New U.S. security restrictions could hurt airlines

By Clare Baldwin and Jui Chakravorty
NEW YORK, Dec 27 (Reuters) - Tighter security measures at U.S. airports following an attempt to blow up a Detroit-bound jet could dampen enthusiasm for air travel, hurting the airline industry just as it seemed poised to recover from a period of bruising losses, some industry experts say.
Airline passengers this weekend already faced tighter security after a Nigerian man tried to blow up a Northwest Airlines (DAL.N) plane as it approached Detroit on a flight bound from Amsterdam on Friday.
The U.S. Department of Homeland Security said it was boosting airport security after the incident and advised passengers they may experience more scrutiny. One DHS official said available security measures that could be implemented range from bomb-sniffing dogs to behavior detection as well as other techniques.
And the tighter security is not being confined to U.S. airports. Passengers may also face pat-downs and are being ordered to stay seated during the last hour of flight with nothing on their laps, airlines and security officials said.
Though delays caused by the new measures might not dissuade international travelers who are already spending massive amounts of time in transit, it could put a significant dent in short hops by business travelers, some analysts said.
Robert Mann, an airline consultant at R.W. Mann & Company, said airlines must watch for the impact on business travelers, who pay higher fares and travel more frequently than leisure passengers.
"If it becomes something like a four-hour wait, business travelers aren't going to do that," Mann said. "They're either not going to travel or they're going to hire their own private lift, and just avoid scheduled transportation altogether."
The security changes come just as major U.S. airlines had been trumpeting the return of demand from well-heeled business travelers who pay full fare. Delta Air Lines (DAL.N), which merged with Northwest Airlines last year, in mid-December had said its fourth-quarter revenue trends had suggested a better 2010.
Delta, like other airlines, had responded to the huge drop in traffic as the recession sapped corporate and consumer demand by cutting capacity.
The U.S. airline industry, which lost $23.6 billion in 2008, has slashed capacity and increased fares to cope with weaker demand and higher fuel prices.
After Friday's attempted attack, Air Canada (ACa.TO) advised U.S.-bound travelers to expect flight delays, cancellations and missed connections, and limit themselves to a single piece of carry-on baggage.
Air Canada said on its website that new rules imposed by the U.S. Transportation Security Administration also limit on-board activities in U.S. airspace that could adversely impact in-flight service.
"Among other things, during the final hour of flights, customers must remain seated, will not be allowed to access carry-on baggage or have personal belongings or other items on their laps," the airline said.
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Some airlines were going as far as shutting down in-flight entertainment systems, which include route-tracking maps.
Security measures are unlikely to have a major impact on earnings for this quarter, which will close in less than a week left, but 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." (Additional reporting by John Crawley, Kyle Peterson and Michael Erman; Editing by Leslie Adler)