Business Features

Ash costs cash as airlines count volcano bill (News Feature)

By Ben Nimmo Apr 16, 2010, 13:26 GMT

Brussels - Ash was the cause of the chaos gripping Europe's airports on Friday, but it is cash which looks likely to seize the headlines in the coming days as airlines count the cost of the volcanic eruption in Iceland.

The ash cloud forced the biggest airspace closure in Europe's history and left hundreds of thousands of travellers stranded across the continent, with a potentially massive cost to airlines.

'Passengers have the right to be put up in hotels, with food and drink provided, and they have the right to a refund. On top of that, there are lost revenues from cargo services,' Geert Sciot, spokesman for Brussels Airlines in Belgium, told the German Press Agency dpa.

'The cost to our company alone is hundreds of thousands of euros easily,' Sciot said.

The eruption of the volcano near Iceland's Eyjafjallajoekull glacier on Wednesday caused little interest outside the specialized world of vulcanologists and geophysicists.

But the cloud of ash and dust which it spewed out has caused unprecedented chaos in Europe's skies.

'It's the first time in the history of European air traffic that we are faced with such a phenomenon,' said the deputy head of European air-traffic safety organization Eurocontrol, Brian Flynn.

European airlines are no strangers to disruptions: snow, rain, forest fires and strikes have all, in their time, wrought havoc.

Four days of unexpectedly heavy snow which forced Brussels airport to scale back operations in December cost Brussels Airlines an estimated 4 million euros, Sciot said.

But while airlines have contingency plans for such events, the sheer scale of the disruption caused by the Icelandic volcano has left them reeling.

'Airlines largely take those sorts of things in their stride, but what's happening now is unprecedented,' said David Henderson, information manager at the Brussels-based Association of European Airlines, Europe's main airline industry group.

Indeed, by Friday lunchtime it was difficult to even begin putting a price on the chaos wrought by the volcano, as airlines grappled to find hotel rooms for stranded passengers, new seats for those who still wanted to fly and refunds for those who did not.

Henderson said that AEA members expect to take in 200 million euros (270 million dollars) on a normal day day. With an estimated 60 per cent of flights grounded on Friday, the initial bill is therefore likely to come in at around 120 million euros a day.

On top of that comes the cost of putting up passengers stuck in transit, with Henderson saying that airlines were reporting spending 'lots of money on hotels.'

British Airways (BA) said Friday that more than 230 aircraft had been grounded, but said it was 'far too soon' to calculate the costs of the losses incurred.

Shares in the airline, which is already on course to make record losses of in 2009, fell by 2.7 per cent to below 240 pence on the London stock market Friday.

The disruption also hit budget carriers Ryanair and easyJet, which both saw millions wiped off their companies' values on the stock market.

Adding to airlines' woes comes the price of getting passengers, aircraft and crews home from wherever the dust cloud stranded them.

Brussels Airlines has 13 of its 50 aircraft stuck in far-flung European and African airports. Like all airlines, it will have to take into account strict rules on crew working hours and aircraft flight and service times as it tries to bring them home.

'It's quite a challenge ... We estimate it will take us up to a day after the airspace re-opens before everything is back in place, and for airlines with more inter-continental flights, it could take some days,' Sciot said.

And complicating that challenge is the fear that, even when the cloud of ash disperses, the fog of confusion which overlay Europe's efforts to shut down its airspace on Thursday will remain.

The European system 'doesn't seem to be very joined up, with different countries taking different decisions at different times,' Henderson pointed out.

'As long as different jurisdictions apply different rules, it's very hard to predict how we'll move out of this situation,' he said.

And that leaves airlines with the unnerving feeling that there is no way of telling how much cash the Icelandic ash might cost them.

'We may only have seen the tip of this particular iceberg,' Henderson warned.