Last updated: 03:54 PM ET, Thu June 16 2016

What Are Terrorism Fears Doing to Airline Shares?

Airlines & Airports | Josh Lew | June 16, 2016

What Are Terrorism Fears Doing to Airline Shares?

Illustration courtesy of Thinkstock

The terror attack in Orlando did not directly target airlines, but U.S. carriers could still feel the effects of the tragedy.

Airline stocks have been struggling recently as falling seat revenue numbers have worried investors. An increase in capacity has meant that most major airlines in the US have a poor ratio of seats filled to seats available. So even though overall profits have been impressive, investors have remained wary.

Wall Street Still Wary

Wall Street had started to gain confidence in recent weeks because airlines have made moves to slow their growth so that they can increase their capacity. Most carriers project rising revenue numbers in the future.

However, the attack at Pulse nightclub in Orlando has hit airline stocks just when a turnaround seemed to be on the horizon. It is too early to tell what the long-term effects on the industry will be, but the drop in share prices in response to the attack has been significant.

Dropping Stock Prices

Southwest fared the best of any carrier, as its share price was down just 8 percent this week. American Airlines was hit worst of all. Its shares have dropped 31 percent since the attack. United, down 27 percent, and Delta, down 25 percent, were also hit by sell-offs. JetBlue was down 28 percent in trading earlier this week.

READ MORE: JetBlue Providing Free Flights To Family Members of Orlando Shooting Victims

These drops came even though the attack in Orlando did not target airlines or airports (or any other form of transportation for that matter). The idea that such attacks could take place on American soil seemed to be enough to scare investors, especially since airlines and airports are a common target for terrorism.

Fliers Could See Lower Fares

The drop is stock prices might be bad news for airlines, but fliers could actually benefit from the uncertainty in the industry.

Airlines will most likely drop their prices in order to get people to travel despite their terrorism fears. Price drops have already been taking place in Europe. The lower fare movement has been led by Ryanair, whose CEO Michael O’Leary has said that dirt-cheap tickets are the best remedy for people who are afraid to fly because of the threat of terrorism.

That seems to be the most logical solution for what is, at least to some extent, an illogical fear brought on by an event that was, though extremely tragic, not aimed at the airline travel industry. 


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