University Study Finds Airline Disasters May
Have Little Effect on Airline Stock Prices

SAN DIEGO (September 4, 2008) – The College of Business Administration at San Diego State University (SDSU) announced today research conducted by one of the University’s professors concluded that major airline disasters may have little or no effect on the long-term pricing of the stock of publically held airlines.

Dr. Kuntara Pukthuanthong-Le, a finance professor at SDSU, along with Dr. Thomas Walker and Dolruedee Thiengtham, both from the Molson School of Business at Concordia University in Montreal, Canada concluded that while the stock of the affected airline would plummet within the first seven days following the accident, there was no clear conclusion that could be drawn on the effect of long-term stock prices.

The research, currently awaiting publication in the International Review of Law and Economics, details how legal liability may play a role in stock prices following an airline disaster. For example, a mechanical failure may bring less liability upon the airline and may affect the stock prices of aviation manufacturers, thus may have less impact on lawsuit payouts and insurance claims. Additionally, airline liability following a disaster is also contingent upon whether the accident was domestic or overseas; circumstances surrounding the accident; intercarrier agreements; and federal and state laws.

“Our research concluded that, on its face, there were no direct correlations between airline disasters resulting in loss of life and market reaction to the disaster,” said Dr. Pukthuanthong-Le. “But we did conclude that airline stock is particularly hard hit over the long-term if a disaster is a result of terrorism or criminal activity, such as case of the airline disaster taking place on September 11, 2001.”