A howler by the American newspaper South Florida Sun-Sentinel, which published a six-year old report on its website, promptly sent shares of aviation carriers plummeting nationwide, especially affecting the airline named in the article - United Airlines parent UAL Corp.
Shares of UAL briefly plummeted by as much as 776 per cent to as low as $3 early on Monday - from $12.30 on Friday - after a 6-year-old story on the company's 2002 bankruptcy filing resurfaced on the Web and was reported as news by an investment letter.
The shares did bounce back after the market realised the report wasn't current, although the magnitude of the decline may underscore the lack of confidence investors have in UAL and the troubled airline industry in general.
The airline industry has been battered by soaring fuel prices that have undone much of the progress airlines made during an industry-wide restructuring.
UAL, US Airways, Delta Air Lines Inc and Northwest Airlines Corp have each reorganized in Chapter 11. But persistently high fuel prices have eroded airline earnings and earlier this year analysts began looking at the liquidity positions of airlines for signs of potential insolvency. (See: European Commission clears Delta-NWA merger and United Airlines reports massive Q1 loss - pledges 'fundamental overhaul')
Although UAL stockholders who held onto their shares throughout the day recouped much of their losses, investors who sold at the day's lows are stuck: The NASDAQ Stock Market, where UAL stock is listed, said trades triggered by the erroneous report wouldn't be rescinded. What's more, shares of other carriers, including Continental Airlines Inc. and AMR Corp., the parent of American Airlines, also briefly dived with UAL before rebounding.
UAL blamed the mess on a posting of a 2002 Chicago Tribune article on the South Florida Sun-Sentinel's website. The story then was picked up by Income Securities Advisors, a Florida investment newsletter, and disseminated as a one-line brief over Bloomberg News, triggering a wave of panic selling.
Tribune Co., the owner of the Sun-Sentinel (and also the parent of The Times), initially pointed a finger at Google Inc., saying it appeared that the search engine highlighted the story out of the Sun-Sentinel's archives over the weekend, which generated traffic and caused the newspaper's computer to move the story to a page of most-viewed articles.
But Google said the only reason its search engine "crawler" bothered with the story was that it was listed on the Sun-Sentinel page of most-viewed stories - and with the weekend date on it, instead of the 2002 date.
To the crawler, "it was a new item that said, 'Hey, look here,' " Google spokesman Gabriel Stricker said.
A Tribune spokesman late Monday said the company was "still looking into" the matter. As for how the story got to Wall Street, human error compounded computer error.
Richard Lehmann, who publishes the Income Securities Advisors newsletter, said his firm focuses in part on bonds of troubled companies. One of his reporters routinely searches the Web for news under the search term "bankruptcy 2008," he said. That Google search on Monday morning found the UAL story on a Sun-Sentinel news page with a 6 September 2008 date.
The reporter, Lehmann said, thought it was fresh because of the date and because the Google search found the story on a current Sun-Sentinel page, which included an item on Hurricane Ike. As a contributor to Bloomberg News, the newsletter generates information that goes out over Bloomberg's news terminals worldwide.
About 11 a.m. PDT Monday, the reporter posted the information to Bloomberg. It appeared as a headline on the system that read: "United Airlines files for Ch. 11 to cut costs." However, a Bloomberg spokesperson said that since Bloomberg did not write the story, Bloomberg editors did not edit it.
Lehmann was quick to dismiss any ulterior motives to the mistake. He insisted that his employee followed normal procedures and Income Securities Advisors has no shares in UAL. "We have no economic interest in United Airlines," he said.
As UAL's stock crumbled and the company saw the headline on Bloomberg, a UAL spokesman told the news service that the report was inaccurate. Trading was quickly halted - but not before some investors let shares go for as little as $3 apiece.
The stock ended the day at $10.92, down $1.38, or 11.2 per cent.