Collapse of airline sends rival shares into tailspin

THE collapse of 15-year-old Scandinavian airline Primera Air has sent its FTSE rivals into a downward spiral.

The budget airline, which began offering long-haul flights from UK airports earlier this year, said on Monday night that it was going into administration and would cancel all flights. Hundreds of passengers were left stranded.

Coming hours after Ryanair warned its profits would be lower for the year due to higher oil costs and strike action, Primera’s downfall piled pressure on the sector. High street travel agent Thomas

Cook, which has its own airline, fell 5.2pc, or 3.05p, to 55.2p,

easyJet dropped 1.4pc, or 16.5p, to close at 1205.5p, Wizz Air was down 4pc, or 106p, to 2544p, and British Airways’ owner IAG edged 1.4pc, or 9.2p lower, to 634p.

Ryanair had more bad news of its own as it released passenger statistics which showed more than 400 flights were cancelled in September due to two days of pilot and cabin crew strikes.

Yet total traffic was still up by 11pc, or 6pc minus the effect of the newly acquired Lauda business, and the planes stayed 97pc full on average after lowering fares. Ryanair shares closed down 1.1pc, or ¤0.12, at ¤11.31.

Primera filed for bankruptcy as it had failed to secure long-term funding from banks or investors.

Though it operated a minimal fleet of aircraft, the company had been rapidly expanding. In May it began offering flights to the US from Stansted, and was due to launch flights between Manchester and Malaga later this month.

The sinking shares of major airlines did not help the FTSE 100, which continued to travel downwards. It closed 0.28pc, or 21.12 points down, at 7474.55. Royal

Mail weighed heavily on the index, falling another 8.4pc, or 32.8p, to 358.6p after its surprise profit warning on Monday afternoon.

Closely behind among the bluechip losers was plumbing and heating supplier Ferguson, which slumped 6.8pc, or 446p, to 6083p as it revealed its full-year results.

Revenue was up 7.6pc to £16bn, while profit was also up from £709.8m to £977.6m and the dividend payment increased by 21pc – so far, so good.

However, investors were more focused on the apparent weakness in Ferguson’s UK market, where revenue slipped 5.3pc to £2bn and profit crashed 28.8pc.

Helal Miah, an investment research analyst at The Share Centre, said the falling share price could also be a sign that some investors were taking profits.

Before yesterday, the shares had risen 27.2pc over the last 12 months. He added: ‘The key driver for the group’s success continues to be the strength of the US economy – particularly its housing and construction market which is keeping demand high for its plumbing and heating products.’

Russ Mould, investment director at AJ Bell, speculated that a sale of the UK arm could be the next natural step for Ferguson.

Outsourcer Interserve, which has been trying to pull itself into shape after a series of profit warnings and the collapse of its rival Carillion, fell a little further after selling its scaffolding unit.

Enigma Industrial Services bought the loss-making business for £3.6m, plus a further £1m if it hits certain targets. Interserve said it would use the cash to pay off debt, but its shares still edged down 3.3pc, or 1.9p, to 55.5p.

On London’s junior market, there was some better news as Pennant International won a £10.2m contract in Qatar.

The firm, which helps train engineers in the defence and other regulated sectors, will supply training aids for aeroplane maintenance, aircraft marshalling and ground handling. Shares soared 9.6pc, or 13p, to 149p.