No major impact on airlines is expected

War On Terrorism

August 11, 2006|By JAMIE SMITH HOPKINS | JAMIE SMITH HOPKINS,SUN REPORTER

The stressed airline industry is finally making money again after the national recession, the Sept. 11 terrorist attacks and spiraling fuel costs. The last thing it needs is another reason for people to stop traveling.

But experts are reasonably upbeat about the business impact of the alleged terrorist plot to blow up planes heading from London to the United States, revealed yesterday by British officials who say they uncovered the plan in time to stop it.

The crawling lines, canceled flights and tightened security are temporary inconveniences, airline specialists believe, and they say that Americans have grown too accustomed to terror alerts to stop flying in large numbers because of a threat. Absent an actual attack, the real danger long term is if the stepped-up security measures don't prove temporary and travelers stay away to avoid the hassle, they say.

"I think this will be just a very short blip," said airline consultant Darryl Jenkins.

"As a practical matter, this is not going to have a major impact on traffic or the attitudes of the traveling public," agreed Jon Ash, president of InterVISTAS-ga2 Consulting Inc., an aviation consulting company in Washington. "My suspicion is we'll see no change, other than that which is driven by the short-term disruptions."

Unlike Sept. 11, which badly hurt airlines for several years, foiled plots don't deter airline travel, Jenkins said. He couldn't find any change in North Atlantic bookings as a result of the thwarted shoe bomber in December 2001.

Caleb Tiller, a spokesman for the National Business Travel Association, said corporate travel managers are telling his group that they're not canceling trips. At most, he said, they're rescheduling or postponing flights between the United States and Britain in the next day or so simply because of the delays and uncertainty.

"It will get back to normal, hopefully in just a couple of days or a couple of weeks at most," Tiller said.

If it doesn't - if newly heightened security measures stick - then some travelers would probably avoid airlines out of frustration rather than fear, experts note. Yesterday the federal government banned liquids on flights, based on intelligence that terrorists had planned to blow up jets with liquid explosives smuggled on board disguised as beverages. In Britain, passengers were faced with even stricter limits - no electronics, for instance.

"This is more than just taking off your shoes," said Joe Fath, airline analyst at T. Rowe Price Group Inc., the Baltimore investment management firm. Meanwhile, "We're hearing lines up to three hours right now at security checkpoints. ... Some people flying from D.C. to New York on the shuttle - I think they'll think about taking the train or driving instead."

Such "short-haul" trips plummeted after Sept. 11, said Robert Mann, president of airline consulting firm R.W. Mann & Co. Inc. in Port Washington, N.Y. Amtrak benefited, he said.

A standing ban on carry-on electronics such as laptops would hurt because business travelers like to work during flights and fear damage if they check their expensive equipment, Mann said. And leisure travelers will accept only so much annoyance before they alter their plans, others said.

"Nobody's going to scare me to stay home, but you might hassle me to stay home," said Terry Trippler, airline expert with the Minneapolis-based travel club myvacationpassport.com, who expects only a minor impact as long as things calm down.

Richard D. Gritta, a professor of finance and transport at the University of Portland, thinks the airlines shouldn't completely discount the fear factor. He knows people who didn't want to fly because of 9/11 and were only just beginning to come around.

"It just demonstrates to me that al-Qaida has not given up," he said.

Other travelers, however, might see the events of yesterday as a reason for confidence in security efforts. "I think people are probably heaving a sigh of relief right now that something this big was actually stopped," Jenkins said.

Either way, the seasonal timing could be much worse. The peak vacation season is winding down, which means most people planning trips this summer have already gone or bought tickets. With increasingly packed planes and rising ticket prices, the airlines have been enjoying their best summer since before Sept. 11.

Perhaps that's why airline stocks did not take a major dive yesterday. Continental Airlines Inc., one of three carriers identified by unnamed U.S. officials as targets in the terrorist plot, saw its share price drop 35 cents - less than 1.5 percent. Share prices for UAL Corp., parent of United Airlines, dropped 1.3 percent and held steady for AMR Corp., parent of American Airlines.

Fath thought this a surprisingly muted reaction to worrisome news, a sign that "people are desensitized to it."

Domestic discount airliners did even better: Southwest Airlines Co., the main carrier at Baltimore-Washington International Thurgood Marshall Airport, saw a slight gain of 4 cents a share.

"I thought it'd be a lot worse today," Fath said yesterday afternoon.

Oil dropped $2.35 to $74 a barrel yesterday on the New York Mercantile Exchange, in part on the expectation that the airline industry - a big purchaser - would take a hit. But for the airliners, which have seen fueling costs soar, that was hardly bad news.

"It's a good buying day for jet fuel," Mann said.

jamie.smith.hopkins@baltsun.com

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