Hurricane Sandy To Impact Q4 Earnings Of Several U.S. Airlines

LCC: US Airways Group New US Airways Group logo
US Airways Group New US Airways Group

Hurricane Sandy impacted normal flight operations on several east coast airports and routes during the last week of October and the first week of November. The combined loss to U.S. airlines as a result of the hurricane is estimated at $190 million. The hurricane caused cancellation of approximately 15,000 flights. [1]

US Airways (NYSE:LCC) which has a significant portion of its operations focused on the east coast said in filing earlier this week that it expects to incur a negative impact of $30 million on its earnings in the fourth quarter on account of Sandy. [2] Other airlines including JetBlue (NYSE:JBLU), Spirit, United (NYSE:UAL) and Delta (NYSE:DAL) that get a significant portion of their passenger traffic from cities around the east coast are also expected to be impacted in the fourth quarter from the hurricane. However, Southwest (NYSE:LUV) and Alaska (NYSE:ALK) are expected to be impacted to a lesser extent as their passenger traffic from the east coast cities constitutes a much smaller portion of their overall traffic.

US Airways said that in the days leading up to and following the hurricane, that is from October 24 to November 3, its total bookings declined by 13% on a year-over-year basis. [2] We currently have a stock price estimate of $12.73 for the airline marginally below its current market price.

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The carrier also said that close-in bookings, which are those that are made 0 to 13 days prior to the departure declined by 21% y-o-y during the same period. [2] It now expects its passenger revenue per unit capacity to remain stable on a y-o-y basis in the month on November, compared to an increase of 2% it had anticipated earlier. However, the bookings and traffic have now recovered to normal levels.

JetBlue is another carrier that was impacted severely. The low cost carrier which has New York as its major hub anticipates the hurricane to impact its Q4 earnings before interest and tax (EBIT) in the range of $20 million to $25 million. Spirit expects its Q4 EBIT to sustain an impact in the range of $32 million to $37 million. And Delta and United expect to incur $20 million and $35 million respectively in losses related to hurricane Sandy. [1] All in all, the hurricane will significantly impact Q4 earnings of several major U.S. airlines.

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  1. Airlines Pay the Price of Hurricane Sandy, November 27 2012, [] []
  2. US Airways Form 8-K, November 26 2012, [] [] []