WRAPUP 3-Travel, tourism stocks in turmoil on swine flu
* Airline stocks fall on flu scare
* Hotels, cruise ship operators also lower
* Steep drop in travel feared (Updates with analyst comment on potential effects)
By Tim Hepher and Deepa Seetharaman
PARIS/NEW YORK, April 27 (Reuters) - Investors fled investments in air, land and sea on Monday as fears of a flu pandemic rekindled memories of the Asian SARS crisis that caused widespread industry turmoil six years ago.
From Sydney to New York, selling hit the world's leading airline brands, hotels and cruise operators and the cost of insuring airline debt rose following the outbreak of swine flu.
The United States declared a public health emergency and Americans and Europeans were urged to avoid non-essential travel to Mexico, where more than 100 people have died from the outbreak.
U.S. airlines most heavily exposed to Mexico racked up double-digit losses in trading. The AMEX airlines index .XAL fell 10.6 percent.
Continental Airlines (CAL.N), which offers more seats than any foreign airline into and out of Mexico, according to data provided exclusively to Reuters by airline schedules consultancy Innovata, saw its stock fall 16.4 percent.
American Airlines parent AMR Corp (AMR.N) and US Airways Group (LCC.N), the second and third foreign airlines in terms of passenger capacity to the same country, also suffered double-digit percentage falls.
Shares of U.S. hotels and cruise operators joined the rout as some analysts suggested they could be most hurt among travel and leisure companies in a swine flu outbreak.
PERFECT STORM
"This flu outbreak creates the perfect storm for beleaguered lodging companies scathed by recession-related demand destruction and Washington's anti-travel rhetoric," said Amit Kapoor, hotel industry analyst for Gabelli & Co.
Shares of Marriott International (MAR.N) fell 5 percent on the New York Stock Exchange, while Starwood Hotel & Resorts (HOT.N) dropped about 11 percent. Starwood put options were actively traded on concerns about the outbreak's affect on travel and tourism.
Rod Petrick, analyst for Stifel Nicolaus, said the outbreak bodes badly for the already-battered hotel industry "right when everyone was looking for demand to kind of stabilize."
The outbreak could also spell more pain for airlines, which have lurched from crisis to crisis in the past year as carriers grappled with high oil prices, then the credit crunch, a slump in business travel and plunging cargo trade.
Some airline executives have been tentatively predicting relief after months of weak traffic, eyeing benefits from sharp cost-cutting measures in the recession.
But ratings agency Standard & Poor's said on Monday that swine flu could cause airlines to suffer a steep drop in international traffic similar to what happened with SARS, which was first reported in Guangdong province in November 2002 and gained international attention in early 2003.
SARS postponed a recovery from recession worsened by the Sept 11, 2001, attacks. During the first months of the SARS outbreak, the AMEX airlines index fell about 21 percent. SARS was declared contained in June 2003.
"Though swine flu has not yet caused health problems on a similar scale, we believe airlines are at risk of suffering reduced traffic because of government-imposed quarantines and travelers' fears," S&P said in a statement.
The number of passengers traveling from the U.S. to Asia dropped 80 percent from January 2003 to June 2003, according to data provided by Oliver Wyman, a management consulting company. Travel demand snapped back after that point, but it took a year for demand to reach pre-SARS levels, it said.
Andrew Watterson, an airline consultant with Oliver Wyman, said airline capacity could be cut even more longer-term in wake of the swine flu outbreak.
In Europe trading, major network carrier British Airways (BAY.L) fell about 8 percent and Spain's Iberia (IBLA.MC), which offers the most capacity to Spanish-speaking Mexico from Europe, gave up about 7 percent.
In Hong Kong, Cathay Pacific Airways (0293.HK) -- which at one point considered grounding its fleet during the SARS crisis -- lost 8 percent and Air China (0753.HK) fell 12.5 percent.
TAKING PRECAUTIONS
Singapore Airlines SIAL.SE said it had taken steps to ensure lessons learned from SARS were used to try to contain the scare. It said cabin crew would try to spot unwell passengers.
David A. Castelveter, a spokesman with the Air Transport Association of America trade group, said U.S. carriers were on "heightened awareness," also talking with customers who had flu-like or other communicable-disease symptoms.
American, Delta Air Lines (DAL.N), UAL Corp's (UAUA.O) United and US Airways Group Inc (LCC.N) said they were allowing passengers to Mexico to change their plans without any fee or penalty, but there were no immediate reports of any canceled flights.
"We've seen minimal changes to bookings related to this," Delta spokeswoman Betsy Talton said.
Royal Caribbean Cruises Ltd (RCL.N) (RCL.OL) shed more than 16 percent, while Carnival Corp (CCL.N) was down 14 percent. Both cruise operators said no changes had been made to their itineraries in wake of swine flu.
"There is that perception that illness is easily transmitted on cruise ships," said Sharon Zackfia, an analyst with William Blair & Co. "In the past when there have been outbreaks, it can cause a short-term disruption in demand."
Not all analysts were rattled by the swine flu outbreak.
Howard Wheeldon, senior strategist at BGC Partners in London, said airlines were used to living through boom and bust.
"The one thing about airlines is they recover from events like this amazingly quickly. It is damaging and unhelpful, but not the end of the world for them," he said. FACTBOX-Airline exposure to Mexico [nLR716823] TAKE A LOOK-Swine, flu outbreak [nFLU] (Additional reporting by Karen Jacobs in Atlanta, Kyle Peterson in Chicago and Jim Loney in Miami, Ben Harding in Madrid, Claire Milhench and Jane Baird in London and Kevin Lim in Singapore; Editing by David Cowell, Bernard Orr)
