Global carriers are forgoing an
estimated $200-million in daily revenue after Iceland’s volcanic ash forced the
grounding of planes, racking up losses that hurt a fragile industry barely
recovering from the recession.
The International Air Transport
Association said Friday that it has set up a crisis centre in Montreal
to help European air navigation authorities deal with widespread flight cancellations
triggered by the “extraordinary situation in Europe as a result of volcanic ash
There has been a domino effect on
airlines around the planet since the volcano’s eruption prompted the shutdown
of an array of European airports on Thursday, with planes stuck on the tarmac because
the ash poses a catastrophic threat to jet engines.
By some industry estimates, the
amount of forgone revenue could top $1-billion, given that it might take nearly
a week just to clear the backlog of hundreds of thousands of passengers waiting
to fly to or from Europe.
“At current levels of disruption,
IATA’s initial and conservative estimate of the financial impact on airlines is
in excess of $200-million per day in lost revenues,” said IATA, whose member
carriers account for 93 per cent of scheduled international air traffic. “In
addition to lost revenues, airlines will incur added costs for rerouting of
aircraft,” burning up pricey jet fuel on longer flight paths to avoid the huge
cloud of ash.
In some cases, carriers are also
absorbing the hotel expenses of connecting passengers left stranded, depending
on individual ticketing rules. For instance, Air France said it had booked more than
2,000 hotel rooms Friday for “passengers who have already arrived at Paris
Charles de Gaulle and who have a connecting flight.”
Air Canada said Friday that it had to
cancel flights for a second consecutive day.
“A number of European airports have
closed and airspace has been restricted until further notice,” Air Canada said in a statement, noting that airports
affected include London Heathrow, Paris Charles de Gaulle, Frankfurt, Munich, Zurich and Geneva.
Amid plans to deploy larger jets
and adding flights where possible, Air Canada cautioned that “it may take
several days for travel to resume.”
Airlines can’t afford to have a
large fleet of spare planes on hand because of the high costs involved in having
dormant assets, so it isn’t a simple matter to reschedule passengers.
Global carriers are hoping to
recoup some of their losses later this year, counting on customers whose trips
have been cancelled to rebook rather than request outright refunds.
But many airlines won’t be able to
reap the rewards of last-minute travellers over the next week because most
flights are fully booked in economy class as a result of the need to accommodate
stranded travellers, said IATA spokesman Steve Lott.
Consumers might also shy away from
making new European bookings in the short term because of the uncertainty over
Raymond James Ltd. analyst Ben
Cherniavsky said the airline industry had been on the rebound prior to “Ash
Thursday,” and he figures the sector will regain its footing after the
“ash-spewing volcano” stops wreaking havoc on air travel.