Forbes.com -- Disaster Of The Day: Northeast Storms

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Tuesday March 6, 5:17 pm Eastern Time

Forbes.com
Disaster Of The Day: Northeast Storms
By Marcella Bernhard

The fearsome blizzard predicted to hit New York has so far turned out to be mostly hot air. But the panic before the storm--and the snow and ice that are actually blanketing the Northeast U.S. this week--will have serious economic consequences.

``It will cause millions of dollars worth of damage,'' says Marty Bahamond of the Federal Emergency Management Agency in Washington, D.C.

FEMA won't tally total damage costs from this storm until after it ends, but officials at the agency are comparing this week's weather with a January 1998 storm that caused $1.4 billion in total damage to Maine, New York, Vermont and New Hampshire.

``The little things add up to be very significant money-wise, things that people don't normally associate with ice and snow storms,'' says Bahamond. ``They have a ripple effect.''

The worst of this week's storm is predicted to hit Boston and New York today, dumping up to three feet of snow on parts of the East Coast. Weather panic peaked yesterday, however, when most New York public schools remained closed, businesses told workers to stay home and staples like milk and bread flew off grocery store shelves.

The airlines are expected to take the biggest losses from the storm, and may sacrifice up to $10 million in revenue from canceled and rescheduled flights yesterday and today, said Henry Hartevelt of Forrester Research in Cambridge, Mass.

Although airlines plan for bad weather, severe snow and ice storms can take a serious bite out of their earnings. Delta (NYSE: DAL - news) and American Airlines' parent company AMR (NYSE: AMR - news) both reported sharp drops in earnings for the quarter ended Dec. 31, attributed in part to bad winter storms. Delta's earnings sank to $79 million for the quarter, down 54% from a year earlier, while AMR's earnings fell to $56 million, a 36% drop from the previous year.

The Air Transport Association of America says air delays caused by bad weather cost airlines and passengers almost $5 billion in 1999. That figure includes the airlines' costs, such as rescheduling flights, and travelers' costs like missed work and meetings.

Delta declined to say how much this week's storm will cost the company. Delta, American, TWA, United and Continental canceled hundreds of domestic and international flights to and from the eastern U.S. yesterday and today.

The nasty weather is pummeling other businesses as well. Truckers in the Northeast are stalled, retail traffic is down and United Parcel Service (NYSE: UPS - news) and Federal Express (NYSE: FDX - news) are struggling with service delays. State governments and businesses are losing thousands of dollars in lost work hours, including AT&T (NYSE: T - news), which told most of its 19,000 New Jersey employees to stay home yesterday.

Other losses won't be obvious for weeks. Most of the losses from the 1998 storm came from the destruction of 17 million acres of forest, but costs also accumulated from dozens of other sources. During those few days in 1998, power outages caused a $12.7 million loss from ruined milk and a $9.3 million loss from damaged maple syrup. Maine estimated that it lost $2.5 million during the 1998 storm, and New York got a $6 million FEMA grant to cover damage and losses.

Of course some businesses benefit from bad weather, especially from events that turn out to be more hype than disaster. Grocery stores still talk of the Y2K effect that drove up earnings in 1999. At supermarkets in New York and New Jersey, where shoppers reportedly elbowed each other reaching for the last milk carton and other staples, a little end-of-winter weather panic may have been a good thing.

Related Item: Forbes Faces: March 6, 2001

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-- (yet@another.opinion), March 07, 2001

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