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Ash Effect: airlines to take 3 years to recover

india Updated: Apr 21, 2010 21:22 IST
Ash Effect

The International Air Transport Association (IATA) estimates that the crisis caused by a volcanic ash cloud above Europe cost airlines revenues of more than $1.7 billion by Tuesday.

“For an industry that lost $9.4 billion last year and was forecast to lose a further $2.8 billion in 2010, this crisis is devastating,” IATA Director-General and Chief Executive Giovanni Bisignani said on Wednesday.

It will take the airline industry at least three years to recover from the volcano crisis, Bisignani said.

Most of Europe’s airspace closed on Thursday after a huge ash cloud from an Icelandic volcano spread out, stranding millions of business passengers and paralysing freight and businesses worldwide.

On the three days from April 17 to April 19, when the air traffic disruptions were the biggest, lost revenues reached $400 million per day, IATA said. At its worst, the crisis affected 29 percent of global aviation and 1.2 million passengers a day.

By Wednesday morning, most of European airspace was open for business, but with so many planes having been grounded it could take days or weeks to clear the backlog.

While the shut-down led to lost revenues for airlines, it also lowered their operating costs for a short time, Bisignani said. Fuel costs dropped by $110 million a day, for instance.

The hit by the volcano crisis was bigger than the impact of the September 11 2001 attacks, which left airlines grounded for three days, Bisignani said.

The IATA chief urged governments to examine ways to compensate airlines for lost revenues. The US government provided $5 billion to compensate airlines after the September 11 attacks, and the European Union also provided assistance.

Lufthansa Chief Executive Wolfgang Mayrhuber said he will not apply for compensation to offset the soaring burden.

Singapore Airlines, the world's second-largest airline by market value said ash-related disruptions had cost it $29 million from cargo and passenger operations.

Shares of Lufthansa were up 1.1 per cent at 12.755 euros, while the STOXX Europe 600 Travel & Leisure was up 1.5 per cent.

British Airways was up 1.2 per cent at 236.6 pence, and Air France-KLM was 0.9 per cent higher.