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Ash Attack cost airlines USD1.7 billion

Airlines count the cost as skies open

The airline industry is rapidly restoring services as almost all European airspace is now available. But relief is quickly turning to anger as airlines count the cost of the massive disruption to their operations. Trans-Atlantic flights operations have gone back to normal, with 338 flights arriving in Europe on 21-Apr-2010, but restrictions are still in force in some areas, including Finland airports and parts of northern Scotland. This was reflected in aviation stock prices yesterday, with Finnair and Norwegian falling 0.7%, but most other carriers gaining…

The airline industry is rapidly restoring services as almost all European airspace is now available. But relief is quickly turning to anger as airlines count the cost of the massive disruption to their operations. Trans-Atlantic flights operations have gone back to normal, with 338 flights arriving in Europe on 21-Apr-2010, but restrictions are still in force in some areas, including Finland airports and parts of northern Scotland. This was reflected in aviation stock prices yesterday, with Finnair and Norwegian falling 0.7%, but most other carriers gaining.

UK air navigation services provider, NATS, stated that after handling approximately 80% of traffic levels yesterday, it expects traffic volumes to approach 90% from 0700 today (22-Apr-2010). NATS stated, “unless there is any significant change to our operations, we will not be issuing any further updates”.

The latest Sabre Flight Explorer shows increasing activity within Europe and across the Atlantic. Sabre noted there was no sign of ash above 20,000 feet, with a continued high (typical) number of North Atlantic Tracks.

Ash Attack cost airlines USD1.7 billion – IATA
IATA estimates the Icelandic volcano crisis cost airlines alone more than USD1.7 billion in lost revenue through Tuesday. At the worst, the crisis impacted 29% of global aviation and affected 1.2 million passengers a day, eclipsing the impact of September 11 when US airspace was closed for three days.

IATA Director General, Giovanni Bisignani stated, “for an industry that lost USD9.4 billion last year and was forecast to lose a further USD2.8 billion in 2010, this crisis is devastating. It is hitting hardest where the carriers are in the most difficult financial situation. Europe’s carriers were already expected to lose USD2.2 billion this year-the largest in the industry”.

He added, “as we are counting the costs of the crisis we must also look for ways to mitigate the impact. Some of our airport partners are setting industry best practice. London Heathrow and Dubai are waiving parking fees and not charging for repositioning flights. Others airports must follow”.

But airports are also licking their wounds and are unlikely to be giving any free rides to airlines. European airport trade body ACI EUROPE estimates that 9.5 million air passengers were unable to travel between 15/20-Apr-2010, leading to lost revenues for the airport sector of EUR250 million. The body stated, “with most of their costs being fixed, any cost savings during the disruption have been minimal for Europe’s airports and were eliminated by the extra cost of providing assistance to passengers.

ACI Europe Director General, Olivier Jankovec called for a European Aviation Relief Plan, stating, “it is clear from the losses sustained by Europe’s airports that they must be part of any compensation measures.”

Credit ratings safe, for now
Moody’s has indicated that its ratings for European airlines are not affected by the flight cancellations. However, the ratings agency stated this assessment could change if conditions do not improve in the coming weeks.


IATA calls for aid, and more
In the meantime, IATA made four specific and urgent requests for regulatory relief, including a call for a financial relief package to compensate airlines for lost revenues. IATA had previously stopped short of calls for financial support for the industry and has consistently pursued a course of liberalisation as opposed to aid to help the industry move forward.

But this time it’s different. Mr Bisignani stated, “I am the first one to say that this industry does not want or need bailouts, but this crisis is not the result of running our business badly. It is an extra-ordinary 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”.

IATA cited the post-September 11 move by the US government to provide USD5 billion to compensate airlines for the costs of grounding the fleet for three days, noting the European Commission also allowed European states to provide similar assistance at that time.

Specifically, IATA called for:
– Relaxation of airport slot rules: IATA urged that rules on take-off and landing slot allocation (use it or lose it) be relaxed to reflect the extra-ordinary nature of the crisis.
– Lifting of restrictions on night glights: 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.
– Addressing “unfair passenger care regulations”: “This crisis is an Act of God—completely beyond the control of airlines. Insurers certainly see it this way. But Europe’s passenger rights regulations take no consideration of this. These regulations provide no relief for extraordinary situations and still hold airlines responsible to pay for hotels, meals and telephones. The regulations were never meant for such extra-ordinary situations. It is urgent that the European Commission finds a way to ease this unfair burden,” said Bisignani.

The Board of Airline Representatives in the UK (BAR UK), representing over 90 airlines, has called on the UK government to “tackle the EU Commission over unfair EU Regulations against member state airlines”.

BAR UK CEO, Mike Carrivick, stated, “the eagerness of the EU and the UK government to publicly state that airlines have a responsibility under EU Regulation EU261/2004, to accommodate and feed passengers booked on flights cancelled by the volcanic disruptions, is a misuse of the regulation”. He added, “Regulation EU261/2004 was intended to apply when airlines had individual delays or cancelled flights. It was never intended to apply to wholesale shutdown of the airways system imposed by governmental rulings and without any limitation of time. It is also relevant that airlines cannot immediately resume normal services from the moment that the airspace restrictions are lifted. This Regulation, when used in this way, is draconian, disproportionate and often impractical”.

BAR UK is calling for an urgent reassessment of the implementation of this Regulation now and in the future.

The case strengthens for a Single European Sky
ACI Europe also pleaded for the implementation of the Single European Sky. Mr Jankovec stated, “these past 6 days have unequivocally shown that Europe is in dire need of a fully functioning Single European Sky and that the lack of it can lead to paralysis, with dramatic consequences.”

IATA’s Bisignani added the past week’s events exposed an “embarrassing situation” for Europe, “which after decades of discussion, still does not have an effective Single European Sky”. He added, “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”.

ACI Europe’s Mr Jankovec concluded, “this situation has also been a stark reminder of the irreplaceable role that aviation plays in connecting our continent and making it work. It is a wake up call for all Governments to finally develop a long-term strategic vision for aviation and make it part of our future”.

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Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

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