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TWO weekend security incidents were not expected to have much effect on airline stocks. Investors instead were expected to focus on an improving economy when trading resumed yesterday.
A failed attack on a Northwest flight on Christmas Day and another incident on the same flight on Sunday may set travellers on edge, but investors yesterday were expected to pay more attention to the big picture of airlines' improving demand and prices.
Shares of airline stocks have climbed out of a recession-dug trough in the second half of 2009 as people began flying again and ticket prices edged up. By November, the volume of people flying was up 2percent compared with a year ago, said Roger King, an analyst for CreditSights in New York.
King said he thought those types of trends would be more important to Wall Street than a man's alleged attempt to blow up Northwest Flight 253 as it descended into Detroit on Friday. There was another scare on Sunday on the same flight after a confrontation with a sick passenger, although officials said there was no security threat from the incident. "The airline industry is constantly exposed to these types of events. A failed attempt like that really doesn't do much in terms of revenue."
That was also Wall Street's reaction in December 2001, after Richard Reid tried to destroy a trans-Atlantic flight with explosives hidden in his shoes.
The event took place on a Saturday; shares of major airline firms barely budged when trading resumed yesterday.
Heightened security measures can prompt louder grumbling but aren't likely to deter passengers en masse or send shares tumbling, analysts said.
Demand from the airlines' high-margin business travellers could be dampened, however, if the new security measures prove to make air travel significantly more onerous, said Kevin Mitchell, president of the Business Travel Coalition.
Morningstar analyst Basili Alukos said more stringent pre-boarding measures could mean more costs for the airlines, but they won't be high enough to hurt the carriers' value. - AP