Friday, January 14, 2011

Image representing TheStreet as depicted in Cr...Delta, US Airways: Winter of Discontent

 ByTed Reed, Staff Reporter , On Thursday January 13, 2011, 8:00 am EST

ATLANTA (TheStreet) -- It has so far been a winter of discontent for Delta and US Airways.

Though Delta is far larger, the two carriers are similar in some ways: both have their largest hub in the Southeast, as well as a major presence in the Northeast. Both areas have been slammed by winter storms.

While weather events are, of course, anticipated by airlines, they nevertheless can have an impact on financial performance. After Delta pegged the cost of a post-Christmas Northeast blizzard at $45 million, several analysts reduced first-quarter estimates.

For instance, Dahlman Rose analyst Helane Becker reduced her fourth quarter estimate to 26 cents from 31 cents and reiterated a buy rating and a $16 price target. Currently, analysts surveyed by Thomson Reuters are estimating 25 cents. Delta will report earnings Tuesday, kicking off the industry's fourth quarter reports.

This week, Delta has cancelled about 5,500 flights, most of them to or from Atlanta, from Sunday through Thursday. That is more than the 3,030 post-Christmas cancellations. The carrier operates about 5,500 daily flights.
Spokesman Anthony Black said a winter storm struck Atlanta Sunday evening, dropping four inches of snow in two hours. The storm continued into Monday morning, then changed to sleet and freezing rain, which is worse for an airline than snow and requires more de-icing time. The freezing rain continued into Tuesday.

What is an airline station manager's least favorite word? The answer is "de-icing," because there is no way an airline can remotely maintain its schedule once de-icing is involved. Atlanta's airport, the biggest in the world, normally has about 120 departures an hour. On average, at least half are Delta departures. But once de-icing starts, even in optimal conditions including improved weather and cleared ramps, Delta's flights are limited to 18 or 20 an hour.

At times during this week's storm, Delta was limited to as few as eight departures an hour. Normally, about 1,000 Delta and Delta Connection flights depart Atlanta each day. Black noted it normally takes about an hour to de-ice a widebody jet, using four trucks, and about 30 to 35 minutes to de-ice a narrow-body jet. But it can take longer when the ice is heavier.

In Charlotte, US Airways had all the same problems, plus one more: it ran out of de-icing fluid.
From Monday through Wednesday, US Airways cancelled about 2,600 mainline and express flights. The carrier normally operates about 3,200 daily flights.

The storm rolled into Charlotte Monday evening. "The storm was centered over Charlotte longer than the forecast period, and we had colder temperatures than expected," said spokesman Todd Lehmacher. "The snow turned to ice earlier than forecast, we had to use more de-icing fluid than normal and we started to run out of fluid." The carrier cancelled its last bank of flights, although it protected evening flights to Rio and to European destinations.

On Tuesday, the freezing rain continued, causing ramp safety issues. "We were optimistic in the morning that we could operate in the afternoon," Lehmacher said. "But we were supposed to get a shipment of fluid early Tuesday morning, and the trucks could not get there due to icing on the road." Because planes could not leave Charlotte, gate space was unavailable, so inbound flights were also cancelled. On Tuesday, the airline cancelled 1,465 flights, most involving Charlotte.

This year, for the first time, the airline has turned over de-icing of its aircraft to the airport. Lehmacher said the two parties will review what went wrong. "This is a learning experience," he said. On Wednesday, with better weather and a new supply of fluid, nearly all of the passengers stranded in Charlotte were able to depart.

Coincidentally, on Wednesday, Soleil Securities analyst James Higgins downgraded US Airways shares to hold from buy. His target price remained $12. The downgrade was not related to the storm, but rather to "the combination of US Airways shares approaching our target price coupled with a recent sharp rise in market fuel prices," Higgins wrote. US Airways has followed a strategy of not hedging fuel.

-- Written by Ted Reed in Charlotte, N.C.

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