Airline stocks drag down Britain's FTSE

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* Blue (OTC BB: BUES - news) -chip FTSE 100 index falls 0.3 pct

* Airlines stocks among top decliners

* EasyJet (Other OTC: EJTTF - news) down sharply on poor outlook

By Atul Prakash

LONDON, July 21 (Reuters) - Britain's top share index slipped on Thursday after four straight days of gains, with airline stocks falling sharply after industry bellwethers easyJet and Lufthansa warned of slower bookings and a worsening outlook.

Shares (Berlin: DI6.BE - news) in easyJet dropped 5 percent after the carrier said it could not predict the outcome for the end of the year as growing security concerns, weaker consumer confidence and currency volatility hit the group during its most profitable peak summer period.

The sector also came under pressure after Lufthansa , Germany's largest airline, cut its full-year profit target saying advance bookings to Europe had fallen sharply due to "terrorist attacks in Europe and to greater political and economic uncertainty". Its shares slid 8 percent.

"The airline sector looks set for a pretty unpleasant ride in the short term, and investors might want to fasten their seat belts, because there could be turbulence ahead," Nicholas Hyett, equity analyst at Hargreaves Lansdown (LSE: HL.L - news) , said.

"The industry has been increasing capacity for some time and that is starting to have an effect on pricing, squeezing revenue per seat. Until now easyJet has been coping well, with rising passenger numbers offsetting lower revenues per seat. Capacity growth is continuing but the scale of yield declines is nonetheless starting to hit revenues."

Airline stocks, including a 3.5 percent drop in British Airways owner IAG, dragged the blue-chip FTSE 100 share index 0.3 percent lower by 0817 GMT.

However, the index is up about 15 percent since a low in late June, when shares fell sharply following a vote in Britain to leave the European Union. In U.S (Other OTC: UBGXF - news) . dollar terms it is up only about 11 percent since then following a fall in sterling.

On the positive side, equipment rental company Ashtead rose 4.4 percent, gathering strength from a 9 percent surge in shares of its U.S. peer United Rentals (NYSE: URI - news) in after-market trade on better than expected results.

Among mid-caps, online electricals retailer AO World (Other OTC: AOWDF - news) jumped 8.3 percent after saying its full-year outlook was unchanged despite economic uncertainty following the Brexit vote and its potential effect on consumer confidence and suppliers' foreign exchange exposure.

"The company continues to grow its European proposition, with sales more than doubling during Q1 year-on-year," Shore Capital (Other OTC: CGHC - news) said. "Encouragingly for investors, the business is making advances in achieving a positive gross margin whilst also commencing trading from its new Bergheim logistics base." (Reporting by Atul Prakash; Editing by Susan Fenton)