"Airline stocks rise: Ban on liquid could hurt airport businesses"

Friday, August 11, 2006

Airline stocks rise: Ban on liquid could hurt businesses
By Donna Goodison
The Boston (MA) Herald


Airline stocks rebounded yesterday following news of a foiled plot to blow
up 10 U.S.-bound planes flying from Britain, but security ramifications
could spell additional industry changes, aviation specialists said
yesterday. 

Added restrictions that prevent passengers from bringing liquids into plane
cabins could affect airport operations - from duty-free shops to businesses
that cater to pre-flight passengers, said Robert Mann, president of R.W.
Mann & Co. Inc., a Port Washington, N.Y., airline industry consulting firm. 

If the restrictions become permanent or more stringent, airlines may be
forced to restore food and beverage services they've eliminated as
cost-cutting measures, he said. 
 
American Airlines yesterday added extra water and soda to account for
passengers, who are not allowed to bring their own, a spokeswoman told the
Herald. 
 
Airlines also could face increased bag-handling costs if there are permanent
and deeper restrictions on carry-on luggage. 
 
"Airlines have spent about 10 years installing those huge overhead bins on
airplanes," Mann said. "Now, the likelihood is that a lot of that stuff that
had been brought on board will have to be checked. It's very costly to them
and very labor-intensive." 
 
That could push carriers to start charging for additional luggage after the
first bag checked, he said. 
 
But Douglas R. Laird, former head of security for Northwest Airlines, said
there's one big issue being overlooked. 
 
"We need to get to the core problem here," said Laird, president of Laird &
Associates, Inc., a Reno aviation security firm. "We need to be able to find
explosives carried on the person, and the only way to do this is through
body-scan technology. Banning liquids doesn't solve the problem, because you
can just carry the liquids in small containers on your person." 
 
Stock analysts, meantime, were more concerned yesterday with the Lebanon
crisis and oil prices. 
 
"The earnings picture for U.S. airlines is still fundamentally strong, but
there are worries," said Jim Corridore, an analyst at Standard & Poor's.
"The biggest risk out there is oil prices being above $75 a barrel and
little indication that it's going to drop pretty soon." 
 
Effects of flight delays and cancellations appeared not to be as great as
originally feared on the cost side for airlines, said Ray Neidl, a Calyon
Securities analyst. 
 
"On the revenue side, we have to wait a couple of days to see if people
cancel or book away," he said. "I don't think it will happen, but it if it
does, I think what you'll see is airlines discounting to get people flying
again." 
 
But Thomas Spagnola, an executive vice president at OneTravel Holdings Inc.
in Atlanta, doesn't believe any impact on fares will extend to the fall. 
 
"The fall and winter fares are already in place and heavily discounted,"
said Spagnola, whose company owns 1-800-CHEAPSEATS and OneTravel Inc.

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