Airline shares fall on flu scare

By Deepa Seetharaman and Laura MacInnis

NEW YORK/GENEVA (Reuters) - Airline shares around the world largely took another hit on Tuesday on fears of steep falls in business and leisure traffic because of the swine flu outbreak.

Among the shares of the U.S. carriers, industry leader Delta Air Lines (DAL.N) fell almost 10 percent and US Airways Group (LCC.N) fell 4 percent.

American parent AMR (AMR.N) and Southwest Airlines (LUV.N) bucked the overall trend and ended a respective 1 percent and 3.9 percent higher, but they were not enough to help the AMEX airlines index .XAL, which ended down 2.6 percent.

Cruise and hotel operators, which took a severe beating on Monday, bounced back, with Carnival (CCL.N)(CCL.L) and Royal Caribbean Cruises (RCL.N) up 3.9 percent and 3.3 percent, respectively.

The swine flu was expected to cause customers to cancel travel plans, sending shares down in double-digit percentages on Monday, but on Tuesday most reports said travellers were largely keeping their current plans in place.

But fears remained that future bookings and travel plans could change, based on the spread of the flu.

"As more news comes out on swine flu, it's more apparent to investors that it's a localised thing," said Jim Corridore, an analyst with Standard & Poor's Equity Research. "It's mostly in Mexico where at least U.S. airlines get a very small percent of their revenues. And it's likely to be of short-term duration."

Matthew Jacob, an analyst with Majestic Research, said the Monday selloff could have created a buying opportunity for U.S. investors.