Airlines adding up losses from February storms; analyst says it could be $100 million

Airlines adding up losses from February storms

The snow from last month’s storms along the East Coast has melted in most places, but not where it matters most for airlines — their financial ledgers.

US Airways and Continental Airlines say the storms cost them a combined $55 million in lost revenue. Other airlines, including the U.S.’s two biggest, Delta and American, say they don’t have figures yet on the storms’ impact or won’t disclose them.

Helane Becker, an analyst who covers the industry for Jesup & Lamont, estimates that the lost revenue will total between $80 million and $100 million for the whole industry.

For US Airways and Continental, the storm-related losses amount to about 1 percent of each carrier’s expected revenue in the first quarter, according to analysts. But with airlines struggling to return to profitability after two years of heavy losses, every million counts.

The storms caused airlines to cancel thousands of flights and to delay many others. FlightStats.com, which tracks airline operations, says 7,400 flights were canceled during the storms at the seven largest airports affected by the weather, ranging from Washington to New York.

US Airways has more flights along the East Coast than any other airline, and Continental has a major hub in the New York area, which made those carriers especially vulnerable to the February storms.

Of course, bad weather is part of doing business in the airline industry, just as farmers must contend with droughts and surprising freezes. But the swath and severity of last month’s storms was unusual.

US Airways had to suspend operations for six days at three of its largest airports. It canceled 7 percent of its flights for the entire month, and said it lost $30 million in revenue.

Continental closed down at its Newark, N.J., hub even before the first snowflakes fell. It took a $25 million hit.

“It’s a big deal,” said Robert Mann, an airline-industry consultant in Port Washington, N.Y. “It’s not just the lost revenue, it’s the costs of deicing and other things.”

Mann said leisure travelers will reschedule trips and some business meetings that were canceled will be made up, so some of the lost revenue will be recovered, “but not all.”

Michael Derchin, an analyst with CRT Capital Group, said the revenue loss was big enough to cause “tweaking” of first-quarter financial numbers. But he said investors shouldn’t change decisions about buying or selling airline stocks because of it.

Derchin said airlines handled the storm better than in the past, as they canceled hundreds of flights far in advance — before passengers could even try to drive to the airport.

“They were more sensitive after all the horror stories we’ve had before,” Derchin said. “Who wants to get stranded on an airplane?”

In 2007, a Valentine’s Day ice storm cost JetBlue Airways $44 million, as it was forced to cancel hundreds of flights and provide vouchers to thousands of stranded passengers. Some planes in New York were stuck on the tarmac for up to 10 hours, giving a boost to passenger-rights legislation.

In December, the Obama administration announced that airlines could face fines up to $27,500 per passenger if flights are delayed more than three hours and people don’t have a chance to get off. For a fully packed smallish jet such as the ubiquitous Boeing 737, the potential fines could approach $4 million per flight.

Mann predicted that the rules will make airlines quicker to cancel flights this summer.

“Airlines won’t take that risk for a $220 domestic fare,” he said.