World Cup Not Financial Boost for Every Industry

The financial impact of the 2014 World Cup has been long-debated in the industry, but the general consensus is that the tournament will have a positive net impact on the Brazilian economy. But what about the rest of the world?

Delta Airlines Inc. experienced the lowest share price since a week prior to the start of the World Cup at $38.24, and it has been on a 3-week slip since the start of the tournament. Prior to the World Cup, Delta enjoyed relatively steady growth from mid-April at $31.73 through early June at $42.23. According to BloombergDelta cited “excess capacity in some international markets” as one of the primary causes for the average fair price to decline, thereby driving their share price down. Also experiencing share price declines were United Continental Holdings Inc., down -7.1% to $39.27, and American Airlines Group Inc., which fell -4.4% to $41.95 as of market close on 7/2/2014.

Delta (DAL) share price trends ending 7/2/2014. Courtesy of Bloomberg.com

Delta (DAL) share price trends ending 7/2/2014. Courtesy of Bloomberg.com

One of the international markets was South America, believe it or not. At first, this negative impact to the airline industry during the month of the World Cup might seem somewhat counterintuitive. After all, the United States bought more tickets to World Cup matches in Brazil than any other country, other than the host nation that is. With all of those people buying tickets, that then means that most, if not all, of those fans would need to also purchase airline travel to make it down to Brazil for the tournament. It would stand to reason that because the World Cup is only once every four years, that this would drive demand for airline tickets up, not the other way around.

What the at first glance approach does not take into consideration, however, is how crowded and busy Brazil is during the month of the World Cup. Unless you’re going there specifically for the tournament, it probably would be a better idea to plan your trip either before or after the World Cup so as to avoid the crowds and mania caused by the world’s largest sporting event. Brazil is also a rapidly growing global business hub, booming in various industries including manufacturing for consumer products goods companies. These firms are right in the middle of organizing 2015 business plans, which often involve travel to manufacturing sites. This is one of a hundred other completely viable reasons for business travel to Brazil, that could normally have occurred during the month of June if not for the World Cup.

This World Cup has already set multiple records for viewership, interaction and engagement on social media, and TV ratings. While these are extremely exciting for the sport, and the broadcast time and social engagement certainly has driven strong revenue for those involved, what we rarely consider is the time that people spend away from their day jobs to watch matches that may occur during the middle of the work day and take part in the World Cup fever. Some countries literally shut down when their team has a World Cup match so that everyone can watch. When all of this happens, there is opportunity cost associated with the lost productivity from people either watching matches during work or surfing Facebook, Twitter, and YouTube and other social media outlets for the World Cup.

Houston Public Media estimated that fantasy football for the NFL would cost the economy $8 billion in lost work alone during 2013. Granted this is over a fifteen week season, not a single month like the World Cup. However, the World Cup is the world’s largest sporting event and surely would cost the globe at least this much and almost assuredly more in lost work during the month of the tournament. The global net impact of the FIFA World Cup is undoubtedly positive, but there are always two sides to every story, and we need to consider both to account for the full picture.

 

What do you think about the impact of the FIFA World Cup on the airline industry? Let us know in the comments section below, or via Facebook or Twitter.

Reporting on the business side of the world's game.