Travel Impact of London Attack Should Be Minimal, Experts Say
Parliament building in London

Saturday's terrorist attack on London may trouble investors, but experts contend it will have little impact on trans-Atlantic travelers.

The attack came in the first week of the summer travel season, which began Memorial Day weekend. Airlines for America, the principal airline trade organization, has predicted that a record 234 million people will travel worldwide on U.S. airlines between June 1 and Aug. 31. The number is up 4% from a year earlier.

"Experienced travelers understand that places like London and Paris are targets, just as New York and Los Angeles are targets," travel writer Joe Brancatelli said Sunday.

"If someone was planning for a London vacation last night and heard the news, maybe they hesitated," Brancatelli said. "And maybe a few booked away. {But} this year, the low fares and strong dollar overrides anything {else}."

Shares of British Airways parent, International Consolidated Airlines Group, fell 1.5% in London trading on Monday.

For the three global U.S. carriers -- American (AAL) , Delta (DAL) and United (UAL)  -- the trans-Atlantic has been an area of relative weakness for several quarters, producing revenue per available seat mile trends that have not matched those in other regions, primarily because of the strong dollar and capacity increases by low cost carriers.

In general, while ticket purchases have fallen in some European markets, they have increased in the United States. However, U.S. leisure travelers have most likely already booked their summer vacations, while business travelers, who book later, are unlikely to be deterred by the incident.

"Absent a State Department warning, I suspect the U.K. events in Manchester and London will have little effect on business, leisure or VFR (visiting friends and relatives) travel," said aviation consultant Bob Mann.

British Prime Minister Theresa May "has stated the intent to take a more aggressive line against organizers of an increasing frequency of terrorism incidents, which should both serve notice and have a calming effect on travel markets," Mann said.

New York-London is the busiest U.S. long-haul international route. American, which has a joint venture with British Airways, is the principal U.S. carrier in the market. The joint venture, which also includes Iberia and Finnair, means the carriers can jointly plan flights and split up the revenue.

However, the big three U.S. airlines' levels of revenue from the U.K. does not seem to differ all that much. American gets about 6.3% of revenue from the region, United gets about 5.4% and Delta gets about 2.8%, according to analyst research. But Delta also owns 49% of Virgin Atlantic.

On Delta's July 2016 earnings call, President Glen Hauenstein said U.S.-London routes represent about 35% of all the traffic between the U.S. and Europe, and "London has a very, very high business component."

While all three carriers have trans-Atlantic joint ventures with European partners,  Star Alliance, headed by United and Lufthansa, does not include a British partner.

In the second quarter, American's trans-Atlantic revenue per available seat mile was minus 5.9%, worse than domestic, Pacific or Latin America and Delta's negative 4% RASM was second worst among the four regions.

United reported a 2.1% trans-Atlantic gain, its second best regional performance. "The strength in the Atlantic was boosted by strong results in Germany and a U.S. point-of-sale shift," said President Scott Kirby.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

If you liked this article you might like

How to Invest Like Warren Buffett

How to Invest Like Warren Buffett

Home Depot Latest Company to Award Employee Bonuses on Passage of U.S. Tax Law

Home Depot Latest Company to Award Employee Bonuses on Passage of U.S. Tax Law

Dow and S&P 500 Jump to New Records as Nasdaq Slips

Dow and S&P 500 Jump to New Records as Nasdaq Slips

Tesla Refutes Report of Model 3 Delays: LIVE MARKETS BLOG

Tesla Refutes Report of Model 3 Delays: LIVE MARKETS BLOG

Stocks Lose Steam, Dow Holds Gains as Caterpillar Turns Lower

Stocks Lose Steam, Dow Holds Gains as Caterpillar Turns Lower