Airlines Lose $1.7 Billion Due to Volcanic Ash

Global airlines recorded losses amounting to approximately $1.7 billion due to flight disruptions due to the volcano in Iceland. The International Air Transport Association (IATA) stated that the volcanic ash crisis affected at least one third of global flights, with over 1.2 million passengers affected per day.

Flights finally resumed on Tuesday (20th April 2010) night after many airports being shut down for a period of six days. The ban was lifted following safety test results indicating the low density ash could be handled by aircraft engines.

Another report released by the Centre for Economics and Business Research, UK estimates airline losses at $1.45 billion.

IATA figures indicated that airlines recorded savings of around $110 million per day on fuel, but had to sustain additional costs from taking care of passengers stranded by cancelled flights. IATA’s Chief Executive, Giovannie Bisignani said that it was quite a serious issue, taking into consideration that the industry made around $9.4 billion in 2009 – and lost $2.8 billion within a space of six days. He openly criticized governments as being ‘too hasty’ to close down airspaces and insisted airlines be compensated for their losses. Bisignani stood his ground saying that the decision to close down airspaces were based on theoretical models instead of hard facts, stating that IATA test flights showed results otherwise.

Easyjet, a budget airline which experienced losses of £50 million during this period, stated that they would seek compensation from the government. British Airways also sought compensation from the UK government, stating that they had incurred losses of £15-20 million per day.

Apart from airlines, other businesses too were hit hard by the crisis. Perishable goods which are frequently flown out for export purposes such as flowers and food items have also been heavily affected.