PCTE Group of Institutes, Ludhiana: BBA 3c

PCTE Group of Institutes,
Ludhiana
BBA 3c
Mentoring management PROJECT REPORT
TOPIC: Project on 9/11 terror attack: impact on the world economy

NAME: Amandeepsingh
UNIV.ROLL.NO: 1924007
OFFICIAL E-MAIL ADDRESS: [email protected]
Introduction:-
The September 11 attacks in 2001 were followed by initial shocks causing global stock markets to
drop sharply. The attacks themselves resulted in approximately $40 billion in insurance losses,
making it one of the largest insured events ever.
Financial marketing:-
On Tuesday, September 11, 2001, the opening of the New York Stock Exchange (NYSE) was
delayed after the first plane crashed into the World Trade Center's North Tower, and trading for
the day was canceled after the second plane crashed into the South Tower. NASDAQ also
canceled trading. The New York Stock Exchange Building was then evacuated as well as nearly
all banks and financial institutions on Wall Street and in many cities across the country. The
London Stock Exchange and other stock exchanges around the world were also closed down and
evacuated in fear of follow-up terrorist attacks. The New York Stock Exchange remained closed
until the following Monday. This was the third time in history that the NYSE experienced
prolonged closure, the first time being in the early months of World War Iand the second being
March 1933 during the Great Depression. Trading on the United States bond market also ceased;
the leading government bond trader, Cantor Fitzgerald, was based in the World Trade Center. The
New York Mercantile Exchange was also closed for a week after the attacks.
The Federal Reserve issued a statement, saying it was "open and operating. The discount window
is available to meet liquidity needs."[6] The Federal Reserve added $100 billion in liquidity per
day, during the three days following the attack, to help avert a financial crisis.] Federal Reserve
Governor Roger W. Ferguson Jr. has described in detail this and the other actions that the Fed
undertook to maintain a stable economy and offset potential disruptions arising in the financial
system.
Gold prices spiked upwards, from $215.50 to $287 an ounce in London trading.Oil prices also
spiked upwards. Gas prices in the United States also briefly shot up, though the spike in prices
lasted only about one week
Currency trading continued, with the United States dollar falling sharply against the Euro, British
pound, and Japanese yen.The next day, European stock markets fell sharply, including declines of
4.6% in Spain, 8.5% in Germany, and 5.7% on the London Stock Exchange.Stocks in the Latin
American markets also plunged, with a 9.2% drop in Brazil, 5.2% drop in Argentina, and 5.6%
decline in Mexico, before trading was halted.
Economic sector:-
In international and domestic markets, stocks of companies in some sectors were hit particularly
hard. Travel and entertainment stocks fell, while communications, pharmaceutical and
military/defense stocks rose. Online travel agencies particularly suffered, as they cater to leisure
travel.
Insurance:-
Insurance losses due to 9/11 were more than one and a half times greater than what was
previously the largest disaster (Hurricane Andrew) in terms of losses. The losses included
business interruption ($11.0 billion), property ($9.6 billion), liability ($7.5 billion), workers
compensation ($1.8 billion), and others ($2.5 billion). The firms with the largest losses included
Berkshire Hathaway, Lloyd's, Swiss Re, and Munich Re, all of which are reinsurers, with more
than $2 billion in losses for each. Shares of major reinsurers, including Swiss Re and Baloise
Insurance Group dropped by more than 10%, while shares of Swiss Life dropped 7.8%.Although
the insurance industry held reserves that covered the 9/11 attacks, insurance companies were
reluctant to continue providing coverage for future terrorist attacks. Only a few insurers continue
to offer such coverage.
Airlines and aviation

Flights were grounded in various places across the United States and Canada that did not
necessarily have the operational support in place, such as dedicated ground crews. A large
number of transatlantic flights landed in Gander, Newfoundland and in Halifax, Nova Scotia,
with the logistics handled by Transport Canada in Operation Yellow Ribbon. To help with
immediate needs for victims' families, United Airlines and American Airlines both provided
initial payments of $25,000. The airlines were also required to refund ticket purchases for anyone
unable to fly.
The 9/11 attacks compounded financial troubles that the airline industry already was experiencing
before the attacks. Share prices of airlines and airplane manufacturers plummeted after the
attacks. Midway Airlines, already on the brink of bankruptcy, shut down operations almost
immediately afterwards. Swissair, unable to make payments to creditors on its large debt was
grounded on 2 October 2001 and later liquidated. Other airlines were threatened with bankruptcy,
and tens of thousands of layoffs were announced in the week following the attacks. To help the
industry, the federal government provided an aid package to the industry, including $10 billion in
loan guarantees, along with $5 billion for short-term assistance.
Tourism:-
Tourism in New York City plummeted, causing massive losses in a sector which employed
280,000 people and generated $25 billion per year. In the week following the attack, hotel
occupancy fell below 40%, and 3,000 employees were laid off. Tourism, hotel occupancy and air
travel also fell drastically across the nation.[citation needed] The reluctance to fly may have been
due to increased fear of a repeat attack. Suzanne Thompson, Professor of Psychology at Pomona
College, conducted interviews of 501 people who were not direct victims of 9/11. From this, she
concluded that "Most participants felt more distress (65 percent) and a stronger fear of flying (55
percent) immediately after the event than they did before the attacks.
New York City:-
In New York City, approximately 430,000 jobs were lost and there were $2.8 billion in lost wages
over the three months following the 9/11 attacks. The economic effects were mainly focused on
the city's export economy sectors.[17] The GDP for New York City was estimated to have
declined by $30.3 billion over the last three months of 2001 and all of 2002. The Federal
government provided $11.2 billion in immediate assistance to the Government of New York City
in September 2001, and $10.5 billion in early 2002 for economic development and infrastructure
needs.
The 9/11 attacks also had great impact on small businesses in Lower Manhattan, located near the
World Trade Center. Approximately 18,000 small businesses were destroyed or displaced after
the attacks. The Small Business Administration provided loans as assistance, while Community
Development Block Grants and Economic Injury Disaster Loans were other also used by the
Federal Government to provide assistance to small business affected by the 9/11 attacks.
Other effects:-
The September 11 attacks also led directly to the U.S. war in Afghanistan, as well as additional
homeland security spending. The attacks were also cited as a rationale for the Iraq war. The cost
of the two wars so far has surpassed $6 trillion.

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TOPIC: Project on 9/11 terror attack: impact on the world economy

Airlines and aviation

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