REFILE-UPDATE 1-Security pressure seen on passenger jet cargo

(Refiles to fix story link at bottom)

* Stock impact wanes as plots are foiled-analyst

* Too early to judge cost impact, industry says

* Pressure seen to move cargo off passenger planes
(Adds comments by Fedex spokesman, analyst, Atlas Air CEO,
adds NEW YORK to dateline)

By Tim Hepher and Lynn Adler

PARIS/NEW YORK, Nov 1 (BestGrowthStock) – Airlines could face
pressure to put less cargo on passenger planes or improve blast
protection after one of the parcels in the Yemen bomb plot was
found to have flown in a passenger jet, analysts said Monday.

Market reaction to Friday’s discovery of bombs hidden in
two U.S.-bound parcels showed some signs of “scare fatigue”
compared with the jitters caused by a failed plot to blow up a
passenger plane over Detroit in 2009 or April’s volcanic ash

But concerns over a possible weak link in air security grew
after Qatar Airways confirmed on Saturday that it had carried
an explosive package that was later seized in Dubai. The parcel
had been flown from Yemen with a stopover in the Qatari capital

“This certainly reinforces the desire to get cargo,
including packages, off passenger airplanes,” said George
Hamlin, president of Hamlin Transportation Consulting in
Fairfax, Virginia.

“That’s not a piece of economic good news for the passenger
carriers, particularly the international ones whose making of a
profit very often depends on carrying cargo in the belly on
long-haul international flights.

“Cargo on domestic flights in the U.S. is a fraction of
what it used to be because FedEx and UPS have taken that market
over, but it’s still very important in the economics of the
international passenger business.”

According to airlines association IATA, about 35 percent of
the value of world trade is carried by air.

Airbus says approximately 60 percent of global freight
tonne kilometres (the amount of freight times the distance
flown) is carried in dedicated freighter aircraft.

Many airlines said on Monday they were already implementing
tough security standards or stepping them up.

“We’re certainly going to look at the trouble spots even
more closely, we’re certainly going to be more vigilant,
although we’re going to continue to use the policies that have
worked in the past,” said FedEx spokesman Maury Lane.


Companies like United Parcel Service (UPS.N: ), FedEx Corp
(FDX.N: ) and European competitors like TNT use a combination of
their own planes and other airline networks or road-trucking to
deliver parcels door-to-door.

Businesses and consumers are unlikely to cut back much on
shipments unless costs rise substantially, said Matt Collins,
industrial analyst at Edward Jones in St. Louis.

“It is a real risk to the global transportation system and
there probably will be new security measures,” he said. “But
the reality is that that would be shared by shippers, customers
and governments around the globe.”

UPS moves 15 million packages a day, and screening each one
is not feasible, said Collins.

“We doubt that this is leading to 100 percent screening of
cargo everywhere,” William Flynn, chief executive of cargo
carrier Atlas Air Worldwide Holdings Inc (AAWW.O: ), said on a
Monday conference call.

“But as you would imagine, well certainly there’s going to
be a lot more screening on cargo and packages originating from
Yemen, just by way of example, and other areas where TSA and
DHS assess the risks to be high.”

Airline stocks were mixed with narrow changes on Monday.
Fedex shares were down 1.3 percent and UPS stock was little

“We think the interception of these packages shows that
security is working, and think new heightened security measures
will ease public fear and improve chances at further
detection,” said Jim Corridore at Standard & Poor’s Equity

During the global economic crisis companies bought fewer
goods for air delivery, hurting airline profits.

However, in recent months companies had to restock
inventory in a rush when goods and service demand picked up
after the economic crisis. British Airways’ (BAY.L: ) midyear
cargo sales, which are 8 percent of its total, rose 39

Cargo carried in passenger planes must be scanned but
governments have for years debated whether to expand this to
all-cargo planes. A 2007 Congressional report said the
technology did not exist to do this affordably for all

Officials have focused on a mixture of x-ray scanning and
risk assessments based on evaluating shippers.

Officials have also considered using tougher materials like
kevlar to replace the aluminium containers used to load cargo.
But the Congressional report found increased costs may prevent
passenger airlines from competing with all-cargo carriers.

“It’s not clear at this stage whether (governments) will
require cargo and freight operators to acquire and use a lot of
new equipment,” said Rob Stallard of RBC Capital Markets.

“With that in mind, I don’t expect that there will be a
major impact on specific U.S. stock prices at this stage, and
certainly not something that will buck the underlying trends.”

Still, expectations of demand for new security equipment
lifted shares in Britain’s Smiths Industries (SMIN.L: ) and
France’s Safran (SAF.PA: ), which make advanced explosives

Dutch logistics group TNT (TNT.AS: ) played down the costs.
“I don’t expect much for the short term but we will have to see
what measures get imposed longer term,” Finance Director
Bernard Bot told Reuters Insider.

For background, see these related stories:

* Governments review air security after plot[ID:nLDE6A00OY]

* Sluggish mail hits TNT Q3 earnings [ID:nLDE69U0JK]

* Bomb plot could raise costs, but who pays?[ID:nLDE6A007Z]
(Additional reporting by Greg Roumeliotis, Rhys Jones, Maria
Sheahan, Donny Kwok, Park Ju-min, Karen Jacobs; Editing by
David Cowell and Matthew Lewis)

REFILE-UPDATE 1-Security pressure seen on passenger jet cargo