When a major catastrophe like the Germanwings Airbus A320 crash in France strikes, does it hit consumer markets equally as hard? For budget airlines, the outlook from their side of the fence might be worse than expected. After the tragic loss of 150 passengers and crew on Tuesday in the French Alps, several Germanwings flights were cancelled in order to give grieving and safety-concerned employees room to cope with the incident — but the full extent of the damage went much deeper as the day went on.
"This is a sad and tragic day for Germanwings and the entire Lufthansa family," said CEO Thomas Winkelmann in a press conference on Tuesday afternoon (Lufthansa is the parent company of Germanwings airlines). As the families and loved ones of crash victims began to flood into the crisis centers and meet with airline-provided psychiatrists in Barcelona and Düsseldorf however, it became clear that the airline itself would take a serious hit both among employee and passenger trust, as well as within its financial ranks.
By end of day on Tuesday, as the European markets closed, positive numbers began trickling in which showed curious potential for the airline company — but the lone bright spot in the day was short lived. CNBC reported a nearly 5 percent loss on shares of the German airline by midday on Tuesday, bouncing back slightly to an overall closing rate of 13.57 euros by the closing bell. The French Press Agency (AFP) reported that the stock finished the day as "the worst performer on the Frankfurt stock market." And the airline wasn't alone — The Telegraph reported that as news of the crash began trickling in, stocks of both Lufthansa and Airbus, the plane's manufacturer, began to slump dramatically as well.
One market analyst carefully dissected the company's fall in a comment to the AFP on Tuesday, lamenting the tragedy and its impact around the globe. "Tragically, market movement cannot always been driven by pure stats," said Connor Campbell of the trade group Spreadex.
Deutsche Welle, a German broadcaster, reported on Tuesday, that consumer confidence would spell out the company's near future as the recovery mission continued. Said Guardian stock analyst Atif Latif in a comment to the news outlet, "Much of the selling is due to uncertainty as to the cause, but questions will be asked and investor confidence and the impact of passenger numbers should not be underestimated."
As consumers and investors weigh their options over the background din left by the tragic crash, it's likely that airline ticket sales will take a hit, if only momentarily. After the terrifying crash of TransAsia Airways Flight GE235 in February, which clipped a traffic bridge and killed over a dozen people on board, the airline's stock prices took a slight hit, but the ticket sale marker barely budged. At the time, one sales manager explained the plateau as a general understanding by regional consumers of traveler necessity. "People understand that this is an accident and accidents can happen anywhere," said Leho Chen in an interview with the Wall Street Journal in February. "Chinese people will cancel travel only for political reasons," he added.
But smaller airlines like Germanwings should beware of getting too comfortable, remarked the Journal that same month. Despite companies like TransAsia being able to work around passenger concerns by upgrading features, budget airlines may not be as fortunate. Frequent travelers, reported the Journal, might take their business elsewhere — most likely to larger airlines who boast embellished safety features and longer track records.
With the recent influx in major airline catastrophes over the span of the last few years, it's entirely plausible. Said Jeff Wise, author of Extreme Fear: The Science of Your Mind in Danger, in a July 2014 interview with Yahoo News, "People will absolutely think twice about getting on a flight right now — it feels like a completely rational thing to not want to get on ... planes at this point."
For those looking for a grim advantage in ticket or stock purchases, the current atmosphere might yield slightly lower rates as airlines attempt to win back their heavy losses after a major crash like that of Germanwings Flight 4U9525 — unfortunately for consumers, they come at a dark cost.
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