Terror threat puts airlines back on shaky groundby Jeff Horwich, Minnesota Public Radio
News of new terror plots against U.S. airlines could mean rough times ahead for the financially troubled airline industry. Even a modest drop in business could mean major trouble for Eagan-based Northwest Airlines, which is trying to emerge from bankruptcy. While Northwest flights were not reportedly targeted by the London-based plot, the airline will not be exempt from industry-wide changes.
St. Paul, Minn. — For an airline in Northwest's vulnerable financial state, much depends on whether the latest arrests are just the tip of a wider network of threats. Based upon the information available now, airline analysts like Standard and Poor's Phillip Baggaley say Northwest and other carriers have little to worry about.
"I don't see the financial impact as being significant, as long as there are no further developments -- either successful attacks or evidence of a wider plot," says Baggaley.
Baggaley says even in the short term, the impact on profits will be muted. The summer travel season is almost over, and August is traditionally a slow month for business travel. He says Northwest is even more insulated than other airlines, with just two direct flights each day from the U.S. to London.
"They have limited operations to Europe. They rely on a joint venture with KLM, and that's serving mainly the continent of Europe rather than the UK, so they're actually less exposed than other big U.S. airlines like American," says Baggaley.
Others are more concerned, especially if new security measures are here to stay for a while. Kevin Mitchell, chairman of the Business Travel Coalition, says even if there are no successful attacks, the new arrests could yield unsettling new information about threats to U.S. airlines.
"Therefore, there may be a lot of pressure to make permanent some of the steps that are in place today and even expand them, which will become very onerous for business travelers and very harmful for the airlines as well," says Mitchell.
A ban on liquids and gels in carry-on luggage has gotten much initial attention following the arrests. Travelers like Julie Marquis, who was returning to Washington D.C. after a business trip to the Twin Cities, say they're willing to make that sacrifice.
"I wasn't happy that it was down to shampoo or toothpaste -- but it's worth it for security. Better safe," says Marquis.
But the Business Travel Coalition's Kevin Mitchell is more troubled by a ban on carry-on electronic devices, being enforced specifically on flights to the UK. The reasoning is that a cell phone or MP3 player could be used as a detonating device. Mitchell fears the ban could spread to other international and domestic routes.
"If that sticks, that will impact business travelers tremendously. Imagine a business trip where you could not bring your laptop on board. You can't check it -- it's going to get damaged or stolen," says Mitchell. "What happens if you need to make a phone call? You're back to the phone booth days, for God's sake."
Mitchell says for many airlines, a handful of passengers can make the difference between a profitable flight and a money-loser. A small chilling effect from strict new security measures could hurt the bottom line.
"A business traveler that might take 10 trips, maybe they'll just take seven that quarter. And that's where it can really erode the economics of these network carriers, and hurt financially a carrier like Northwest," Mitchell says.
Northwest's finances are currently looking better than they have in years. If not for the costs associated with bankruptcy, the airline would have made a modest profit in the most recent quarter.
A Northwest spokesman declined to comment on what lies ahead. He said it's too early to tell if the new terror threat will have any impact on its profits or its drive to emerge from bankruptcy.
The events may have some cooling effect on the airline's conflict with its flight attendants.
Flight attendants have been preparing to strike on Tuesday night, pending the outcome of a court ruling. But a union spokesman says it has temporarily suspended strike training and picketing in order to focus on its members' safety. He did not say whether the union would actually push back the start date of the strike.
- All Things Considered, 08/10/2006, 4:49 p.m.