Frédéric Bastiat showed simply and brilliantly that destruction doesn’t benefit the economy (even though you may spend to rebuild) n his 1850 essay That Which Is Seen, and That Which Is Not Seen. He coined what’s become known as ‘the broken window fallacy,’ showing that while the window gets replaced (and restores you to the original position), the resources spent fixing the broken window could have gone to something else – and now will not.
Destruction may not benefit the economy, but Delta Air Lines President Glenn Hauenstein said during the carrier’s fourth quarter earnings call that it benefits Delta.
Delta Air Lines LAX
Bloomberg’s Mary Schlangenstein asked about the “impact of the LA fires,” whether in the aftermath the airline expects to see “a drop in demand in that area because all these people who have lost their everything they have and are likely to be much less inclined to travel for a certain period?”
After all, they’ll be focused on rebuilding and spending their money rebuilding and may not be in a position to travel! Not so, says Hauenstein. Disasters are good for Delta profits! People are going to be traveling to L.A. to rebuild, and that’s good for Delta:
I think unfortunately after natural disasters, we actually see an uptick in demand as people go into rebuild that. Insurance adjustments come from all over the country. So I’d say until it’s rebuilt, you actually you never a natural disaster is a terrible thing and certainly something that our hearts go out to everybody in Los Angeles who’s affected by this. But from a long term airline perspective, we faced hurricanes, we faced flooding, we faced all that. And usually the impacts are in the beginning phases followed by recovery phase.
If you take Asheville, for example, we are actually having more traffic to Asheville than we did in the pre pandemic or the pre flooding experience as people go in to rebuild their homes and businesses.
Delta Air Lines LAX
Broken windows don’t benefit society – by the do benefit glassmakers!
(HT: Enilria)
More exclamation points and I might take the regular anti Delta articles from Gary more seriously.
I think he answered the question as best he could. I don’t think he was saying they were happy to see natural disasters. He was asked if they were expecting a drop in demand. And he said that historically (“unfortunately”) they see an uptick. Nothing to be offended by here. Not by this exchange anyway. Bit of a clickbait headline there Gary.
Come on Gary, you missed the obvious conspiracy theory your readers have come to expect.
If it’s good for business, no wonder the government creates such disasters.
Though there is also the theory that if the windows and such are fixed then people take more pride in their neighborhood, residents keep an eye on things, crime goes down, and values go up. Anyway, this situation was looked at from a business perspective and while it sounds heartless is probably true. But maybe it would have been better if he didn’t say it, at least until after the disaster when a positive spin could be put on Delta’s profit. (“We’re helping move in people to fix things.”)
There are a lot of offensive things that come out of the C-suite at Delta (that are then usually parroted and cheered by Tim Dumm), but this is not one of them. It is reality. I say this as someone who has lived in Los Angeles for over 30 years and as someone who was evacuated due to the fires.
The construction industry is also going to benefit. And lawyers are going to benefit as well, first from suing insurers that act in bad faith (and inevitably, insurance companies will try to screw Californians), and then from suing unscrupulous contractors in construction defect matters. I was discussing this very point yesterday on a United Airlines flight.
A lot of people seem to be wondering what the economic impact on growth will be from the LA fires. Due to reconstruction and other recovery needs — not all of which are just physical — the economy and economic demand tends to be rather resilient after a disaster when it comes to large population centers. At least in the relative near term.
That said, there are many reasons why I would not choose to live in LA/California nor in Florida.
If you lost your primary residence, and expect an eventual payout from insurance, you could become an embodiment of John Lennon’s Imagine, leave all those material possessions behind, and travel luxuriously, enjoy rich experiences, give back to others, see the world, and why not stay at a few five-star resorts, etc. After all, you survived a deadly fire, hurricane, volcano, earthquake, tsunami, or whatever, so it’s about time you ‘live a little’ and maybe splurge on DeltaOne!
However, the cynic in me celebrates yet another example of ‘profits over people,’ which at this point really should be our new national moto. As much as I personally prefer it, ‘e pluribus unum’ just is not the reality anymore. We could also go with ‘Praise be to DJT’ — It rhymes, sorta. Obviously, he’s not ‘my guy’ but for those drinking the Flavor Aid, you’d like that, wouldn’t ya?
Now, where are those typical right-wingers who frequent this site? Please, do tell me again that I am ‘the problem’ and that some form of ‘muting’ and ‘forced-labor/re-education’ camp is in my near future. Dear foes, please feed me your hate again soon; I will starve on mere kindness alone.
So Delta is cackling with glee over making money from other people’s misery? Welcome to Delta!
first, Delta was the first airline to report and it was inevitable that someone would ask the question about the LA fires.
second, while DL is the largest airline at LAX, southern CA is a divided and highly competitive market with lots of players. whatever impact DL sees, others will see as well
third, the near-term impact is far more significant than what is expected to happen long term based on what happened with other major disasters.
and the most important factor is that this round of LA fires might not play out like other disasters have. There are a number of structural and governmental reasons why this got out of hand so quickly and they have to all be addressed before some people are willing to rebuild. Insurance companies have been pulling out and this will only cause them to pull further back until things are fixed with how the state and city manage itself. Water, power and forest management issues are not easily fixed even when everyone agrees what needs to change. and there is a very real recognition that the current political environment has failed and, as much as they try to cling to power, few will trust their lives and wealth to the same people that could have at least minimized the scale of this disaster.
There are lots of reasons why this is nowhere near like previous CA fires or the NC or FL disasters.
@Neal Z, there are many business and individuals that will benefit from the fires and there is no reason to believe the fires are in control with such little containment and winds in the forecast again.
Government will be busy in the permit business and the inspection business. Workers will come. They will need housing, food, clothing and household supplies. They will have money and some time off so some will seek entertainment. Supply companies of all sorts will benefit. Architecture companies will benefit. Engineering companies will benefit. Because of the scope of the work, contracts for repowering the areas will go out because to rebuild fairly rapidly is beyond the scope of the local power companies. They don’t have enough qualified workers to do all of the extra work and wouldn’t want to put them on the payroll anyhow because of the problems related to layoffs after the work is done. Training new workers would take too long. All of the utilities will have to be reworked to some degree but electricity will probably require the most work. If the cities want to, they can require all electricity to be fed underground. Some already was but a lot was fed overhead. Underground systems cost a lot more. Conduits can be sized for the future power usage where every house has electric vehicles with fast chargers.