Airlines face soaring security costs after bomb plot: analysts (AFP)

[News Desk]

LONDON (AFP) - Airlines, already hit by soaring fuel bills, will face higher security costs after British police revealed they had foiled a major plot to bomb US-bound passenger jets.

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However, demand for air travel and the outlook for the airline sector will remain strong, they added.

Police said on Thursday that they had prevented a plot to blow up planes flying from Britain to the United States, and placed the country on its highest state of alert for terror attacks.

That caused severe disruption to air traffic at London's Heathrow airport, Europe's biggest air hub, where British airports operator BAA requested all inbound and outbound flights to be suspended.

All major European airlines saw their share prices tumble.

"The main impact is likely to be on the long-haul sector of UK airlines (BA, Virgin Atlantic and Bmi) as they face delays and cancellations," BNP Paribas analyst Nick van den Brul said in a note to clients.

"Continental and European airlines are less effected beyond cancellation of short-haul flights to and from the UK, affecting some connecting traffic.

"In the medium term the effect will be to drive up UK airport and airline security costs," he added, while advising caution over BA and other airline stocks in the near term.

Thursday's news revived safety concerns dating back to the devastating September 11, 2001, terror attacks on the United States. After a disastrous spell, the industry has fought back owing to higher passenger numbers despite surging oil costs.

In the near term, Thursday's events would affect the airline sector owing to passengers feeling worried about flying, Morgan Stanley analyst Penny Butcher said.

"But post-July 7 in London, it only took about three or four weeks for (air) demand to get back on track again."

Butcher was referring to the limited economic impact of last year's deadly July 7 bomb attacks on London's transport network that left 56 people dead.

She added: "Presuming there isn't any follow-up consequences or actual events in the next week or two and things settle down, then I expect demand to get back on track."

BA's share price plummeted by more than 6.4 percent on Thursday, while Germany's Lufthansa, Iberia of Spain also suffered heavy losses.

British Airways cancelled all its short-haul flights due on Thursday between London's Heathrow Airport and other British and European cities, as well as the Libyan capital Tripoli, the airline said after the alleged failed bid to blow up jets.

"The news and airport disruption is negative in the short term for all UK airlines, especially for BA at its busiest time of year and will also contribute to negative sentiment for the European airline sector as a whole," van den Brul said.

BA added that it was cancelling some of Thursday's domestic and shorthaul services in and out of London's Gatwick airport.

"This comes at a time when airlines have been doing well in terms of results," Barclays Stockbrokers analyst Henk Potts noted.

"But it also shows the risks in investing in the airline sector. BA is more vulnerable than others because it is heavily reliant on transatlantic routes."

[Kristie]

now, i could see security prices going up because they have to bring more people on the line....but....