Airlines Take Hit Despite Terror Success

The success of the British at stopping multiple plane attacks saved thousands of lives, but the plot still cost millions of dollars. That, of course, is part of the bin Laden strategy, to undermine the economies of the western nations even if his minions fail to kill. The short-term effects of the foiled plot are no worse than a snowstorm, but longer-term, the damage may persist.

Wall Street, driven as it is by greed and fear, reacted to the British operation by selling airline stocks. CNN reported, “Shares of American Airlines parent AMR Corp. (down $1.02 to $19.27) sank nearly 4 percent, United parent UAL Corp. (down $0.89 to $22.94) tumbled about 4.5 percent, Continental Airlines (down $0.97 to $23.24) slid 2.5 percent and US Airways(down $0.88 to $39.90) dropped just less than 2 percent in early trading.” These, along with British Airways, were the terrorists’ targets.

However, investors weren’t satisfied with running those stocks down. CNN also reported, “Even Southwest Airlines (down $0.24 to $16.66), which does not operate any international flights, saw its stock fall nearly 1 percent. Major European carriers, including British Airways [fair enough], Lufthansa [not so fair], Air France-KLM [unfair, too] also fell sharply in Europe.” This was the fear talking. Ray Neidl, airline analyst for Calyon Securities, said, “Cost-wise, the cancelled flights will be like having a snowstorm hit where you have your planes out of position for a couple of days.”

Snow in August though it might be, the incident has created huge lines at Heathrow, which are like to extend to other airports. The major US air carriers are all running an operating profit, even the bankrupt ones, but that is built on a market that has a large number of business travelers who go relatively short distances – New York to Boston, Orlando to Miami, Minneapolis to Milwaukee. It’s a pretty good drive along any of these routes, but if one must spend three hours making sure no one has shampoo or bottled water in their carry-on luggage, driving starts to look like the way to go -- $3.50 a gallon for gas or not.

That will be the real business measure of this affair. Will it become too much of a pain for people to fly the shorter distances? Seattle to Atlanta is not a drive under any circumstances that most people relish. Seattle to Portland is, and the viability of the airlines now hangs, in part, on what effect security measures have on passengers’ willingness top fly. One expects people aren’t afraid; they just don’t have the time to waste waiting in line.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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