Airline shares take hit after US travel alert

Police guard the Netherlands team hotel ahead of a friendly soccer match with Germany in Hanover. Photo / AP

Travel stocks plummeted across the board yesterday following the US issue of a global travel alert, warning travellers to be extra cautious amid heightened terrorist concerns.

Air New Zealand shares fell as much as 2.87 per cent during trading yesterday, with Qantas down more than 2 per cent, Cathay Pacific down 1.46 per cent and China Southern Airlines down 2.86 per cent.

Hamilton Hindin Greene director Grant Williamson said the impact of the alert was likely to be felt further than just among airlines.

"It's quite logical that with terrorist threats you are going to get less movement of people and obviously that is going to affect not just the airlines but the airports, catering companies for the airlines and other businesses, so it does have quite a widespread effect across the travel industry," Williamson said.

"It's not particularly good news to see these sorts of things happen and I can understand why stocks like Air New Zealand have come under a bit of pressure."

Tourism Industry Association New Zealand chief executive Chris Roberts, said given all the new air services between the US and New Zealand, they expected to see an increase in US visitor arrivals. In the year to August, 236,272 Americans visited New Zealand, an 11.2 per cent increase on the previous year, and approximately 80 per cent of them arrived at Auckland Airport.

"We know that New Zealand is perceived as a safe destination, however, given recent events, we will be monitoring the situation," Roberts said.

Normally one of the most visited cities in the world, Paris has seen a decline in new flight bookings by more than 25 per cent in the week following attacks there that killed 130 people.

Andrew Kelleher, director at investment advisory firm JMIS, said the announcement was likely to have a detrimental impact on consumer activity in general.

"It's a negative statement and so you do get a knee-jerk reaction and those immediately affected stocks," Kelleher said.

"But more importantly we need to take a step back and have a think about what the medium-term impacts of these things are, particularly in the Europe space where it does seem to be more of an epicentre in terms of interest and effect."

According to data from travel information company ForwardKeys, bookings to Paris from customers around the world were 27 per cent lower for the November 14 to 21 period compared with the same time last year and Williamson said decline in travel could continue depending on what happened in the coming period.

"At this stage it's probably just a short-term thing but as we look further ahead it does make you wonder whether, if terrorist attacks do start escalating further, then it is going to have quite a medium-term effect on the overall travel industry - which is obviously not going to be positive for those types of businesses."

Williamson said New Zealand had a large number of American tourists coming into the country on a fairly regular basis, and that if the US was putting out alerts to reduce travel then this would have an effect on the payloads for airlines like Air New Zealand.

Although a short-term threat for now, Williamson said the heightened alert would be something travellers would likely get used to over time. Shares in Air New Zealand eventually closed down 6c, or 2.15 per cent, at $2.73 while ASX-listed Qantas was down A10c, or 2.64 per cent, at A$3.69.