Hercules Was Enough! Airlines Can't Afford Another $100 Million Hit

When Winter Storm Hercules hit – and thank you, Weather Channel, for that new trend of naming winter storms like hurricanes – airlines were just one of many industries to feel the pinch.

Airlines analyst Helane Becker, of New York-based Cowan and Co., wrote in an investor’s note that she estimated Hercules cost the industry anywhere between $50 million and $100 million thanks to nearly 20,000 delayed or cancelled flights.

The airlines have insurance against man-made and natural disasters, but the industry can ill-afford another $100 million blow.

“Everybody thinks that because the airlines lose flights to weather that you’re not paying extra fuel, you’re not paying this, you’re not paying, but it’s not true,” Evan Gold, a senior vice president at Berwyn, Pa.-based Planalytics, told TravelPulse.com. Planalytics is a business weather consultancy, mapping out storms and advising companies on best practices during such natural events.

Gold said for every flight piece that’s grounded, it’s lost.

“Airlines just don’t get it back by flying three extra times if they lose three flights,” he said. “Put it this way. If I go to Starbucks every morning for coffee on my way to work, and a storm hits and I have to work from home for two days, when I go back to the office the next time I’m not buying three coffees to make up for the two I missed.”

So how does an industry lose upward of $100 million in a matter of 24-48 hours? Well, airlines are different beasts.

A plane might be sitting on the tarmac but some airlines are still obligated to pay flight crews.

Airplanes cost upward of $75 million to purchase and some $250,000 to $350,000 to lease. Time is money, and if a plane is not being used an airline is not recouping its money.

In weather-related instances, airlines automatically expect to lose 25-30 percent of the money spent on refundable tickets, emergency travel or business travel related to that specific time frame. Some passengers simply won’t re-book for logistical reasons.

And then there’s the vagaries of industry standards and rules, such as the amount of time a pilot can be in the air without rest. Becker wrote in her analyst’s note that this probably affected an airline like JetBlue the most, since the storm hit the northeast the hardest and 80 percent of JetBlue’s flights go through New York or Boston. Many were delayed or cancelled over the course of several days during Hercules.

“Going forward,” she wrote, “we believe the airlines will adopt a more conservative approach during storms. In the past, they might take a delay; going forward they will outright cancel.”

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