Blast rocks Kenyan hotel, as missiles fired on Israeli plane

11.50pm - UPDATED

Suicide bombers struck an Israeli-owned hotel near the Kenyan city of Mombasa minutes after two missiles were fired at an Israeli jet as it took off from the city's airport.

Initial reports said at least 11 people were killed, including two children, and up to 80 injured at the hotel. Kenyan police said the dead included six Kenyans, two Israelis and three suicide bombers. Israeli officials predicted the death toll would rise.

Kenyan police tonight arrested two people in Mombasa and had mobilised their anti-terrorist police squad to search for suspects.

Sky News reported that a woman who had just arrived at the Paradise Hotel with other Israelis said: "People were cut in the legs, arms, all over their bodies. Almost all the guests are Israelis. A few Kenyans were also hurt."

The Strella shoulder-launched missiles narrowly missed the aircraft, which was carrying more than 260 passengers and 10 crew. A pilot reported seeing a flash of light outside the left side of the plane just after take-off.

Kimgori Mwangi of the Kenya police said the aircraft was about 2km from the airport and at a very low height when the missiles were launched by men of Arabic appearance. The flight continued to Israel and landed safely at Tel Aviv five hours later.

The Thanksgiving Day attacks appeared co-ordinated. The missiles were fired at the charter plane just before 8am local time (6pm NZ time), and the hotel blast came five minutes later, at Kitambala, 27km from Mombasa.

Israel and Kenya blamed the blombing on Osama bin Laden's al Qaeda network, the terror group behind the September 11 attacks in the United States.

On November 25, there were reports of an al Qaeda terrorist attack planned for today with the warning ending "the zero hour has come", according to the well-informed Debkafile website.

The terrorist group has also been accused of the twin bombings of United States embassies in Kenya and Tanzania four years ago which killed 231 people and wounded thousands.

"There is no doubt in my mind that al Qaeda is behind this attack, because we have no domestic problems, no terrorism in our country," Kenya's Ambassador to Israel John Sawe said.

If it is confirmed to be the work of al Qaeda, it will be the group's first direct attack on Israelis outside Israel, and comes just two months after the Bali bombing which killed 200 people, mainly Australians.

A barman at a hotel across the road from the Paradise said he saw a four-wheel-drive being driven into the gate just before the explosion.

"Just after a group of tourists were brought to the hotel, I saw a white Pajero forcing its way into the gate," said a barman at a hotel across the road from the Paradise.

"It had three people of Arabic origin and after it got to the reception area I heard an explosion and the whole hotel was on fire."

The hotel, which had hosted Israeli troops, was badly damaged in the attack.

There were also unconfirmed reports that a light aircraft flew over the hotel, dropping packages.

Ambulances ferried the casualties to a Mombasa hospital.

The attack happened as several buses carrying Israeli tourists arrived at the hotel, an Israeli foreign ministry spokesman said.

"We got to the hotel and after a short time there was an explosion," one tourist said.

"We were just about to leave the lobby when suddenly everything was on fire. We threw down everything and began to run."

The tourist said he had gone on holiday to escape the troubles in Israel.

An Israeli journalist said the charter flight the hotel guests had arrived on early in the morning was also the aircraft which was to become the target of the missile attacks.

Kelly Hartog said the Israeli Air Force was being sent to Mombasa to evacuate survivors and victims.

"I saw people covered with blood, including children. Everyone seemed to be screaming.

"We were herded out to the beach. There were no medics. People were screaming for water.

"I tried to occupy myself tending to the children. 'I want to go home,' they said, 'where are my parents?"'

The aircraft targeted in the missile attack belonged to the Arkia charter company, which takes weekly flights to the coastal city which is an extensive Muslim history. Officials said the aircraft was slightly damaged by shrapnel.

One of the plane passengers, Makhlouf Amsalem, said an explosion was heard about two minutes after take-off and some passengers saw smoke. However, they were told everything was fine.

"In the middle of the flight, about two hours later the pilot said there had been an attack in Mombasa and that two missiles were fired that didn't hit the plane," he said.

"Then there was some panic, but people calmed them down."

Israel's Foreign Minister Benjamin Netanyahu warned there could be no compromise with terror.

"Today, they're firing missiles at Israeli plans, tomorrow they'll fire missiles at American planes, British planes, every country's aircraft.

"It means that terror organisations and the regimes behind them are able to arm themselves with weapons which can cause mass casualties anywhere and everywhere.

"This is a very serious escalation of international terrorism."

Fresh terrorism fears yesterday saw guards posted at the Sydney Opera House, and led both the Australian and Canadian Governments to shut down their embassies in Manila.

The attacks come on the day of important primary elections in Israel as Prime Minister Ariel Sharon faces a party leadership challenge from Mr Netanyahu ahead of the general elections in January.