A speedy recovery will not be enough to achieve a speedy decarbonization

Business environment risk
Political risk
Commercial risk
  • Government support in the form of public infrastructure (ports, airports, roads, railways etc.), given its crucial role in enabling trade, tourism and daily mobility.
  • Monopoly or oligopoly in some countries, which gives companies pricing power.
  • In the cargo segment, shipping companies benefit from 1) bunker fuel being cheaper than car diesel or jet kerosene and 2) the largest transport capacity: today’s largest vessels can transport up to 24,000 containers, which explains why 85% of global trade is transported by sea.
  • Rail transportation is rarely privatized. In most cases, rail companies are state-owned, which gives them relatively easy access to financing and grants (vs airlines which have a lower credit profile).
  • Fuel-price volatility constantly affects margins as it is the main cost for transportation firms. So far in 2024, bunker oil, diesel, kerosene and biofuel prices have declined from the peaks observed in 2022 and 2023 but they remain relatively high, weighing on companies’ earnings.
  • Increasingly criticized for its negative environmental impact, especially airlines (anti-flying social movements).
  • Capital-intensive sector as companies need an expensive fleet of airplanes, buses, trucks, vessels etc, which must be frequently renewed and have high maintenance costs.
  • Highly leveraged as companies rely on a huge amount of debt to acquire and expand their fleets.
  • Since it mostly transports freight, maritime transportation is very cyclical so both prices and volumes depend on economic activity (trade).
  • Airlines have faced tough competition since the arrival of low-cost carriers.
  • Compared to maritime transport, road transport faces higher labor costs that are not proportional to the capacity of trucks despite its lower transportation capacity (a truck can carry only 1 container, while a vessel can transport 20,000).
  • Road transportation companies depend on government budgets for road infrastructure, which remains less developed in developing countries, limiting expansion. In other geographies, the toll system is too expensive.
Maria Latorre
Allianz Trade