Monday, September 17, 2001

Remember 9-11-01

Local stocks
follow the market
lead, fall sharply

Reliance on tourism
comes home to roost

Travel stocks dive
Dow off 684
Isle airlines face reckoning

By Dave Segal

Tourism-dependent Hawaii incurred the wrath of investors today as some state-based travel companies saw their stocks lose about a quarter of their value or more in a broad-based U.S. market selloff.

Speculative biotechnology firms based on the Big Island were hurt even worse as their shares plunged to multiyear lows.

"I can't say I'm too surprised about what's happening in the market," said Bank of Hawaii Senior Vice President Dave Zerfoss, who manages more than $4 billion in assets for the bank's investment department. "It's predictable. The companies getting killed are transportation companies and other related ones. And defense stocks are doing better.

"Hawaii has to be hurt to some unknown degree by tourist interruption of some undeterminable length. I don't know what that means to us in the aggregate because it depends how long it happens. If it's a few weeks, I don't think it makes much difference in the long run. But this type of environment has pretty much stopped the Japanese from coming here because they have the same attitude (as the Americans)."

Hawaiian Airlines Inc., which had soared 79.3 percent during the first half of the year, dropped more than 40 percent at the opening and closed down 22.4 percent, or 59 cents, to $2.25. The stock, which earlier fell to $1.70, traded as high as $3.48 on July 23.

"Frankly, Hawaiian is in better shape than most other airlines because a lot of their travel is interisland," Zerfoss said. "Local people might increase their travel because there will be better deals. I think you'll see kamaaina deals coming out of the woodwork."

Honolulu-based discount retailer Cheap Tickets Inc., which in August agreed to be acquired by Cendant Corp. for $16.50 a share, saw its stock and the shares of its soon-to-be parent both take sizable hits. Cheap Tickets, which earlier fell as much as 33 percent to $11, lost 23.7 percent, or $3.89, to $12.55. Cendant was off 18.9 percent, or $3.36, to $14.40.

Big Island competitors Cyanotech Corp. and Aquasearch Inc., which both cultivate nutritional products out of microalgae, both saw their stocks fall to levels they hadn't seen in more than a year. Cyanotech collapsed 38.2 percent, or 5 cents, to 60 cents while Aquasearch tumbled 22.7 percent, or 35 cents, to 17 cents.

Zerfoss said the market's severe drop-off might be more unsettling under a different situation because the key indexes fell below their March and April lows. Instead, he sees a great buying opportunity ahead.

"If these were normal times, the market's level now below the lows of the first quarter would suggest you're going to go lower," he said. "But you can hardly consider now to be normal. Also, the Fed rate cut this morning is pretty significant because we didn't expect to see 50 basis points of additional rate cuts for two more meetings -- in October and November. This is pretty stimulating, plus the Fed added a lot of liquidity to the market.

"I'd prefer to see the market close weak today and be really weak tomorrow and that will be the end. You might get a classic selling climax tomorrow, which from my point of view will be one of the great buying opportunities of all times. A year from now, you'll be ecstatic about this buying opportunity."

Oil and natural gas producer Barnwell Industries Inc. was one of the few Hawaii companies to buck the trend and show a gain. The company, which does most of its business in Canada, stands to benefit from a disruption of oil from the Middle East and higher energy prices. Barnwell saw its stock rise 2 percent, or 50 cents, to $20. Ironically, the upward move came on a day that the company announced it was cutting its dividend 25 percent, from 20 cents to 15 cents. It is payable Oct. 17 to stockholders of record Oct. 2.

Hawaiian Electric Industries Inc., which is undoubtedly considered a safer investment due to its utility business, American Savings Bank subsidiary and 6.2 percent dividend, saw its stock lose just 42 cents, or .01 percent, to $40.50.

Thinly traded ML Macadamia Orchards LP, which grows and processes nuts on the Big Island, was unchanged at $3.24.

Travel-related companies that have a strong Hawaii presence also were buried under intense selling pressure today.

American Classic Voyages Co., which operates American Hawaii Cruises and United States Lines in Hawaii waters, saw its stock fall 34.9 percent, or 63 cents, to $1.40 amid fears that a travel slowdown would cut into the company's business.

Likewise, Hilton Hotels Corp., which owns the Hilton Hawaiian Village and operates other hotels in Hawaii, fell 23.6 percent, or $2.64, to $8.55 and Starwood Hotels & Resorts Worldwide Inc., which operates or markets 13 hotels in Hawaii, including some of the best known properties on Waikiki Beach, plunged 28.4 percent, or $8.40, to $21.15.

