[EN-AIR] Icelandic Volcano : Aviation Industry Counts The Cost

With airlines still reeling from the 2009 global economic meltdown, they now have to count the cost of the latest meltdown to hit the industry - the Icelandic volcano eruption that caused much of northern Europe's airspace to shut down.

According to the International Air Transport Association (IATA), the Icelandic volcano crisis cost the world's airlines more than $1.7 billion in lost revenue during the six-day period after the initial eruption.

For the three-day period (April 17th - 19th), when disruptions were greatest, lost revenues reached $400 million per day.

The scale of the airspace shutdown is unprecedented. According to IATA's director general & CEO Giovanni Bisignani, the crisis impacted an estimated 29% of global aviation, eclipsing 9/11 when US airspace was closed for three days.

Airlines can take little comfort from the savings on their fuel bills - estimated at $110 million per day less than normal. But airlines face added costs, not least from their obligations in terms of passenger care.

"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," said Bisignani. "It is hitting hardest where the carriers are in the most difficult financial situation. Europe's carriers were already expected to lose $2.2 billion this year - the largest in the industry."

While some airports like London Heathrow and Dubai are trying to mitigate the impact on airlines by waiving parking fees and not charging for repositioning flights, Bisignani is calling on governments for regulatory relief:

Relax airport slot rules: IATA urged that rules on take-off and landing slot allocation (use it or lose it) be relaxed to reflect the extraordinary nature of the crisis.

Lift restrictions on night flights: IATA urged governments to relax bans on night flights so carriers can take every opportunity to get stranded passengers back home as soon as possible.

Address unfair passenger care regulations: Under Europe's passenger rights regulations, airlines are responsible for paying for hotels, meals and telephones for stranded passengers. "The regulations were never meant for such extraordinary situations," said Bisignani, adding that the European Commission (EC) urgently need to find a way to ease this unfair burden.

Examine ways for governments to compensate airlines for lost revenues. Following 9/11, the US government provided $5 billion to compensate airlines for the cost of grounding the fleet for three days. The EC also allowed European states to provide similar assistance.

Bisignani stresses that while industry neither wants nor needs bailouts, this crisis is not the result of airlines running their business badly. "It is an extraordinary situation exaggerated with a poor decision-making process by national governments. The airlines could not do business normally. Governments should help carriers recover the cost of this disruption," he said.

On Monday, the EC announced revised measures for handling airspace closures, following widespread criticism of their methodology.

According to Bisignani, the decision to categorise airspace based on risk was a step in the right direction. Unfortunately, not all states are applying this uniformly.

"It is an embarrassing situation for Europe, which, after decades of discussion, still does not have an effective Single European Sky. The chaos and economic losses of the last week are a clarion call to Europe's political leaders that a Single European Sky is critical and urgent," said Bisignani.

Source : EFT, 22.04.10.