BRITISH Airways yesterday conceded that August's terror scare cost GBP100m, far more than initially expected, as profits fell by 27-per cent in the second quarter.

The airline said grounded flights and disruption at airports after the security alert pushed costs way past the GBP40m it originally estimated.

It came as BA posted a 27-per cent fall in pre-tax profits to GBP176m for the three months from July to September, on a 4.9-per cent hike in revenues to GBP2.31bn.

Chief executive Willie Walsh said: "Given the significant impact of the security disruptions, estimated at a cost of some GBP100m, these are good results."

The airline has agreed to sell the regional business of BA Connect to Flybe.

Walsh said: "Point-to-point regional operations are not a strategic part of our business and we believe that such activities are better undertaken by a regional low-cost airline."

Under the agreement, which has yet to be finalised, BA will take a 15-per cent stake in Flybe.

The fall in second-quarter profits meant pre-tax profits for the six months to September 30 were up just 1.6-per cent at GBP371m while revenues lifted 8.6-per cent to GBP4.63bn.

BA said results were hit by a one-off writedown of GBP106m in its investment in BA Connect.

The airline group also lowered its revenues growth forecast for the full year by half-a-percentage point to between 4.5-per cent and 5-per cent because of the tighter security arrangements at airports across the UK.

BA added its annual fuel bill was expected to be GBP400m more than last time, with costs up 30-per cent in the second quarter.

The airline also said it was in "constructive" negotiations with trustees of its pension fund over a GBP2.1bn deficit.

Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said apart from the cost of the terror scare, there are still "other issues" facing BA.

"Cost-cutting measures are becoming more difficult to implement, particularly after the GBP450m programme which ended last year, and the pension deficit remains a concern. Nonetheless, the longer-term forecasts for the industry remain rosy, with some predicting a doubling of passenger numbers by 2020.

BA shares gave up 15.75p to 449.25p.