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UK terror threat: Airline, travel firm shares drop

india Updated: Aug 11, 2006 14:47 IST
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Airline and travel company shares dropped sharply on Thursday after British authorities reported they had thwarted a terrorist plot to blow up several aircraft in flight between the United States and the United Kingdom.

As heightened security measures caused long delays and cancelled flights at airports around the country -- including Europe's busiest airport, London's Heathrow -- experts said that the alert could be a severe blow to both industries.

"You will always see a sell off based on the headlines today, but investors and analysts will now be waiting to see the depth of issues," said Henk Potts, equity strategist at Barclays Stockbrokers.

The news sent stocks down across the board, with the FTSE 100 share index in London down 1.3 per cent at 5,781.90, Germany's DAX index down 1.6 per cent at 5,609.42 and the CAC-40 in Paris off 1.5 per cent at 4,950.36.

British Airways PLC was one of the hardest stocks hit because of its heavy exposure to the trans-Atlantic route. Its shares fell 3.9 per cent to 374.50 pence ($7.15; euro5.55) on the London Stock Exchange.

BA said it has cancelled all short-haul inbound and outbound flights from Heathrow until 3 p.m. local time. Several other airlines including Lufthansa, Air France, Iberia and Olympic have cancelled flights to the UK.

Analysts said that the main impact on airlines would come immediately from the cost of cancelled flights and in the longer term from extra expenditure on security.

Expenses at BA's home airport of Heathrow -- which caters to 190,000 passengers and 1,250 departures and arrivals on an average August day -- could skyrocket, they said.

Budget airline easyJet PLC was 2.6 per cent lower at 411.75 pence ($7.84; euro6.09) while fellow low-cost carrier Ryanair Holdings PLC was down nearly 2.8 per cent to euro7.32 ($9.41).

The new security measures banning all hand luggage from all flights leaving the UK posed a particular logistical problem for Ryanair, which this year began charging customers for each bag they checked -- a policy that has swelled the volume of luggage carried on board their aircraft.

Among other airlines, Air France-KLM was down 2.8 per cent to euro19.19 ($24.68; euro19.16) in Paris, while Lufthansa was down 3.2 per cent at euro14.16 ($18.21) in Frankfurt.

The ban on hand luggage will also likely impact some retailers, who run tax-free franchises at airports.

Retail operations are a major source of income for the airport operators like Grupo Ferrovial SA's BAA PLC.

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