London's Foiled Terror Plot Does Scary Things To The Fragile Airline Industry
Thursday, August 10, 2006SUSIE GHARIB: The world is on alert tonight. From Washington to Wall Street to Main Street, people everywhere focused on terrorism issues once again and new stringent security measures at airports as a result of a major terrorist plot thwarted by British authorities today. News of the plot stirred up fresh terrorism worries in global financial markets and international airports, but stability and calm were restored by the end of the day. We have two reports this evening looking at the impact of the terror alert. We begin with Scott Gurvey in New York.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Long lines greeted travelers at major airports in the most visible sign that something was amiss. It was a result of America`s precautionary response to word that the British had arrested more than 20 people suspected in a plot to blow up as many as 10 jetliners headed from the UK to the United States. The plotters apparently planned to sneak liquid explosives on board. The Department of Homeland Security used its red alert designation for the first time at airports, confiscating most liquids from passengers at security checkpoints.
MICHAEL CHERTOFF, SECRETARY, DEPT. OF HOMELAND SECURITY: This plot appears to have been well-planned and well-advanced.
GURVEY: Stocks tumbled when New York markets opened, but recovered and ended the day in positive territory as investors analyzed the news.
JAMES AWAD, PORTFOLIO MANAGER, AWAD ASSET MANAGEMENT: It was classic that you had a knee-jerk reaction to go down in price because it`s an unsettling piece of news and then quickly the market refocused on its fundamentals and regained its balance.
GURVEY: Stocks for companies in the security and defense sectors rallied on the reports, especially for technology companies which make the types of explosive detection equipment used by airport security. The defense sector got another boost when President Bush made his first comments on the developments coming out of Britain.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The recent arrests that our fellow citizens are now learning about are a stark reminder that this nation is at war with Islamic fascists, who will use any means to destroy those of us who love freedom.
GURVEY: On the energy markets, crude oil futures prices fell, traders believing a reduction in travel will cut into demand for jet fuel and gasoline. The bottom fell out of the travel and leisure industry following the 9/11 attacks five years ago and stocks in those sectors did fall on the open today. But for the most, they too recovered and analysts say right now, with the plot apparently foiled, a big sell-off in the sector is unlikely.
JEFFREY RANDALL, LODGING ANALYST, A.G. EDWARDS: I think a successful attack, all bets are off, but, you know, these threats are not going to change the business travel patterns. If people are concerned on the leisure side about flying, that will have a noticeable impact, but again those people are still going to travel. They`re still going to be going to perhaps hotels that are closer to home and so you`re still going to get demand that`s pretty resilient out there.
GURVEY: There are also signs today that some government leaders will be pointing to today`s events as they ask for increased intelligence capabilities. That should be bullish for companies in the data-mining and surveillance businesses. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Stephanie Dhue at Washington Dulles international airport. Passengers here, around the nation, in London and Europe faced cancellations, delays, long lines and the loss of anything liquid they tried to carry on. Analysts say the security delays increased hassles and terror fears may put off some travelers, but most people we spoke with today were taking it in stride.
CAROLYN STONE, PASSENGER: I`d rather have the security and knowing that they`re thoroughly checking everybody than quickly getting through.
STEVE TRAUTWEIN, PASSENGER: We got here a little early, three and a half hours early for a 4:30 flight and found that it was much easier than it usually is.
DHUE: Still, airline stocks lost ground today. The carriers will bear the costs of the delays and cancellations, and there are worries that longer-term bookings could suffer. Analysts say the industry is better equipped to weather this storm than they were just a year ago.
PHILIP BAGGALEY, TRANSPORTATION ANALYST, STANDARD & POOR`S: All of the large airlines have reported profits in the second quarter, if you set aside some of the bankruptcy charges and their cash positions are fairly healthy at this point.
DHUE: Also in better shape are airline operations. Since the 9/11 terrorist attacks, the airlines have been streamlining procedures and getting rid of inefficiencies in the system.
RANDY BABBITT, CEO, ECLAT CONSULTING: They have become more nimble. They certainly have learned better scheduling techniques. They can substitute equipment more efficiently and they`ve gotten, quite bluntly, they`ve cleaned up a lot of their inefficient airplane fleets.
DHUE: The increased security and heightened terror alert come as the airlines head into a slower travel season. The airlines will know in the next day or two how significant the impact will be. Much of it will depend on how quickly the Transportation Security Administration and passengers adapt to the security changes. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington Dulles international airport.
