Submitted by: Rajvi Rajendra Chatwani

Student Id: 201900929

Which industry will recover first? Why?

The coronavirus effects are now felt in almost all industries. Others are likely to come back faster than
others. After considering the current scenario and the nature of the industry, in my opinion, the oil
industry will bounce back earlier than the airline industry. The reasons being as follows:
Due to Covid-19, many flights between China and European airports were cancelled and was then
followed by government restrictions on travel to Italy, then transatlantic flights, and finally most intra-
European air traffic. The airline industry is facing massive cash flow pressure from severe travel
restrictions and a sharp decline in passenger demand. The decline in passenger flights has had a knock-
effect on air freight, half of which is normally carried in passenger- aircraft. With reduced capacity, and
increased demand to compensate for delays in sea transport, air freight prices have risen sharply. Airlines
have already experienced a steep fall in traffic on their international high-profit routes. In this scenario,
airlines also miss the summer peak travel season which results in bankruptcies. The low demand resulting
from the coronavirus pandemic will not last forever but people will avoid travel for a long time due to the
fear of the virus. Travel for business purposes might resume earlier but for leisure purpose people will
avoid travelling for a long time.
In case of the oil industry, the demand for oil has reduced due to the pandemic due to low consumption.
This has led to increase in reserves and low storage facilities which has in turn lead to reduction in oil
prices. Demand is dropping so quickly relative to supply that very soon the key problem for many
producers will not be whether they can guarantee operating income, but rather whether they can find an
outlet for their crude supply. This oil glut produces a situation where certain obscure grades of oil have
already fallen below zero. But in case of oil, the recovery will be faster. Once the effects of the pandemic
starts declining, the wholesale and retail industry will start its operations and in turn the transportation
will begin which will require fuel. Eventually airlines will also take jet fuel back to the air and continue
purchasing it. As per a research, American drivers will be consuming more petrol when they return to
work. And therefore, the industry will recover faster.