BA may sell £60m investment in the London Eye to stave off cash crisis

War on terrorism: Airlines

British Airways is considering selling its £60m investment in the London Eye to help cope with the devastating loss of passengers since the 11 September attacks.

The airline is looking at cashing in the loan that funded the attraction to lessen the extent of job cuts forced on it by the terrorist attacks.

The BA chairman, Lord Marshall, said the airline had lost up to 25 per cent of its passengers since 11 September and, if people continued to stay away, more job cuts might follow the 7,200 already announced. He warned there would be more "airline blood on the walls" unless European carriers considered "extraordinary" solutions to the crisis.

The airline was put under pressure from unions who urged BA to realise its investment in the London Eye rather than make more staff redundant. It confirmed last night that it was looking at recouping the £60m it loaned to build the hugely successful "big wheel" on the banks of the Thames. It will not sell its one third share and the attraction would continue to be known as the BA London Eye. However, the airline is exploring the idea of selling the loan, probably to a bank, to bring in an immediate injection of cash.

"It has become an issue since 11 September . It is not that it's something we desperately want to do. We are not looking at selling it and we are not looking at withdrawing our involvement in the London Eye," said an airline source. Any "refinancing" deal would not take place until planning permission for the Eye is extended beyond 2005. That will not happen until the middle of next year at the earliest.

John Edmonds, general secretary of the GMB, said BA "should be concentrating on keeping their aeroplanes in the air and their customers happy".

Speaking at a civil aviation conference in London, Lord Marshall said the impact of 11 September had been "far sharper and more devastating" than the Gulf war, when it took a year for passenger numbers to return to normal. Business was now between 20 and 25 per cent down for the time of year and the slump in transatlantic travel meant there was little chance of recovery.

Transport Minister John Spellar told the conference that the Government's commitment to British airlines was shown by the help it had given to provide insurance cover when premiums soared after the attacks.

The Treasury agreed to pay insurance premiums for a month to keep airlines flying after 11 September and this week the agreement was extended for another 30 days. However, from 1 November the amount of cover that airlines will have to find in the open market will double from £35m to £70m.

*American Airlines, the world's biggest airline, reported a record quarterly net loss of $414m (£292m) yesterday.

"With the economy weak and fuel prices still relatively high, we and the rest of the industry were experiencing a very difficult financial quarter even before the attacks," said Don Carty, chairman and chief executive of AMR, the corporate parent of American Airlines. He added: "The attacks and their aftermath further weakened traffic and had a staggering effect on our overall financial performance."