New terror attack could be costly for airlines

Over two years, the direct loss in revenues to the U.S. airline business of a new terrorist attack would be $43.65 billion, the researchers calculated. This is very close to the total net loss that the Air Transport Association estimated the U.S. airline industry incurred in the 2001-2005 period, before the industry returned to profitability in 2006 — though Moore said the USC scientists did not use the ATA estimate in performing their calculations.

Their lost-revenue estimate assumes that transport of air freight would return to normal immediately after the seven-day shutdown, but that passenger traffic would take two years to return to pre-attack levels, as happened after 9/11. They estimated the average cost of a domestic ticket at $325, and of an international ticket $667.

But the economic impacts go much deeper. The airline industry uses goods and services from other business sectors. This demand for goods and services from airlines stimulates these businesses' own use of the air transport system, said Moore.

Additionally, U.S. businesses need to use the air transport system in many other ways to stimulate their growth. "There's a web of relationships," and these create multiplying effects economically, he said.

One industry that the USC researchers thought would do well during a post-terrorism U.S. airline reversal is telecommunications, which they estimated would see as much as $19.5 billion in extra revenue in the two years following an attack.

Yet the estimate of an overall negative impact of $214 billion to $420 billion might be conservative. If the U.S. public took longer than two years to become as willing to travel by air as it had been before the attack, "losses would mount up and this could damage the (airline) industry," perhaps irrevocably, said Moore.

"Suppose the traveling public was skeptical that the government could not guarantee the safety of air travel. I would imagine it would be destructive for the industry," he said. "I think everyone understands the industry is in some ways very fragile financially."

Equipping the entire U.S airliner fleet with countermeasures against portable anti-aircraft missiles would cost anywhere from $10 billion to $100 billion, the USC researchers estimated. The actual equipment cost would be $10 billion to $20 billion, but since "some countermeasures deteriorate quickly and must be replaced frequently," continuing costs could total an additional $5 billion to $10 billion annually.

But equipping the U.S. fleet with anti-missile countermeasures might well be worth the cost, they concluded.

The 9/11 terrorist offensive "was a very expensive event" for the United States, said Moore. But "it is possible for events to happen that are even more expensive. It's in everybody's interest to avoid impacts (from terrorist attacks). The entire exercise was intended to focus on, what costs do we avoid, and what do we have to lay out?"

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