April 27 (Bloomberg) -- Airline stocks tumbled worldwide, dragging a benchmark U.S. index to its biggest drop in two months, on concern that the swine flu outbreak will damp travel demand.

The U.S. Centers for Disease Control and Prevention said it will recommend that nonessential travel to Mexico be avoided. U.S. carriers reported some cases of suspected flulike symptoms to the CDC, the Air Transport Association trade group said, adding that details weren’t available.

Today’s stock slump extended a global industry slide as the death toll from the new virus surpassed 100. The World Health Organization will raise its pandemic alert to an unprecedented level, saying the disease is spreading across North America, two people familiar with the agency said.

“People are panicked, and you can see that,” Helane Becker, a New York-based analyst with Jesup & Lamont Securities, said in an interview. “I don’t think people will cancel. A lot of this is short lived and a knee-jerk reaction.”

Delta Air Lines Inc., the world’s largest carrier, fell $1.13, or 14 percent, to $6.75 at 4 p.m. in New York Stock Exchange composite trading. The Bloomberg U.S. Airlines Index slid 11 percent, the most since Feb. 20. The Bloomberg World Airlines Index fell 7.5 percent.

Mexico Travel

The CDC will recommend that “nonessential travel to Mexico be avoided,” said Richard Besser, the acting director, adding that health officials expect more, and more-severe, infections than the 40 swine flu cases confirmed in the U.S. so far.

Katherine Andrus, assistant general counsel of the ATA, said she didn’t have details about the cases of flulike symptoms that airlines reported to the Atlanta-based CDC.

“I’m not hearing that there’s a huge uptick in the number of cases being reported,” Andrus said in an interview. “There have been some, but I don’t know how many.”

Delta, American Airlines, United Airlines, Continental Airlines Inc., US Airways Group Inc. and Alaska Air Group Inc. are letting passengers cancel or rebook flights to Mexico without fees or penalties, spokesmen said. The airlines are awaiting further direction from authorities including the WHO, spokesmen said.

Delta has seen “minimal changes” from travelers shifting flights, said Betsy Talton, a spokeswoman for the Atlanta-based carrier.

‘Few Calls’

AMR Corp.’s American has had “a few calls relative to total volume” from travelers, Tim Smith, a spokesman for the Fort Worth, Texas-based carrier, said yesterday in an e-mail. US Airways is “not seeing a lot of takers” by passengers seeking to modify travel plans, said Michelle Mohr, a spokeswoman for the Tempe, Arizona-based company.

Airlines are at risk of suffering reduced international traffic “because of government-imposed quarantines and travelers’ fears,” said Philip Baggaley, a Standard & Poor’s credit analyst in New York, in a report today.

The European Union “strongly recommended avoiding” Mexico, where the swine flu has sickened more than 1,000 people and been blamed for more than 100 deaths, and other affected areas.

“While Mexico tends to be a modest portion of most airlines’ revenue, a major health crisis in Mexico could have a real impact on those airlines with significant Latin American exposure,” said Douglas Runte, managing director with Piper Jaffray & Co. in New York.

Continental, Alaska

Among U.S. carriers, Continental and Alaska have the most seating capacity to Central America, according to a report today by William Greene, an analyst at Morgan Stanley in New York. Of 364,000 weekly airline flights in the U.S., about 4,000, or 1.1 percent, are to or from Mexico, according to the ATA.

Airlines outside the U.S. slumped as the flu outbreak spread.

British Airways Plc, Europe’s third-biggest carrier, slid 7.8 percent to 151.2 pence in London, while Air France-KLM Group, Europe’s largest, fell 6.6 percent in Paris to 8.39 euros.

Mexican airport operators declined the most in at least two years, with Grupo Aeroportuario del Pacifico SAB dropping 15 percent to 27.51 pesos, the most since shares began trading three years ago, and Grupo Aeroportuario del Centro Norte SAB declining 10 percent to 13.15 pesos.

Airports in the U.S. haven’t been asked to take any specific actions for the swine flu outbreak, Victoria Houghton, a spokeswoman for the Airports Council International trade group, said in an e-mail.

Travel Companies

Marriott International Inc., the biggest U.S. hotel chain, is operating Mexico properties as usual and has dispensed extra hand-sanitizing products and told employees to frequently clean handrails, elevator buttons, door handles and fitness-center equipment, Tom Marder, a spokesman, said in an e-mail.

Expedia Inc., the world’s largest online travel agency, is waiving its fees for passengers who originally booked hotel and air travel to Mexico and will “continue to monitor the situation,” according to an e-mail from Katie Deines, a spokeswoman for the Bellevue, Washington-based company.

Priceline.com Inc., the Internet travel agency, also dropped its fees, Brian Ek, a spokesman, said in an e-mail.

To contact the reporters on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

Last Updated: April 27, 2009 16:11 EDT