But while the tragic events may have sparked immediate fears of traveling, analysts say it’s unlikely to dent the industry long-term, indicating that the tumble in shares in Friday’s trade is overdone.
“This whole selloff today looks like a buying opportunity,” said Neil Wilson, senior market analyst at ETX Capital, in emailed comments.
“I think we get used to so little volatility that when it comes along we make more of a thing of it than maybe [we] should — markets are supposed to go up and down. This summer has seen ultralow volatility in particular,” he added.
Shares of easyJet PLC EZJ, -0.92% were down 1.9%, Ryanair Holdings PLC RY4C, -1.82% traded 2.5% lower and British Airways and Iberia-parent International Consolidated Airlines SA IAG, -1.52% ICAGY, -1.60% fell 1.9%. Norwegian Air Shuttle NAS, -1.44% dropped 2.9%, Wizz Air Holdings PLC WIZZ, -0.59% slid 2.3%. while SAS AB SAS, -1.58% lost 1.6% and Air France-KLM SA AF, -1.67% erased 2.7%.
The airline stocks also dragged the broader European market lower, with the Stoxx Europe 600 index SXXP, -0.83% down 0.9%. The U.S. Global Jets ETF JETS, -3.33% wasn’t moving in U.S. premarket trade.
“There’s always an element of overreaction to events such as these in the markets. It’s not surprising to see weakness in the airlines in response to the attack as people may be deterred from traveling to certain locations due to the frequency of these attacks,” said Craig Erlam, senior market analyst at Oanda.
“That said, the stocks have recovered from previous terrorism-related bouts of weakness and I see no reason why this will be any different,” he added.
The losses came after a truck driven by terrorists plowed into pedestrians in the heart of Barcelona’s tourist center. At least 13 people died, and many were so injured that the death toll could rise, according to Joaquim Forn, the Catalan region’s interior minister. Islamic State claimed responsibility for the attack.
The carnage follows a string of similar incidents across Europe, including the truck attacks around London Bridge in the U.K. in June, at a Christmas market Berlin last December and in Nice on France’s Bastille Day in July last year. Other recent violence linked to terrorism without the use of vans include the coordinated bombings and mass shooting in Paris in 2015 and suicide bombings in Brussels in 2016.
Airline stocks tend to take a dive after such incidents, on fears they will hit revenue and traffic numbers as people become scared of traveling to major tourist hot spots.
“In London, Paris and now Barcelona, the terrorist attacks over recent years have taken place in the three most visited cities in Europe, with inevitable implications for [airlines] numbers over the coming year,” said Joshua Mahony, market analyst at IG, in a note.
“With Turkish tourism numbers finally coming back, the focus on top European cities will arguably be a bigger hit to low-cost European carriers if people decide to stay away,” he added.
A report from the International Air Transport Association concluded that the terrorism in Western Europe in late-2015 and early-2016 slashed passenger traffic for European airlines by 1.6% the following year. The fall in passengers is estimated to have cost the European carriers around $2.5 billion in 2016 revenue, according to the IATA.
Specifically looking at the Barcelona incident, Davy Research transport analyst Stephen Furlong said the airlines most likely to be impacted are Ryanair, easyJet, Vueling (owned by IAG), Wizz Air and Norwegian.
A hypothetical 20% drop in prices for flights in and out of Barcelona would hit Ryanair’s group-level pricing by 1.4%, easyJet’s by 0.9%, Vueling’s by 11.9%, Wizz Air’s by 0.6% and Norwegian’s by 1.3%, he said.
“However, from a stock-market perspective weakness from these terrible events tend to be short lived and have been more buying opportunities,” Furlong said.