BRITAIN’S airport terror alert spread to Gatwick yesterday when a Venezuelan passenger was arrested with a live hand grenade in his luggage.

Police sealed the North Terminal for five hours, almost 100 flights were delayed, and many incoming passengers were kept aboard their aircraft as the 37-year-old passenger, who was carrying a copy of the Koran, was taken to Paddington Green police station.

In a separate incident, two men were arrested near Heathrow under the Terrorism Act 2000 after a routine police check.

There were signs last night that the terror alert, and the police and military response, were making travellers increasingly nervous. There was also evidence that the alert and fears of war against Iraq were beginning to hurt the tourism industry, with travel agents, airlines and hotels all reporting a fall in bookings.

Police said that the Venezuelan man was detained after his bags were searched by Customs officers when he arrived on British Airways flight 2048 from Caracas, which had stopped in Bogotá and Barbados. It was not known where he had boarded the plane.

Scotland Yard, whose bomb disposal team was called in to examine the weapon, said that the man had no known connections with al-Qaeda, it is not known whether he is a Muslim, and it was unclear whether his arrival was linked to the terrorist threat that has led to increased security at airports.

More than 1,400 police and soldiers were patrolling Heathrow yesterday and police carried out spot-checks at other airports. An RAF Nimrod communications aircraft was also flying over London, providing unprecedented links between the Government, police, the military and security services.

The Gatwick alarm was raised shortly after 2pm when armed police and airport officials began ushering more than 2,000 passengers and staff out of the North Terminal. All incoming passengers were diverted to the South Terminal, where departing passengers were also sent to wait.

Kim Fowle, who works in the North Terminal, said: “A manager told me police had found a live hand grenade. There was no Tannoy announcement. The police just started moving people out of the terminal and there was a bit of a panic.” Her friend Fiona Ritchie said: “We saw women with pushchairs and their husbands pushing trolleys, running as fast as they could.”

David Blunkett said last night that the arrests proved that there was a real threat. “It reinforces that we really do have a problem, as people have been saying that it doesn’t exist. Second, it means that our security services are on the ball. Third, over the next few days we need to follow these leads through.”

Fears about a terror strike were beginning to bite as hotels and travel companies reported a sharp drop in American business. Virgin Atlantic reported that more people than usual failed to arrive for flights yesterday.

The Association of British Travel Agents said that most agents had lost bookings. “The same thing happened during the Gulf War in 1991, when bookings went down by 16 per cent.” During that war visitors to Britain from America dropped by 30 per cent, and the tourism industry lost £400 million. BA has put aside £2 billion to cope with the expected dip this year.

The Dorchester Hotel in London said: “There have been more cancellations than normal this week and they have all been from America. They all said that it is because of the situation with Iraq. Customers are talking as if we are already at war.”

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