Airline investors seen staying on course despite attack attempt and new passenger restrictions

Failed attack likely won’t crash airline stocks

Two weekend security incidents aren’t expected to have much effect on airline stocks. Investors instead are likely to focus on an improving economy when trading resumes Monday.

A failed attack on a Northwest flight Christmas Day and another incident on the same flight Sunday may set travelers on edge, but investors Monday are 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 2 percent compared with a year ago, said Roger King, an analyst for CreditSights in New York.

King said he thinks those types of trends will be more important to Wall Street than a man’s alleged attempt blow up Northwest flight 253 as it descended into Detroit Friday. There was another scare 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,” King said. “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 companies barely budged when trading resumed Monday.

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 travelers 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.

Basili Alukos, a Morningstar analyst, 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.

Since July 1, shares of United parent UAL Corp. have more than tripled. American Airlines parent AMR Corp., Delta Air Lines Inc., and Continental Airlines Inc. have about doubled.

__

AP Airlines Writer David Koenig in Dallas contributed to this report.