Icelandic Volcano’s Eruption Has Cost Airlines Billions of Dollars: IATA

by Staff on April 21, 2010

The International Air Transport Association (IATA) estimates that the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue through Tuesday, April 20 — six days after the initial eruption.

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

“Lost revenues now total more than $1.7 billion for airlines alone. At the worst, the crisis impacted 29 per cent of global aviation and affected 1.2 million passengers a day. The scale of the crisis eclipsed 9/11 when US airspace was closed for three days,” says Giovanni Bisignani, IATA’s director general and CEO.

On Monday, April 19, 2010, the Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) instrument onboard NASA's Terra spacecraft obtained this image of the continuing eruption of Iceland's Eyjafjallajökull volcano. Image credit: NASA/GSFC/METI/ERSDAC/JAROS, and U.S./Japan ASTER Science Team

IATA notes the airlines did see some cost savings related to the flight groundings. For example, the fuel bill was $110 million a day less compared with normal costs. But airlines faced added costs, including from passenger care, says IATA.

“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. 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,” says Bisignani. “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.”

NASA's Aqua satellite view of volcanic ash plume on April 19, 2010. The volcanic eruption was particularly explosive because it surged underneath a glacier 200 meters thick. Melting ice pouring into the crater helped create the plumes of ash that rose as high as 9 kilometers (5.5 miles) into the air. (For the sake of comparison, commercial aircraft flying at 30,000 feet are at a height of 5.68 miles.) Once the crater ice mostly melted away, the ash cloud decreased to below 3 kilometers (1.8 miles) in height, though eruption continued. European travel was badly hit by the ash cloud, with airspace largely shut down since the morning of April 15. Credit: NOAA/NASA

However, IATA believes governments must play the larger role in mitigating the financial impact to airlines of the Icelandic volcano’s eruption. Bisignani made four specific requests for regulatory relief:

● Relax airport slot rules: IATA is urging 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;

● Lift restrictions on night flights: IATA is urging governments to relax bans on night flights so carriers can take every opportunity to get stranded passengers back home as soon as possible; and

● Address 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,” says Bisignani. “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.”

The MODIS instrument on NASA's Terra satellite captured a visible image of the ash plume (brown) drifting south and east from Eyjafjallajökull volcano in Iceland at 11:55 UTC (7:55 a.m. EDT) on April 20. Credit: NASA's MODIS Rapid Response Team

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

“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,” says Bisignani.

On Monday, the European Commission announced revised measures for handling airspace closures, following widespread criticism of its civil aviation and air navigation agencies’ methodology.

The MODIS instrument on NASA's Terra satellite captured a visible image of the much diminished ash plume (brown) drifting south and east from Eyjafjallajökull volcano in Iceland on April 21. Image credit: NASA's MODIS Rapid Response Team

“Airspace was being closed based on theoretical models not on facts. Test flights by our members showed that the models were wrong,” claims Bisignani. “Our top priority is safety. Without compromising on safety, Europe needed to find a way to make decisions based on facts and risk assessment, not theories.”

“The decision to categorize airspace based on risk was a step in the right direction. Unfortunately, not all states are applying this uniformly,” says Bisignani. “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.”

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