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Economy catches a chill as cold snap hobbles transportation sector

Travelers walk at departure area Terminal 3 at O'Hare International Airport in Chicago on Sunday, Jan. 5, 2014.

Nam Y. Huh/AP

For ski resorts and beach-bound tour operators, the wild winter weather is good news. For many other businesses, however, the frigid temperatures gripping much of Canada and the U.S. Midwest are making life difficult.

Few sectors have been hit as hard as transportation, where winter storms and the intense cold have snarled key routes and stranded travellers.

American Airlines Inc. had cancelled 900 flights by mid-day Monday, on top of the 1,800 cancellations in the four-day aftermath of the ice storm that hit Canada and the United States before Christmas.

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It got so cold in Chicago that the glycol used to de-ice aircraft froze. One type freezes at -14 Fahrenheit (-26 C), American Airlines spokesman Kent Powell said from Dallas.

The weather is "certainly is wreaking havoc on our operations," he said.

Just as operations at Air Canada were returning to normal after disruptions from the pre-Christmas ice storm, freezing rain forced the closing of airports in Montreal and Ottawa Sunday night, Air Canada spokesman Peter Fitzpatrick said.

The airline gave out 2,200 hotel rooms to stranded passengers in the Toronto area Sunday night, and added two special flights to Montreal Monday with its biggest aircraft – Boeing 777-300s.

Porter Airlines cancelled about two dozen flights out of Toronto on Monday because of runway conditions and poor weather in Boston and Newark, spokesman Brad Cicero said. Where possible, Porter has added flights to try to get stranded passengers on their way.

The weather's broader effect on the economy is likely to be largely temporary, but while it lasts, the impact can be dramatic. Spot prices for natural gas in the New York city area skyrocketed Monday for any utilities in need of immediate supply.

Doug Porter, chief economist at BMO Nesbitt Burns Inc., said a significant proportion of business that is lost during outbreaks of bad weather can be recouped when the sun comes out. "[Companies] can play catch up the next day or the next week or the next month." While some businesses – such as restaurants – may not get back what they lost, most others will be able to make up the difference, he said.

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Mr. Porter noted that during the massive ice storm of 1998, when huge swaths of Quebec and eastern Ontario were paralyzed for weeks, there was a significant short-term hit to the economy, but then it roared back very quickly.

In the current spell of wild weather, companies are doing what they can to keep their operations running.

Canadian National Railway Co. said it is running shorter trains and taking detours in regions where the snow and below-normal temperatures are affecting switches and railroads. CN, which operates about 32,000 kilometres of rail in Canada and the United States and serves ports on Canada's East and West Coasts, has installed heaters and blowers at some switches to ensure trains can safely move from one track to another.

"The cold snap is affecting shipments from Edmonton to Northern Ontario, and the railway has implemented a winter operating plan," said CN spokesman Mark Hallman.

Canada's truckers absorb a double-whammy when the temperature drops. Not only does fuel consumption increase when the thermometer plunges, the price of diesel also usually climbs because of higher demand for heating oil, said David Bradley, president of the Canadian Trucking Alliance. At the same time, many truckers pay to have their rigs cleared of snow and ice, and if they end up in the ditch, the towing is expensive, Mr. Bradley said.

Janine Chapman, vice-president of marketing at Sunwing Travel Group, said the charter vacation operator sees an immediate spike in website traffic as soon as the weather becomes bitterly cold. There is the same effect after several consecutive days without sunshine.

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However, the nasty weather also makes it much harder to operate the airline. The company doesn't cancel flights, because there are always customers at the sunny destinations who have to return to Canada. But there can be long weather delays, and that creates "an unfortunate domino effect which may last beyond the day of the storm," Ms. Chapman said. It also means high costs for overnight accommodation for travellers, meal vouchers, and extra crew costs, she said.

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Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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