Hurricane crimps airlines' bottom line

ATLANTA -- By disrupting travel to and from the Gulf Coast, Hurricane Gustav denied the airline industry some critical revenue over the Labor Day holiday.

Gustav also was expected to nick tourism, insurers and utilities. Although quantifying losses in these sectors -- and the region's energy infrastructure -- will be difficult until the storm that made U.S. landfall Monday blows over, early indications suggest the impact wasn't nearly as bad as after Hurricane Katrina, which struck three years ago.

Some retailers and construction companies are even likely to see a moderate boost in business.

"After a hurricane, when government aid flows dramatically, it tends to have actually a positive impact on economic growth, because now we're spending huge amounts of money to rebuild, shore up, in ways that never would have been spent had we not had a hurricane," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.

Some observers breathed a sigh of relief that the storm weakened. But the weather was severe enough to force the cancellation Monday of more than 135 flights to and from airports in Louisiana, Mississippi and Alabama.

"It will be a big hit to the airlines for September," said AirTran Airways spokesman Tad Hutcheson. "It's usually a tough month. The only bright spot is the Labor Day weekend. Those pretty much were full flights we've had to cancel."

AirTran canceled 23 flights because of the storm, while Delta Air Lines canceled 21, Continental Airlines canceled 28, and Southwest Airlines canceled 65.

Amtrak also suspended service along several routes south of Atlanta, east of San Antonio and in the New Orleans area. Some of the affected service wasn't expected to resume until Thursday.

"We projected that we were going to be up nationally 10 percent this Labor Day versus last Labor Day," Amtrak spokesman Marc Magliari said. "The question is how much will three or four days of cancellations pull that down?"

Robert Hartwig, president and economist at the Insurance Information Institute, said insurance payouts will likely not be nearly as high as those suffered from Hurricanes Katrina or Rita in 2005.

More manageable

"There will be thousands of claims, there will be insured losses, but they will be manageable by the resources that the private insurance industry has at its disposal," he said.

The reduced population of New Orleans and the surrounding areas will help limit those payouts, he said. The region also mitigated damage by enacting stricter building codes, tightening down roofs and elevating structures based on lessons learned from Katrina.

Oil companies, too, learned from the 2005 hurricanes. In recent days, they shut down virtually all oil and natural gas production in the gulf.

On Monday, Eqecat, a risk modeling firm, projected that Gustav could knock out capacity for about 5 percent of both oil and natural gas production for the next year.

Balm for oil markets

The oil markets, which edged up at week's end, seemed reassured that the preparations -- plus Gustav's weakening -- had worked. Light, sweet crude for October delivery fell $4.21 to $111.25 a barrel Monday in electronic trading on the New York Mercantile Exchange.

Still, trading may be uneven when the market reopens today.

Wall Street knows from experience that infrastructure problems can emerge long after a hurricane strikes. Moreover, while lower oil prices help consumers and most businesses, they weaken the stocks of energy and other commodities-related companies.

Perhaps most important, the hurricane season -- which lasts until the end of November -- can have broader influences on the U.S. economy.

"Hurricanes have a wide-reaching impact," said Quincy Krosby, chief investment strategist at The Hartford. "Anything that taxes the consumer will obviously be a negative for the economy."