Swine flu cases have reached as far as New Zealand, and cases were found in Spain, America and Canada, In the country of origin, Mexico, there have also been deaths, making this a worldwide outbreak. These concerns resulted in battered airline stocks in foreign trading. In Chinese trading, Air France KLM, Deutsche Lufthansa, British Airways, and Iberiea were all more than 7% lower. Cathay Pacific and Air China were both sharply lower as well.
This news has come at the worst possible time for airlines, as noted by Diogenis Papiomytis, an airline consultant with Frost & Sullivan. Papiomytis said that the SARS epidemic "happened just at the start of a growth phase for the airline industry, and only delayed the recovery by a few months." However, this swine flu outbreak is "happening at the very bottom of a sharp recession, so its impact could be felt more harshly." The International Air Transport Association noted that the global airline industry was expected to post losses of $4.7 billion; watch for that number to increase.
In retrospect, mainly Chinese airlines were impacted by the SARS epidemic, which limited the worldwide losses for airlines. The problem with the current outbreak is that it has started in Mexico and could directly impact North American airlines. Doublas McNeill from Blueoar Securities told MarketWatch that it is important to note which airlines have "a heavy exposure to Mexico," like U.S. Airways (NYSE: LCC) and AMR Corp.'s (NYSE: AMR) American Airlines.
With the swine flu outbreak threatening to shut down global travel, it looks like it could be a cruel summer for airlines.
Closing Bell: Economic Catapult for Thanksgiving & Black Friday (WMT, TGT, GRMN, GOOG, MSFT)
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
