IMPACTS OF COVID—19 ON URBAN PUBLIC BUS PASSENGER TRANSPORTATION SYSTEMS

On 15.03.2020, the State Government of Minas Gerais published Decree 47,886, establishing “Measures for Preventing Contagion and for Coping with and Contingenting the Epidemic”. The Decree, repeated in a similar way in several other States, determined the suspension of non-essential activities and all events with the potential for crowding people. The objective was to reduce the risk of the spread of COVID-19 by restricting the movement and crowding of people, promoting the phenomenon of social isolation, following the guidelines of the World Health Organization (WHO). The immediate economic impact of the isolation was the reduction of the flow of consumers on the streets, which in turn drastically reduced the revenue of several companies, especially linked to Retail, such as Clothing, Parking, Bars and Restaurants, etc., as portrayed in the Elo Card Flag survey.

¹ Average Day means Average Revenue between 05.01.2020 and 22.02.2020. Source: Elo Flag

Another heavily impacted segment, despite being considered an essential service for the population, was that of Urban Public Passenger Transportation by Bus. According to the National Association of Urban Transportation Companies (NTU), of the 2,901 existing Urban Public Passenger Transportation Systems in Brazil, approximately 279 had reduced supply or total suspension of services since the beginning of the pandemic. The segment generates R$ 42.1 billion annually, carrying 824 million passengers every month, and generates 1.8 million direct and indirect jobs, according to the NTU. The total stoppage has so far been registered only in the state of Santa Catarina and in some cities such as Marília (SP), Jaboticabal (SP) and João Pessoa (PA). In these cases, there was a complete reduction in Tariff Revenue for Transportation Systems. The companies, in turn, were able to reduce several Variable Costs (Fuel, Maintenance, Tires, etc.), practically in proportion to the reduction in Tariff Revenue, since the vehicles are stationary. Expenses, which do not necessarily have such a direct relationship with the vehicles in operation, have been reduced as far as possible.

* 11 Transportation Systems, such as the one in São Paulo, grant government subsidies to the System, supplementing the collection. Generally, subsidies are provided so that it is possible to maintain the system's economic and financial balance with a reduced rate.

Most worrying, however, are the municipalities that experienced a drastic reduction in demand without necessarily a compatible decrease in supply. In order to comply with the recommendations of the National Land Transportation Agency (ANTT), WHO and City Halls, such as reducing the volume of passengers per vehicle, without allowing people to stand, some Systems even showed an increase in Cost/Km, even with the fall in Tariff Revenue. In the municipality of Campinas (SP), for example, which has 1,246 vehicles and employs 2,500 people, the Municipal Development Company of Campinas (EMDEC) announced that there was a drop of 78.9% of Transported Passengers, from 562,066 on 11.03.2020 to 118,420 on 25.03.2020 2020, and the estimated reduction in the fleet was 50%. In the city of São Paulo, the drop in passenger demand was estimated at 75%. However, the City Hall authorized the reduction of the fleet in circulation by only 60%. In the city of São Paulo alone, the estimated fleet is 15,000 vehicles, generating 32,000 direct jobs.

In the Federal District, the drop in passengers reached 78.9% and companies are asking the Transportation and Mobility Secretariat (SEMOB) to inject R$ 100 million into the System to guarantee the provision of the service.

In Belo Horizonte (MG), which has a fleet of 3,000 vehicles and generates approximately 14,000 direct and indirect jobs, the situation is no different from that in the rest of the country. The Belo Horizonte Passenger Transport Companies Union (Setra-BH), due to the drop in revenue due to the reduction in the number of passengers transported by 70%, as well as due to late adjustments in the supply of buses in circulation, is negotiating, in addition to the reduction of working hours, the payment of salaries in up to three installments, with the intention of maintaining healthy cash flow. So far, it is estimated that supply has been reduced by 50% in Belo Horizonte. Fear of Transportation Systems led three entities linked to Urban Public Transportation to submit to the Ministry of Economy, through Minister Paulo Guedes, a document in which they warned about the possibility of collapse and paralysis of services, given the inability to pay obligations. Several companies in the segment have used the Provisional Measure that regulated the Reduction of Working Hours with Reduced Wages, not only to avoid mass layoffs, but also because they do not have the financial resources to carry them out. The NTU, the National Public Transportation Association (ANTP) and the National Forum of Secretaries and Directors of Urban Mobility, asked the Government to create a program to help the Systems maintain the cash register, called”Emergency Social Transportation Program” claiming the need for a monthly investment of R$ 2.5 billion, an amount that would be used to purchase electronic credits and the stock of tickets released to informal workers, beneficiaries of the Federal Government's social assistance programs. The abrupt drop in the number of Passengers Transported is the obvious consequence of the restriction on the movement of people. The natural counterpart for equalizing the new reality of demand, while maintaining the financial balance of the Concession Contracts, should be the downsizing of the supply of lines and trips, provided that, of course, it maintains adequate service levels for the population. However, in many cases, the reduction in supply does not accompany the drop in demand, in an attempt to keep the fleet larger than necessary, with the purpose of avoiding crowds and helping to block contagion between people. Therefore, there is interference with the balance between supply and demand, justifying the request for financial relief and government intervention. The economic impact that COVID-19 and the measures to restrict movement and agglomeration of people are generating in various segments is undeniable. Unfortunately, apparently, this scenario will continue for a while longer, increasing the need for immediate intervention, through agreements with municipalities, states and the Federation, to guarantee the provision of services, avoiding collapse, without detriment to cash and government budget, since this could become an even bigger problem in the long term for the country.ARTICLE WRITTEN BY LEO PEREIRA— ASSOCIATE OF FC PARTNERSGo to our site: http://www.fcpartners.com.br