Delta Air Lines Inc., American Airlines parent AMR Corp. and UAL Corp. fell in New York trading as a terrorism attempt on a Christmas Day flight to Detroit highlighted potential aviation risks.
Delta slid 48 cents, or 4.1 percent, to $11.29, AMR fell 39 cents, or 4.8 percent, to $7.75,and United Airlines parent UAL decreased 45 cents, or 3.4 percent, to $12.64 at the close of New York Stock Exchange trading. Delta and AMR are the world’s largest carriers, while UAL is No. 3 in the U.S.
Market reaction may be accentuated this week by low trading volume betweenChristmas and New Year’s Day, said Jeff Straebler, an RBS Securities Inc. analyst. The Bloomberg U.S. Airlines Index of 13 carriers traded last week at its highest since January on signs that travel demand is improving. The index fell 2.9 percent Monday.
“Investors are going to remember that things like this can happen in the industry,” said Straebler, who is based in Stamford, Conn., and doesn’t rate airline shares.
On Dec. 26, U.S. officials charged Umar Farouk Abdulmutallab, a 23-year-old Nigerian, with trying to blow up Northwest Flight 253 as it prepared to land in Detroit on Christmas Day. The flight, carrying 278 passengers, was en route from Amsterdam when Abdulmutallab mixed explosive substances undera blanket on his lap, the U.S. Department of Justice said in a statement.
Other passengers subdued and restrained him until the plane landed safely. A court hearing over a government request to take DNA from Abdulmutallab was canceled, said federal prosecutors, declining to provide an explanation.
Security overhauls are likely to follow the attempted Christmas Day attack, said Michael Derchin, an analyst at FTN Equity Capital Markets Corp. in New York, who recommends buying shares of American and Atlanta-based Delta. New procedures will ease passengers’ minds even if the methods cause inconvenience, while other safety improvements will probably be invisible, he said.
The airline index slid 2.1 percent on Dec. 24, 2001, the first trading day after Richard Reid unsuccessfully tried to detonate explosives in his shoe aboard aflight from Paris to Miami by American Airlines. Delta surpassed American as the world’s largest carrier last year when it bought Northwest.
“The shoe-bomber happened, and now we have to take our shoes off at the airport,” Derchin said. “This is something that we all live with when we fly.”
Business travelers are “pretty resilient about things like this” and won’t be scared off, Derchin said.
Travel is starting to rebound. Traffic, measured in miles flown by paying passengers, fell 1 percent in November for the six biggest U.S. carriers, the best results in 18 months.
Delta and Chicago-based UAL rose to their highest in at least 11 months on Dec. 22 after UBS Securities LLC analyst Kevin Crissey said revenue per passenger mile flown may increase in January for the first time in a year.
Airlines don’t anticipate a negative effect on travel because of the Northwest attempted attack, said David Castelveter, a spokesman for the Air Transport Association in Washington, a trade group.
“Our hopes are they would recognize that we’re working with the Transportation Security Administration and the Department of Homeland Security to ensure this doesn’t happen again,” Castelveter said.
By the time most people return from the Christmas and New Year’s break on Jan. 4, additional airport screenings and rules aboard flights will probably overcome lingering fears of flying, Straebler said.
“Not many people are making business-travel arrangements around the holidays,” he said, “and by the time they are back in the office, tighter screening or procedures should get everybody comfortable again.”
Business, Pages 23 on 12/29/2009