Shares of British Airways plunged by nearly ten per cent today amid growing fears that it could be the biggest victim of new plans to open up the £9 billion transatlantic airline market.

Traders said that BA may have to hand over several lucrative take-off and landing slots at Heathrow if a draft Open Skies agreement between the US and European Union is implemented.

US and EU negotiators concluded a draft deal on Friday and will present it to transport ministers on March 22.

Howard Wheeldon, airline analyst at BGC Partners, said: "Open Skies is a negative for BA, it cannot be seen as anything other.

"They haven't got many people to support them, the UK government perhaps, but that is it."

The fall saw BA shares tumble 43p to 388.5p and wiped nearly £500 million off the value of the airline.

It came as the airline said that it would suffer a £105 million post-tax hit from the sale of the loss-making regional airline BA Connect to its no-frills rival Flybe.

The sale was completed today but BA is still cancelling 900 flights during a three-week "transition" period that runs up until March 24, sparking travel chaos for 15,000 passengers that had booked tickets from airports such as Birmingham and Manchester to the Continent.

Customers affected by the move will be offered a seat on a Flybe plane, a BA service out of Heathrow or a refund.

A BA spokeswoman said that the cancellations had to be made “to protect the ongoing viability of the business”.

BA Connect is losing nearly £40 million a year and BA is paying Flybe £96 million to take the business off its hands as part of today’s deal.

Flybe revealed it will cut up to 250 jobs at the business as the first part of a recovery programme. The cutbacks will hit staff in the Isle of Man and Manchester.

Separately, BA is in talks about out-sourcing its ground-handling business at the regional airports to the transport group Go-Ahead, which would take on BA’s 730 staff.

Jim French, Flybe chairman and chief executive, said that it was “very unfortunate” that the flights had to be cancelled.

But he added: “You have to keep it in perspective. BA Connect runs around 200,000 flights a year, 18,000 a month.

“It’s BA that has made the cancellations, but we understand why they are doing it and we will work with them.”

Mr French said that Flybe, the UK’s biggest regional airline, was confident of turning BA Connect around.

It will cancel 11 routes but keep about 60, taking its total number of services to 152.

Mr French said that BA Connect had not made enough use of the internet and added that far more money could be made selling ancillary services such as car hire and hotel bookings.

BA is taking a 15 per cent stake in Flybe as part of today’s deal. It has booked a further £20 million charge from the sale, given further losses at BA Connect in recent months.

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