Hurricane Harvey Could Cost United Airlines Hundreds of Millions

August 29, 2017, 4:21 PM UTC

United [hotlink]Continental Holdings[/hotlink] Inc. is likely to take at least a $265 million financial hit from Hurricane Harvey because of the carrier’s reliance on Houston as one of its biggest hubs, an airline analyst said.

The third-largest U.S. carrier’s seat count will fall an estimated 1.5 percent in the current quarter because of the storm, with little opportunity to recoup lost sales, Helane Becker of Cowen & Co. said in a report Tuesday. Houston’s George Bush Intercontinental Airport is one of United’s largest hubs, accounting for about 17 percent of the airline’s capacity.

The projected losses would more than double the $125 million blow Delta Air Lines Inc. suffered when it canceled about 4,000 flights after April storms in Atlanta. Harvey will probably also prove more troubling than Hurricane Ike in 2008, which cost Continental Airlines $50 million two years before it merged with United, Becker said.

Harvey “seems more powerful and impactful,” she said in her note. Sandy, the storm that hit New York in 2012, “is probably the best comp, given the impact lingered beyond just the initial airport closings. After the airports opened, there was rebuilding to be done, and people just didn’t travel for a while.”

United fell less than 1 percent to $62.99 at 10:57 a.m. in New York after a similar drop Monday. The shares tumbled 13 percent this year through Monday, more than twice the decline of Delta and three times the slide of American Airlines Group Inc.

Southwest Airlines Co. will probably take a $77 million hit in the third quarter because of its major presence at Houston’s William P. Hobby airport, Becker said. Discounter Spirit Airlines Inc. is in line for $11 million in storm-related losses, she said.

The total blow adds up to $353 million for the three airlines, assuming the airports reopen Aug. 31. Intercontinental is expected be reopen no sooner than the middle of that day, while Hobby may reopen Wednesday, according to the Federal Aviation Administration.

A computer outage last year led to a $150 million hit for Delta