GO
Loading...

Buy Airlines On Investor Jitters?

Jittery investors appear to be locking in profits on airlines stocks after a terror suspect smuggled explosives aboard a trans-Atlantic flight.

As you may know, On Christmas Day a Nigerian man tried to blow up a Northwest Airlines plane as it approached Detroit on a flight bound from Amsterdam on Friday.

The disturbing event took an even more ominous turn on Monday; Al Qaeda's regional wing said it was behind the failed Christmas Day attack.

Fortunately, the terror attempt was thwarted and nobody was hurt but as a result, the government cracked down on security introducing everything from bomb sniffing dogs to full body pat downs. Beyond that, passengers are being ordered to stay seated during the last hour of flight with nothing on their laps.

Some airlines are even shutting down in-flight entertainment systems, which include route-tracking maps.

Repercussions

Security measures are unlikely to have a major impact on earnings for this quarter, which will close in less than a week left, but they could have longer-term repercussions.

Passengers who have already had to absorb at least five industrywide fare hikes from major U.S. airlines this year and faced additional fees for services such as bag checks or priority seating may find the new restrictions the last straw.

Michael Boyd, president of aviation research and consultancy firm Boyd Group International, said restrictions that include not being able to use laptops for the last hour of the flight could hurt domestic travel, where one hour could be a significant chunk of the entire flight.

Joseph Schwieterman, a professor of urban transportation issues at DePaul University, said the effects of new security regulations will likely be moderate. "There will be some effect, but we don't know how much."

"We again have a combination of a high fuel prices and heavy publicity on terrorism," he said. "That's a disturbing combination."

As jittery investors cash out of airline stocks, should you do the same?

I’m bearish, admits Steve Grasso. I don’t want to get on a plane right now as a result of these events -- and I think a lot of other people feel like I do.

American Science may be worth a look, says Steve Levenson of Stifel Nicolaus. They have back scatter technology that might have been able to detect the chemical smuggled onto the Northwest plane.

Options action in General Dynamics suggests it could make some big moves on the news, reveals Pete Najarian, although the moves could be in either direction.


______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On Dec. 28th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders

For Steve Grasso:
Grasso owns (AAPL)
Grasso Owns (BAC)
Grasso Owns (C)
Grasso Owns (CSCO)
Grasso Owns (PFE)
Grasso Owns (WMT)
Grasso Owns (V)
Stuart Frankel is Short (QQQQ)

For Steve Cortes:
Cortes Owns (GD)
Cortes Is Short (TOL)
Cortes Is Short (PHM)
Cortes Owns (SPX)
Cortes Owns US Dollar
Cortes Is Short Gold

For Pete Najarian:
Najarian Owns (LLTC) calls
Najarian Owns (MS) & Short (MS) Calls
Najarian Owns (PFE)
Najarian Owns (STEC) Call Spread

For Joe Terranova:
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.

For Jeff Harte:
Sandler O'Neill Has Received Compensation from (C)
(C) Is A Client Of Sandler O'Neill

For Steve Levenson
Stifel, Nicolaus & Company, Inc. makes a market in the securities of (ALOG)
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek
compensation from (ALOG)
Stifel, Nicolaus & Company, Inc. makes a market in the securities of (ASEI)
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek
compensation from (ASEI)

For Tom Lydon
Lydon's Clients Own Shares of (TIP)
Lydon's Clients Owns Shares of (VWO)
Lydon's Clients Own Shares of (EEM)
Lydon's Clients Owns Shares of (GLD)

For Heath Terry
FBRCM acts as a market maker in (ATVI)
FBRCM acts as a market maker in (ERTS)
FBRCM acts as a market maker in (THQI)
FBRCM acts as a market maker in (TTWO)

CNBC.com with wires

Symbol
Price
 
Change
%Change
ASEI
---
GD
---

Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET

Halftime Report