You might think there's no bigger threat to an airline's bottom line than a fatal plane crash.
But the day after American Airlines Flight 5342 collided with a U.S. Army helicopter in Washington, D.C., killing all 67 people onboard, shares of the company were trading just 2.5% lower. The decline grew four days later, with shares trading 4.5% lower than the day before the crash.
Do deadly crashes hurt airlines, or are they too isolated to affect them financially? Analysts don't expect long-term consequences for American. They point to the most recent major U.S. air disaster, in 2009, when a plane operated by the regional airline Colgan Air crashed shortly after takeoff outside Buffalo, New York, killing 49 people onboard.
"Similar to the Colgan (operating as United Express) crash on Feb. 12, 2009, we suspect there will not be a long-term impact on U.S. air travel demand and American shares," Savanthi Syth, an analyst at Raymond James, said, according to MarketWatch.
It remains to be seen whether the D.C. crash could add uncertainty to the weak outlook American Airlines has predicted for 2025. It forecast profit below Wall Street expectations due to higher costs stemming from labor contracts signed last year, Reuters reported. The outlook, released Jan. 23, caused shares of the company to tumble 9%, CNBC reported.
Following the crash, the company sought to reassure investors and passengers — a move that could relieve further pressure.
"Nothing is more important than safety in our business,” CEO Robert Isom said in a statement. “It’s a responsibility that every American Airlines team member — and aviation professional — takes very seriously. American has thousands of flights in the air today, and more than ever, the professionalism that distinguishes our team on the ground and in the air is on display."
The financial cost of crashes
Data on the financial impacts of plane crashes on airlines isn’t widely available, mostly due to a steady reduction in accidents. Commercial air travel has been safer each decade since the 1970s, with the risk of fatality for the average passenger falling to 1 per 13.7 million boardings between 2018 and 2022. Also, airlines have sometimes kept financial details of crashes private, citing legal or privacy concerns.
Even when accidents weren't as rare, U.S.-based airlines weren't likely to financially suffer. A study from 2004 that examined more than 783 accidents found that between 2% and 3% were "serious enough to cause financial pain."
The stock dip that American Airlines recorded on Thursday tracks with another study, this one in 2020, that examined the financial fallout from air disasters. The study, which analyzed 138 accidents involving U.S. airlines from 1962 through 2003, found the companies can expect their stock price to fall around 2.8% during the first full business day after a major crash. Airline stock prices can dip more dramatically "as the degree of fatality increases," a 2013 study in Economics Letters stated.
Airlines are more likely to be affected by insurance liabilities, the costs of repairing or replacing equipment and a loss of consumer confidence, according to the 2020 report.
They also face payments to victims’ families that can range between $2.4 million and $4.1 million per passenger, suggesting a total cost to insurers of between $700 million and nearly $1.3 billion, according to the Insurance Information Institute.
In 2015, the airline Lufthansa reportedly set aside $300 million for liabilities following the Germanwings Airbus A320 crash that year, in which a co-pilot deliberately crashed in the French Alps, killing all 150 onboard.
Since 2001, two regional airlines have shut down in the years following major crashes. They include Colgan Air, which closed three years after the 2009 crash in New York. Another was Comair, a regional airline whose Bombardier jet overran its runway during takeoff in Lexington, Kentucky, in 2006, killing 49 of the 50 people aboard.
But broader factors were at play in both closures. Their owners, Delta Air Lines and Continental Airlines, had been struggling financially before the crashes, with record-high fuel costs in 2005 and the 2007-8 recession slamming the industry.
American Airlines seems to be on firmer financial footing. After losing $28 billion in the first year of the pandemic, the company reported revenues of $54 billion in 2024 — nearly $10 billion more than in 2019.
The company spent much of 2024 trying to reverse the fallout from a business travel sales strategy that pushed for direct bookings instead of travel agencies, CNBC reported. Its competitors, United and Delta, have issued rosier outlooks for 2025 after benefiting from improved pricing and strong winter demand.
