Michael Harrison's Outlook: How BA and the rest of the airline industry have learnt to live with the bombers

Nuclear leaks and PR exercises; The web Sneaks up on traditional media
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The Independent Online

Another August and another crisis at Heathrow for British Airways. Like the previous three, this one has come out of a clear blue sky. Unlike the previous three, it is entirely and utterly beyond BA's control.

The failed plot to bomb as many as 10 transatlantic airliners out of the sky using liquid explosives smuggled on board in hand baggage is a frightening example of the ingenuity of the terrorist and a grim reminder of how vulnerable air travel remains to the threat from determined fanatics with no respect for life.

Despite the more apocalyptic warnings yesterday of what the travel chaos might do to the economy, the stock market at least reacted with its now customary sangfroid. The FTSE 100 could have fallen out of bed. It did not and ended the day just 37 points down.

Airline stocks fared worse but even BA, which was forced to cancel 90 per cent of its scheduled short-haul flights from Heathrow, fell by only 5 per cent. In the past, the odd set of disappointing monthly traffic statistics has inflicted more damage.

Last night BA and its fellow airlines at Heathrow were already planning to return to something like normal service. BA estimates that it will operate 60 per cent of its short-haul schedule and 75 per cent of its long-haul flights today. Bmi, which managed to operate two-thirds of its schedule yesterday, plans to run a full service today.

It is harder to know what the long-term impact of yesterday's events will be on BA or the airline industry in general. Unlike last summer's Gate Gourmet dispute, which cost BA £40m, terrorist campaigns have no beginning and no end.

But it is reasonable to suppose it will not be as cataclysmic as it might once have been. The fact that BA was not one of the three transatlantic carriers targeted will come as scant consolation to those who have booked with the airline. But there is growing evidence that air travellers have become inured to the threat of terrorism, just as Londoners learnt to live with the IRA bombing campaign 30 years ago.

Since 9/11, the air travelling public have adjusted to the reality of the bomber, gauging it as one more risk to be placed alongside others such as the danger of crashing. Despite the frequent terrorist outrages around the world which have occurred since then, air travel has proved remarkably resilient, growing at a rate of more than 3 per cent a year. Nor has Sars, foot and mouth and another Iraq war proved more than temporary bouts of turbulence.

What will change is the cost and hassle of air travel. That will have an economic effect and, at the margins, an impact on demand for flights. But will it be any greater than the challenge the airline industry faces from the arguably even bigger modern day scourge of global warming?

Rod Eddington, BA's last chief executive, once quipped that he had had an awful lot of luck since joining the airline - all of it bad. His successor, Willie Walsh, is surely beginning to understand what he meant.

Nuclear leaks and PR exercises

As pointless exercises go, the fining of one arm of government by another takes some beating. That is what happened yesterday when the Nuclear Decommissioning Authority imposed penalties of £2m each on British Nuclear Fuels and the United Kingdom Atomic Energy Authority for radioactive spillages at their respective Sellafield and Dounreay sites. All three organisations are state-owned, which means the effect was merely to send £4m of taxpayers' money on a financial merry-go-round from one corner of the public finances to another. No one suffered any financial hardship.

As an exercise in public censure, however, it probably served some purpose. The NDA is the body charged with cleaning up Britain's civil nuclear legacy. The cost of decommissioning the 20 sites for which it is responsible was initially put at £54bn. The figure is now estimated at £63bn and rising. The NDA has promised to give ministers what it calls a "robust" number by spring, 2008.

Whatever figure comes out of the number-crunching, it is going to mean some extraordinarily lucrative business for nuclear clean-up firms. At the moment, BNG and UKAEA account for virtually all of that business but when the tenders start going out this autumn they will face some tough competition from foreign competitors. Ideally, the NDA wants half a dozen bidders for each of the contracts it advertises.

The Government is in the process of privatising BNG so that it cannot be accused of favouring itself when the contracts are handed out. It does, however, risk being accused of selling off another state asset on the cheap. The sale of BNG is due to be completed by the middle of next year but it will take the NDA until 2012 to award all the decommissioning contracts.

The Government has already sold one of the jewels in its nuclear crown with the $5.4bn disposal of the reactor designer Westinghouse to Toshiba of Japan earlier this year. The sale raised some eyebrows because Westinghouse is well positioned to be one of the biggest beneficiaries of the nuclear renaissance taking place not just in Britain but around the world.

If BNG scoops the pool when the NDA has finished awarding all those contracts, then the £300m-£500m the sale is expected to raise may look like a poor return for the taxpayer. There again, that cannot be taken for granted. Given its less than stellar safety record, it has a lot to do to rebuild its reputation.

The web Sneaks up on traditional media

If you are still reading this column, then, dear reader, thank you. The communications watchdog Ofcom published some salutary facts and figures in its annual review yesterday. According to Ofcom, more than a quarter of those in the 16-24 age group are reading fewer national newspapers since they got their broadband connection. The figures are not much better for local newspapers and magazines - down 22 per cent and 21 per cent respectively.

As if on cue, Emap, one of Britain's biggest consumer magazine groups, suspended publication of Sneak. In case you are not familiar, Sneak is a teen mag filled largely with celebrity gossip. Emap announced rather coldly that the publication was "no longer a viable proposition for the news-stand". The reason is that Sneak's audience can get all the information it provides and more on the internet from social networking websites such as MySpace, whose prospects we analyse on page 50. With audiences go advertisers.

Another of Ofcom's salutary findings is that 70 per cent of 16- to 24-year-olds now use MySpace or one of its imitators. Not only has surfing the web become a displacement activity for reading magazines, it has become a replacement activity. Working on the principle that if you can't beat 'em, join 'em, Emap has devised online versions of a number of its magazines. But it has decided that Sneak is not a suitable candidate for such treatment.

Despite Ofcom's sobering findings, it says that the rise of the web does not mean the death of traditional media. It merely requires an adjustment. It is proving a painful one.