U.S. markets open in 8 hours 55 minutes
  • S&P Futures

    +2.25 (+0.05%)
  • Dow Futures

    +3.00 (+0.01%)
  • Nasdaq Futures

    +13.25 (+0.09%)
  • Russell 2000 Futures

    +0.80 (+0.03%)
  • Crude Oil

    +0.81 (+0.97%)
  • Gold

    +3.70 (+0.21%)
  • Silver

    +0.12 (+0.47%)

    +0.0016 (+0.14%)
  • 10-Yr Bond

    -1.6760 (-100.00%)
  • Vix

    -15.01 (-100.00%)

    +0.0023 (+0.17%)

    +0.2000 (+0.18%)

    +901.03 (+1.48%)
  • CMC Crypto 200

    -49.70 (-3.31%)
  • FTSE 100

    +14.25 (+0.20%)
  • Nikkei 225

    -252.96 (-0.88%)

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

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

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.

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.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Southwest Airlines Co. (LUV) : Free Stock Analysis Report

American Airlines Group Inc. (AAL) : Free Stock Analysis Report

Spirit Airlines, Inc. (SAVE) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research