In the wake of Hurricane Irma, the most devastating natural disaster for the American aviation industry this year, airline executives are being forced to make some very drastic business decisions.
The first major financial loss was announced by American Airlines on September 12. According to business news site CNBC.com, American Airlines filed a financial statement that indicated how severe Hurricane Irma had been to its operations: more than 5,000 passengers suffered cancellations as 40 airports in the Sunshine State and the Caribbean were forced to close. As a result, American Airlines is expecting flat revenue for the rest of the year.
Prior to Hurricane Irma, American Airlines also dealt with the aftermath of Hurricane Harvey and the closure of Houston International Airport, a major hub for this carrier. Before Harvey, the airline expected revenue growth of about 2.5 percent for the third quarter; after Irma, that forecast has been drastically reduced.
Even though the international airports in Miami and Atlanta reopened for business less than 72 hours after Hurricane Irma made landfall, investors were concerned about the future of airline stocks as day traders were shorting shares and looking for short-term buying opportunities.
Flight operations at Charlotte and Atlanta airports were less active than expected, leading to exasperated passengers who flooded the customer service channels of American and Delta Airlines. The situation was even more uncertain at various airports in the Caribbean, some of which suffered structural damage as the hurricane carved a dangerous path over the weekend.
On Tuesday afternoon, spokespersons from American Airlines announced that their operations were still hampered as controllers decide to cancel 400 flights. Still, this was seen as an improvement over Monday, which required more than 1,500 cancellations.
For Southwest Airlines, dealing with Hurricane Irma meant canceling more than 2,000 flights over the last few days. It is important to note that the canceled flights that originated from airports impacted by Hurricane Irma will resume with capped fares. In the case of American Airlines, this means $99. In some cases, airfare has been waived for passengers who were trapped either inside airports or in shelters when the storm hit South Florida.
Airline sector analysts are predicting that the months ahead are going to be very challenging for the companies they follow. Institutional investors may start looking for other options if another hurricane makes landfall in the United States, and this may hurt the bottom line of major airlines.