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Post-9/11 industry changes outlive bin Laden

'The cost of doing business has gone up permanently' since World Trade Center tragedy A man is screened with a backscatter x-ray machine at a TSA security checkpoint in terminal 4 at LAX, Los Angeles International Airport, May 2. updated 5/2/2011 7:03:46 PM ET 2011-05-02T23:03:46

Security screening at airports will still be a hassle and raise the cost of travel. Laws that turned banks into financial cops will stay in place. And most companies will still spend more to ship goods and secure their computer systems.

Osama bin Laden's death won't reverse the transformation of business that followed the Sept. 11, 2001, attacks.

The attacks fueled higher corporate spending on security and intelligence — costs that have been passed on to consumers. Those surging gas prices that motorists are cursing are higher, in part, because the bin Laden-driven attacks raised fears that terrorists might disrupt the flow of Middle East oil.

No matter what happens next, bin Laden's legacy has meant costs and fees that business and consumers had never faced before and that aren't about to go away.

"The cost of doing business has gone up permanently since 9/11," said Sung Won Sohn, an economics professor for the California State University at Channel Islands.

At the same time, John Silvia, chief economist at Wells Fargo Securities, said bin Laden's death might reduce the perception of risk in trading and doing business, something that could benefit the global economy.

"I would view this as a risk-reducing event," Silvia said.


Stocks began climbing Monday morning after news of bin Laden's death. Strong earnings reports from Humana Inc. and other companies also pushed them higher.

But by lunchtime, the gains were gone. The major indexes wavered the rest of the day and closed slightly lower.

Here's a look at how different industries and sectors were reshaped by the Sept. 11 attacks:

The terrorist attacks turned the act of flying into a test of patience. Air travel changed from a routine exercise — almost as simple as hopping on a train — into a process of seemingly ever-changing rules and procedures and time-hogging scrutiny. The role of flight attendants changed from serving coffee and a meal with a smile to being a first responder with a need for combat training.

In the near-decade since 9/11, passengers have been forced to take off their shoes, throw away containers containing more than 3.4 fluid ounces (100 cubic centimeters) of liquid and, more recently, subjected to full-body scanners if they want to avoid pat-downs that have sparked complaints about invasions of civil liberties.

"Whether or not these rules are effective at making our planes more secure is debatable, but one thing for sure is that they have made going through security more of a hassle for the traveling public," said Anne Banas, executive editor of SmarterTravel.

It also caused deep financial hardships for an industry that had long struggled to maintain profits. Besides having to charge a $2.50-per-flight fee to help bankroll the Transportation Security Administration, most airlines now charge to check baggage, too. That adds $100 to $200 to the cost of flying for many travelers.

The good news: An airline ticket itself costs slightly less than it did before the attacks. That's largely because airlines remade themselves into leaner operations, desperate not to lose money after a wave of bankruptcies triggered by 9/11. The list of post-attack bankruptcies included US Airways in 2002 and 2004, United in 2002, Northwest and Delta in 2005.

Mergers have reduced the number of airlines. The result: Airlines employed about 380,000 people at the end of last year — down 27 percent from roughly 520,000 from 2000.

Electricity and other energy costs are likely higher than they would be had the Sept. 11 attacks not occurred. Power plants and energy transmission networks are deemed to be potential terrorist targets. So the security costs related to them have risen, with costs passed along to customers.

After 9/11, U.S. oil refineries were subjected to increased and costly security measures that remain in place, says Bill Day, spokesman for Valero Energy, the nation's largest independent refiner. Bin Laden's death prompted Valero to increase security at its 14 refineries as a general precaution.

Michael Lynch, President of Strategic and Economic Research, Inc., says oil has been more expensive over the past decade because traders have worried that al-Qaida could disrupt supplies by attacking refineries, pipelines or ports in the Middle East.


"The right person in the right place could do a lot of damage, and al-Qaida has always had people willing to take more risk than anyone else," Lynch said.

But Lynch says the threat, and the fear premium, have diminished in recent years, in part because attempted attacks failed to do any damage. In 2006, terrorists tried to attack a Saudi oil refinery. And last year, an al-Qaida affiliate took credit for an attack on a Japanese oil tanker in the Strait of Hormuz.

"It will fade more with time because of the death of bin Laden," he said of the fear premium.

The attacks spurred more demands for more sophisticated computers and software.

The fear of another destructive attack that might target information technology, or IT, forced companies to hustle to upgrade their security software. This included heavy-duty encryption and data-recovery protections. The urgency has been especially felt in banking and government and operators of bridges, tunnels and power plants.

"The one thing 9/11 really brought to life was how organized the terrorists were," said Patrik Runald, who runs the U.S. security lab for Websense Inc., a San Diego-based Internet security firm. "People started realizing, if they're so organized when it comes to physical attacks, what if they were that organized when it comes to cyber-attacks?"

More companies also tried to make their workers more productive to help offset their higher costs in 9/11's aftermath. That goal also helped sell more computers and technology services.

"When businesses want to raise productivity, the first place they look is technology," Sohn said.

Port security
Before 9/11, port security focused almost solely on smugglers and thieves. Now, the focus has shifted to international terrorism threats. And that's raised the cost of doing business.

"We are really looking at threats through a different lens," said Aaron Ellis, a spokesman for the American Association of Port Authorities.

There are more guards, and radiation and gamma ray technology is used to scan containers and ships. Unusual shipments like artillery or chemicals draw extra attention.

Financial companies
Banks had to shoulder higher costs to obey the Patriot Act after 9/11. Among other things, the law required banks to police their customers more vigilantly to prevent money laundering and detect the transfer of money to terrorist causes. To comply, the banks had to improve their record-keeping and more closely scrutinize new accountholders and the sources of large deposits.

The regulations have been costly to implement, particularly for small financial institutions, according to the most recent information from a 2007 study published in the Journal of Money Laundering Control. "Banks, brokerage firms, and other financial institutions spent over $11 billion in 2002 to strengthen their internal controls," after the Patriot Act was passed. Those same firms spent an average of 61 percent more in the three year period from 2001 to 2004 than they had in prior years.

Brokerages also spent more to guard against possible terrorist attacks. After 9/11, Lime Brokerage in Manhattan invested in backup servers to handle orders in case the primary servers went down. It now has 22 extra servers on standby, one for each primary one. The costs involve millions for redundant fiber-optic lines and software to coordinate the multiple systems.

"We try to be as paranoid as possible," says John Jacobs, head of operations at Lime's offices just north of the World Trade Center site.


Timeline: A timeline of Osama bin Laden's life


Video: Details on US raid that killed bin Laden


Photos: World reaction



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