Aerospace giant BAE Systems' profits have fallen by a quarter, partly because of the air travel downturn.

BAE said on Thursday that pre-tax profits for the six months to 30 June came in at �359m ($502m), down from �482m during the same period last year.

We continue to seek to expand our position in North America

Sir Richard Evans BAE Chairman

Sales also took a hit, falling 9.4% on the year to �5.7bn.

The figures disappointed City investors, and BAE's shares fell more than 14% to 232p, down from a peak of nearly 550p in May 1998.

The company's weaker bottom line partly reflects a deteriorating performance at its part-owned subsidiary Airbus, the world's second biggest maker of passenger jets.

Delays in finalising lucrative export contracts have also weighed on BAE's earnings.

US acquisitions sought

The firm, which earlier this year narrowly failed to buy out US defence contractor TRW, said it remains on the lookout for American acquisitions.

"To complement our strong position in Europe, we continue to seek to expand our position in North America, which is where we see most opportunity for significant growth," BAE Chairman Sir Richard Evans said.

He added that the company is planning for a "resumption of growth" in 2003.

The US government's efforts to combat terrorism in the wake of the 11 September attacks has led to large increases in defence spending.

BAE Systems is already the fifth largest military contractor in the US.