Market Report: BA in a spin on fares war and Dan-Air worries

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The Independent Online
SHARES of British Airways were forced lower yesterday as the stock market worried about the growing danger of a price- cutting war and the planned rescue bid for the stricken Dan-Air.

The shares fell 14.5p to 281p in busy trading. When the Dan-Air package was announced on Friday they were 305p.

Kleinwort Benson did the damage. It slashed this year's profit forecast by pounds 50m to pounds 300m and next year's by pounds 80m to pounds 325m.

Latest shots in the emerging price war were fired this week by some US airlines reducing their transatlantic fares. BA, which is already trimming margins for Continental passengers, is expected to be forced to match the lower US prices.

The gathering controversy over Dan-Air is adding to the unease. A drawn-out row with the independent airlines could, it is thought, be damaging to BA, although the Government is likely to wave through the deal as soon as possible. Others fret about the cost, which could exceed the initial pounds 35m outlay.

BA was not the only blue chip hit by profit downgrades on a day when prices drifted lower as the market contemplated today's Mansion House speech by the Chancellor and expressed disappointment about the lack of interest rate action.

At one time the FT-SE 100 index was down 26.3 points. It closed 19.4 points weaker at 2,650.4.

Imperial Chemical Industries, nine-month figures today, dropped 23p to 1,050p as County NatWest reiterated its sell recommendation. The investment house expects a 25 per cent profit fall to pounds 525m.

Others feeling the impact of the analytical axe were BOC Group, Forte, Guinness, Pearson, Reuters and RTZ.

BOC attracted sell advice from Credit Lyonnais Laing. Year's profits, due next month, are expected to be pounds 344m with pounds 385m this year. The shares fell 9p to 694p.

'The valuation is beginning to look high and we are now more cautious about prospects for industrial gases,' CLL said.

Forte, down 5p at 167p, suffered from Carr Kitcat & Aitken caution. It trimmed its forecasts by pounds 5m to pounds 70m and pounds 120m.

Guinness attracted Barclays de Zoete Wedd. The flat figures from LVMH and the growing signs of a perfume price war prompted an pounds 11m cut to pounds 964m. BZW also descended on Reuters, reducing next year's expectation from pounds 440m to pounds 425m. Guinness fell 16p to 533p and Reuters 22p to 1,198p.

James Capel and Cazenove were thought to have hit Pearson, down 31p at 342p. RTZ, 12p lower at 612p, was rumoured to be a UBS Phillips & Drew casualty.

Great Universal Stores was one of the few to win a buy recommendation. Panmure Gordon described the shares as a 'safe and strong' buy, helping the 'A' shares up 37p to 1,570p. PG expect profits of pounds 468m this year.

Most stores tended to give ground, ruffled by the interim statement from Marks & Spencer, down 15.5p to 227.5p. Boots continued to feel the influence of the perfume tension, down another 7p to 464p.

London and Manchester slipped 6p to 264p. Cazenove and SG Warburg placed an 8 per cent stake, most of the Sun Alliance interest, at 255p.

HP Bulmer, the cider maker, rose 12p to 347p. The family-controlled company has met institutional investors who were apparently impressed by the continuing growth of the cider market and the group's scope to improve margins.

JA Devenish, the pubs group, jumped 8p to 219p as Hoare Govett made bullish noises. Allied-Lyons fell 12p to 627p. It took a party of analysts on a tour of its Spanish operations.

Ranks Hovis McDougall continued to draw support from talk of a counter to the Hanson offer. The shares rose 1.5p to 251.5p, with the French BSN food and drink group still the favourite to intervene. Unigate, rumoured to be the next food target, jumped 11p to 278p.

Levercrest, the playground equipment group engaged in a rescue rights issue, gained 9p to 30p. Buckingham International's recent run ended. The heavily borrowed hotel group fell 1p to 6.75p.

WPP, the advertising agency, responded to indications that it had regained the dollars 60m American Express advertising account, gaining a further 3p to 44p.

Tie Rack, the retailing group, edged forward 1.5p to 50.5p. County has turned positive. Interim figures are due on Monday. About pounds 150,000 is expected.

But County sees year's profits more than doubling to pounds 2.2m and stretching to pounds 2.7m in the following year. The company could have net cash of pounds 5.8m by the end of January.

The FT-SE 100 share index ended 19.4 points down at 2,650.4 yesterday. At one time the fall had stretched to 26.3 points. The FT 30-share index lost 22 to 1,956.5. Trading was again above the break-even 500 million, reaching 517.2 million shares with 22,061 bargains. Government stocks were firm

Expect action soon at Prime People, the recruitment and training group that used to be called ASB Barnett Kinnings. The shares held at 4p yesterday. There is talk of a significant acquisition that should sharply increase the group's operations. The company has already been revamped and tidied up by Alan Greenough who moved in as chairman last year.

Haemocell romped ahead 23p to 224p as enthusiasm strengthened about its blood filtration machine, already approved by the US Food and Drug Administration. But the company could have achieved a non-medical breakthrough. Field tests with Unilever on detergents have made headway and an announcement, it is rumoured, could be made next week.