Chicago Control Tower Incident Could Cost Airlines “Hundreds of Millions”

Industry analysts are speculating on the financial impact to major carriers affected by the fire in Chicago that crippled an FAA control center and grounded thousands of flights.

As the FAA continues to restore its Chicago control center, which was devastated by a fire and has forced the grounding of thousands of flights since September 26, industry experts are speculating about the financial impact to both airlines and travelers going forward.

In a report from the Chicago Sun-Times, Mike Boyd, chairman of aviation industry consulting group Boyd Group International, predicted losses of “hundreds of millions of dollars” to the three major airlines serving Chicago O’Hare International Airport (ORD) and Midway International Airport (MDW). These include United Airlines, American Airlines and Southwest Airlines.

“It’s very messy,” Boyd told the Sun-Times. “A lot of money is being lost. A lot of traffic and business is being lost.”

Boyd explained that airline losses will result from refunds paid out, cancelled bookings, the cost to support passengers who are inconvenienced, disrupted crew schedules and planes that had to land elsewhere. Boyd also speculated that the crisis could result in higher airline tickets prices in the long term.

Neal Dihora, an analyst for Morningstar, countered by saying he doesn’t think that the airlines will see a big hit on overall profitability. He told the Sun-Times that because airlines usually fill 80 to 85 of every 100 seats, they are unable to accommodate more than 20 extra people on most flights. According to Dihora, this means more passengers per plane and no additional pilot, maintenance or crew costs.

United accounted for nearly 16 percent of all operations out ORD in 2013, while American accounted for 13 percent during the same period. At MDW, Southwest represented 83 percent of flights in 2013, according to U.S. Department of Transportation statistics reported by the Sun-Times.

[Photo: iStock]