Goldman fallout offsets travel boost

AN ANNOUNCEMENT yesterday by air traffic control firm Nats that some UK flights would recommence today eased the run on airline and travel operator stocks, which saw some firms shed as much as 4 per cent in early trading.

Nats gave the go-ahead to re-open Scottish airspace and lifted restrictions over parts of northern England, soothing investor fears over the long-term financial impact of the volcanic ash crisis.

British Airways revealed it has asked the European Union and national governments for compensation amid estimates that it has been losing between 15 million and 20m a day. BA recovered from heavy losses earlier in the day to close down 1.4 per cent, or 3.3p, at 231.7p. EasyJet said it has so far lost 40m after being forced to cancel 4,500 flights. The budget airline, which trades on the FTSE 250 index, dropped 1 per cent, or 4.8p, or 473p.

Robin Geffen, managing director of Neptune, warned that the natural disaster is likely to trigger a number of corporate failures in the aviation sector.

Geffen predicted that one of the large US airlines could be forced to file for Chapter 11 bankruptcy, but he said some of the national European airlines are most vulnerable. "This is a situation where the strong will get stronger and the weak will go to the wall," he said.

Tour operators TUI Travel and Thomas Cook also found themselves victims of investor uncertainty at yesterday's opening but recovered in the afternoon, eventually closing down 1.2 per cent at 288.2p and 1.6 per cent at 256.9p, respectively.

However, the continuing travel disruption raised concerns over lower demand for jet fuel, sending oil prices down to $81 a barrel.

Meanwhile, the fall-out from the Goldman Sachs fraud allegations continued to rock international markets and the FTSE 100 shed 16.1 points or 0.3 per cent to close at 5,727.9.

Investors had been keeping an eagle eye on the situation over the weekend after the news broke late on Friday that the US Securities and Exchange Commission had charged Goldman and one of its directors, Fabrice Tourre, with fraud.

Goldman rigorously denies the charges, but banking stock came under heavy scrutiny yesterday.

Among the few winners was Royal Bank of Scotland, which has been named by the SEC as one of the biggest victims of the alleged $1 billion (651m) fraud. If the SEC charges are proved, it is believed that RBS could pursue legal action against Goldman. As a result, RBS, which is 84 per cent taxpayer-owned, found itself up 4.4 per cent, or 2.1p, at 50.4p by the close of play.

RBS's share price is now hovering around the crucial 50p break-even mark at which the government/taxpayer begins to make a return on the 45.2bn it ploughed in to save the Edinburgh-headquartered bank.

However, the rest of the financial sector came under considerable pressure, with Barclays down 2.9p at 370.45p and HSBC off 7p at 691p.

Elsewhere, shares in bus and rail firm Arriva were 24p higher at 760.5p as it confirmed it was on the brink of a 1.5m-plus takeover deal from German public transport giant Deutsche Bahn.