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Airline and Travel Company Shares Rally

Posted on: Friday, 11 August 2006, 06:00 CDT

By JANE WARDELL

LONDON - Shares in airlines and travel companies rallied Friday, appearing to confirm analysts' expectations that the economic impact of the discovery of a terrorist plot aimed at trans-Atlantic flights would be short-lived.

However, experts reiterated warnings that airlines would likely be hit with higher security costs as airports tighten passenger checks in the long term.

Shares in British Airways PLC, one of the hardest hit on Thursday when hundreds of flights were canceled as authorities increased security at airports around the country, were up 0.9 percent at 373.5 pence (US$7.09; euro5.51) on the London Stock Exchange.

BA canceled around 400 flights from Heathrow, Europe's busiest airport, and Gatwick on Thursday - around half its services to and from those airports - after the government revealed it had thwarted a large-scale attack.

Investigators, describing a plot on the scale of the Sept. 11 attacks in the United States, said the attackers planned to use common electronic devices to detonate liquid explosives to bring down as many as 10 planes.

"It is a significant issue which may impact short-term traffic volumes. But longer term I expect passenger traffic to return to normal levels," said Gert Zonneveld, an analyst at Panmure Gordon.

BA said it expected the majority of its flights to operate on Friday, but warned of delays because of the new security regulations that severely restrict onboard baggage.

Among other European airlines, budget airline easyJet also picked up ground, with its shares up 0.9 percent at 417.5 pence ($7.92). Lufthansa was up 0.8 percent at euro14.31 ($18.30) in Frankfurt while Air France-KLM was 1.4 percent higher at euro19.46 ($24.88).

Travel companies also rose. Shares in package tour operator MyTravel were up 0.7 percent at 210 pence ($3.98) while cruise line Carnival lifted 0.8 percent to 2,053 pence ($38.95).

"As we've seen on a number of occasions in recent years, concerns of terrorist threats do initiate a degree of profit taking in the short term but the opportunity to buy up some keenly priced stocks invariably tends to prevail," said Jimmy Yates, an analyst at CMC Markets.

Ryanair Holdings PLC bucked the general trend, with its shares down 0.5 percent at euro7.38 ($9.44).

The ban on hand luggage posed a particular logistical problem for budget airline Ryanair, which this year began charging customers for each bag they checked. The airline waived its new euro2.50 ($3.20) fee for each carry-on bag that unexpectedly had to be checked in Thursday.

Airports operator BAA PLC said it did not know how long the extra checks would be in place. Zonneveld said that there are likely to be longer-term cost implications for all airlines from the heightened security procedures.

Source: Associated Press/AP Online

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