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If The Laptop Ban Goes Through, Will US-Based Airlines Mimic Gulf Carriers?

Shanthi Rexaline

After landing itself in court following an immigration ban on select predominantly Muslim countries, the Trump administration announced it would block laptops and large electronic devices from the cabins of U.S.-bound direct flights originating from 10 airports in the Middle East and North Africa. This would affect about 350 flights per week that originate from these countries.

Unlike the much-maligned travel ban, the decision announced in late March arguably had specific reasoning behind it. ISIS and other terrorist groups have developed the technique of planting bombs and other explosive devices in laptops and electronic devices, according to CNN. It's tough for these laptop bombs, according to the CNN report, to be detected by airport screeners.

Incidentally, the U.K. also announced a similar move, banning laptops on flights from Turkey and five countries in the Middle East and North Africa. 

Why The Cargo Hold?

Luggage in the cargo holds ofg airplanes undergoes additional screening — and the luggage could provide some insulation from an explosion. Additionally, explosive devices in cargo holds may require a sophisticated timing device to detonate.

Ban to Be Expanded

Speculation was rife that a similar ban could be extended to inbound flights from Europe, although it was reported in mid-May that following a meeting between the EU and U.S. Department of Homeland Security Officials, the U.S. decided not to go ahead with the idea. There is renewed speculation that the European ban may be on, with Reuters quoting Secretary of Homeland Security John Kelly's testimony before a House of Representatives panel suggesting that about 71 incremental airports would be brought into the net.

Even as the purported U.S. move to expand the laptop ban to Europe still hangs in limbo, there are mixed views on whether it's the right step to take. 

Lost Revenues, Incremental Costs

A laptop ban is expected to hurt air travel and in turn the revenues of airlines such as Delta Air Lines, Inc. (NYSE: DAL), United Continental Holdings Inc (NYSE: UAL) and American Airlines Group Inc (NASDAQ: AAL), along with other overseas airlines operating flights into the U.S. from these locations.

If the laptop ban were extended to Europe-to-U.S. flights, the industry could suffer a $1.4 billion hit on productivity and industry costs, according to a release from the International Air Transport Association.

"And an IATA-commissioned survey of business travelers indicated that around 15 percent would seek to reduce their travel in the face of a ban," Alexandre de Juniac, the organization's director general and CEO, said ina  statement.

The expanded ban could cost airlines and passengers $3.3 billion a year, as the industry has to plow money into bomb-detection technology, anti-tampering detection for devices, sniffer dogs and an array of other security screening options, according to a.

Productivity Affected

The economic impact of lost productivity due to the laptop ban on European flights was estimated at $500 million per year, said Yahoo Finance writer Ethan Wolf-Mann.

The calculation is based on data released by the National Trade and Tourism Office of the Department of Commerce, which calculated the number of business passengers flying back to the U.S. in 2015 at 1.9 million and the hours they spent on board at 13.3 million hours.

With an average income of $152,868, these travelers' pay equates to $76 per hour, translating to a lost productivity of $500 million, assuming about half of the travelers work while flying. 

Several measures are being discussed widely to mitigate the impact of a laptop ban One possible solution for airlines: loaning out laptops to customers, just as Qatar Airways has done as a work-around. 

A Loaner Laptop — Any Takers? 

Along with the loaned out laptop, Qatar Airways offers free Wi-Fi for an hour and a $5 charge for staying connected throughout the flight.

A survey by ExpertFlyer.com showed that about 40 percent of 1,566 respondents said they would be impacted by the laptop ban from 10 countries that was announced in March. These respondents suggested that they wouldn't change their travel itineraries, but would change their inflight activities accordingly. 

When asked if they would prefer to use a loaner laptop, 42 percent said they are against it.

"For the travelers who want to work in flight, it isn't a replacement at all," Gary Leff, author of the frequent flyer blog View From The Wing, said in a statement. 

"You don't have access to your hard drive and you probably don't want to use a USB drive for fear of leaving a digital footprint behind. The device doesn't have the software or apps needed to work effectively and there are serious security issues to consider."

Spy Agencies Make Merry

Once a laptop and an owner are separated, there is the possibility of foreign intelligence agencies, corporate competition or merely thieves scooping in on the data and information. 

A 2013 study examining the theft of American intellectual property estimated the total losses to U.S. businesses as a result of economic espionage to be in the order of "hundreds of billions" each year according to the FBI. These numbers do not take into consideration those companies who either do not detect, do not report, or under-report losses tied to economic espionage.

Explaining the modus operandi of foreign intelligence agencies that steal intellectual property from U.S. travelers, Harvard Business Review said techniques include covert hotel intrusions, electronic intercepts, eavesdropping and email monitoring.

Related Links:

Tech Companies Most Exposed To Trump's Immigration Ban

Indian IT Outsourcing Giants At Crossroads As Trump Tightens Screws On Immigration

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© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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