Snow storm puts new burden on U.S. airlines

CHICAGO Tue Feb 9, 2010 12:46pm EST

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CHICAGO (Reuters) - A brutal snow storm that snarled air traffic and grounded flights along the East Coast this week also clouded the outlook for carriers that must foot the bill for stranded passengers.

The true impact of the storm and the hundreds of canceled flights on the beleaguered airline industry will not be known for months. But experts said on Tuesday that, while some of the costs are expected and offset elsewhere, they will almost certainly weigh on first-quarter earnings.

"Where it's going to hurt the carriers is an increase in expenses in the month of February," said Jim Corridore, an airline analyst at Standard & Poors.

The obvious expenses include overtime, de-icing, customers service and airport costs.

"It's certainly not insignificant," he said, adding that investors may be surprised.

The U.S. airline industry has suffered in the last year under the weight of an economic recession that eroded travel demand.

The airlines hardest hit by snows storms this week are those with large operations near Washington D.C. and in Philadelphia and New York. Those carriers include Delta Air Lines Inc, AMR Corp's American Airlines, UAL Corp's United Airlines and Continental Airlines Inc.

The U.S. Midwest, where United and American share a hub at Chicago's O'Hare International Airport, also is reeling from the storm. Carriers are canceling flights preemptively to avoid a backlash of stranded passengers.

Delta, the world's largest airline, said on Tuesday morning it had canceled 75 mainline flights connections. Some carriers such as United waived some of their ticket change fees to encourage travelers at times unaffected by the storm.

A United Airlines spokeswoman said the airline canceled 800 flights on Tuesday.

"I'm assuming reticketing is the biggest headache from weather delays," said Morningstar equity analyst Basili Alukos.

He said it was hard to gauge the damage the storm will do to airline financial results because January is not a peak travel month and carriers may have available seats on later flights to accommodate displaced passengers.

"So if there's available capacity in the next couple of days to fit those passengers then there shouldn't be much of an impact," he said.

U.S. airline shares were mostly higher on Tuesday, helped by data that showed strong January traffic figures for United and other airlines.

UAL shares were up 15 percent at $15.03 on Nasdaq. The Arca airline index was up 6.33 percent.

(Reporting by Kyle Peterson and Deepa Seetharaman; editing by Andre Grenon)

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