Nevada-based Boyd Gaming Corp., which conducts travel packages from Hawaii to Las Vegas and has many shareholders in Hawaii, lost 24.6 percent, or $1.23, to $4.60.

Hawaii banks, which normally benefit when interest rates are lowered, all ended lower despite the Federal Reserve dropping the federal funds rate a half-percentage point today to 3 percent.

Bank of Hawaii parent Pacific Century Financial Corp., which had been one of the top performing Hawaii stocks this year, lost 10.3 percent, or $1.84, to $23.71.

Central Pacific Bank parent CPB Inc. and City Bank parent CB Bancshares Inc., both of which are thinly traded, were also both lower. CPB was off 16.6 percent, or $3.24, at $30 while CB Bancshares was down 3.7 percent, or 90 cents, at $36.00.

First Hawaiian Bank parent BancWest Corp., which is waiting for French bank BNP Paribas to finalize its deal for the 55 percent of BancWest shares it doesn't already own, was off 0.5 percent, or 13 cents, at $34.76. BNP Paribas has agreed to purchase BancWest's shares for $35.

Among other Hawaii companies, Maui Land & Pineapple Co. was off 3.4 percent, or 60 cents, to $25.70; Schuler Homes Inc. was down 9.4 percent, or $1.49, to $12.50; Matson ocean shipping parent and landowner Alexander & Baldwin Inc. was down 8 percent, or 54 cents, to $23.79; Tesoro Petroleum Inc. was down 9.3 percent, or 75 cents, to $12.75; and Dole Food Co. was off 6.3 percent, or $1.29 cents, to $22.20.

Kauai shrimp producer Controlled Environment Aquaculture Co. and Hawaiian Natural Water Co. both had no shares traded and remained at $1 and 20 cents, respectively.

Travel stocks dive

Airline and tourism stocks drop sharply

By Brad Foss
Associated Press

NEW YORK >> The stocks of major airlines and travel-related companies fell sharply today, with Wall Street jittery about long-term financial woes and, in some cases, bankruptcies in the wake of last week's terrorist attacks.

The industry is lobbying for a $20 billion federal bailout, having lost $1 billion already because of weak demand from nervous travelers, a costly two-day shutdown of the nation's air system and higher security-related expenses.

US Airways said today it expects to lay off 11,000 employees, roughly one-fifth of its work force, and cut its nationwide service by 23 percent.

"The entire U.S. aviation system is in jeopardy, and without decisive actions the future of the system, along with its impact on the nation's economy, is imperiled," company chairman Stephen Wolf said in a statement.

Other major carriers have trimmed schedules by 20 percent and an industry group said as many as 100,000 airline layoffs are likely in coming weeks.

American Airlines, the nation's largest airline, will announce layoffs later this week, a company official said on condition of anonymity. The exact number of layoffs will partly depend on the size of the federal bailout, the official said.

Continental, the fifth-largest carrier, laid off 12,000 employees, more than one-fifth of its work force, over the weekend.

Today, the airlines' woes reverberated throughout the travel industry as shares of hotel, rental car and electronic ticketing companies became mired in the selloff.

Analysts say airlines are the most vulnerable over the long term.

"We do not believe every airline's survival is guaranteed under any circumstances," said Jim Higgins, analyst at Credit Suisse First Boston in New York. Higgins said the industry will lose at least $5 billion this year.

Shares of AMR Corp., the parent of American, plummeted $11.62, or 39 percent, to $18.08 on the New York Stock Exchange. Shares of UAL Corp., which owns United, dropped $12.90, or 42 percent, to $17.92 on the NYSE, where Delta plunged $16.74, or 44 percent, to $20.51 a share. Continental's stock tumbled 49.4 percent, or $19.59, to $39.64.

US Airways Group Inc. fell $5.57, or 52 percent, to $6.05, also on the NYSE. It announced the layoffs after the close of trading.

Electronic reservation firm Sabre Inc.'s stock fell $15.54, or 39 percent, to $23.89 on the NYSE and rival Galileo International Inc.'s stock tumbled $8.57, or 30 percent, to $20.03.

Online travel agencies trading on the Nasdaq Stock Market also were affected. Inc. shares dropped $9.52, or 43 percent, to $12.50 a share and Expedia Inc. shares fell $11.50, or 31 percent, to $24.75.

Cendant Corp., owner of Days Inn and Avis, also got hurt in NYSE trading, with shares falling $3.31, or 19 percent, to $14.45. Shares of Marriott International Inc. dropped $8.43, or 21 percent, to $33.42 on the NYSE.

Forrester Research analyst Henry Harteveldt said online travel companies have noticed a falloff in business since hijacked planes were used last Tuesday in terrorist attacks on the World Trade Center and Pentagon.

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