Jobs at risk as anxious airlines cut flights

The economic impact

Concern for jobs in the UK air industry is growing after Continental Air lines cut flight schedules by a fifth and gave 12,000 staff a leave of absence in the wake of the US terrorist attacks.

Concern for jobs in the UK air industry is growing after Continental Air lines cut flight schedules by a fifth and gave 12,000 staff a leave of absence in the wake of the US terrorist attacks.

The Houston-based company said the move was a "direct result" of the expected fall in air travel following the hijackings. The company has admitted to losing $30m (£20m) a day because of the fears over air travel, the closure of US airspace over the past few days, and the delays and higher costs associated with the new airport security measures.

British Airways said it had introduced a recruitment freeze and also cut back on expenditure since the attacks, but that it was too early to say if it would have to axe jobs. Virgin Atlantic said it would be "looking closely" at the affect of the hijackings.

Attention is also being focused on share values. With the US economy teetering towards a recession, the resumption of trading on Wall Street after four closed sessions will test nerves across the markets. There were sharp falls in European stock prices before the weekend with airlines and airport operators taking the brunt.

London, which ceased trading for three minutes on Friday as the City mourned, ended a volatile week with the leading FTSE 100 index closing down 187.9 points to 4,755.7. But oil stocks and crude oil prices rose, fuelled by expectations of US military action.

The G7 group of industrialised countries is believed to be ready to act in concert to cut interest rates across the world to stave off recession.

The US Federal Reserve is also believed to have been engaged in shoring up the dollar. Central banks worldwide said cash would be available to prop up the banking system. A coalition of US pension funds said it would step in if the US stock markets fell through panic selling.

The onslaught damaged the cogs that kept the US economy ticking over ­ the investment banks and brokerage houses. Many of those who escaped the carnage have moved to emergency centres to start trading tomorrow. But market sentiment is not easy to predict. The insurance industry has to pick up a bill running into billions, though it says it has enough in reserves ­ up to $50bn ­ to meet the costs.

Consumer confidence will be dented.Worries about the economy couldhalt planned spending sprees, whether on luxury goods, cars or houses. "I certainly don't feel like going out and spending now," said Bill Robinson, head UK economist at PricewaterhouseCoopers.

Tourism, particularly involving Americans abroad, will suffer. The travel industry will also be hit by fears of terrorism, as well as higher premiums to cover "war risk".

The immediate aftermath of the attacks will create a surge in building and infrastructure investment, though in global terms this will be a drop in the ocean. What could provide a boost is spending on security. But if the US decides to pick a fight with an oil producing state, the economic ramifications could be catastrophic: the Gulf War heralded the recession of the early 1990s.