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Last Updated: Friday, 3 November 2006, 13:13 GMT
BA's terror alert bill hits 100m
BA planes
BA was angry about how BAA handled airport security
Tough airport security measures brought in after August's terror alert have cost British Airways 100m.

The measures, which introduced strict limits on hand luggage and regular searches, caused widespread disruption.

BA said profits in the three-month period, including August, fell 27%. But over the six-month period to 30 September, profits rose 1.6% to 371m.

The carrier also revealed plans to sell its loss-making regional airline BA Connect to rival Flybe.

BA Connect, which handles most of BA's domestic and European routes that do not fly out of Heathrow or Gatwick, is due to be sold next year for an undisclosed sum.

Security row

Tougher security measures were introduced in August after police disrupted an alleged plot to blow up planes flying from the UK.

The gloss has been taken off these numbers following generally higher fuel costs and August's terror alert
Richard Hunter, Hargreaves Lansdown

The move led to cancellations and lengthy delays for air travellers - BA had to cancel 1,280 flights between 10 and 17 August.

The new security measures were fiercely criticised by leading airlines, and Ryanair is seeking compensation from the government.

Hand luggage restrictions - which limited passengers to taking one small bag on board with them - were eased slightly in September, although passengers are still limited to taking one item.

However, the ban on liquids being taken in cabin luggage is to be relaxed, the government said on Thursday.

Fuel costs

BA has experienced a turbulent few months. In addition to August's terror alert the airline is facing a confrontation with its pilots over plans to plug its pension gap, and is being investigated by UK and US regulators over alleged price fixing of fuel surcharges.

The carrier said the cost of the terror alert, combined with losses relating to BA Connect and high fuel prices, cut its profits to 176m in the three months to the end of September, down 27% on the same point last year.

But over the longer six-month period, sales rose 8% to 4.6bn.

BA's fuel bill for the year as a whole is likely to be 400m - or about 30% higher than last year.

This increased cost, added to the financial impact of the security measures at Heathrow and other airports, has led BA to reduce its forecast for annual sales growth by half a percentage point to 4.5%-5%.

One analyst said that, in addition to security concerns, BA faced further difficulties with its pension deficit and the fact that further cost-cutting measures would be harder to carry through.

"The gloss has been taken off these numbers, following generally higher fuel costs and August's terror alert," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

But he said the market was still "cautiously positive" about BA.

"The longer term forecasts for the industry remain rosy."




VIDEO AND AUDIO NEWS
BA chief executive Willie Walsh on the costs incurred



SEE ALSO
BA says terror alert cost it 40m
05 Sep 06 |  Business
BA pair quit amid surcharge probe
09 Oct 06 |  Business
BA investigated on fuel surcharge
22 Jun 06 |  Business
Ryanair to sue government for 3m
25 Aug 06 |  Business

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