Northleaf's Jamie Storrow, Managing Director & Co-Head of Infrastructure, sat down with David Snow of Privcap Media to discuss the impacts of COVID-19 on transportation infrastructure. Below is an edited transcript of the podcast.
How has the COVID-19 crisis affected transportation infrastructure?
Depending on the jurisdiction, starting in February and March, there were regional lockdowns and we saw usage of pretty much every type of transportation decline dramatically. People were not on subways; they were not flying on planes; they were not driving to work in vehicles. Everything was impacted, and we had never seen that before. The global financial crisis was probably the most relevant recent drop in transportation activity that we have modelled.
But this is entirely different. We saw some roads in the U.S. experience traffic declines of over 90%. Almost every airport was impacted. This is completely unprecedented, and there are going to be winners and losers. People may stay away from airports and move more to roads for regional travel. People may avoid public transportation and things like Uber and ride-sharing. We still do not know the answers to these questions.
You have spoken in the past about 'mode shifts' in transportation. What does this mean?
I will use commuting as an example. You might have a choice between the subway and driving into work. Some people might be concerned about enclosed public spaces, like the subway, and so if they have a choice, they may move to using their car and parking, or to use some other non-public form of transportation. That is a mode shift until things go back to normal. We are already seeing people make those kinds of decisions, and it will likely continue until there is a vaccine. For some people, there could be permanent change. There is a lot of real-time data about public transportation, and we see this mode shift across many communities.
Another similar mode shift involves people meeting virtually to avoid air travel and using platforms such as Zoom and Google Meets. We are seeing that happen, with travel restrictions internationally and, in some countries, domestically. But people are generally adapting, and we expect a continued use of COVID-era methods of communication to minimize their travel on an ongoing basis. People are becoming more comfortable with working remotely and digitally. This is going to have a significant impact on the infrastructure that they are going to need.
There are many predictions that car ownership will decline in favour of car-sharing. What is your take?
This shift is very community dependent. In some communities, people could transition away from cars and move to a rideshare program or use Uber. In some places, we have seen that happen quickly - typically in urban settings. It has had a significant impact on both parking and rental cars because the need for those services has declined.
That said, post-COVID, there have been some suggestions that people will be less comfortable sharing vehicles with non-family members. If that is the case, we may see an increase in car purchases and a reduction in ridesharing.
Infrastructure investors have bought many transportation assets from governments. Given that tax revenues are under tremendous strain now, might this spur more municipalities to sell their infrastructure assets to private investors?
Certain governments do not want to own some of their hard assets and work to push the risk of operations to the private sector. Some governments have fiscal issues and they are looking to recycle money from assets they have. But from a COVID perspective, it is just too early to know. These sale processes take a long time - years in almost every case. But we are going to see more privatizations in some places as a solution.
The U.S. is well behind Europe and Australia with regard to the private ownership of transportation infrastructure. Might that mean that there will be many PPP deals to be had in the U.S.?
The U.S. is fragmented, with most of the 50 states acting independently from a transportation perspective. In other countries, a lot of the PPP deals are executed on a national or federal basis. In the U.S., you are dealing with the individual state transportation authorities the vast majority of the time. States like Texas and Virginia have a fair bit of private road ownership, and then other states have absolutely none. In Europe, almost all the major airports are privately owned. Whether it is airports or roads in the U.S., we could absolutely see states and municipalities looking to privatize those.
Please talk about the rise of electric vehicles and the infrastructure that will be necessary for them.
Firstly, electric vehicles will need charging stations, and given the current range of electric vehicles, charging infrastructure has to be widely available. Those may or may not be investable infrastructure depending on the revenue model.
The demand for electricity in some areas is going to change. Getting involved in local generation and battery storage are opportunities related to electric vehicles as well.