Commercial airlines have become the first economic victims of the conflict in Iraq.

Many carriers, including British Airways, have been placed on credit watch - ready for downgrades - by rating agency Standard & Poor's.

'We've ready cash and committed facilities of £2bn, so we are prepared, but we are watching the situation carefully,' said a BA spokesperson. BA is already seeking a further £450m of cost cuts including job losses.

The international Air Transport Association (IATA) has warned that traffic could fall as much as 10 per cent in the immediate aftermath of war.

The World Tourism Organisation (WTO) says nervousness about travel had already hit an already fragile industry, even before war had begun.

Francesco Frangialli, secretary-general of the WTO, has asked whether 'people really have the heart to think about travel, relaxation, leisure and holidays, while weapons are at the ready and people are bracing for suffering?

'Since 11 September, we have been experiencing the most serious crisis in the history of world tourism. Djerba, Bali, Mombassa … the attacks have come one after another, targeting foreign visitors who have become innocent victims of conflicts with which they have nothing to do.'

'It is likely that, in the next few months, thousands of jobs will disappear.'

However, he is keen to stress that tourism has not collapsed 'as some were only too quick to predict'.

A spokesperson from British Tourist Authority says the BTA is canvassing 27 overseas markets to monitor the situation: 'The key areas for concern are US and Japan. We are reassuring people that there is no need to change plans but people have more nervousness about flying itself than destinations.'

'We don't envisage political disagreements between Britain and France will have any significant impact on visitors to Britain. France is second most important to the US in terms of visitors coming to Britain - the French are always welcome and are very important to us. We believe the European travel market will recover quicker than other areas due to the alternatives to flying as a means of transport.'

Anti-French feeling is running high in the US, however and companies in both France and Germany are increasingly concerned about being blacklisted by American customers over their respective political leaders' anti-war stance.

One hotel giant is reported to be attempting to disguise its identity by removing the French flag from its premises in the US and a website dedicated to the online sale of French cheeses has reported receiving a barrage of abusive mail from US consumers.

Stephen Dowd, chief executive of The British Incoming Tour Operators Association (BITOA), says the US regards Britain as a friend and ally, however and said that Britain must get as much mileage out of that as possible by attracting American tourists to Britain. He added that the current anti-French feeling in the US could see more Americans choosing Britain as a destination over continental Europe.

Rebecca Milton, press officer at the ETC, said the unstable situation could certainly boost British home bookings: 'These are uncertain times and will clearly have an impact, largely on overseas visitors. The uncertainty may persuade more UK travellers to holiday at home.'