Osama bin Laden may be gone, but commercial airlines remain an attractive, high-value target for terror groups like Al Qaeda and its affiliates. The latest threat against commercial aviation? �Human bombs� � explosive devices that are surgically implanted into a passenger�s body in order to evade detection by security screeners.
While the Transportation Security Administration (TSA) says it is responding to a general threat rather than a specific plot, U.S. intelligence officials say Al Qaeda in the Arabian Peninsula already has attempted to smuggle body bombs onto planes via dogs. Many experts believe current screening technology and procedures would not detect implanted explosives � particularly human bombs implanted in fatty areas like bellies and buttocks.
A bomb small enough to be implanted in the human body may not seem powerful enough to bring down a commercial airplane. But iIntelligence officials disagree. In 2009, an Al Qaeda terrorist used a tiny, military-grade plastic explosive device inserted in his body in an assassination attempt against a Saudi counter-terrorism official. The human bomb was missed by metal detectors and would not have been detected by TSA�s low-radiation scanners.
What does that mean for U.S. airlines like American (NYSE: AMR), United Continental (NYSE: UAL), Delta (NYSE: DAL), Southwest (NYSE: LUV) and US Airways (NYSE: LCC)? It means tighter airport security, longer TSA screening lines as well as the possibility of higher airport security fees.
TSA is beefing up security in response to the threat, but pat-downs may not be enough. Some experts speculate only full-power X-rays or swabs measuring for explosive residue would work — and passengers are certain to balk at those intrusive measures.
So the net result is even more security and costs with questionable impact. Well, except on airline stocks’ bottom lines that is. A survey of 1,000 travelers released by the U.S. Travel Association last year found that 64% would take more trips by air if TSA inspections weren�t such a hassle. If all those trips were taken, it would result in an additional $84.6 billion in total travel spending.
What’s more, this latest airline security threat comes just days after Southwest (NYSE: LUV) and 19 other airlines lost a court challenge over TSA security fees. The airlines argued that annual security fees of $420 million were too high, but the U.S. appeals court in Washington ruled against the airlines in the 2-1 decision.
Of course, while implementing additional security measures is expensive it can pale by comparison to the cost of a single, successful attack. After the tragedy of 9/11 shook our nation to its core in 2011, the airline industry was in a tailspin as fear gripped American travellers. Even after receiving $5 billion in government aid after 9/11, U.S. airlines still lost $7.7 billion in 2001. Huge financial losses pushed United, Delta, Northwest and US Airways (NYSE: LLC) into bankruptcy. In the eight years after 9/11, U.S. airlines lost a total of more than $38 billion and more than half of their total market capitalization.
Such is the delicate and expensive balance between safety and airline sales. There is a small area between high security costs that hurt profits and lax security that allows a terrorist attack – and airline stocks must tread that very thin line.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.
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