The “Rhapsody of the Seas” cruise liner carrying U.S. citizens leaves the Israeli port of Haifa for evacuation to the Mediterranean island of Cyprus on October 16, 2023, amid ongoing fighting between Israel and the Palestinian Islamist group Hamas.
Aris Messinis | AFP | Getty Images
Some of the world’s best-known companies are already finding the war between Israel and Hamas weighing on their operations.
On October 7, the militant group Hamas struck Israeli towns in a surprise attack and took more than 200 hostages. More than 7,000 people have been killed in Gaza, according to Palestinian health officials, while the Israeli Defense Forces said more than 1,400 people had been killed in the country.
Companies that do business or have operations in the region have already begun to see the war alter their financial outlook, as the unrest takes a toll on everything from advertising dollars to tourism and supply chains. The first admissions come as world leaders grow increasingly concerned about the escalating conflict, with international calls for a ceasefire rejected.
United Airlines said fourth-quarter performance could vary depending on the length of Tel Aviv flight suspensions. Its updated range for adjusted earnings per share came in below analysts’ forecasts.
“We have unmatched geographic diversity with an extensive domestic network complemented by the largest international long-haul network and both are solidly profitable,” CEO Scott Kirby said earlier this month. “While this is a great attribute, it creates some short-term risk and volatility, as we are currently seeing with the temporary impact on margins this quarter following the tragedy in Israel .”
United is one of several carriers, including Delta Airlines And American airlines who rushed to change their schedules as the conflict developed. Notably, El Al, Israel’s national airline, said it would fly on the Jewish Sabbath for the first time in more than four decades to help bring overseas reservists back to the country.
Across the travel industry, war is on the minds of business leaders. Aircraft manufacturer Boeing said in a regulatory filing that the conflict could potentially affect some suppliers, in addition to airlines.
About 1.5% of Royal Caribbean capacity in the fourth quarter had planned to go to Israel, CEO Jason Liberty said Thursday on the cruise line’s call. Some of the adjusted sailings that were previously expected have their home port in Haifa, a city located in the northern region of the country.
The company also offered free use of its ship Rhapsody of the Seas to the U.S. government to help evacuate Americans from Israel. Between the route changes and the use of the vessel, the company estimates it would have a 5 cents per share impact on its earnings. The company expects adjusted earnings per share of between $6.58 and $6.63 for the year.
El Al Airlines plane flying in February 2023.
Nuphoto | Nuphoto | Getty Images
“I would like to… recognize the incredible efforts of our shore teams and crew aboard Rhapsody of the Seas who worked tirelessly with the U.S. Department of State to help safely evacuate Americans from Israel” , Liberty said. “My deepest gratitude goes to everyone involved.”
Still, Liberty said the cruise line’s customer base is strong and so it might be more about where they’re going to travel rather than whether they’re going to cancel their plans.
“They’re going to go somewhere with us,” he said. “That’s what we’re working on to make sure they do.”
Tech companies are among those seeing the conflict impact workforces, ad spending and supply chains.
Instant said in its latest earnings release that it saw a pause in spending on a “large number of primarily brand-focused advertising campaigns” immediately after the start of the war. This has weighed on revenue for the quarter so far.
While the company said some of the campaigns that were initially paused have now resumed, the company has also seen others, which did not initially stop their advertising, go on hiatus. Snap said it would be “unwise” to give formal guidance on what to expect for the current quarter “due to the unpredictable nature of war.”
Susan Li, Meta’s chief financial officer, said the parent company of Facebook and Instagram had seen a decline in ad spending so far in the quarter, correlating with the start of the dispute. Li noted that this is not necessarily due to a single event, but that declining spending has aligned in the past with the start of conflicts such as Russia’s invasion of Ukraine last year.
“It’s something we continue to monitor,” Li told analysts during the company’s earnings conference call Wednesday. “We have reflected the latest trends and advertiser reactions in our fourth quarter outlook, which, again, we believe reflects the greater uncertainty and volatility in the landscape going forward.”
Align technology expects increased headwinds from uncertainty and potential supply chain issues related to the conflict, according to CFO John Morici. He said fourth-quarter operating margin, after adjusting for generally accepted accounting principles, is expected to be down from the prior quarter as the company offers severance packages to accommodate staffing changes in this situation. .
Several companies including Aon And West Pharmaceutical noted a continued focus on supporting employees and their family members who live and work in the region. Israel is known in part for its vibrant startup and tech scene, with entrepreneurs now wondering how to move forward in the new normal, especially as citizens are called upon to serve in reserve units.
ServiceNow CEO William McDermott said Wednesday during the company’s call with analysts that employee Shlomi Sividia was among those murdered at the Supernova Music Festival. He said Sividia was “highly respected, admired and a good friend to many”.
We stand in solidarity with our team and their families. Terrorism has caused an unfathomable humanitarian crisis that today engulfs millions of people in Israel and Gaza,” McDermott said. “Our hearts pray for the innocent on all sides. Even if optimism is lacking, we choose to honor the dream of a peaceful and prosperous future for the Middle East region. »
Defense companies are also on alert as a new international conflict erupts.
General dynamics, the largest U.S. producer of artillery shells, had already increased its artillery production to meet needs amid the war in Ukraine, according to finance chief Jason Aiken. Today, the company is working to increase its production to 100,000 units per month, up from 14,000 previously.
“I think the situation in Israel will only put upward pressure on that demand,” Aiken said during General Dynamics’ earnings conference call Wednesday.
— CNBC’s Robert Hum, Morgan Brennan and Leslie Josephs contributed reporting.
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