September 6, 2017 / 3:14 PM / 10 months ago

United Continental lowers Q3 forecast in wake of Harvey, N. Korea

(Reuters) - United Continental Holdings Inc on Wednesday said third-quarter results will be sharply lower than previously forecast, as Hurricane Harvey and geopolitical tensions between the United States and North Korea weigh on the airline’s performance.

Harvey was the largest operational disruption in the Chicago-based carrier’s history, it said, and will drag third-quarter passenger unit revenue to down between 3 percent and 5 percent, Chief Financial Officer Andrew Levy said at the Cowen and Co Global Transportation Conference.

Prior to the storm, United had forecast that the closely watched performance metric would be flat in the third quarter.

Levy also blamed the standoff between the United States and North Korea, including North Korea’s threat to fire missiles near U.S. territory Guam, for some depressed performance.

“The closure of our Houston hub because of Harvey is estimated to have a significant negative impact on our third-quarter financial results. Jet fuel prices have increased, even more so after Harvey, and our revenue is below our initial forecast due to a variety of reasons,” Levy said in a Wednesday letter to United employees.

Shares fell as much as 1.9 percent to $59.94 in midday trading on the news.

Harvey has weighed on the U.S. travel industry after it destroyed homes and businesses in Texas, especially in Houston, flooding entire neighborhoods and grinding travel in and out of the region to a halt. An estimated 60 people lost their lives.

Operations at United’s second largest hub, George Bush Intercontinental Airport in Houston, were suspended for over four days, forcing over 7,400 flights cancellations.

United now projects flight capacity will be slightly lower, between 3 percent and 3.5 percent, from its earlier forecast of 4 percent.

“Look, we lost a lot of revenue,” Levy said at the conference, adding that the carrier will only be able to recoup a small amount of the losses in other markets.

“We had to just walk away from a large amount of revenue during what is an important period of the year for us.”

The U.S. airline industry, still recovering from Harvey, is bracing for more disruptions as Hurricane Irma approaches Puerto Rico and the U.S. mainland. By Wednesday, numerous flights and cruises were canceled, but as Irma’s path becomes clearer in the next few days, more cancellations are likely, costing the industry millions of dollars more on top of already soaring costs.

Reporting by Alana Wise in New York and Ankit Ajmera in Bengaluru; Editing by Jeffrey Benkoe and Marguerita Choy

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