Losses spiral as plume 'to cost airlines €750m'

ICELANDIC ERUPTION:THE CLOUD OF volcanic ash that has shut airports across Ireland and the rest of northern Europe, stranding thousands of passengers, could cost the aviation industry as much as €750 million, according to industry estimates.

Most airlines are already struggling with declining passenger numbers and rising fuel costs, while strikes at British Airways and Lufthansa and ongoing security scares have also caused problems.

Disruption yesterday was even worse than on Thursday, with about 15,000 flights cancelled across Europe, or half the usual timetable, according to Eurocontrol, which oversees the region’s flight paths.

Consultants at the Centre for Asia Pacific Aviation say the latest and most unexpected problem to strike the industry could end up costing airlines $1 billion if it last for three days, as now seems likely. Up to six million passengers could be affected, the Sydney-based organisation estimates.

“Airline finances, particularly in Europe, remain fragile, and airline managements will be hoping the ash – and the attendant paranoia – settles quickly,” it commented.

While the potential losses seem large, they pale alongside the €37 billion the industry as a whole has lost over the past decade. A UK estimate yesterday put the cost to airlines there arising from the grounding of hundreds of aircraft at €34 million a day. In Ireland, the two largest airlines, Ryanair and Aer Lingus, are losing out on about €9 million a day in income, and are also incurring costs for accommodating and transporting stranded staff and binning spoilt food. Airlines won’t have to provide compensation, however, because of the extraordinary circumstances. They will also save on fuel costs as planes remain on the tarmac.

The problems caused by the ash cloud knocked 2.7 per cent off Aer Lingus’s share price and 1.9 per cent off Ryanair’s as the news emerged on Thursday, and further falls were recorded in the companies’ share prices yesterday morning.