dramatically decreased from that number.
The demand for oil has hit the lowest point in 17 years because because China, the world’s largest oil importer, wasn’t and is still not buying oil in the same quantity as before.
The IEA, the International Energy Agency predicts 2 scenarios for oil. In a more pessimistic case, global measures fail to contain the virus, and global demand falls by 730,000 barrels a day in 2020. In a more optimistic high case, the virus is contained quickly around the world, and global demand grows by 480,000 barrels a day.
On January 1 , a barrel of crude oil sold for $67.05 on New York’s NASDAQ exchange. Today, it is trading at around $30 per barrel.
With this dramatic plummet, some companies in the industry are hanging on by a thread. Exxon Mobil, a leader in the industry, has announced they have decreased cash flow and capital available due to the lack of revenue.
The energy companies in the S&P 500 stock index( measures the top 500 companies in the US, used to evaluate the American economy) are down roughly 60% as of right now.
It’s safe to assume that small to midsize oil companies will likely go bankrupt without a sustainable source of revenue.
An even bigger problem is with China being the largest oil importer, oil producers have oil that isn’t being sold.
To compensate for the high supply, Saudi Arabia’s state owned oil company, Aramco, is selling oil barrels for $25, the lowest price in decades. Russia and Saudi Arabia have been in an oil war, fighting to have a complete global monopoly. Aramco decided to undersell to compete with Russian oil companies. This will have devastating effects on North American and European oil companies, because they can’t compete with the cheap prices, resulting in a lot of money being lost. In the next couple of weeks, we might see mass oil worker layoffs to decrease costs to stay afloat.
While international oil companies are struggling, the future for American oil companies might not be so grim. Donald Trump’s new economic support measures have resulted in a 2% increase in oil prices, which means that American oil companies have a chance at surviving this crisis.
5.Entertainment Industry
Sports
In sports, the #1 priority are the athletes. Many sports agencies and associations decided to stop or postpone sporting events to prevent the spread of infection. Because every major sporting organization(the NBA, NFL, NHL, e.t.c) shut down or postponed their sporting season, it caused major financial losses.
Many other sporting events have been postponed. The 2020 Olympics in Tokyo, Japan, is being postponed until 2021. Postponing the Olympics in Japan will decrease Japan’s GDP(Gross Domestic Product, measures the goods and services produced in the country) by 6 billion dollars USD.
The NBA decided to cancel all the games left in the season, costing the NBA 500 million dollars in revenue for 2020.
Although many sport associations have cancelled their games, some athletes and associations are thinking outside the box.
Many athletes have taken up to social media to promote fun, physical challenges to do while isolated in your home, with many sports sponsorship brands using this as an opportunity to sponsor athletes(Nike,Gatorade, e.t.c). This ensures that athletes will be able to make money off the playing field.
NASCAR has done something that has never been seen before; they’re replacing the traditional, in person racing with online, video game racing simulations, where NASCAR drivers can race each other and viewers can bet on their favorite players.
With no spectators, many sports associations will lose revenue due to no ticket sales, but with other streams of revenue, the sports industry will outlive this crisis with no major losses.
Movie industry
Because theaters are considered public gatherings where COVID-19 can spread, most film companies have postponed their movie releases and most theaters are closed.
As of right now, 31 movie releases have been postponed and are queued for release on a later date. Some titles include Mission Impossible 7, Fast and Furious 9, and Jurassic World: Dominion.
Many studios have lost tens of millions of dollars in advertisement campaigns. With high movie budgets and no sales, movie studios could lose hundreds of millions of dollars.
Film studios are in a position where there only choice is to lose money because theaters are closed and they can’t integrate with an online feature(viewing movies online) due to the fears of piracy.
Because of the theater closures and films being postponed, around 4 billion dollars was lost in potential revenue.
Hollywood is estimated to have lost 7 billion dollars and will potentially lose another 10 billion if theaters remain closed.
If theaters continue to close, the movie industry will lose potential revenue, and will probably not return any profit due to the amount of money lost this year.
Overall, the Entertainment industry has lost billions of dollars and has taken some big hits to potential revenue. Because most public gatherings are closed, revenue during the COVID-19 outbreak will be significantly lower than normal.
6. The Education industry
Montessori/Preschool
Because Montessori schools and preschools are being shut down to prevent the spread of COVID-19, the economic future for these businesses is threatened.
Owners of these establishments won’t have a source of income, because their business is shut down. This will lead to these owners laying off their employees to compensate for the lack of no income. As the WHO(World Health Organization)warns that the rate of spreading and infection rate for COVID-19 is increasing, these centers will be shut down for longer, leading to some bankruptcies in this industry.
Elementary+Secondary schools
Schools have been shut down to prevent mass-gatherings, decreasing the chance of infection. Fortunately, the majority of governments are implementing eLearning , online learning, meaning teachers will keep their jobs and keep getting paid by teaching through an online platform.
Almost all people involved in the Elementary and Secondary school will not suffer as severely as other industries.
Post Secondary
Many universities and other post-secondary education have decided to shut down their institutions. Fortunately, there have been no layoffs thanks to online learning platforms already in place. Many institutions forced their students to leave dorms and/or institution owned housing, causing a decrease in institution revenue due to no tenants paying for the property.
