Economy

Saviors Or Profiteers? The Business Of Hurricane Recovery

Cleaning up after natural disasters has become a lucrative business, but raises questions for victims and governments alike.

Assessing post-Harvey damage in Rockport, Texas.
Assessing post-Harvey damage in Rockport, Texas.
Prashant Gopal

HOUSTON — Frank Jones's cell phone chimes: He's landed another job. If he's lucky, it could net him a cool million. "We got a monster house," says Jones, driving through Houston in his Range Rover. His aptly named Cavalry Construction Co. is part of a legion of contractors and other entrepreneurs fanning out across Texas and Florida in the wake of hurricanes Harvey and Irma.

Don't call him a storm chaser. Jones bristles at the term. Saviors to some, opportunists to others, these businesses clean up, in every sense, after hurricanes, tornadoes, and other catastrophes. Disaster is fueling a growth industry as more frequent and powerful storms lash coastal regions teeming with new homes and offices.

Many of these rebuilding outfits are mom and pop shops. Some are midsize enterprises such as Cavalry, which is based in Houston and operates throughout the South. Jones expects $30 million in revenue this year; he says his sales averaged from $5 million to $10 million before 2008.

A handful of these companies are major operations, such as Birmingham, Mich.-based Belfor Holdings Inc., which this year expects to surpass $1.7 billion in revenue. It will have more than 500 employees in Florida for Hurricane Irma's aftermath. Others are outright scammers — the real storm chasers, in Jones's view. "There's a lot of competition," says Sheldon Yellen, Belfor's chief executive officer. "It's an industry because there's a need." Belfor has handled reconstruction after natural disasters around the world, including sending teams to rebuild after the recent storm damage in the Caribbean.

Reconstruction runs in his blood

The reason is clear: On rapidly developing coastlines, storms are becoming more common and costly to homeowners, according to the Insurance Information Institute industry group. Scientists blame global warming, which would suggest the reconstruction boom is just beginning.

Even before Harvey and Irma made landfall, the first quarter of 2017 had shaped up as the most expensive since 1994, the year of the devastating Northridge, Calif., earthquake, according to Verisk Analytics, an insurance industry research firm. Thirteen storms, including hail and tornadoes, delivered $7.3 billion in insured catastrophe losses nationwide.

Cavalry's sales have been growing 10% annually because of everything from tornadoes in Tulsa to softball-size hail crashing through North Texas roofs and decks. Jones, who employs 38 workers and hundreds of subcontractors, plans to send some to Florida.

Reconstruction runs in his blood. He grew up in storm-prone Texas, and when he was a child, a house across the street got ripped apart. His father also made a living from disasters, owning a property and casualty insurance company in San Antonio.

A former sheet metal worker who still wears jeans and sneakers to jobs, the younger Jones started after-storm contracting in the 1970s before founding Cavalry in 1989. He's done well for himself in the aftermath of 10 hurricanes, including Ike, Ivan, and Katrina. Now 64, he owns two ranches in La Grange, Texas, and has two sons working in the family business. "My dad always told me there's only two entities that have money, the banks and the insurance companies," he says. "And the banks, you have to pay "em back."

The homes he's worked on range in value from $200,000 to $20 million, Jones says. He favors clients with insurance who can also afford to pay a chunk of it upfront and tries to be flexible when they can't, but he's in no position to finance millions in repairs. (About 14% of Houston-area homeowners have flood insurance.) He charges $6 to $8 per square foot — $24,000 for a 3,000-square-foot house — for the basics: Workers rip out water-soaked wood, walls, and insulation, drag in fans and dehumidifiers to dry out the dwelling, then treat the space for mold. Reconstruction for a house of that size costs about $150,000; pricier homes get more expensive finishes.

In the case of a 13,000-square-foot mansion owned by a prominent lawyer, Jones expects the basic part of his service to run $150,000. If he wins the entire reconstruction gig, he stands to make more than $1 million. Supersize contracts are so common that the company mounted a brass bell on the wall of its Houston headquarters. "Big Sale," it reads. Staffers ring it each time they win a contract worth more than $100,000.

Loot and I shoot

Jones heard about the lawyer in need when he was driving through his own neighborhood past rows of waterlogged couches, stoves, and chairs. Like other established companies, Cavalry gets referrals from insurers; Jones doesn't knock on doors. He charges more after a storm — in part because materials costs rise, and so do wages for workers and subcontractors. The price of drywall, for example, is already up more than 40% since Harvey, he says.

Jones gets worked up at the mention of aggressive, unscrupulous competitors, ones that he says give his field a bad name. Potential customers can get cranky because they're overwhelmed by shady offers, not to mention thieves. This being Texas, they aren't shy about protecting themselves. In northeast Houston, residents put up a giant spray-painted sign in front of their Texas flag and pile of couches, cabinets, and bed frames: "U Loot I Shoot," it read.

Nearby, Jamie Reneau is tired of the men in pickup trucks hawking power washing or construction, or stealing from front yards. Some have even waltzed through her front door without knocking. Reneau, another lawyer client, signed up with Jones to rebuild her red-brick colonial in northeast Houston. She evacuated on her 11-year-old son's birthday.

She shows a visitor a line on her living room couch. It marks the height of the flooding, more than 2 feet. The hurricane also totaled both the family's cars, including a 2016 Cadillac her husband gave her for Christmas. Cavalry tore out so much of the room where she's standing that it's recognizable as the kitchen only because of a fridge sitting alone at its center. "We now have an open floor plan," Reneau jokes, standing in borrowed flip-flops. "It's funny to say that the company that rips your house to shreds and puts everything on the front lawn did a great job, but they did."

Reneau declines to reveal the cost of rebuilding. But she gives a ballpark. "Financially devastating," she says.

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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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