9/11's Impacts on Critical Infrastructure

The functioning of society depends on collective confidence in the government’s guarantee of our security. On September 11, as that confidence shattered in an hour, infrastructure shut down.

I’ve read every Wall Street Journal issue from the days after September 11 to better understand the impact that the attack had on the critical systems of society.

Aviation

September 11

• US airspace closed. The FAA orderd a nationwide groundstop at 9:25 am. At 9:42 am, they ordered all planes to land. International flights en route to the US either turned around or landed outside the US. Planned flights in or to the US were canceled. Officials said that US airspace would open no earlier than 12:00pm on September 12. As it turned out, airspace would be largely closed until September 14.
• Air freight grounded. Fedex and UPS, which then every day carried 3.2 million and 2 million units by air respectively, were forced to ground their fleets. They told customers to expect delays of 24 to 48 hours. The most severely impacted customers were manufacturers who relied on just-in-time delivery of inputs. Fedex and UPS also canceled all deliveries to New York City and parts of Washington, DC, probably because of road closures.¹

September 12

• FAA allows diverted flights to continue to their destinations. As part of that temporary, limited reopening of US airspace, airlines were also allowed to reposition passengerless planes in anticipation of resuming commercial flights. Takeoffs were briefly halted in the New York area when a man was arrested for suspicious behavior.²
• Major cutbacks in business and leisure travel expected. A survey found that 88% of businesses would cut back on travel in the coming weeks.³

September 13

• FAA announces new security rules. The rules banned cutting instruments of any kind, even plastic knives. Curbside check-in was ended. The boarding area became restricted to ticketed passengers. Airplanes would be searched before passengers boarded. Passenger planes would no longer carry freight cargo. Unattended cars would be towed away from airports. The rules were met with skepticism by the flight attendants’ union, who said the new rules wouldn’t have prevented the hijackings.⁴
• FAA considering more security reforms. In addition to the rules announced on 9/13, newspapers report on other security reforms floated by lawmakers, airline industry leaders, and security professionals. These include stronger cockpit doors, nationalizing airport security, and expanding the air marshall program. The air marshall program was established to deter hijackings while metal detectors were being installed in airports, but the number of air marshals is estimated to be in the low hundreds.

September 14

• Passenger flights resume at 40% capacity. The line at Los Angeles International started forming at 4:30am as passengers anticipated long security lines. Nail clippers, plastic knives, and meat thermometers were confiscated. FAA officials approved flights on a case-by-case basis. Reagan International Airport was not reopened because of its proximity to the White House. American Airlines said it expected to resume 30% of it’s normal schedule. Delta airlines said 40-50% of its normal flights would resume. Southwest would fly 30% of its normal schedule.⁵
• Airline freight ban expected to continue 1-2 weeks. While passenger flights resumed, the normal practice of placing freight in the cargo hold of passenger flights did not, out of fears that it would make it easier to sneak a bomb onto a passenger plane. This added complications as the air freight industry worked to clear their backlog resulting from three straight days of suspended flight operations. Industry participants expected the ban to be lifted in 1-2 weeks. Dedicated cargo flights, with only a crew and no passengers, could fly as normal.⁶

September 15

• Airline industry calls for bailout. With half of more of their fleets sitting idle, Transportation Secretary Mineta said airlines are losing $250 to $300 million per day. Given the $9.4 billion cash on hand the industry reported in their most recent filings, they faced bankruptcy within 45 day if something did not change. Airline executives spoke openly to reporters about their need for fiscal support.⁷

September 17

• Airline stocks lead the market down as trading resumes. In the first day of trading since the attack, American Airlines dropped 40%, Delta dropped 45%, and Southwest dropped 24%.⁸

September 18

• FAA approves VFR flight ban for crop dusters. Crop dusters returned to the skies, but most other flights that use VFR flight rules - like most small planes and helicopters - remained grounded. All noncommercial flights also remain banned within a 25-mile radius of New York and Washington, D.C.⁹
• Too scared to fly, flight crews take leave. Northwest Airlines’s flight attendant union said that 300 of its members were granted unpaid leave in the past week, ranging from one day to weeks, out of fear of flying.¹⁰

