Airline Stocks Take a Hit on New Fears
After showing resilience in the immediate aftermath of the alleged London bomb plot, airline stocks took a drubbing Friday as investors worried about higher costs from increased airport security and rising oil prices.
Meanwhile, travel agents, hotels and air carriers said travelers seemed to be adjusting to new security measures and reported only scattered booking cancellations.
Some cautioned, however, that it could be a week or more before they know whether travel to Britain -- or air travel in general -- would be seriously hurt by the latest terrorism scare.
“We will probably be better informed next week when we have data to measure the impact,” said Brad Garner, vice president of Smith Travel Research in Hendersonville, Tenn. “But from what we’re hearing, seeing and reading, it’s business as usual.”
The Air Transport Assn., the airline industry’s trade group, said the air travel system was “functioning smoothly” the day after news of the suspected bomb plot and the resulting change in security procedures caused flight cancellations and delays.
The ride was bumpier on Wall Street, where airline stocks had held up surprisingly well Thursday.
Shares of AMR Corp., parent of American Airlines, dropped $1.46, or 7.2%, to $18.83 after closing unchanged the day before; UAL Corp., parent of United Airlines, fell $1.19, or 5.1%, to $22.33; and Continental Airlines Inc. lost $1.70, or 7.1%, to $22.16. British Airways, which suffered the worst flight disruptions Thursday and the biggest stock decline, slipped $1.15, or 1.6%, to $69.33.
Some analysts said investors were reacting to a small rebound in oil prices and the possible effects on jet fuel costs. Crude climbed 35 cents to $74.35 after plunging 3% the day before.
In addition, airlines are approaching the post-Labor Day travel season, typically one of their slowest periods of the year.
But there was still concern that the new security measures -- especially the ban on carry-on liquids and follow-up checks at the boarding gate -- would discourage business travelers by adding even more time to trips.
“The airlines could lose some of their valuable business travelers if the hassle factor gets so bad that they put off trips in favor of videoconferencing,” said James Corridore, an airline analyst at Standard & Poor’s Corp.
One beneficiary of that could be private jet charter services, which are seeing a pickup in demand since the latest terror scare. Guardian Air Services, a charter operator at Ontario International Airport, said it booked trips for five new corporate clients in the last two days -- as many new customers as the company usually lands in a month.
“The straw that broke the camel’s back for them was no liquids on the plane and double screening,” said Louis Desmond, a spokesman for the charter carrier. It’s not an alternative for everyone. Chartering a small Guardian jet from Ontario to Dallas for as many as six people costs $10,000 round trip.
Ron Archer, vice president of Montrose-based Archer Travel Group, downplayed the effect of the measures on business travelers.
“The hassle factor for frequent long-haul business travelers is already at 8 or 9,” he said. “All you’re doing is pushing it up incrementally to 9.5.”
Susan Tanzman, president of Martin’s Travel & Tours in West Los Angeles, said the airlines might lose some short-haul leisure business to places such as Las Vegas as travelers weigh the additional time they will have to spend at the airport against the time it takes to drive and the cost of gasoline.
Whether international travel -- another key source of airline profit -- holds up remains to be seen. An unscientific online poll by Tripadvisor.com asked: “In light of the most recent terrorist threat, would you avoid traveling between the U.S. and the U.K. over the next two months?” Of 1,200 respondents, 47% answered yes, TripAdvisor spokesman Brooke N. Ferencsik said.
Hotel chains, meanwhile, reported some cancellations but said they also were booking rooms for stranded travelers or those extending trips until the airports return to normal.
Some hotels were handing out free toiletries, including makeup and contact lens solution, Garner of Smith Travel Research said.
Texas-based Omni Hotels said it would provide complimentary skin-care products, cosmetics, toothpaste and other toiletries to its customers.
“We just want to help relieve some of the stress that they’re going through,” spokeswoman Christine Connelly said.