Airline shares, which have faced strong headwinds thanks to months of rising fuel price that forced carriers to raise fares, started to edge higher in the past month. Analyst Helane Becker of Dahlman Rose & Co. expects them to rise further on Monday with oil prices heading downward in the wake of Bin Laden's death.
"I expect airline stocks to react favorably to oil prices, even with the travel alert," Becker says. "Overall, I expect oil prices will carry the day."
Becker notes that travel alerts based on concerns about terrorism generally don't stop Americans from going abroad, unless something happens in the region they were planning to visit. For example, the bombing of a London subway might taper travel to the United Kingdom, but it won't affect travel to Korea. And since 2001, Becker notes, the U.S. has had a worldwide travel alert out. With the death of Bin Laden, the government increased it to a high alert.
In its most recent worldwide alert, the State Department says:
The travel alert is slated to expire on Aug. 1.The U.S. Department of State alerts U.S. citizens traveling and residing abroad to the enhanced potential for anti-American violence given recent counter-terrorism activity in Pakistan. Given the uncertainty and volatility of the current situation, U.S. citizens in areas where recent events could cause anti-American violence are strongly urged to limit their travel outside of their homes and hotels and avoid mass gatherings and demonstrations.
Airfare hikes, however, have a much greater affect on travel and, as a result, airlines stocks, Becker adds.
"Airfares have risen 40% to 100% in the last four months, and Americans have suffered from sticker-price shock," she says.