September 24

• Bush signs airline bailout. The package provides $5 billion of cash infusions to the end of the year, $10 billion in loan guarantees, and allows the government to reimburse airlines for insurance increases and to cover terrorism liability for 9/11 and for the next 180 days. Most airlines are back to 80% of pre-attack capacity.¹¹

Other Transport

September 11

• Rental cars see surge of demand. With flights canceled, car rental companies experienced a rush of walk-in requests for long-distance, one-way rentals. In Washington, DC a line of people at Hertz dressed in business suits went around the block. Hertz rented over 5,000 cars at O’Hare and over 1,600 cars at Atlanta’s airport. This increase in walk-in customers was offsetting an increase of no-shows caused by canceled flights. Avis waived one-way charges.¹²
• Public transportation briefly suspended in New York. Tens of thousands of workers evacuated lower Manhattan on foot as public transportation was briefly suspended. There were sporadic disruptions to transportation infrastructure throughout the Northeast. Many roads and bridges were closed to traffic entering New York City. Amtrak’s busy Boston-New York-Washington corridor stopped at 10:40am and resumed at 2pm. All Amtrak trains outside the Northeast Corridor continued to run.¹³
• Ship traffic stops at the port of New York and New Jersey.

September 17

• Security checks delay cargo shipments. New security procedures mandating every truck be searched at the border, in place indefinitely, have extended the time for truckers to enter the US from Canada from 20 minutes to 15-20 hours at most crossings, creating 6-mile backups. Similar procedures are in place at seaports.¹⁴

Manufacturing

September 17

• Manufacturers slow production due to supply chain snarls. The grounding of air transport, relied upon by just-in-time manufacturing systems, and major delays at ports of entry forced some manufacturers to slow production as necessary inputs are slow to arrive and inventories are depleted. Ford Motor Co. and General Motors Corp. experienced periodic parts shortages, delaying production at some GM plants from one to four hours. Some steel makers have slowed production. Eka Chemicals Inc., Columbus, Miss., said an important chemicals shipment from Canada to a pulp mill in Pennsylvania was held up by the railroad for security reasons.¹⁴¹⁵

Retail

September 11

• Americans buy survival gear and TV sets. At Wal-Mart, sales of gas cans were up 895%, of guns were up 70%, of ammunition up 140%, and of TV sets up 40%. Kmart quietly removed guns and ammunition from stores.¹⁶¹⁷

September 12

• Surge of patriotism visible in retail data. On Tuesday, Wal-Mart sold 116,000 American flags, compared with 6,400 the same day a year earlier. The chain sold 200,500 flags on Wednesday, compared with 10,000 a year earlier. Every store in the country sold out of flags. “God Bless the USA” is the most played song on the radio. Wal-Mart’s sales were down 10% nationwide and 30-40% in the New York and Washington, DC areas. By the weekend, shopping patterns would return to normal.¹⁶¹⁸

September 13

• Officials target gas price gouging. As consumers filled their tanks on fear of Middle Eastern oil supply distruptions, long lines and prices of $6/gal were seen at some stations. But the Energy Secretary said there had been “no supply disruption to justify such prices.” Texas, Mississippi and Florida all declared states of emergency to trigger price-gouging laws. By the end of the day, most prices returned to normal. Some retailers said that without a spot price for gas, they raised prices to be safe. BP stopped supplying oil to non-branded stations. QuikTrip said they were seeing supply tightening and rising wholesale prices.¹⁹

Media

September 11

• 60.5 million people watch evening news. From 8pm to 11pm Eastern, NBC was watched by 22.35 million viewers, CBS by 14.4 million, ABC by 17.62 million and the Fox broadcast network by 6.1 million. Those numbers are expected to be revised upward. There were about 105.5 million TV homes in the U.S.²⁰
• News publishers print special editions. Well over one million copies of special edition newspapers were published in the afternoon. The New York Post’s was the first to hit newsstands, with the headline “TERROR: Jets destroy World Trade Center”. The Wall Street Journal, Washington Post, Chicago Tribune, LA Times, and San Francisco Chronicle printed afternoon or evening special editions. The New York Times and USA Today did not. The New York Daily News was unable to deliver its regular evening edition in New York due to road closures.²¹

September 12

• Companies reassess planned advertising in light of tragedy. Companies began reviewing their planned advertisements and pulling those that would seem tone-deaf in the new environment. Other advertisers switched to messages of condolence and reassurance. Airlines generally canceled planned advertising altogether. ²²²³

