- The Washington Times - Thursday, August 10, 2006

U.S. airlines, still recovering from a years-long struggle against high costs and empty seats, face new turbulence with British authorities’ foiling of a terrorist plot to blow up airplanes over the Atlantic.

Passengers throughout the U.S. yesterday faced long lines and delayed departures because of heightened security measures, and multiple flights in and out of Britain were canceled.

Investors worried yesterday that the terror plot might scare consumers enough to cancel travel plans, while lengthening delays at airports and increasing security costs for airlines. But analysts didn’t sound very concerned yesterday about the industry long term.

“It is too soon to judge what, if any, lasting impact today’s events will have,” said Daniel Jester, an economist at Economy.com.

Tom Parsons, chief executive of Bestfares.com, said Americans would pause to reconsider travel plans because of the terror plot but ultimately would return to the skies.

“Overall, I think that domestic travel will bounce back quickly. [Travel to] Europe will bounce back in a couple months because we have a short memory,” Mr. Parsons said.

Airline shares were roiled early in the day but recovered.

United Airlines parent UAL Corp. dropped 31 cents to $23.52 a share on the Nasdaq Stock Market. On the New York Stock Exchange, Continental Airlines slid 35 cents to $23.86; US Airways fell 26 cents to $40.52; AMR Corp., American Airlines’ parent, stayed even, closing at $20.29; and Southwest Airlines moved up 4 cents to $16.94.

U.S. airlines have recently turned a financial corner, bolstered by robust passenger demand, cost cuts and industry consolidation.

UAL last month announced its first real quarterly profit since 2000. AMR, Continental Airlines, Southwest Airlines and US Airways Group also posted profits for the quarter.

Ray Neidl, an airline analyst at Calyon Securities, said the companies probably will be able to ride out disruptions after the thwarted terror plan.

“Right now, I think is going to have minor costs associated with it. But I think it will be no worse than a major snowstorm,” Mr. Neidl said.

“The net effect is short term and not terribly significant. Travelers are a little hardened toward this,” he said of post-September 11 terror warnings.

Travel-related businesses downplayed possible fallout from the thwarted terror plot.

“It’s too early to tell,” said Vivian Deuschl, spokeswoman for the Ritz-Carlton Hotel Co.

Some hotel companies are considering waiving penalties for no-shows caused by new travel restrictions, said Joe McInerney, president of the American Hotel and Lodging Association.

“We don’t anticipate any major business loss, but it’s going to be an inconvenience,” he said.

Duty-free stores and other retailers with a heavy presence at airports also prepared for some disruptions to their businesses after the Transportation Security Administration announced that no liquids or gels would be allowed in carry-on luggage. That meant no duty-free liquor or perfumes.

“There is definitely a concern,” said Simon Falic, chairman of Duty Free Americas, which operates 90 stores across the country. “Hopefully, it won’t last too long.”

But Rep. Peter Hoekstra, Michigan Republican and chairman of the House Select Committee on Intelligence, was not so sanguine. The situation, he said, “eliminates the days of carry-on baggage.”

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