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Thu, Aug 17, 2006 - Page 10 News List

Business counts cost of terrorism


As British airports struggled to return to normal after last week's dramatic terror alert, the travel and airline industries have begun counting the cost of the delays and cancelations that followed the allegations of a plot to blow up trans-Atlantic jetliners.

Almost 2,500 flights have been canceled at London's three principal airports since last Thursday, when revelations about the scheme plunged air travel in Britain into chaos and triggered a security clampdown across the global aviation sector.

The sense of upheaval which followed the news that British police were holding more than 20 suspects in connection with the plot is estimated to have cost major British carriers alone about US$475 million.

While industry draws up battle plans for business travellers to cope with a new era of strict airport security, the prospects of airlines facing an additional cost burden has raised questions about the future of Europe's budget airlines, which have emerged as major competitors to scheduled carriers.

As the new terror alarm emerged in the middle of the European summer holiday season, many airline travelers were prompted to swap to rival means of transport, such as the Eurostar between London and continental Europe.

In a radio interview, Michael O'Leary, the chief of Europe's leading budget airline, Ryanair Holdings Plc, described the fall-out from the terror scare as "almost the breakdown of the London airports."

Meanwhile, the airlines have been forced to foot the hotel bill for passengers left stranded by the security scare as well as to refund tickets and even pay compensation to travelers for canceled flights.

Furthermore, both the airport authorities and the airlines are likely to face an increased expense of training staff to deal with the new security measures.

In the long term, analysts also say the risk for the airline business is that travelers will be put off flying by the tough security measures and the threat of long queues and more specially avoid the various airlines that appear to have become likely terrorist targets.

In the meantime, regular business travellers have been trying to weigh up the cost of the round of new security measures that are likely to place new restrictions on cabin bags and involve longer waits at check-in and for the immediate future, possibly even retrieving baggage.

British Airways Plc alone is currently attempting to clear a backlog in Britain of about 20,000 checked-in pieces of luggage.

As gridlock descended on British airports the airline was forced to hire trucks to cargo baggage around Europe.

British Airways said it is now considering legal action against British airport operator BAA Plc for lost earnings, estimated at about US$95 million.

Michael Carter, an analyst in Milan at ING, the Dutch financial services company, said, "If you had several hundred flights canceled, you are never going to be able to put that revenue back in there."

In addition, for companies jetting their executives around the world, the extensive airport security checks and risks of enormous delays means that the period of time and consequently costs for business trips may have to be increased.

Already leading companies have issued guidelines to their business travelers advising them to leave their computers at home rather than risk them being damaged or lost in the aircraft's hold in event of tough security measures being reintroduced.

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