Most of the education industry has been shut down or blocked from physical contact. Most locations have replaced it with online learning, which has kept jobs afloat. If the situation gets better, educational institutions will start to reopen again, benefiting parents that had to stay home to care for kids, further benefiting the economy. If the situation worsens, this industry will overall not be affected, because they have the framework(online learning) to continue with their work.
7. The Public Sector
Military+Law Enforcement
With an outbreak as big as COVID-19, there’s no doubt that the military and law enforcement are overwhelmed.
Police are arresting fewer people who commit low-level offences (shoplifting, trespassing, etc) in attempts to minimize to its staff. A good example is the New York Police Department. 52 NYPD(New York Police Department) officers have been infected with COVID-19.
Because everyone is at home, more people are on the internet. Because of this, there’s been in a surge in online scammers. FBI Director, Christopher Wray, says “We will not let our guard down”.
With the U.S lockdown, US Citizenship and Immigrations are shutting down their services and cancelling all appointments at the moment.
To prevent a higher infection rate, the Drug Enforcement Administration(American administration which sets the rules for all drug categories) now allows drugs to be prescribed over the phone, to limit human contact.
To prevent further spread, many federal courts have closed and/or delayed trials. 30 courts in the US have suspended and/or ended jury trials. New York City is currently the only region in America where hearings and court events have been replaced with video.
For the first time ever, The Board of Correction, which sets the policies for NYC jails, wants to decrease the population of the city jails, to reduce the risk of infections among inmates and jail employees. This could mean serious societal and economic implications by releasing prisoners.
In Los Angeles and New York, prisons are releasing many prisoners who are convicted of low-level offences to reduce the risk of infection, due to many inmates testing positive for COVID-19.
The US currently has over 2.3 million people in jail, meaning this could have serious impacts on the economy with criminals being released into the public, and societal implications with these criminals posing a danger to the people around them.
Public Transit
Since public transport squishes so many people into a little space, its easy for someone who is infected to spread COVID-19 really fast (due to the virus being transmitted through droplets, so sneezing, coughing, etc)
Because of this, people are using public transportation a lot less, in order to decrease the chance of infection especially in affected areas.
Here’s how people over the world are approaching public transport:
-Use of public transit has plummeted by 80% since Jan 15 in European and American cities.
Ridership in Italy is down 90% (since Jan 15 2020)
In the US, ridership is down 45%-60%
Due to the decrease in revenue, US Transit agencies are asking congress for $25 Billion worth of support in its federal relief package in order to continue operations.
Other countries, like Australia, have suspended their public transport service to decrease the amount of people infected.
Public transit will have some of the lowest ridership ever, with very low revenue. While some countries are cancelling their public transit service, other countries like the US are prepared to support this industry financially.
Public Healthcare
With an outbreak like COVID-19, healthcare systems all over the world have exceeded their healthcare capacity, because their hospitals and centers are full of people afraid they have COVID-19, and people infected with it.
Dr Michael Warner, a specialist in an intensive care unit(ICU) at a Toronto Hospital predicts that if COVID growth continues at this rate in Ontario ( a 21% increase in patients daily), Ontario’s 2053 ICU beds will be taken up very quickly.
All over the world, healthcare systems will soon be overwhelmed, with the number of patients exceeding the healthcare system’s capacity. China estimates that 11–18% of people infected will be put into serious condition. So of China’s 80,000 infections, up to 14,400 extra people in need of more treatment than normal. Their healthcare system might not be able to facilitate this large amount.
The number of hospitalizations in Florida’s hospitals could peak around 185,000, while there is only 49,000 hospital beds in the whole state. And those beds are generally 63% full. Since COVID patients generally require intensive care beds, there are only 4590 of those which are usually 67% full. The Florida healthcare system is at risk of having too many people without any support for them.
Hospitals have also been taking huge hits to revenue and an increase in costs. Hospitals are being forced to cancel their more profitable surgeries to treat COVID patients which are more expensive and no source of revenue from it.
A good example of this is Beaumont Health, a eight-hospital organization with 5 billion dollars in revenue may suffer a $1 to $2 billion hit in annual revenue as it cuts most surgeries to brace for COVID-19 patients, the CEO of Beaumont Health, John Fox said.
Fortunately, employees at healthcare systems are being compensated for their work in this health crisis. Nurse paychecks have increased from an average pay of $1700(USD)/week in January to $3000(USD)/week, in March.
Healthcare systems all over the world will be bombarded with new patients, resulting in even less medical supplies. Many hospitals don’t have the beds to facilitate more COVID-19 patients, which could mean a higher rate of infection. In the next couple of weeks, many healthcare systems over the world will have a dangerously low amount of medical supplies.
The public sector has and will continue to be overwhelmed with this outbreak, with more patients than beds or so many infected prisoners. The public sector will go through periods of no revenue, like public transit. The public sector’s main priority is decreasing the infection rate, at the expense of economic and societal implications.
After careful research, the Public sector, Transportation, Energy, and the Banking and Financial Services industry will suffer severely from the COVID-19 outbreak, due to economic implications(loss of revenue, high costs) and societal implications(overload of public healthcare capacity). Although the future for these industries seem negative, there may be a bright future ahead. With the strong economic support from countries all over the world, these industries can stay afloat during these hard times, and come back strong.
