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Crash could hurt air travel
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November 12, 2001: 5:32 p.m. ET
Fears about further hit to confidence in flying sends airline stocks lower.
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NEW YORK (CNN/Money) - Airline stocks closed sharply lower Monday, as the crash of an American Airlines jet shortly after takeoff in New York sparked investor fears of a further drop in demand for air travel.
There were 255 people on board American Flight 587, an Airbus A300 that crashed near New York's Kennedy Airport following its takeoff shortly after 9 a.m. ET Monday. While there was no immediate report on the cause of the crash, investigators said later in the day that an accident, rather than terrorism, was what they were suspecting.
Shares of AMR Corp. (AMR: Research, Estimates), the world's largest airline company and owner of American Airlines and Trans World Airlines, lost as much as 28 percent in early trading, but ended down $1.64, or 9 percent, at $16.49. Other major airline stocks also moved off their lowest levels, with most closing off between 5 and 10 percent.
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CNNfn's Allan Chernoff takes a closer look at airline stocks.
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Meanwhile shares of European Aeronautic Defense and Space Co., which owns about 80 percent of Airbus, fell nearly 10 percent in Paris while shares of its competitor Boeing Co. (BA: Research, Estimates) closed off less than 1 percent, slipping 18 cents to $33.06.
The airline industry has been struggling with ongoing losses and a sharp drop in demand for air travel since the Sept. 11 terrorist attacks, in which four commercial jets were hijacked and crashed. Traffic figures show that the number of miles flown by paying passengers in October was off about 25 percent from year-earlier levels.
"As you would imagine, today's news comes at a difficult time for the nation, a difficult time for the airline industry and a very difficult time for American Airlines," Donald Carty, AMR CEO, said at a news briefing about the crash. He said the airline had no information about the cause.
While there was no initial indication that Monday's crash was another terrorist attack, investors worry the crash will further damage the public's confidence about the safety of flight.
Click here for a look at airline stocks
Michael Boyd, president of the Boyd Group, a Colorado airline consulting firm, said that even if there is no terrorism or other security breach involved in Monday's crash, the demand for air travel is likely to be hurt further at a time when the industry is already in trouble.
"The airlines have got to get traffic back or they're not going to survive," he said. "This is not going to help."
If it turns out that the crash was caused by a deliberate action that got past security barriers, Boyd said that he believes all U.S. airlines will end up seeking bankruptcy court protection, with many going out of business.
"If it's a mechanical thing, people will eventually shrug it off. If it's security, it (the industry) is doomed," he said. "If this is a security issue, no one will trust airline security or the FAA again."
Most major airlines have grounded a significant portion of their fleets and laid off about 20 percent of their staffs due to the drop in demand for air travel since the Sept. 11 attack.
Boyd said he believes that Thanksgiving travel, traditionally one of the busiest travel periods of the year, was already going to be severely lower than past years before Monday's crash. 
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