Airlines braced for more misery

The global aviation industry is already suffering huge losses as a result of the September 11 terrorist attacks on New York and Washington.

A steep fall in passenger numbers, increased security costs and the cancellation of flights in the immediate aftermath of the attacks have all hit the industry hard.

In the North-East, Gill Aviation went into receivership after its backer, the Bank of Scotland, called in its £4m debt just days after the September 11 attacks.

The troubled airline, which had built up business since a management buyout five months before, collapsed with £12.2m of debt, with 240 staff losing their jobs.

BAA has reported a 12 per cent fall in passengers last month, compared with the same period last year. Its airports handled 9.8 million passengers, with Heathrow and Gatwick heavily affected.

Passenger numbers at Heathrow were 20.1 per cent down and 12.7 per cent down at Gatwick, with North Atlantic traffic through the airports slumping more than 30 per cent.

Phil Butterworth-Hayes, civil aviation editor of Jane's Information Group, said that yesterday's crash would have serious financial implications for every airline.

He warned that it would pile "misery upon misery" on British Airways, which is in partnership with American Airlines and has announced thousands of job losses in the wake of September 11.

He said: "This crash will have a huge knock-on effect for the airline industry. Confidence in air travel was badly dented after September 11 and it will be even more so now.

"It will be misery upon misery for British Airways, especially because it has a substantial partnership with American Airlines."

American Airlines, which lost two planes on September 11, was already facing massive losses before yesterday's crash.

It is reliant on a multi-million dollar bail-out package from the US Government.

The airline could be crippled if passengers' relatives sue for damages, said Mr Butterworth-Hayes.

"A lot depends on what actually caused this crash. But if the airline is found in any way culpable for a security or maintenance lapse, the relatives of the deceased could take them to court," he said.

"American Airlines has already taken a big hit with September 11. A crash of any nature has a very large effect on an airline and American Airlines will not be the same after this crash."

Jennie Campbell, transport analyst with City fund manager Gerrard, said: "It was a relatively new plane, used international-wide, and people would have expected them to be reasonably safe," she said.

"BA will be hit because of its relationship with American Airlines, but I think it's going to be hard for all airlines."

l London shares slumped in the minutes after yesterday's crash.

At 2.37pm, the FTSE 100 Index was down 178.9 points at 5065.3, after being down about 30 points at lunchtime.

In the US, the Dow Jones industrial average also tumbled, falling 171.67 points at 14.38pm to 9436.33.

Experts said trading was highly volatile as investors scrambled to sell shares in their concern about the repercussions of the crash.

Tom Hougaard, a trader at bookies Financial Spreads, said: "Has the terror campaign started again? There is volatility all over the place.

"People are worried sick and want to get out of their positions at any price - they just want to get out of their investments."

The share slide brings back memories of the stock market falls seen on September 11, when the FTSE 100 Index saw £67bn wiped off share prices, closing at 4746, down 287.7 points on the day.

Despite falling further since that date, to touch lows of around the 4,430 mark, for the last month the Footsie has managed to close above 5,000.

By the close yesterday, the Footsie had pulled back from its initial 178-point fall, and finished down 98 points at 5146.2.

Hilary Cook, director of investment strategy at Barclays Stockbrokers, said the crash would be another blow for the travel and tourism industry.