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Volcano cloud pushes European airlines to the brink: analysts

Volcano cloud pushes European airlines to the brink: analysts
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First Published: Sun, Apr 18 2010. 09 26 PM IST
Updated: Sun, Apr 18 2010. 09 26 PM IST
Paris: The volcanic ash hanging over Europe has mushroomed into a dark $1.5 billion cloud with no hope of a silver lining, analysts warned.
Airlines and other travel industry sectors already face a bill of more than €1.2 billion ($1.5 billion) from the four-day closure of European airspace, analysts said.
And they added that the longer the disruption goes on the bigger the threat to the European economies struggling to come out of recession.
European carriers such as KLM, Lufthansa and Air Berlin are stepping up pressure to get passenger carrying jets back in the air. They have questioned scientists claims that the mineral dust blown over Europe from a volcano in Iceland is a threat to jet engines.
While the European Union is investigating the extent of losses, Brussels Airlines has already called for government help to survive. Many of their counterparts are also in a desperate state.
Crisis advisory company Lewis PR estimated that the shutdown has so far cost the European travel industry more than £1.0 billion (€1.2 billion/$1.5 billion) in cancelled flights, lost hotel rooms and empty cruise liners.
It has warned the disruption could go on for another two weeks.
Paul Charles at Lewis PR said: “Airlines alone are facing a massive bill from lost revenues and the enormous costs of reaccommodating and repatriating stranded passengers.
“Travel and transport firms have faced a double-whammy of disruption this year, with snow-related cancellations and now the ash cloud crisis, and several firms are at breaking point.”
The International Air Transport Association (IATA) has said the travel mayhem was costing airlines more than $200 million (€230 million) a day at a “conservative and initial” estimate.
John Strickland, aviation analyst at the JLS consultancy, said the final losses are “an unknown quantity”.
“A lot of people were being quite dismissive, but we are now running to three, four, five days’ worth of disruption,” he said, highlighting the “enormous losses” the airline industry is already struggling with.
“Airlines have got the closed sign up and are hemorrhaging revenue every day. It started having a major impact for UK carriers but now it’s become pretty well a Europe-wide phenomenon.”
Accountancy firm Deloitte said “the big concern” will be if the volcano keeps sending the sulpherous cloud toward Europe for a prolonged time.
“Following one of the worst year’s for financial performance the aviation industry has ever seen, a prolonged period of losses for an industry that is already in a difficult financial position could have serious repercussions.”
Charles at Lewis PR said there would be a fallout for the wider economy.
“The wider implications will add further costs to the economy, in terms of staff not being able to get back to work because they are stranded and cargo, such as fresh food and vital medicine supplies, not being delivered,” he said.
Howard Archer, chief European economist at IHS Global Insight consultancy, said the impact on the economy would be limited as long as the chaos is quickly controlled.
“Obviously the longer the problem persist, the more serious will be the economic repercussions.
He said the pharmaceutical industry may be “hit significantly” as many of its products are moved by air, to be met tight delivery schedules. “Individual companies could also be affected if they need spare parts or inputs brought in quickly from overseas.”
EU transport ministers are to hold a teleconference on Monday on the crisis, with talk inevitably turning to aid for the stricken airlines.
Spanish finance minister Elena Salgado said that so far no country has proposed giving aid.
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First Published: Sun, Apr 18 2010. 09 26 PM IST