Airline stocks lower after failed terror attack

By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney.com) -- Airline stocks opened lower Monday after a botched terror attack aboard a Northwest Airlines flight approaching Detroit on Christmas Day shook the industry.

Northwest's parent Delta Air Lines (DAL, Fortune 500) and American Airlines's AMR Corp .shares (AMR, Fortune 500) were down almost 5% in midday trading, and US Airways (LCC, Fortune 500) was down 5.2%. Continental Airlines (CAL, Fortune 500) and United Airline's UAL Corp. (UAUA, Fortune 500) were more than 3% lower, and JetBlue Airways (JBLU) was down 2.3%.

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"These events tend not to impact stock in the longer term," said Hunter Keay of Stifel Nicolaus. "Investors know what they've signed up for when they get involved in the airline space."

He noted that US Airways' (LCC, Fortune 500) stock fell sharply the day Capt. Chesley "Sully" Sullenberger landed flight 1549 on the Hudson River last January, but bounced back before the market closed and rose the following day.

"That type of movement tends to happen when you see accidents, whether they are caused by unintentional human error or a terror attack," said Keay, adding that the dip could be because investors are reaping profit from airline stocks before the year ends.

Thin trading due to the holiday season also means any selling has a bigger impact on stock movements, said Bob McAdoo, airline analyst for Avondale Partners.

Shares of airline stocks have climbed from the recession lows hit they in March, as energy prices have mostly held under $80 a barrel and corporate travel has rebounded, Keay said.

Analysts don't expect that fear generated by the Christmas incident will have a lasting impact on the airline industry.

"It would have been nice if this didn't happen, but nobody was hurt," McAdoo said. "I'd be surprised if very many people change their travel plans because of the incident."

But the additional security measures could inconvenience travelers enough to hurt air travel going forward, according to Mike Boyd, president of aviation consulting company The Boyd Group.

"The security measures are making it more difficult for consumers to fly so fewer of them will want to and that's going to delete revenue for airlines," Boyd said. "Instead of responding intelligently to the security concerns, the TSA is just inflicting more pointy-object patrol on customers."

The Transportation Security Administration said Friday it is implementing more screening measures and adding explosive detection canine teams at some airports.

An official from the Department of Homeland Security told CNN Sunday that the government agency is increasing the number of air marshals on flights after the failed attack.

Measures will be even tighter for international flights into the United States. The TSA said passengers will get new instructions from flight crews to put away personal items and turn off electronic equipment during certain portions of the flight.

Air Canada said Sunday it is canceling flights to the United States because of "protracted waits for customer security clearance at Canadian airports."

Boyd said authorities should be addressing airport security by figuring out how the explosive made it onto the Northwest aircraft through the "back door in Amsterdam" rather than by adding screenings.

He said international flight crews are telling passengers they can't have blankets or laptops in their laps during the last hour of the flight, and Lufthansa crews have turned off in-flight tracker maps so passengers don't know the location of the plane.

"These are all knee-jerk reactions," Boys aid. "Taking off a blanket won't fix anything. If a bomb is there, it's there."

Umar Farouk Abdulmutallab, the Nigerian man suspected of allegedly trying to ignite an explosive on the flight from Amsterdam to Detroit on Friday, was charged in a federal criminal complaint Saturday.

A second security threat also involved a Northwest flight from Amsterdam to Detroit Sunday, but federal authorities determined the incident was "nonserious." To top of page

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