BA stops Pakistan flights after bomb

ISLAMABAD (Reuters) - British Airways has suspended itsflights to Pakistan because of security fears after a hugesuicide truck-bomb blast at an Islamabad hotel killed 53 peopleat the weekend, an airline spokesman said on Monday.

The Czech ambassador and at least three other foreignerswere among those killed in Saturday night's blast at theMarriott Hotel, Islamabad's worst bomb attack, which woundedscores and which security officials said bore the hallmarks ofal Qaeda.

There has been no claim of responsibility but thegovernment said it expected the investigation would lead to alQaeda and Taliban militants in the Federally AdministeredTribal Areas on the Afghan border.

The beleaguered Pakistani rupee sank to a new low, tradingat 78.55 to the dollar on Monday compared with 78.15/25 at theclose on Saturday.

The blast reinforced investors' negative attitudes aftermonths of political uncertainty, a currency dealer said.

In a sign of growing international unease aboutdeteriorating security in nuclear-armed Pakistan, BritishAirways said it had suspended its six flights a week to thecountry.

"Our people at headquarters are reviewing the securitysituation," said airline spokesman Sohail Rehman.

The bombing has also raised fresh calls for Pakistan'sgovernment to rethink its alliance with the United States andmilitary operations against Islamist militants, which manyPakistanis blame for inciting violence.

Pakistan's army is in the midst of an offensive againstmilitants in the Bajaur region on the Afghan border, while theUnited States has intensified attacks on militants on thePakistani side of the border, infuriating the Pakistani army.

A security official said troops had fired at two U.S.helicopters that intruded into Pakistani air space on Sundaynight, forcing them back to Afghanistan.

Elsewhere, troops were attacking militant hideouts, amilitary spokesman said.

"Our security forces are engaging militants with artilleryfire and targeting their hideouts," said the spokesman, MajorMurad Khan. The government says more than 600 militants havebeen killed in fighting in Bajaur since August.

But a senior opposition politician said offensives were notworking and the government should rethink its policy.

"Enough force has been used but what's the result? Anincrease in terrorist activities," said Zafar Iqbal Jhagra, avice president of former prime minister Nawaz Sharif's party.

"The war on terror will be another disaster if we keepfollowing this course," he said, adding some troops should bewithdrawn to show that authorities were serious about talks.

NO ARRESTS

Islamabad police chief Asghar Raza Gardezi said no arrestshad been made in connection with the blast and declined to giveany details about the hunt for evidence.

Among the foreigners killed on Saturday were a Vietnamesewoman and two members of the U.S. armed forces assigned to theU.S. embassy. A U.S. State Department employee was missing, anembassy spokesman said.

Denmark's security service said one of its staff, attachedto the Danish mission in the capital, was missing and presumeddead.

The Interior Ministry said 266 people were wounded, 11 ofthem foreigners, after the bomber blew up a truck packed with600 kg (1,320 lb) of explosives, including artillery shells.

A political analyst said despite widespread scepticismabout government security policy, the severity of Saturday'sbombing should have convinced more people the military was notjust fighting America's war.

"Your state is being challenged and people are coming andkilling innocent people ... what do you negotiate with them?"said Shafqat Mahmood, a former government minister and analyst.

Authorities could take advantage of anger over the attack,he said. "This is a popular government not a militarygovernment, it has support among the people. They can mobilisetheir support for fighting real challenges," he said.

Financial analysts said the bombing would be a blow forforeign investment but not a fatal one unless it marked thebeginning of a new phase of violence.

"In the near-term, investor sentiment, which is alreadyrunning weak, will be further dented," said Asif Qureshi, headof research at Invisor Securities Ltd.

The cost of buying protection on debt from Pakistan roseafter the attack. A five-year CDS (credit default swap) was nottraded but a dealer said it was quoted at 1,500 basis points,about 50 bps wider than Friday.

(Additional reporting by Kamran Haider and Sahar Ahmed;Writing by Robert Birsel; Editing by Paul Tait)