Travel, Tourism Stocks In Turmoil On Swine Flu
Investors fled investments in air, land and sea on Monday as fears of a flu pandemic rekindled memories of the Asian SARS crisis that caused widespread industry turmoil six years ago.
From Sydney to New York, selling hit the world's leading airline brands, hotels and cruise operators and the cost of insuring airline debt rose following the outbreak of swine flu.
The United States declared a public health emergency and Americans and Europeans were urged to avoid non-essential travel to Mexico, where more than 100 people have died from the outbreak.
US airlines most heavily exposed to Mexico racked up double-digit losses in trading. The AMEX airlines index was off about 10.9 percent in late afternoon.
Continental Airlines, which offers more seats than any foreign airline into and out of Mexico, according to data provided airline schedules consultancy Innovata, saw its stock fall 16.5 percent.
American Airlines parent AMR and US Airways, the second and third foreign airlines in terms of passenger capacity to Mexico, also suffered double-digit percentage falls.
In Europe, major network carrier British Airways fell about 8 percent and Spain's Iberia, which offers the most capacity to Spanish-speaking Mexico from Europe, gave up about 7 percent.
Airlines have lurched from crisis to crisis in the past year as carriers grappled with high oil prices, then the credit crunch, a slump in business travel and plunging cargo trade.
Some executives have been tentatively predicting relief after months of weak traffic with summer on the way, and eyeing benefits from sharp cost-cutting measures, including more than 25,000 job cuts in the United States.
But Helane Becker, a New York-based transportation analyst with Jesup & Lamont Securities, said the flu fallout could stall any recovery.
"In the summer of 2002, international airline traffic was down 14-15 percent so we would expect something similar, and we would expect any recovery to be pushed from the third quarter of '09 into the fourth quarter of '09 and 2010," Becker said.
Andrew Watterson, an airline consultant with management consulting company Oliver Wyman, said there could be other fallout.
"If there are increased health concerns, there might be reduced capacity," Watterson said.
LESSONS FROM SARS
The SARS epidemic broke out in early 2003, postponing a recovery from recession worsened by the September 11, 2001 attacks. However, its economic impact was mostly confined to one quarter.
In Hong Kong, Cathay Pacific Airways -- which at one point considered grounding its fleet during the SARS crisis -- lost 8 percent and Air China fell 12.5 percent.
Airlines, hotels and other leisure companies took precautions on Monday as the reports of the numbers sickened with swine flu continued to rise.
Singapore Airlines said it had taken steps to ensure lessons learned from SARS were used to try to contain the scare. It said cabin crew would try to spot unwell passengers.
David Castelveter, a spokesman with the Air Transport Association of America trade group, said US carriers were on "heightened awareness," also talking with customers who had flu-like or other communicable-disease symptoms.
American Airlines reassured travelers it was prepared to deal with any type of illness on board a flight and that it had full ground-to-air communication with its medical staff.
American, Delta Air Lines, United and US Airways said they were allowing passengers to Mexico to change their plans without any fee or penalty, but there were no immediate reports of any cancelled flights.
"We've seen minimal changes to bookings related to this," Delta spokeswoman Betsy Talton said.
Shares of US hotels and cruise operators joined the rout as some analysts suggested they could be most hurt among travel and leisure companies in a swine flu outbreak.
Royal Caribbean Cruises shed more than 16 percent, while Carnival was down 14 percent.
"There is that perception that illness is easily transmitted on cruise ships," said Sharon Zackfia, an analyst with William Blair. "In the past when there have been outbreaks, it can cause a short-term disruption in demand."
US giant Starwood Hotels lost about 11 percent and Marriott International fell 5 percent.
Not all analysts were rattled by the swine flu outbreak.
Howard Wheeldon, senior strategist at BGC Partners in London, said airlines were used to living through boom and bust.
"The one thing about airlines is they recover from events like this amazingly quickly. It is damaging and unhelpful, but not the end of the world for them," he said.