September 13

• Hollywood firms review project pipeline in light of tragedy. In light of new sensitivities around terrorism, airplanes, and the destruction of landmarks, movie studios are editing or delaying the release of some planned films. The October 5 release of $80 million movie starting Arnold Schwarzenergar, a fireman seeking justice for his family killed in a terror attack, has been indefinitely postponed. A Spider Man trailer featuring a web spun between the World Trade towers was removed from Sony’s website.²⁴

Telecommunications

September 11

• Cell service disrupted for millions in Northeast. A spike in call volume and the destruction of telecommunications equipment in lower Manhattan jammed cellphone networks throught the Northeast for hours. AT&T said its long-distance network carried an average of four million calls every five minutes, double the normal call volume, with traffic heaviest in New York and Washington. Sprint said that 75,000 calls were blocked within an hour after the initial explosion. British Telecom said its customers attempted to make 250,000 calls to the US every 15 minutes, 10x the average. French Telecom said its customers attempted to make 500,000 calls in an hour, 25x the average. Spotty wireless service was reported nationwide. AT&T dispatched a fleet of 18-wheelers capable of providing backup service, typically used after hurricanes.²⁵
• Heavy traffic crashes news websites. Websites for The New York Times, CNN, and ABC all crashed. USA Today and MSNBC had partial outages. By early afternoon, many news sites had switched to barebones layouts. Google put cached versions of news articles on its usually sparse homepage. A web analytics company said that 187,000 people visited the FBI’s website. Visits to FedEx’s website doubled.²⁶²⁷

September 14

• Verizon says restoring service could take months. A main Verizon switching building was badly damaged when the trade towers collapsed and requires extensive repair. The NYSE switched to a different telecom provider and will soon be at 90% capacity.²⁸
• FCC approves telecom to provide Manhattan phone service from New Jersey. With its Manhattan phone lines damages, a telecom company plans to run wires from its New Jersey switching station into Manhattan. The move received a quick nod from the FCC, which usually would have wanted a more extensive review. “Basically the message is, ‘You guys do whatever you need to do to get service up and running. We’ll take care of any paperwork later,’” an FCC official said.²⁹

September 18

• Verizon completes restoring phone service to NYSE. Verizon said it has restored 2 million of the 3.5 million data circuits of its badly damaged hub building, which serves 9,000-14,000 businesses and 160,000 residences. Verizon sent 2,000-3,000 employees to Manhattan for the job. “We have essentially rebuilt our entire communications system in lower Manhattan.” The NYSE reopened for trading with only 14,000 of its normal 15,000 data and phone lines. Verizon said call volumes remain about double the usual 115 million calls a day in Manhattan. AT&T also said its network was extremely busy in New York. Sprint said some customers in New York are still without service.³⁰

Finance and Banking

September 11

• All financial exchanges close. The SEC confirmed that all US financial exchanges closed or did not open for trading. Evacuations and telecommunications disruptions in Manhattan forced many exchanges based on that island to close. Exchanges in other cities closed as a security precaution. The last time the NYSE shut down due to physical damage was during the 1835 New York City fire. The last time the exchange closed unschedueld was for President Nixon’s funeral in 1994.³¹
• Bilateral trading frozen in many markets. Without exchange trading to provide a spot and forward prices, bilateral trading came to a standstill in many markets. “No one knows the price of a bushel of wheat”. Instead of quoting a dollar price to farmers, grain elevator operators offered to pay a discount on the spot price once exchange trading resumed. Few farmers took the offer. Grain deliveries to millers and exporters continued, but analysts said that reserves could be depleted by Friday if trading did not resume.³²
• Air-based check transfer system grounded. The common payment practice of transporting physical checks by plane was grounded. The company operating the system planned to switch to ground-based transport if flights did not resume at 12:00pm Wednesday.³³
• Sporadic branch closures. Wachovia closed all 2,900 of its bank branches on the East coast. Other banks had some sporadic closures on the initiative of local branch managers. There were some reports of empty ATMs in Manhattan. One small bank announced that it would limit withdrawls.³³
• Fed remains open. The Federal Reserve issued this statement: “The Federal Reserve System is open and operating. The discount window is available to meet liquidity needs.”³⁴

