Hurricane Earl: A Lost Weekend for Airlines and Insurance Companies

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Hurricane Earl will, by some estimates, hit the North Carolina Outer Banks late Thursday, and run up the East Coast and over Long Island. Hurricane force winds will extend for 90 miles from its center, and tropical storm winds could spread as far as 200 miles.

Labor Day is a big weekend for air travel and driving. Earl will almost certainly undermine some of that and could close airports as far south as Washington and as far north as Boston. Because of the "hub-and-spoke" system most carriers use to funnel passengers from one area to another, air traffic as far as the West Coast could be affected.

It is difficult to guess how much Earl could cost the airlines this weekend. It will certainly be much less than the volcanic activity that shut down travel in northern Europe last April. The International Air Transport Association said that cost nearly $2 billion. On that basis, the cost of American carriers should only be, worst case, in the tens of millions -- not much, but still a significant number for an industry that operates on small margins.

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The costs of insurance company claims should not be much more than for airlines, unless the storm passes near a major city or over a heavily populated area like Long Island, where some homes are worth millions of dollars. So, the cost to the insurance industry should be fairly modest as well.

Earl may make a lot of people unhappy because they will have to stay home over a holiday weekend. As for airlines and insurance companies, it's just another big storm.
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