CHICAGO/WASHINGTON, Dec 28 (Reuters) - The U.S. Transportation Security Administration (TSA) will now give air captains discretion over when commercial airline passengers can move about the cabin and what they can have on their laps.

The update of airline security rules follows what U.S. government authorities called a thwarted attempt by an individual on Christmas day to blow up a Northwest Airlines flight as it approached Detroit from Amsterdam.

President Barack Obama said that as a result of this oversight, he had ordered a thorough review of the screening process.

The TSA confirmed Monday that pilots can now decide whether to allow passengers to keep items in their laps or require them to be seated during portions of the flight.

The agency also will let pilots and airlines determine whether in-flight entertainment systems that show a plane's location should be turned off to avoid a security risk, an agency spokeswoman said.

JetBlue Airways (JBLU.O) announced through its Twitter page earlier Monday that its LiveTV service resumed on its flights.

Airline industry experts have said renewed terror threats and potentially tighter airport security measures could dampen business travel demand just as it starts to recover. [ID:n28168827]

Shares of U.S. airlines slumped Monday, the first trading session following the attempted attack. The Arca Airline index .XAL fell 1.8 percent.