* FTSE 100 down 0.6 pct
* Airlines top fallers; RBC cuts easyJet target price
* Analysts reckon index will consolidate near-term
* Dixons, Carphone fall after agreeing retail merger
By Tricia Wright
LONDON, May 15 (Reuters) - Britain's top shares dropped on Thursday, led down by airlines, as investors bet on a period of consolidation for the FTSE 100 after it reached a 14-year high earlier in the day.
Profit-taking continued for shares of British Airways owner IAG and easyJet. Both airlines have jumped around 40 percent in the last 12 months, and investors have been cashing in the gains.
Traders said an elevated oil price was partly to blame for the declines, with Brent crude near 2-1/2 week highs above $110 a barrel. For a table of jet fuel hedging positions, click
RBC cut its target price for easyJet, to 1,750 pence from 1,800 pence. It cited the difficulties easyJet set out in its results statement in forecasting passenger behaviour this summer, when people's holiday dates might be based on whether their team was still in the World Cup soccer competition.
EasyJet led the market lower, down 6.7 percent, followed by IAG, 6 percent weaker.
The blue-chip FTSE 100 index ended down 37.60 points, or 0.6 percent, at 6,840.89 points. Earlier in the session, it had climbed to 6,894.88, the highest level since December 1999, when it set a record high of 6,950.60 points.
The pullback seen in airlines underscored concerns about the outlook for share prices more broadly.
Lofty valuations are stopping investors from putting more money to work in equities. The FTSE 100 is trading on a 12-month forward price/earnings ratio of 13.7 times, against its 10-year average of 11.7 times, Thomson Reuters Datastream shows.
"We were at a 14-year high on not very much, really, so I just think it's a little bit of weariness," said Peel Hunt equity strategist Ian Williams.
Williams reckoned the UK benchmark will trade around current levels until at least mid-year, enabling earnings to catch up after what has proved a lacklustre corporate results season.
With 84 percent of the reporting season wrapped up, 50 percent of STOXX Europe 600 companies have missed analyst forecasts, StarMine data showed.
"(Investors are still concerned about) valuations versus underlying earnings... That will remain the case until we get a better bottom-up earnings story, which won't happen till H1 reports are out the way really," Williams said.
Among mid-caps, Dixons Retail and Carphone Warehouse shed 10.3 percent and 8.1 percent respectively as investors took the view that it would take time for their 3.8 billion pounds ($6.38 billion) all-share merger to feed through to the bottom line.
"The benefit to derive from this merger is a (profit) margin increase, not from higher income but a reduction in costs. This isn't particularly exciting," Marc Kimsey, senior trader at Accendo Markets, said.
"With investors assuming the stocks' advances (are) exhausted, they're cashing out to deploy funds elsewhere." (Additional reporting by Atul Prakash; Editing by Catherine Evans)