Volcano ash cloud hits airline, shipping, travel industries

BRUSSELS, Belgium — Bumping into friends in the neighborhood around the European Union’s headquarters on Friday morning was enough to illustrate the extent of the disruption caused by the volcanic cloud drifting over Europe.

There was the United Nations negotiator forced to cancel a trip to Sudan; then the Estonian woman whose diplomat husband was stranded in Moscow; a business writer unable to cover key EU finance talks in Madrid; an EU official seeking overland alternatives to a planned flight home to France for the weekend.

With northern Europe transformed into a no-fly zone by the eruption of Iceland's Eyjafjallajokull volcano, airlines were expected to loose over $200 million a day in revenue, said a “conservative estimate” from the International Air Transport Association.

About 8,000 flights in Europe were canceled on Thursday and about 16,000 were expected to be grounded Friday — well over half the number normally criss-crossing the continent.

Ireland, Britain, Norway, Denmark, Sweden, Belgium, the Netherlands, Finland and Estonia completely closed their airspace for all civilian flights. Northern France and Germany were shut down, including Paris, Frankfurt and Berlin airports.

Eurocontrol, the body that coordinates flights in Europe, called the disruption “unheard of in the history of European aviation.” About one-third of transatlantic flights to Europe were grounded.

Some flights to Ireland and Scotland resumed Friday as the ash cloud moved on, but with the volcano in Iceland still belching out ash, there was no clear sign as to when skies over Europe might again be safe for planes. Economists said it was too early to estimate the overall economic impact, but it could run into billions of euros.

“It comes at a difficult time,” said David Frost, director general of the British Chambers of Commerce. “Business is just recovering from a deep recession … our recovery depends on British business searching out new overseas markets and getting cargo across the globe.”

The airline sector has already been suffering from the global economic squeeze, high fuel costs and, for some, a spate of strikes. Last month, British Airways said a walkout by cabin staff cost it about $10 million a day, but the strike affected less than 40 percent of its flights, much less than those grounded by the dust cloud.

Some industry analysts said, however, that if the stoppage did not drag on too long, the airlines should be able to absorb the short-term impact, despite having to offer refunds, meals and hotel rooms for many customers left marooned by canceled flights.

The uncertainty dragged airline stocks down. Shares in British Airways had fallen by 3.42 percent close to the end of European trading Friday. Lufthansa slipped by 2.73 percent, KLM-Air France by 2.95 percent and the Irish low-cost carrier Ryanair by 3.12 percent.

With air freight also blocked, the shock was being felt well beyond the transport sector.

“It’s terrible. I do not have any more scallops,” said Christophe Malysse, director of the Lobsterfish company that supplies European restaurants with live shellfish imported from North America.

“If it only lasts a day or two it’s not a disaster, but if it goes on any longer it’s a real problem. Thankfully I got in a big supply of lobsters from Canada just before they shut the airports,” he said from his headquarters in western Belgium.

Malysse's North American suppliers could face even bigger problems if their fresh, perishable products are not flown out on time.

The express mail company DHL Express said it was fortunate because its hub airport in Leipzig, Germany, was able to stay open through Thursday night enabling it to keep up dispatching to most destinations. Although the airport was closed Friday morning, spokesman Joerg Wiedemann said the company was hopeful it would re-open in time for its peak nighttime flights.

Speaking from Bonn, Germany, Wiedemann explained that the company was switching some mail to trucks for European destinations unreachable by air. “We’re switching to road, which will cause some delays, but considering the entire situation, that’s the best we can do.” He said it was too early to estimate the extra costs caused by the volcano.

The impact on the insurance industry was also not immediately clear. In Britain, some insurers were classifying the ash cloud as a bad weather event, which means clients may be able to file claims if their vacations are nixed by canceled flights. However others were treating the Icelandic eruption as an “act of God” which would be outside most travel policies.

Iceland will likely be hit hardest. The explosion of the Eyjafjallajokull volcano has brought damage from ash fall and floodwaters from melted glaciers at a time when the economy is still reeling from its 2008 collapse.

Ironically wind conditions have allowed flights from the country’s main airport to North America and southern Europe to continue, but Iceland’s booming tourism trade looks certain to suffer in the volcano’s aftermath.

Following the meltdown of the Icelandic banking system in 2008, the county’s currency plummeted, turning one of Europe’s most expensive destinations into a bargain for tourists attracted by the wild Arctic landscapes.

The number of stays on the island grew by 6.6 percent last year despite a global travel slump. Tourism now accounts for 15 percent of all jobs, according to the World Travel and Tourism Council.

Iceland is even cashing in on its seismic location. One tour operator offers trips with “real-live volcano action” that promise “the hottest tour you have ever had.”

Its volcano tours are, however, canceled for the moment due to the ferocity of the current eruption.