When events like the bombings in Paris or Brussels happen, we as human beings let it affect the decisions that we make. We tend to become more cautious about traveling to certain parts of the world, which is directly related to dips in airline stock.
Predictable Stock Drop Across Carriers
As earnings were starting to be released for most of the major European airlines after the November Paris attacks of 2015, a majority of those reports mentioned weakening demand. The effects were worsened after the 2016 Brussels bombings, most likely due to it happening in an airport terminal and metro station. Mid-2010's attacks across Europe can have a tremendous effect on airlines stock prices, but nothing quite like the September 11 attacks, which drove American Airlines (AA) stock down over 90% over the following year.
Ryanair: Europe's largest low-cost airline lost over 10% of its stock value in the six months following the Paris attacks, eventually culminating in a more than 25% loss following the Brussels bombings.
easyJet: After the attacks, Europe’s number two low-cost carrier reported a half-year loss of $34.6 million. The company said that a few things contributed to these results. French air traffic controllers went on strike earlier that spring, which caused hundreds of flights to be canceled. In addition, the company said the terrorist attacks have affected the demand for air travel. Lower tickets prices were issued to try and get people back in the air.
IAG: Subsidiaries British Airways and Iberia, as well as Irish carrier Aer Lingus, both stated that demand in March 2016 was notably weaker due to the attacks in Brussels. "Revenue trends in quarter two have been affected by the aftermath of the Brussels terrorist attacks, as well as some softness in underlying premium demand,” IAG CEO Willie Walsh said in a statement. “As a result, IAG has moderated its short-term capacity growth plans."
Deutsche Lufthansa AG: Europe’s largest airline, commonly referred to as Lufthansa, also reported weakness in the same quarter. They attributed most of their issues with increased competition and pricing. The companies CFO Simone Menne did mention that they saw weakening demand by both U.S. and Asian group bookings after the Brussels attacks.
Air France-KLM: Another of Europe’s large airlines said that they lost roughly $76 million in the aftermath of the Paris attacks. The good news for the company is that they saw a quick recovery in terms of passengers numbers and things were back in line to their usual tune by December.
Out of the three U.S.-based airlines that fly to Europe, Delta Airlines Inc. (DAL) was the only one that mentioned terrorism as having an effect on their business in the first quarter. Delta reported a first quarter operating revenue decrease of 1.5%. They said that the Brussels attacks had a $5 million impact on the company.
The Bottom Line
Based on the guidance that most companies have given, the majority feels that while there was a short-term decrease in demand, the trend will reverse itself rather quickly. It is important to note the emotional effect an investor might have when profiting off an event like terrorism, and needs to be considered before placing such investments, as not all losses – such as moral deficits – can be quantified.