Airline search schemes boosting security firms

Kathleen Brooks
IT is probably fair to say that 2009 was a bad year for the airline industry. Afflicted by strikes, falling passenger numbers and fluctuating fuel prices, the year was topped off with a security alert onboard a Detroit bound Delta Airlines flight on Christmas Day. In the aftermath of another terrorist attempt, European and American governments have pledged to toughen up security at airports.

Yesterday Ferrovial-owned BAA, which operates six airports in the UK, said it would introduce full body scanners at Heathrow after prime minister Gordon Brown committed to using the new technology to protect airport passengers. BAA said it will implement the new security checks as soon as “practicable.”

The heightened security measures will mean more queues for passengers at airport check points, but it’s good news for the producers of this new scanning technology. Initial estimates of the cost of implementing the new screening devices are as high as £250m. Smiths Group, the British-based technology company, is the world’s largest producer of airport scanners and its share price rallied 4 per cent yesterday as investors looked to cash in on the potential increase in demand for its products.

Other companies that make scanning equipment include Lockheed Martin, Raytheon Systems, OSI Systems and General Electric’s security division, GE Security.

Although news about the stricter measures has reignited the debate about passenger protection versus passenger privacy, analysts are predicting that the stricter measures will be implemented after the Transportation Security Administration in the US said passengers flying into the US will face “enhanced security measures.”

Fingerprint, iris and face recognition systems may also be adopted as airports intensify their security checks. This would be good news for the likes of the French company Safran, a world leader in biometric technology. Alongside this airports and airliners may need more personnel to manually pad down passengers before they board an aircraft and to check more bags. This is bad news for airlines desperately trying to cut costs after the economic slowdown. But it could benefit security companies such as G4S, which provides passenger checks and baggage screening at airports across the world. On Monday the G4S share price was given a boost, rising 2 per cent.

Investing in companies that provide enhanced airport security is a good long-term strategy using CFDs. It will take some months for the new security devices to be introduced at airports around the world and for profits to start flowing to the companies who make the new devices. But airport security is likely to remain a major theme for the foreseeable future and investment in passenger safety is likely to keep expanding for as long as terrorist threats remain.