Hurricane Harvey may do to United Airlines what David Dao couldn’t and hurt its bottom line.
According to a report published by Cowen & Co. analyst Helane Becker on Tuesday, the financial toll from the hurricane on United could be more than $265 million.
United Airlines is by far the largest tenant of Houston George Bush Intercontinental Airport. The airline’s operations at the airport account for 17% of its total capacity.
(Prior to its 2010 merger with United, Continental Airlines was based in Houston.)
While Southwest and Spirit also face losses as a result of the storm, the scale of United’s operation in Houston means it’s exposed to a higher degree.
Becker expects Southwest to take a $77 million financial hit while Spirit will likely lose $11 million.
Further, the analyst does not expect United to be able to recoup much of the revenue it has lost during the airport’s closure. (George Bush Intercontinental is not scheduled to reopen until Thursday.)
In the report Becker wrote:
“We assume the airports in the area will be closed for seven days and expect relatively little chance to recoup the lost revenue as the impact to people in the region could be profound (justifiably difficult to go on vacation after your house was flooded or the roof torn off). In addition, we expect school closures, and it is possible future vacations will be canceled to make up the lost classroom time. Given Houston is a major hub for United, they will likely be the most impacted by the storms.”
In April, the video surfaced of David Dao being forcibly removed from one of the United’s planes in Chicago. The public backlash after the incident forced CEO Oscar Munoz to institute a series of passenger-friendly policies to reduce the likelihood of such an event ever happening again at the airline.
Even though the incident turned United into the butt of every joke about poor customer service for a few months, it didn’t actually harm the airline’s bottom. In fact, United had a great second quarter with profits up 39%.
For United and its Houston-based employees, Harvey will prove to be much more devastating not just in lost business, but the widespread devastation will affect employees’ ability to return to work even after the airport reopens.
For its part, United sent three of its brand new Boeing 777-300ER jets to Houston over the weekend. The wide-body airliners were filled with emergency supplies and more than 100 employees to help with relief efforts. In addition, United donated $200,000 to aid Texas communities impacted by the hurricane.
Source: Business Insider