Tighter Security, Terrorism Worries Could Cost Airlines Big
David Sessions
Washington Reporter
Posted:
01/5/10
Increased security and worries about terrorism could result in major revenue losses for U.S. airlines, even if just 1 percent of their customers decide not to fly, USA Today reports.
"A 1 percent drop in demand would be equal to a revenue hit of more than $1 billion," says analyst Vaughn Cordle at AirlineForecasts. "And because airlines are so highly leveraged, nearly all of that would come off their profit bottom lines."
It would only take losing as few as two or three passengers per flight to create a 1 percent drop in revenue, showing how fragile the profit-and-loss picture is for an industry that has lost almost $60 billion in the past 10 years. Airlines that are barely making profits could be severely impacted by the money they may lose from passengers looking to avoid the hassle of extra security.
Other experts note that passengers typically adjust quickly to new regulations, and say that the slight decline in air travel after a terrorism incident is usually brief.
"There'll be some impact [on travel demand] because people are just that way," says travel agent Steve Cosgrove, owner of Dynamic Travel in Texas. "But they'll get over it and start flying again pretty soon. Some will be nervous and say it's not worth it. They'll be worried another crotch bomber is on their flight. But most people who need to fly will continue to fly."
"A 1 percent drop in demand would be equal to a revenue hit of more than $1 billion," says analyst Vaughn Cordle at AirlineForecasts. "And because airlines are so highly leveraged, nearly all of that would come off their profit bottom lines."
It would only take losing as few as two or three passengers per flight to create a 1 percent drop in revenue, showing how fragile the profit-and-loss picture is for an industry that has lost almost $60 billion in the past 10 years. Airlines that are barely making profits could be severely impacted by the money they may lose from passengers looking to avoid the hassle of extra security.
Other experts note that passengers typically adjust quickly to new regulations, and say that the slight decline in air travel after a terrorism incident is usually brief.
"There'll be some impact [on travel demand] because people are just that way," says travel agent Steve Cosgrove, owner of Dynamic Travel in Texas. "But they'll get over it and start flying again pretty soon. Some will be nervous and say it's not worth it. They'll be worried another crotch bomber is on their flight. But most people who need to fly will continue to fly."