Business

Airlines lost a lot of money during the brutal hurricane season — despite high fares

Travelers pack Miami International Airport as they hustle to leave Miami on Thursday, Sept. 7, 2017 ahead of Hurricane Irma.
Travelers pack Miami International Airport as they hustle to leave Miami on Thursday, Sept. 7, 2017 ahead of Hurricane Irma. cmguerrero@elnuevoherald.com

Six of the largest airlines in the country lost more than $550 million in the third quarter of 2017 thanks to a brutal hurricane season.

American Airlines on Thursday announced it had a $75 million loss in pre-tax earnings due to the barrage of Hurricanes Harvey, Irma and Maria that, at the height of problem, closed 30 American stations.

The carrier, which has a large hub in Miami, had the most cancellations, among the airlines that reported their losses, with 8,000 flights canceled due to the hurricanes.

American chairman and CEO Doug Parker said the hurricanes posed a “significant operational challenge” for the airline, in an earnings call Thursday.

8,000 Number of flights American Airlines canceled due to the hurricanes

“The hurricane response highlighted the humanity and professionalism of the American team, and our industry as a whole,” he added.

United Airlines, whose hub in Houston was closed for four days due to Hurricane Harvey, reported $185 million in pre-tax losses in the third quarter — July, August and September. The Chicago-based airline did not report how many flights it had to cancel.

Among low-cost carriers, Dallas-based Southwest Airlines lost $100 million in revenue and canceled 5,000 flights due to Harvey, Irma and the earthquakes in Mexico in September. At Fort Lauderdale-based Spirit, 1,650 flights were canceled and $40 million in revenue lost as a direct result of the three hurricanes and a dispute with its pilots earlier this year over contract negotiations that led to strikes.

The hurricane response highlighted the humanity and professionalism of the American team, and our industry as a whole.

Doug Parker, American Airlines chairman and CEO

And revenue losses weren’t the only challenges airlines faced. During the hurricanes, most airlines were also grappling with a potential public relations disaster when passengers scrambling for last-minute tickets were faced with fares that cost as much as thousands of dollars. Even celebrities started speaking out against airlines, claiming they were price gouging at a time of crisis. Comedian Chelsea Handler tweeted a screenshot of a $3,258.50 Delta Air Lines flight from Miami to Phoenix, calling on a boycott of the airline, days before Irma hit Florida.

At the time, the airlines claimed the higher ticket prices were a result of very high demand and their computer algorithms responding rapidly. Most, including Delta, instated fare caps shortly thereafter to keep flights relatively affordable.

Speaking during the company’s third-quarter earnings call on Oct. 11, Delta CEO and director Edward Bastian said the fare caps weren’t a response to pressure from any group, including lawmakers (in Florida, Sen. Bill Nelson called on airlines to instate fare caps earlier before Hurricane Maria).

We didn't make that decision based on any input at all from Washington. It was the right thing to do for our customers.

Edward Bastian, Delta CEO and director

“We didn’t make that decision based on any input at all from Washington. It was the right thing to do for our customers,” he said. “We added about 12,000 seats in the last few days at very, very low fare levels to bring 10,000, 12,000 people out of South Florida and San Juan and the islands with equipment that ordinarily doesn’t even fly to Florida, whatever we could get our hands on to get people out of there. I think we did an amazing job with respect to the overall recovery efforts.”

In the end, Delta lost $120 million in revenue from Irma-related cancellations and disruptions.

Now that the storms have passed and the end of hurricane season is near (Nov. 30), airlines are looking to the challenges still ahead as the areas impacted move into recovery mode.

JetBlue Airways, which canceled 2,500 flights in the third quarter and lost $44 million in revenue in that time period, is already predicting a loss of $70 million to $90 million in the fourth quarter of the year.

“In the Caribbean, the full recovery in Puerto Rico, in the wake of Hurricane Maria will take many months,” said Robin Hayes, JetBlue’s president and CEO, during the airline’s earnings call on Oct. 16. “I visited the island twice in the past few weeks and have seen both the scale of devastation, but also the determination to rebuild. As the largest airline in the Commonwealth, we are working closely with the authorities and the community to support short-term needs and help in the long-term recovery.”

Chabeli Herrera: 305-376-3730, @ChabeliH

  Comments