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Storm Won't Interrupt Airlines' Strong Financial Performance

The Street logo The Street 1/27/2015 Ted Reed
Winter Storm Won't Interrupt Airlines' Strong Financial Performance© TheStreet Winter Storm Won't Interrupt Airlines' Strong Financial Performance

From Philadelphia on up, the Northeast corridor is largely without air service Tuesday, and carriers are generally not planning to resume outbound flights until Wednesday.

So far, the airlines have cancelled nearly 7,000 flights, according to FlightAware.com.

American AAL cancelled 906 on Monday and 1,396 on Tuesday. United has cancelled about 1,800 through Wednesday morning. Delta cancelled 730 flights on Monday and nearly 1,000 flights for Tuesday.

"We're cancelling the flights because it's not safe to operate," said American spokeswoman Andrea Huguely. "When it is safe to operate, we will. That will depend on how much snow the airports receive and on how quickly we can safely recover the operation."

It is costly to cancel flights, but a winter storm is not something that that is going to interrupt the airline industry's strong financial performance.

"Despite what may be a costly and long lasting storm in the Northeast, we remain positive," said S&P Capital analyst Jim Corridore, in a prepared statement. "Near term losses may total from tens to hundreds of millions of dollars, but longer term the sector is well positioned with a good supply demand balance, lower jet fuel costs and free cash flow generation which has helped reduce balance sheet risk."

If investors sell off airline stocks in response to a few days' weather, Corridore would view that as "an enhanced buying opportunity." He has strong buys on Delta, United, JetBlue and Spirit and buys on Southwest and Alaska .

MasFlight, an airline operations consultant, estimates that mainline carriers incur $6,000 in costs per cancelled domestic flight and $40,000 per cancelled international flight. Cost per cancelled flight for regional airlines is estimated at $1,050.

The firm said that so far, January 2015 winter weather does not compare to January 2014 weather.

Winter weather cancellations for this month are running 70% below 2014 and are more in line with typical January winter weather cancellations," said MasFlight president Tulinda Larsen, in a prepared statement.

According to FlightAware.com, airlines cancelled about 2,800 flights on Monday in preparation for the storm, with 5,000 more flights expected to be cancelled Tuesday. FlightAware expects significant cancellations on Wednesday, but not as many as 5,000.

Late Monday, American and US Airways told pilots that no aircraft would overnight at Philadelphia, LaGuardia, Kennedy, Newark, Boston, Providence or Hartford Bradley. On Tuesday, the carriers plan no flights into six of the airports, but it does plan to operate its "terminators" into Philadelphia, so that the planes will be ready for their morning departures on Thursday.

In general, airlines are planning to start to resume cancelled operations on Wednesday. "We hope to begin operating in some airports as early as Wednesday," Huguely said. For passengers traveling at affected airports on flights scheduled to depart through Wednesday, American will waive change fees for travel through Feb. 1.

For Delta, some northeast cancellations "may also be necessary Wednesday morning," the carrier said. United said, "As always during such events, we will begin operating as soon as it's safe for our customers and employees."

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