It would have been ?mass murder on an unimaginable scale?, according to a senior British police officer. An alleged plot to blow up at least three trans-Atlantic flights on at least three days, for a potential of nine or more catastrophes, could have had a dramatic and chilling effect on air travel, but a less serious impact on the insurance and reinsurance industry. According to news reports, the plot may not have been entirely foiled, and the possibility of calamity remains real.

The potential total economic loss, had the alleged plot succeeded as it was described yesterday, would have included the cost of the aircraft, most of which would probably have been close to full at this time of the year. To the cost of equipment would have been added the value placed by the legal system on the lives that would have been lost.

Precise calculations are impossible at this stage, but early estimates suggest that total losses might have been about a billion dollars for the aircraft, and as much again, perhaps, for the lives lost. Thursday is one of the least popular days on which to fly, which might have kept the human losses down a little.

Courts value human lives differently, depending on their jurisdiction. Lives lost on flights departing from or arriving in the largest cities have been valued by the courts in those cities more highly than similar lives lost in less advanced corners of the globe. The life of a chief executive officer of a public corporation, for example, would be valued, and probably insured, more highly than that of a manual worker. The flights that might have been affected were believed to have been mostly travelling in the New York-London air corridor.

Standard & Poor?s Ratings Services said yesterday that the most immediate impact on rated airlines would be felt by British Airways, whose main hub is at London?s Heathrow Airport, in the form of lost revenue and added costs. US airlines, which some reports indicated were targets of the plot, would likely suffer some loss of revenue, S&P said.

American, Continental, Delta and United are the principal US airlines serving London airports. Ratings and outlooks of these various airlines are not affected by these events, S&P said, although any successful attacks or, possibly, discovery of further threats could have credit implications. ?Unfortunately, the risk of terrorist attacks has joined recessions and fuel price volatility as an ongoing industry risk factor for airlines, particularly those in the US and Western Europe,? said S&P.

August flights tend to carry a higher percentage of families taking vacations during the school holidays, but almost every trans-Atlantic flight has senior people in every class, especially in the business and first class cabins. Every flight has experienced professional staff on the flight deck.

Airline companies that suffered financial losses would have faced a decision: should they claim for lost equipment under their aviation coverage, or their terrorism insurance? The airlines are more heavily insured under the former than the latter.

Without wanting to underplay in any way the human price, the fact is that a $2 billion loss would not have seriously disrupted either the insurance or reinsurance markets. The industry would have interpreted its policy language to treat each downed flight as a separate event, although protracted court battles would doubtless have been mounted by those who would have been better served by treating all nine catastrophes as the result of a single plot.

The multiple event assumption would have worked better for the reinsurers than well as the primary companies. The insurers would have been able to claim against their reinsurers for the first and second events, but subsequent losses might well have fallen outside the net of insurance altogether. Airline association spokesmen said the costs of Thursday?s disruption would be borne by the airline industry, which will refund individual travellers even if they did not have their own travel insurance. An issue that may yet arise is whether any individual claims may be made, since smart intelligence work by the British and American authorities means that yesterday?s events involved only a threat of, rather than an act of terrorism. Emergencies of this type expose the strict terms of travel insurance policies.

Given the disruption that yesterday?s events will cause in the general flow of air travel in one of the busiest months of the year, some insurers will face claims arising from delays and disruptions to travel plans, from travellers as well as airlines. Personal losses under such policies for those who suffer travel delays are usually limited to such items as airfare and hotel expenses, so the overall insured cost from such claims will be minimal.

It is clear that the effect on the airline industry will be serious, even though much (or all) of the plot may have been scotched. Running an airline today is a fraught and difficult business. Competition from new and small airlines, together with world conditions, has made profitability elusive at the major airlines.

Europeans are much more accustomed to terrorist activities than Americans, as was seen after the events of September 11, 2001. Within a year, European air travel was back to near-normal levels. American international air travel has yet to fully recover, almost five years later.

Yesterday?s events, and those that will follow in the next few days, will act to depress air travel. The already frustrating experience that check-in has become will be further degraded. For years, El Al, the Israeli national carrier, has required passengers to check in at least four hours before flight time. They are then subjected to rigorous physical and background checks and, ultimately, must carry their own baggage to the plane. Moving in that direction will almost certainly become the order of the day in the US and the UK, over the howls of regular travellers.

Regulations regarding hand luggage will almost certainly change. An expert hastily handed a microphone by the British Broadcasting Corporation yesterday morning argued that limiting hand luggage would be a sign that the terrorists had won; some would argue that they already have.

Premium rates for aviation cover will increase for the 2007 renewal season, although the airlines? ability to pay sharply increased premiums might be an issue. Airline and travel shares fell across the board by lunchtime yesterday, and may not recover for some time.

The good news, of course, is that potential losses from this particular plot are being discussed in a theoretical, rather than an actual, context.