2006 Transatlantic Aircraft Plot Security Reaction - Economic Effects

Economic Effects

The Times commented the day after the arrests, that the economic effects were minor and that the FTSE 100 index showed only "mild signs of strain", suggesting that terror was already priced into assets, that the market impact will be contained, and that "what is lost on the swings may be gained on the roundabouts". It observed that the real commercial risk is that "people's behaviour is altered... change may come so subtly and subconsciously that it is hard to see, let alone measure… people may stop travelling for example, not because they are scared of being blown up, but because they are tired of complying with necessary security measures."

Estimates have also been made of the cost to airlines of their disrupted business. British Airways had to cancel 1280 flights, at a cost of £40 million. Ryanair had to cancel 500 flights, and are suing the UK government for the £3.3 million the cancellations cost them. Easyjet had to cancel 469 flights, at a cost of about £4 million. BAA says the alert cost them £13 million.

BA is considering making a claim for compensation against BAA, which operates Heathrow, for its failure to provide adequate security services and shortages of personnel during the crisis. The Civil Aviation Authority has just commenced its five-yearly review of operation of the airport, and it is likely that BAA's ability to handle the security alert will now become part of that review. The combined airline losses may have totalled £250 million.

Air passengers also switched to other means of travel. Sea France ferry company operating from Dover to Calais announced that it had beaten its all-time record for number of passengers carried in one week, while Eurostar found that at the peak of the alert it was receiving 10 bookings per minute for immediate travel.