Investors, for the most part, stood behind Comair on Friday - the first trading day after one of the Erlanger-based airline's commuter planes crashed outside Detroit, killing all 29 people aboard.
Stock in Comair Holdings Inc. fell hard at the open of Nasdaq National Market trading, dropping as much as $4.75, or 19 percent, to $20.25. But the stock recovered to $23.50 by day's end, down $1.50 from Thursday's closing price of $25. Trading was unusually heavy at 3.0 million shares, eight times the three-month daily average.
Airline stocks typically lose value after a fatal crash, as ValuJet Inc.'s shares did last May. Whether a company's stock recovers - and how quickly - depends on the market's faith in the company.
''Comair, I don't think anybody thinks it's another ValuJet,'' said Stephen Klein, a transportation analyst with Standard & Poor's Equity Group in New York. ''This isn't any kind of an indictment on commuters. There was an initial selloff but the market is coming around.''
That hasn't been the case with ValuJet. The low-cost carrier's stock is down about 60 percent since its fatal crash in the Florida Everglades on May 10. Federal authorities grounded the airline after the crash revealed a pattern of maintenance problems. Limited service has resumed.
Heavy insider selling by ValuJet managers and officers also has contributed to the stock's inability to recover.
Likewise, stock in Trans World Airlines has yet to shake off the effects of the July crash of TWA Flight 800 that killed 230 people off Long Island. The stock has since lost 40 percent of its value.
Some airline stocks, in time, do recover from the negative publicity associated with a fatal crash. USAir, for example, lost 67 percent of its value in 1994 to close that year at $4.25. The stock suffered as a result of a crash that killed 132 in Pittsburgh in September 1994 and also because of poor financial results. The stock rebounded in 1995 and 1996 as the company's financial results improved, and is now trading around $23.
Comair, founded in 1977 by father-and-son duo Raymond and David Mueller, was considered among the safest carriers in the industry. Its only other fatal crash was in 1979.
Comair has long been a favorite pick of analysts and money managers who follow airline stocks.
Its revenue and profits have skyrocketed in the 1990s, helped in large part by its marketing alliance with Delta Air Lines. Comair is a feeder carrier to Atlanta-based Delta. And Delta owns about 21 percent of Comair's stock.
Profit for Comair's fiscal 1996 ended last March totaled $60.0 million on revenue of $463.3 million. Sales have increased nearly 200 percent since 1990 and profits have grown at about twice that rate.
''Comair is very different (from ValuJet) in that it has a newer fleet of planes, an extremely good safety record and its business in general has been good,'' said Rosemary Haddad, a broker with Merrill Lynch in downtown Cincinnati.
Many investors used the early weakness in Comair's stock Friday as a buying opportunity. Fifth Third Securities, the trust and investment division of the Cincinnati-based bank, picked up more shares. Fifth Third now owns just over 1 million shares of Comair in its trust, mutual fund and separately managed accounts.
''I think Comair's good long-term record of safety is part of the reason that so many people were willing to step in and buy it (Friday),'' said Steve Folker, chief equity strategist for Fifth Third. ''That's the reason the stock ended up down a point and a half instead of the four (points) it was earlier.''
Still, the possibility of a crash underscores one of the greatest risks of buying airline stocks, Mr. Folker said.
Ms. Haddad said she expects Comair shares to struggle in a range between $24 and $26 ''while this gets worked through'' and assuming the cause of the crash isn't linked to any systemic problems at Comair.
Analysts don't expect that.
CRASH
FAMILIES
CREW
MINISTER
SCENE
INVESTIGATION
TRAVELERS
COPING
TODAY'S SUMMARY
FIRST-DAY COVERAGE Jan. 10, 1997