September 12

• Bank regulators issue rare joint statement. For the first time since the Long-Term Capital Management crisis in 1987, the four top US financial regulators - Treasury, the Fed, SEC, and CFTC - issued a joint statement. They said they support the decision of exchanges to close and they they “have every confidence that trading will resume as soon as it is both appropriate and practical.” Treasury Secretary Paul O’Neill said markets reacted “extraordinarily well”.³⁵
• Trading of dollar-linked fund shares halts in Europe. Given that most US markets are not trading, European funds linked to US stocks, bonds, and most other dollar-priced commodities can’t be priced and trading comes to a standstill.³⁶

September 13

• Chicago futures markets resume trading. The Chicago Mercantile Exchange and the Chicago Board of Trade resumed trading after being closed for two straight days. Trading in stock-related futures contracts won’t resume until the NYSE restarts operations. Market participants worked to keep volatility low, mindful that regulators would view the reopening as a test as it looks to reopen other markets.³⁷
• Two exchanges to reopen on backup systems. The Nymex and New York Board of Trade, the two exchanges physically closest to the World Trade Center towers, plan to resume trading electronically before their physical floors are reopened, as no one can say when that will be.³⁸

September 14

• NYSE Chairman confident trading will resume Monday. The Nasdaq also plans to open Monday. It will be the longest span of halted trading since FDR’s bank holiday. Extensive testing of the trading system is planned over the weekend.³⁹
• Logistical hurdles keep NYSE closed. Logistical hurdles, not fears about investor confidence, are what keep the NYSE closed in the longest stretch without trading since FDR’s bank holiday. Spotty elephone and electricity service and reduced transportation options into lower Manhattan are the primary challenges.⁴⁰
• New York Board of Trade will never return to trading on its floor, which was damaged beyond repair.⁴¹

September 17

• Stocks down as trading resumes. Nasdaq droped 7% to 52 week low; Dow Jones droped 7.1% in largest single day fall; S&P 500 fell 4.9%.⁴²
• Fed makes surprise cut of 50bp to 3% before market open. Traders said the street expected the size and timing of the Fed’s inter-meeting rate cut and therefore the move caused little stir in price movements.⁴³
• SEC waives rules to encourage buying. A number of minor restrictions on stock buying were lifted. Corporate insiders could freely buy their company’s stock no matter when they last traded. The corporate buyback limit was raised. Separately, the Federal Reserve quietly informed banks that it would be “very understanding” if they lent to their securities-dealer affiliates, a practice normally restricted. A suggestion to ban short selling was rejected out of hand as it would force many hedged strategies out of the market.⁴⁴
• Defense stocks up. Northrop Grumman rose 16%, Raytheon rose 27%, General Dynamics rose 9%, and Lockheed Martin rose 15%. Boeing, which serves both defense and airliness, fell 18%. Various security companies, such as those offering facial recognition and metal detectors, saw their valuations double.⁴⁵
• IPOs cancelled. All scheduled IPOs have been cancelled by their promoters without giving a new planned date.⁴⁶

September 18

• Banks borrowed $45 billion at discount window last week. The week before, they had borrowed $200 million.⁴⁷

Events and Public Spaces

September 11

• Landmarks and public spaces close. Universities, convention centers, theme parks, landmarks, and government buildings all closed. While some Las Vegas landmarks closed, casinos closed only sporadically, and normal gambling volume was reported for the day. MLB canceled its games.⁴⁸

September 12

• Disneyland reopens to thin crowds.⁴⁹

September 13

• Divided over when to resume, NFL asks White House for guidance. NFL team owners are divided on whether to play scheduled games this weekend, with the players’ union against it. The league has reached out to the White House for guidance. On a given weekend, one million people attend an NFL game. Given that there are so many stadiums, and security staff are mostly part time and trained only to deal with rowdy fans, it would be challenging to substantially step up security.⁵⁰

September 14

• NFL, MLB announce Monday games. The NFL announced Friday that its Sunday and Monday games would be canceled, then later in the day said that the Monday games would go forward. Following the NFL’s lead, many leagues that had announced weekend games again postponed. NFL owners in New York, Washington and Baltimore, whose teams are closest to Tuesday’s terrorist attacks and were scheduled to play at home, vehemently opposed a restart. The MLB announced that its games would also resume Monday.⁵¹