For the airline industry, emerging from a severe economic downturn, the eruption of a volcano in Iceland and the subsequent disruption caused by it could not have come at a worse time. With only about a third of the transatlantic flights coming into Europe arriving at their destinations, the revival of business on this busy route has come to a halt.
In February, the number of passengers for European airlines was up 4.3% over the previous year according to IATA, following which the industry body cut its forecast losses by half to $2.8 billion. However, these projections will need to be reassessed after accounting for losses in excess of $200 million a day and bring to the surface worries about several struggling airlines going under. This situation resonates with the?damage?wreaked after 9/11?to US carriers that were forced to file for bankruptcy in spite of a $15-billion bailout. The ?ash attack?, as it is popularly referred to, has already affected 8 million passengers around the world, resulting in the loss of over $1 billion for airlines. Add to this the costs of airlines, airports, suppliers, freight operators and so on and the losses are projected to be $2 billion, and counting with each day of stoppage of services.
The European Commission is already talking about the possibility of a bailout of struggling airlines. It has set up an ad-hoc committee with a view to discuss the waiving of European state aid, allowing EU member states to channel emergency funding to airlines like Ryanair and Aer Lingus that have lost 120 million euro, with their share prices falling 2.4% in an otherwise healthy European stock market. Aeroflot lost 2.1%, while British Airways and Lufthansa fell 3.1% and 4.1%, respectively. In view of this beating taken by airlines, it is important that they devise a contingency plan for natural calamities, barring prospects of government bailouts, by building in safety nets in their account books.
Interestingly, the losses incurred by the airline industry have overshadowed the troubles facing airports. They have lost $208 million so far and continue to deal with the chaos, while bearing fixed costs of operation and minimal revenues. Airports also face the additional costs of coping with and making comfortable the estimated 8 million stranded passengers. After successful flight trials with no apparent risk, by Lufthansa, Air Berlin and KLM, airlines? hopes of re-establishing regular business now lie with the powers that be at various national aviation authorities.
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