Icelandair stocks shake in quake scare

Icelandair stocks have dropped sharply since Monday morning, from 18.25 a share down to 17.7. Market analysts agree that the situation at Bárðarbunga is a large factor.

"I think this is someone overreacting, like people are focusing too much on the possible short-term expenditures if flights would be cancelled due to an eruption and such. But in the long-term this has every possibility to be very positive to not just Icelandair, but to tourism in Iceland as a whole. It's like people are ignoring the fact that the Eyjafjallajökull eruption 3 years ago seemed to cause a boom in tourism that's still being felt to this day," says Jóhann Viðar Ívarsson, stock market analyst at IFS.

Jóhann believes that it is the smaller investors that are selling their Icelandair stocks now. The impact would be more noticeable if larger investors had been selling their stocks, and it is a known fact that smaller investors are more inclined to react harshly to market-affecting situations than the larger investors.

Sveinn Þórarinsson, market researcher at Landsbankinn, says that this sharp dive in Icelandair stocks comes as a surprise to him. He states that no predictions can be made about what effects an eruption may have upon Icelandair, but people are mindful of history and past experiences.

"In reality we have nothing to go on. No one knows if or when an eruption will take place, how big it will be, ash density and drift or even how the weather will affect things. But people seem to be pricing Icelandair as if an eruption is about to take place," he adds.

Stefán Broddi Guðjónsson, market analyst at Arion Bank, adds that people tend to err on the side of caution, even though the eruptions from Eyjafjallajökull and from Grímsvötn had a positive economic effect. Icelandair released a statement right after the Eyjafjallajökull eruption where they announced that the 2011 eruption had cost them 1.5 billion kronur.

Stefán Broddi adds that the discussion about a possible major eruption on Iceland doesn't seem to be affecting stocks in European airlines, despite the eruption being covered in the world media.

"The focus there is on the price of oil and international politics, they don't seem to believe that another eruption on Eyjafjallajökull's scale may be about to take place."

An Icelandic version can be found here.