Airlines worldwide face $20B tab

Passengers check in for travel on Monday in Malaysia, where American flights took off for the first time since the attacks

By CNN's Alex Frew McMillan

HONG KONG, China -- Asian airline stocks took a beating Monday, with the industry bracing for the huge cost of last week's terrorist attacks in the United States.

Airlines around the world may face a $20 billion price from the attacks, according to one early estimate.

But with people likely to scale back on air travel if United States enters a protracted "war on terrorism," that could rise.

Airlines already incurred a $10 billion cost just last week, the International Air Transport Association states. It represents 266 airlines around the world.

"It's a nightmare for these guys," said Philip Wickham, Asian airline analyst with ING Barings. "There's no historical record you can look at," to judge the eventual cost, he said.

U.S. market worth $1B a day

The U.S. market is worth around $1 billion a day to carriers around the world, according to IATA. Any company with international flights took some of that hit.

Around a third of the world's 12,000 commercial planes were idled last week after the attacks.

Those planes have gradually been getting off the ground. All U.S. carriers are now back in action, including their international flights. Only Washington, D.C.'s Reagan International Airport remained closed early Monday.

International carriers have resumed U.S. flights. They had been forced to reroute or even turn back flights after the Federal Aviation Authority's unprecedented shutdown.

Business will never be back to normal, though. After the Gulf War, international air travel briefly ground to halt on fears of terrorism. Terrorism is not just a fear now.

"We had four highjackings. So people are going to be avoiding traveling," Wickham said.

Asian airline stocks bruised

New security measures will take time and money to implement. Any disruption in the Middle East, where the U.S. is expected to retaliate, would drive up fuel prices.

Those considerations were hitting home Monday, with airline stocks proving some of the biggest losers.

In Hong Kong, Cathay Pacific's stock was the biggest loser on the exchange. Its shares closed down 10.1 percent at HK$6.25.

Singapore Airlines finished down 7.3 percent at S$8.20. A Deutsche Bank analyst noted that Cathay has twice as much business that is tied to the United States, but investors weren't drawing such fine lines.

Qantas, which gets 10 percent of its business from flights to the United States, dived from the open and ended down 13.6 percent at A$2.86.

The results of last week's weeks attacks are felt most directly and immediately by U.S. carriers, of course. While flights were grounded, American carriers were losing $300 million a day.

Those airlines are also likely to suffer the most long-term, if travelers fear they could be the targets of future terrorism.

After the U.S. attacks, Continental Airlines said this weekend it will lay off 12,000 workers and scrap 20 percent of its flights. Northwest Airlines and American Airlines also both said they would cut flights 20 percent. Other carriers are expected to follow suit.

Asian carriers may gain some business if fliers favor them over American counterparts that fly in Asia, said Peter Harbison, managing director of the Centre for Asia Pacific Aviation in Sydney.

But there are few silver linings, anywhere, out of last week's events.

"The impact, whatever happens, will be very significant," Harbison said. "Particularly if we see Wall Street come off, the general feeling of economic malaise starts to spread. And tourism and travel are very susceptible to that sort of headwind."

Consolidations, collapses expected

Taiwan's two carriers, China Airlines and Eva Air, will take a sharp hit, with much of their travel linked to the United States. Japan Airlines and All Nippon Airways, as well as South Korea's two carriers, Korean Air Lines and Asiana Airlines, will suffer.

On Monday, KAL dropped the maximum 15 percent it could in a day, to 4,280 won. Asiana lost 11.9 percent to 1,180 won.

Chinese mainland carriers may be insulated by their home market. But Philippines Airlines and Malaysia Airways are also facing a hit.

Passengers have already cut back their plans, an effect that is expected to worsen, Harbison said. Near-term, many trips were too close to be canceled.

The effect is hard to gauge. But it is severe, and hitting at a bad time.

"It comes on the cusp almost, or halfway down, the slide into fairly ugly economic conditions which were already starting to hurt tourism," Harbison noted.

U.S stock trading is expected to be brutal once Wall Street reopens on Monday.

Airlines already saw their profits slide after freight shipments around the world started to slow in January and February. They're often one of the first signs of the economy slowing, or picking back up.

Passenger travel stayed fairly strong for a few months. But it turned down in May and June, particularly with high-end business travel.

That highly profitable segment is the bread and butter business of many airlines, with business travelers paying five times or more the price of budget travelers.

In the United States, bankrupt Midway Airlines closed shop on September 12. In Australia, Ansett Airlines, the second-largest domestic carrier, collapsed last week.

Now, analysts expect more consolidations, and possibly more failures.

There "are unlikely to be any winners out of this," Harbison said.