British Airways has revealed that August's terrorist alert cost it £100 million and prompted a shock 27 per cent slump in its pre-tax profits in the second quarter to £176 million.

The cost of the distruptions, after the foiling of a terrorist plot brought UK airports to a standstill, is double analysts' initial forecasts that the UK's flagship airiline would lose about £50 million. Hundreds of thousands of passengers were left stranded after their flights were cancelled amid stringent new security measures imposed on all major British airports.

The delays, and the subsequent handling of the new measures, brought to the boil simmering tensions between BA, led by chief executive Willie Walsh, and airports operator BAA.

The £100 million figure is also double the cost to BA of last year's acrimonious dispute with contract catering firm Gate Gourmet.

As it told the stock market of the profits slide - City analysts had pencilled in a rise in profits to about £244 million - the airline said despite the setback its profits for the half-year still rose by 1.6 per cent to £371 million.

"Given the significant impact of the security disruptions, estimated at a cost of some £100 million, these are good results. Despite the extremely difficult operational environment, we have delivered improved revenue," Mr Walsh said.

Revenues at BA for the three months to the end of September rose by 4.9 per cent to £2.3 billion.

BA also said it had reached an in-principle agreement to sell its Manchester-based regional airline BA Connect to rival operator Flybe. Although BA did not disclose the terms of the proposed sale, it said it would be taking a £106 million writedown on the value of BA Connect, which operates 52 routes from 13 regional airports.

And despite the dent to passenger confidence of the August alert, BA added that it carried 1.5 per cent more passengers in October, with premium passengers increasing at a faster rate than non-premium traffic.

The disruption costs are a setback to Mr Walsh, who has been trying to revive BA's efficiency and profits in a fiercely competitive market against low-cost operators such as easyJet and Ryanair.

Mr Walsh is also locked in tense negotitations with staff unions over how best to reduce the airline's £1.2 billion pensions deficit. In a joint statement at the beginning of the week, BA's four main unions said there was "still some distance" between them and the company over BA's proposed cash injection to the fund based on changes in retirement ages for certain staff.

Shares in BA closed last night at 465p. Having risen steadily this year, the shares currently value BA at almost £5.3 billion.

Analysts at Panmure Gordon downgraded their recommendation on BA shares to "hold" from "buy", but noted that operating profits were in line with expectations.

Panmure Gordon also responded to BA scaling back its full-year outlook on revenues to an increase of 4.5 per cent to 5 per cent, from the previous 5 per cent to 6 per cent.

"The company is performing well, but results this quarter were hit by 30 per cent higher fuel prices and revenue weakness following the security-related disruption in August," Gert Zonneveld at the broker said.

• Ryanair, the low-cost airline, flew 3.73 million passengers in October, a full 706,579 more than it carried in the same month last year. Ryanair, which is currently pursuing a hostile takeover bid for Irish rival Aer Lingus, said it had now flown nearly 39.6 million air travellers over the past rolling 12 month period. Although Ryanair said its load factor, a measure of its efficiency, had decreased by 2 per cent compared with last October, the passenger increase, further cements the success of the low-cost airline's operations, led by flamboyant chief executive Michael O'Leary. Shares, which have risen from below €4 in 2004, held firm at €8.93, as its battle to take control of Aer Lingus rumbled on.

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