13 September 2001, 11:33 FOCUS US airlines to suffer further financial turmoil in wake of terrorism
SAN FRANCISCO (AFX) - US airlines, which are already suffering the
effects of a slowing economy, will likely see their fortunes sink
further as a result of yesterday's unprecedented terrorist attacks in
New York and Washington, analysts at Deutsche Banc.Alex Brown warned.
"The recent scale back-in (US) GDP growth numbers coupled with
unprecedented fears about terrorism by US passengers are not going to
bode well for airline stock performance in the coming months," Deustche
said in a note to clients.
The broker said the terrorist strikes, in which hijacked passenger
planes were deliberately crashed into New York's World Trade Center and
the Pentagon, would scare many consumers into cancelling holiday plans
and avoiding air travel altogether.
"Yesterday's horrific events are most certainly going to
reverberate and negatively impact many industries, including air
travel," it said.
The broker said while an analysis of past air disasters shows that
airlines' financial and stock performance held up pretty well soon
after such incidents, yesterday's events are of an entirely different
magnitude.
"The magnitude of terrorism's impact on American travelling is
likely to be greater this time around, given the fact that this
terrorism has hit US soil, instead of abroad," it said.
Yesterday, the Federal Aviation Administration grounded all US
flights after terrorists hijacked two passenger jets each from American
Airlines and United Airlines.
The events will heap further pressure on carriers, who have already
seen huge losses arising from the slowdown in the US economy and other
key markets.
Earlier this month, AMR, the parent of American Airlines, warned
that losses for the current quarter would be wider than last quarter's
105 mln usd loss as the slowdown in the economy and rising fuel prices
continue to weigh on its finances.
UAL Corp, which owns United, also expects to post a loss this year.
And with economists warning that yesterday's events are likely to
push the world economy closer to recession and spark a surge in oil
prices, prospects will remain bleak for all major carriers.
"We were already getting cautious in the past few weeks and this
adds another concern to our group (of companies)," Deutsche said.
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