OTTAWA - The slumping travel industry is bracing for dwindling sales and higher costs in the wake of this week's terrorist attacks in the United States, with the first corporate casualty already being claimed.

The deadly attacks, involving three U.S. airplanes and another that crashed near Pittsburgh, came at a particularly painful time for the airline industry, analysts said. Already hit by the economic slowdown, the industry's woes will almost certainly be made worse by Tuesday's tragedy.

"This is clearly a sector that's going to be hit," said Ben Cherniavsky, an analyst with Raymond James Ltd. in Vancouver. "This is the last thing the industry needed."

Travel agents said the attacks already have been hurting sales. "The cancellations started almost immediately," said Ed Kopec, who runs the call centre for U.S.-based travel Web site Lodging.com. "We're doing more cancellations and modifications than bookings." A host of large companies, including Intel Corp., Texas Instruments Inc., Hewlett-Packard Co., Agilent Technologies Inc. and Electronic Data Systems Corp., have suspended business travel until further notice.

Some airline stocks struggled Wednesday in trading overseas, after a drastic drop a day earlier. Shares in Deutsche Lufthansa AG, for example, lost 55 cents (U.S.) or 3.7 per cent to $14.20.

Analysts widely expect many travellers will be slow to return to the air in the wake of the terrorist attacks. They also expect the industry to be hit with higher costs from a need for greater security and from insurance-premium increases.

Most airlines operating on this continent - which have already been hit by high fuel prices - also will be hurt by closed airports that have kept their high-cost fleets grounded for at least two full days since the attacks.

"Air travel will be certainly disrupted for several days and possibly for months," wrote Charles Dumas and Tim Congdon of Lombard Street Research Ltd. The analysts said the airline industry is responsible for about 1 per cent of U.S. gross domestic product.

The industry's confluence of bad news claimed its first victim Wednesday. Midway Airlines Inc. of Chicago, citing the impact of the terrorist attacks on its already precarious financial situation, said it is suspending its entire operation. The airline, which filed for Chapter 11 bankruptcy on Aug. 13, said the move will put about 1,700 employees out of work.

The carrier, which had its largest hub at Raleigh-Durham International Airport, said in a statement that the action was being taken "with the recognition that, following the recent terrorist attacks, demand for air transportation is expected to decline sharply."

Midway, which posted losses of $15-million in 2000 and $15-million in the first half of this year, also blamed its recent problems on a sudden fall in business travel and on increased competition.

Analysts agreed that it's unlikely the airline industry will be able to make up its shortfalls through higher prices. "If demand decreases, it's pretty hard to put prices up," said Robert Harwood, an analyst at Lafferty Harwood & Partners in Montreal.

Laura Cooke, a spokeswoman for Montreal-based Air Canada, this country's dominant airline, said it isn't ready to make any new financial projections.

European holiday companies such as Club Méditerranée SA of France and Hilton Group PLC of Britain may see their worst losses since the Persian Gulf war, analysts said, as North American travellers decide not to fly overseas.

"I'm not an optimist,' said Thierry Girardet, a portfolio manager at Fival SA in Paris. "We're in an exceptional situation and no one knows what's going on."