Wings Magazine

News
Horrid winter weather could affect airlines’ bottom line

Jan. 8, 2014, Montreal - Will the weather-related chaos translate into financial chaos for Canadian airlines?


January 8, 2014
By The Montreal Gazette

Yes and no.

 

A half dozen analysts said Tuesday that
the Toronto-centred disruptions — even standstill for long stretches —
will have an impact, perhaps even a significant one, on Air Canada’s,
WestJest Airlines Ltd. and Porter Airlines’ quarterly results, but not
enough to derail the generally positive and improving fundamentals of
the North American airline industry.

Advertisement

 

A cold snap is hardly unexpected in Canada in January and airlines generally budget for weather problems.

 

Still, expenses will pile up for carriers.

 

Air
Canada said it had booked “thousands of rooms” in Toronto to
accommodate stranded passengers. But it’s too early to quantify how much
that and related expenses will end up costing the Montreal carrier.

 

Robert
Palmer, spokesperson for Calgary’s WestJet, called the frigid wave
“unprecedented” and “an extraordinary situation, borne out of the fact
that it’s occurring at Pearson, Canada’s largest airport. That’s what
makes it extraordinary. At a smaller airport, it wouldn’t have the same
impact.”

 

Palmer said that new “flight rights” rules for compensating passengers for tarmac and other delays will also cost his airline.

 

WestJet
is far too busy trying to get things back on track to quantify the
costs, he added, “but we’ll turn our attention to that soon enough.”

 

WestJet
had difficulty finding hotel rooms in Toronto for its stranded
customers, but said later in the day that it was having better luck.

 

Cameron
Doerksen of Montreal brokerage National Bank Financial said that
“weather always has some sort of impact on results, especially in (the
fourth and first quarters). Is this one more severe than usual? We’ll
have to wait and see.”

 

One of the worst aspects for airlines in
such exceptional circumstances that back up traffic nationwide — or
continent wide — is that aircraft and their crews are all in the wrong
places, unable to get to their scheduled departures cities. They all
have to be ferried to their appropriate destinations, which can take
days and cost a lot of money.

 

With the same havoc in many U.S.
cities — where the problem is exacerbated by insufficient preparedness
and equipment — the entire system is hopelessly gridlocked for days,
said Chris Murray, an analyst with AltaCorp Capital Inc.

 

Palmer of
WestJet said that “when the aircraft is not there because it’s stuck
somewhere and the crew is somewhere else, it’s a massive undertaking to
get the system back up and running.”

 

“When everything grinds to a
halt at Canada’s biggest airport, as happened for a time (Tuesday), you
can’t just flick a switch and resume normal operations. It takes time
and that’s where we are today.”

 

“But we are making progress and
the planes are starting to move and we’re doing absolutely everything we
can to get things back on track.”

 

“Obviously there is a cost
associated with … irregular operations. They cost money, but they are
unfortunately a reality — part of the cost of doing business.”

 

One
Toronto analyst, who declined to be named, as did most others, said
that “for sure, you will see an impact on results: No. 1, during the ice
storm we had in December, even from the simple de-icing perspective, it
more than doubled. Cancellations also (cut into revenues but usually
are rebooked later); you have to put on more aircraft (to catch up); and
some people decide not to travel at all. You say “I have a meeting in
Montreal, but Pearson is closed and the weather’s really crappy.’ Well,
you call it off.”

 

Airlines are pleading with passengers to check the status of their flight before leaving home.

 

By late afternoon Monday, Calgary-based WestJet had cancelled 98 flights, Palmer said.

 

Brad Cicero of Porter Airlines said that about 50 flights had been cancelled by mid afternoon.

 

“And
it’s not just today. The ice storm (in Toronto in December) was
unprecedented in the last 15 years, we had severe storms in Atlantic
Canada and in the U.S., from Boston to Chicago — essentially everywhere
we fly — and that makes it a little more challenging.”

 

“I don’t think any airline’s been spared this year.”