Irma: Cost to UK travel industry is over £10m and rising fast

​Flying empty planes across the Atlantic, handing out refunds and paying for hotels for stranded passengers all add to the cost

Simon Calder
Travel Correspondent
Monday 11 September 2017 16:34 BST
Stormy business: forecast for south-eastern US between now and Saturday 16 September
Stormy business: forecast for south-eastern US between now and Saturday 16 September

Buying a holiday in the Caribbean or Florida between June and November is a risk, as tens of thousands of British travellers discovered when Hurricane Irma tore through the region.

Likewise, selling holidays and flights during hurricane season is risky — and can cost tour operators and airlines millions of pounds.

Large UK airlines and holiday firms have declined to tell The Independent how much the crisis has cost them so far. But estimates based on additional costs and lost revenue indicate that the total is now above £10m, with the financial damage meter still rising rapidly.

British companies are vulnerable to costs that are disproportionately higher than American firms. For US airlines, Irma provides immense logistical challenges, but the main cost is lost revenue — sometimes slightly offset by the high fares being extracted from passengers desperate to leave Florida. For UK firms, handing back cash to thousands of customers who are unable to travel is just one element of the rapidly escalating costs — along with obligations under European passenger-rights rules. The big players are exposed to big losses.

Every time a wide-bodied Boeing 777 makes an eight-hour flight across the Atlantic, it burns around 70 tonnes of fuel. The exact cost will depend on the hedged price of fuel, but typically this month the cost is around £32,000 (depending on the airline’s hedged price of fuel). Navigation charges, staff costs and airport handling costs also run into many thousands. An eight-hour flight will also imply a cost in airframe and engine maintenance. So £60,000 is a reasonable estimate for each “positioned” aircraft.

The Independent is aware of around 20 such operations; some using smaller aircraft, some larger. The bill is around £1.2m, with considerably more to come as operations start up again.

There have also been cancellations of dozens of flights, with British Airways and Virgin Atlantic particularly affected by lost revenue. A Boeing 777 flying one-way between the UK and Florida in September is likely to earn around £150,000 to £200,000, with the higher amount feasible if a fair number of premium seats have been sold at a good price.

Some of lost revenue is offset by the avoidance of operating costs, but £100,000 per flight is a reasonable estimate for each cancelled flight at this time of year.

With around 20 scheduled flights grounded so far, another £2m must be added to the running total.

The giant package holiday companies, Thomson and Thomas Cook, are less exposed to extremes of lost revenue, since they do not have First and Business Class cabins. Also, in strict legal terms the big tour operators are not liable to pay out full refunds to every customer caught up in Hurricane Irma. But they giving passengers caught up in the Cuba kerfuffle all their money back. There are an estimated 7,000 such tourists . Assuming each holiday costs an average of £700 — a reasonable price for a long-haul trip during hurricane season — the total is within a whisker of £5m.

British Airways. Thomas Cook Airlines, Thomson Airways and Virgin Atlantic all have passengers who are in Florida and waiting to get out as soon as airports open. Until that happens, the carriers are responsible for covering all accommodation and meal costs. (Under EU regulations, US airlines have no such responsibility for flights leaving American airports.)

With perhaps 2,500 passengers awaiting flights, each racking up costs of £200 per day with an average wait of four days, the total is £2m.

So far, then, these giant UK travel business are £10.2m out of pocket, with much more to come. The unquantifiable damage, though, is longer-term: the extent to which demand for travel to the Caribbean and Florida will fall because of a perception that the region has been laid waste.

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