While Irma weakened to a Category 4 hurricane as it arrived in Florida’s Keys, it still has caused tremendous damage. As it moved along the east coast of the state, the hurricane caused power outages to 2.4 million consumers. Tanker traffic came to a complete stop and more than 6000 gas stations were also shut down. The worst impact is going to be to the Florida farmers, with an expected $1 billion in damages as first cut estimates.
In market news, the airline’s stocks were hit by the mass cancellations due to the approach of Irma. Airline stocks have been low also because of the mass cancellations just two weeks ago due to Hurricane Harvey.
The worst hit airlines were JetBlue Airways (JBLU) and United Continental Holdings Inc. JetBlue stocks dropped by 3.1% while United Continental (UAL) saw a 2.4% drop. JetBlue is expected to the take the brunt of losses due to Irma because the carrier has two hubs in Florida (one in Orlando and the other in Fort Lauderdale) as well as one in Puerto Rico. The airline company had to cancel 878 flights so far. United, on the other hand, cancelled fewer flights – in the range of 200.
Analysts predicted that Spirit Airlines (SAVE) and Allegiant Travel Co. (ALGT) we also going to be hard hit by Irma. Both airlines are struggling, and the share drop this weekend did not help. Spirit Airlines’ stock dropped by 0.2%, taking the company close to its lowest share prices since September 9, 2013. Allegiant went down by 0.8%, but that also meant the company was close to the second lowest it’s been in since August 24 this year.
Other airlines were also impacted by the storm, with Delta Airlines (DAL) shares going down 0.4%, American Airlines (AAL) dropping 1.2% and Southwest Airlines losing 1.4%.
Till Friday, the tally of flights cancelled in Florida was as follows:
Wednesday – 501 cancelled
Thursday – 356 cancelled
Friday – 234 cancelled
JetBlue, American Airlines, United and Delta capped their prices and used larger aircraft to help people trying to escape Hurricane Irma as part of the evacuation orders in the state. While this was a great move to help people, it still affected the bottom lines of these carriers.
As the hurricane rages through Florida, most airports in the state remain closed. Key West was the first to shut down, followed by Orlando and Fort Lauderdale. Miami International also closed down as Irma finally made its final approach.
Last week, thanks to the after effects of Hurricane Harvey, there were a total of 8,343 flight cancellations across the country – excluding the weekend. The weekend cancellations alone saw more than 3,100 flight cancellations, with most of them being out of Orlando and Miami. American Airlines saw the largest number of cancellations for the weekend at 743, followed by Southwest Airlines, which had to cancel 633. Most airports report that they will continue to stay closed through Tuesday. Fort Lauderdale tweeted that its airport operations will remain closed until such time as damage is assessed and repaired; no opening date was given.
The airlines sector was already grappling with problems such as increasing fuel prices and stronger-than-ever-before competition. Airline companies are struggling with revenue and margin outlooks. Delta Air Lines, United Airlines and Spirit Airlines are showing the lowest revenues and margins. According to UBS analyst Darryl Genovesi, there will be a 10% cut in earnings for 2017. These cuts would be directly attributable to hikes in fuel prices.
The Arca Airline Index in the NYSE (XAL) dropped 10.5% in the last 3 months and has lost 4.7% YTD.