It’s been called Frankenstorm, and from an economic standpoint it’s a perfect fit. Because by the time it’s all said and done, Hurricane Sandy likely will have taken a monster-sized bite out of the U.S. economy.
Travelers on Delta Air Lines wait for flights Monday in Detroit. Delta, which has hubs in Memphis, Detroit and five other U.S. cities, has canceled more than 2,000 flights because of Hurricane Sandy.
(Photo: AP Photo/Charlie Riedel)
The ripples already have spread far. The storm grounded more than 15,000 flights across the Northeast and the globe.
Wall Street analysts expect carriers like Delta Air Lines Inc. to suffer a short-term hit to earnings as they spend money to shuffle crews and planes away from and then back to the East Coast.
The three big New York airports were closed on Tuesday. Delta, which operates one of its seven U.S. hubs at Memphis International Airport and has a major presence here, has canceled 2,100 flights over three days.
Part of LaGuardia Airport was under water after the storm. LaGuardia is where Delta has expanded recently, and executives have pinned much of their plan for permanent cuts in capacity here in Memphis and expanding business class service elsewhere on that expansion. Memphis has endured two rounds of service cuts from Delta in a year. The most recent cuts in service began this past August.
The price tag of the storm’s damage will be about $20 billion, with an additional $10 billion to $30 billion in lost business activity, according to forecasting firm IHS Global Insight.
The storm, which hit in a part of the country that produces about 10 percent of U.S economic output, cut power to 7 million homes and shut down 70 percent of East Coast oil refineries. Gas prices didn’t seem to be immediately affected in Memphis, although there is an expectation they could rise.
FedEx closed its Northeast operations earlier this week, and company spokeswoman Parul Bajaj said it will resume service as soon as safety allows.
The company stopped pickups and deliveries in parts of several states along the eastern seaboard Monday.
“We temporarily closed some facilities and stopped shipping packages,” she said. “We definitely apologize to customers for the inconvenience, and our thoughts and prayers also go out to everyone affected by the storm.”
Wall Street went dark for Sandy, and the financial services industry locally wondered what might happen if trading remained sidelined for a third straight day, following the closure of U.S. markets Monday and Tuesday. Word came Tuesday that the New York Stock Exchange and Nasdaq would open Wednesday.
The chief executive of one Memphis-based investment firm explained the significance of an extended sidelining of trading.
“I am sure that there are many, many dealers wanting to balance inventory positions and have a good ‘mark’ for month-end,” he said. “I doubt many traders went home last Friday thinking they would have to hold their current positions through month-end and price them as of last Friday’s close, but I could be wrong. Also, the last few days of every month are typically much busier than the first few days. This will also show up in revenue numbers. Only catch here is that October had a lot of trading days in it already so the loss of revenues may not be as pronounced.
“(The) bottom line is that brokerages are no different than any other business. You have to be open to make money.”
Tuesday marks the first time since 1888 that the New York Stock Exchange remained closed for two consecutive days due to weather. Dozens of companies postponed earnings reports this week because of the storm. And there also was a question still not widely answered as of Tuesday morning – whether the U.S. Bureau of Labor Statistics would go forward with releasing the latest employment figures at the end of the week.
Those numbers likely could have taken added political significance, since it marks the final Friday jobs report before the presidential election.
The storm’s immediate impact on Memphis was to scramble the lineup for the sixth annual Intermodal Freight Conference at the University of Memphis.
Bob Costello of the American Trucking Association was stuck in New York City with early hopes for a teleconference link. But that too was scrapped.
If there was any immediate concern among the local logistics professionals at the gathering by the university’s Intermodal Freight Transportation Institute, it wasn’t evident.
A PowerPoint slide at the beginning of the half-day gathering showed the port in Prince Rupert, British Columbia, an area of some concern here in Memphis because of the city’s direct link to the port there, which is near the epicenter of the earthquake earlier in the week in Canada.
Dr. John Gnuschke, director of the Sparks Bureau of Business and Economic Research at the University of Memphis, subbing for Costello ran through Costello’s grim predictions for slow economic growth in the future.
Gnuschke talked about the destruction of Hurricane Sandy and the coming recovery and its impact on the national economy.
“They are going to be fixing their homes. They’re going to be spending money on homes,” Gnuschke said. “They are spending money and the more money you are spending it helps the economy.”
Memphis, meanwhile, also is seeing the effects of Hurricane Sandy in its scheduled air travel.
Memphis International Airport saw 11 outbound flight cancellations and four delays as of mid-morning Tuesday, according to flight-tracking service FlightStats.com. Fourteen inbound flights were canceled and three were delayed Tuesday.
FlightStats reports Pinnacle Airlines Inc. canceled three flights, ExpressJet Airlines Inc. canceled five flights, Delta Air Lines Inc. canceled 11 flights, and PSA Airlines Inc. canceled six flights.
Memphis International as of Tuesday morning did not currently have any active Federal Aviation Administration issued delays. However, there are also delays from other airports that are having ripple affects on flights departing from Memphis.
The effect on Memphis International’s bottom line was uncertain at press time. Many of those affected by canceled flights will be able to reschedule later, meaning airlines will still collect the fares, but it could be days before some passengers can get to their destination.
Staff reporters Sarah Baker and Bill Dries and The Associated Press contributed to this report.