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Hurricane Ida: Another Headache for Delta Variant-Hit Airlines?

In a bid to mitigate the harassment caused to passengers by Hurricane Ida, airlines like Delta (DAL) are offering travel waivers.

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This story originally appeared on Zacks

Hurricane Ida, accompanied by fierce winds and torrential rain, is wreaking havoc in Louisiana where it made a landfall on Sunday afternoon as a category 4 storm. As a result of the damages caused by this natural calamity, the city of New Orleans reportedly went without power yesterday. Hurricane Ida hit Louisiana exactly 16 years after Hurricane Katrina induced untold devastation to New Orleans.

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This latest natural disaster consequently disrupted the airline operations resulting in multiple flight cancellations. All flights, departing as well as arriving at the New Orleans airport, were called off on Sunday following this catastrophe. Per reports, a total of 226 and 40 flights were cancelled on Sunday and Saturday, respectively, at the airport. More than 150 flights (departing plus arriving) are likely to be cancelled today.

Following this inclement weather event, passengers’ travel plans naturally went haywire. To compensate for the passengers’ harassment, the airlines immediately swung into action. As evidence, Delta Air Lines DAL, currently carrying a Zacks Rank # 3 (Hold), issued a travel waiver for those likely to be impacted in the Aug 29-31 time frame. The Atlanta-based carrier also capped fares through Aug 31.

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Airlines Already Hurt by Delta Variant-Led Woes

We note that disruptions caused by natural calamities are not new to airlines. A few years back, hurricane Harvey and then Irma prompted a plethora of flight cancellations, denting operations of carriers in a big way.

However, the Hurricane Ida-induced disturbance comes at the most inappropriate time. This is because airline operators after being battered last year due to the pandemic-borne crisis, were just finding their feet owing to improved air-travel demand (particularly for leisure). The rampant spread of the highly contagious Delta variant of the coronavirus is threatening to undo this uptick in air travel.

The likes of Southwest Airlines LUV, Frontier Airlines and American Airlines AAL already warned of revenues being depressed by softness in bookings and increase in cancellations. Primarily, due to the Delta variant-induced demand weakness, the Zacks Airline industry has depreciated 5.2% so far in the September quarter against the S&P 500’s 5.4% gain in the same timeframe.

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The Delta variant woes apart, airlines are suffering labor shortage and technological glitches, which forced multiple flight cancellations of late. Per Spirit Airlines SAVE management, adverse weather conditions and airport staffing scarcity caused 2,826 flight cancellations in the Jul 30-Aug 9 time frame.

In fact, compelled by several flight cancellations, this Miramar, FL-based ultra low-cost carrier issued a bearish revenue outlook for the September quarter. Southwest Airlines recently announced its intention to reduce flight schedules starting this September through the end of the year in a bid to address operational interruptions and labor crunch.

Wrapping Up

As the above write-up suggests, the northward movement in air-travel demand, witnessed over the past few months, is under threat as COVID-19 cases and hospitalizations are rising again in the United States due to the Delta-variant-triggered fourth wave. Besides revenue erosion, other headwinds as highlighted above, are looming on to thwart the comeback of airline stocks. Amid all these challenges, disruptions caused by Hurricane Ida are another dampener.

Watch this space for further updates on this key industry.



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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

 

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