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Airline stocks hurt after Detroit incident

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By Tomoeh Murakami Tse
Washington Post Staff Writer
Tuesday, December 29, 2009

NEW YORK -- Shares of U.S. air carriers dropped Monday on concern that international business fliers, critical to the industry's recovery, will curb travel after the attempted bombing of a transatlantic Northwest Airlines flight.

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Stocks of major airlines opened lower after a weekend of reports about the incident and the government's actions to avoid a repeat. Air travelers spoke of longer lines at security checkpoints, increased searches before boarding, and a ban on using items such as laptop computers as planes near U.S. airspace.

On Friday, a Nigerian man apparently tried to set off a plastic explosive on a flight from Amsterdam to Detroit. On Monday, an al-Qaeda branch in the Arabian Peninsula claimed responsibility for the attempted attack, leading some analysts to speculate that more restrictions on fliers may be ahead.

AMR, the parent company of American Airlines, finished the day lower by 4.8 percent. Delta closed down 4.1 percent. UAL, United's parent, lost 3.4 percent, while Continental fell 3.1 percent.

"The difference between profit and loss on any given flight is the last six passengers that board," said Kevin Mitchell, chairman of the Business Travel Coalition. "Business travelers tend to pay the higher fares because they want the tickets with the most flexibility. If you lose even a few business travelers on one flight, that can put the flight into a loss."

Some analysts played down the impact of the incident on air travel, saying that passengers quickly adjusted to increased security measures after the shoe-bomb scare eight years ago and the suspected plot in 2006 to blow up airplanes headed to the United States from London.

"The history of terrorist incidents of this kind is that the public's memory tends to be fairly limited over time," said William Warlick, an analyst with Fitch Ratings. "So I wouldn't necessarily expect any dramatic impact from this type of event, even though it's clearly going to have a negative impact on the customer experience, particularly the international experience, in the short run."

Still, Warlick noted that the timing of the incident, as the industry is starting to show preliminary signs of recovery in revenue, is far from ideal.

"Business travel is the main driver of international revenue, the focus of what most U.S. carriers had been looking to as a source of recovery moving into 2010," he said.

Mitchell said the airline industry has suffered a string of setbacks during the downturn.

"A little over a year ago, they were battling $147 oil, and they made it through that. Then we had the economic malaise that we're hopefully coming out of. And now this."


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