Airline shares slump after terror plot news

Airline and travel shares were badly hit today as details emerged of the terrorist plot to blow up planes in mid-air.

British Airways fell 6%, while low-cost rivals Ryanair and easyJet were down at least 2%. Other casualties in a bleak session for investors included cruise ship giant Carnival, which fell 2%, while tour operator MyTravel dipped 5%.

The FTSE 100 Index, which had been expected to open lower before news of the terrorist plot broke, was off by around 100 points at 5761.8.

Analysts said it was too early to estimate the likely cost of the disruption to BA and other airlines.

The widespread cancellation of flights represents the fourth summer of disruption for BA after a wildcat strike by workers at Heathrow in the summer of 2003 was followed by severe staff shortages a year later and the Gate Gourmet catering dispute in 2005.

Despite soaring oil prices, the industry has shown signs of recovering from September 11 and the London terror attacks last year. BA recently made pre-tax profits of £195m (€288.7m) in the three months to the end of June, an increase of 57% on a year ago.

Henk Potts, equity strategist at Barclays Stockbrokers, said: “This comes at a time when airlines have been doing well in terms of results.

“But it also shows the risks in investing in the airline sector. BA is more vulnerable than others because it is heavily reliant on trans-Atlantic routes.

He added: “It’s worth remembering that markets tend to be pretty resilient. When we have seen events in the past, such as the London attacks, stocks have bounced back.

“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.”