waraich66
SENIOR MEMBER
- Joined
- Oct 19, 2008
- Messages
- 4,641
- Reaction score
- -2
- Country
- Location
Volcanic ash costing airlines US$200 million a day
Published On Fri Apr 16 2010
A aircraft maintenance worker covers a jet engine at Belfast City Airport, Northern Ireland, Friday, April, 16, 2010.
A aircraft maintenance worker covers a jet engine at Belfast City Airport, Northern Ireland, Friday, April, 16, 2010.
PETER MORRISON/AP
Ads by Google
Copa Air Seat Sale
Lowest Fare Guaranteed!
Great Tickets Available Now Online
CopaAirlines.FlightNetwork.com
Emily Mathieu Business Reporter
A mountainous plume of ash generated by an Icelandic volcano is costing the global airline industry US$200 million a day in lost revenue, with no clear estimate on when regular service will resume that figure is expected to rise.
On Friday, the International Air Transport Association (IATA), a trade body that serves 230 airlines representing 93 per cent of air traffic, released an early estimate of the financial fallout from the eruption.
IATA called the estimate "initial and conservative." An IATA spokesperson said it was too early to calculate the costs airlines will incur for re-routing of aircraft, hotel costs and care for stranded passengers and the recovery of stranded aircraft at various ports.
On Wednesday, the volcano beneath Icelands Eyjafjallajokull glacier erupted, pushing a cloud of ash and particles 6-9,000 metres into the air.
Concerns the microscopic particles could cause aircraft malfunctions shut down air space over Britain, Ireland, France, Denmark, Norway, Sweden, Finland and Belgium. Flights were halted at Europe's two busiest airports Heathrow in London and Charles de Gaulle airport in Paris as well as dozens of other airports, 25 in France alone.
Planes are also grounded in Germany including Düsseldorf, Cologne, Hamburg, Berlin and the airspace around Frankfurt, and parts of Poland including Warsaw's airport.
On Friday, Eurocontrol, the European air traffic agency, said airline service was cut by more than half, with only 11,000 flights expected to operate in Europe - compared to the usual 28,000.
John Strickland, director, JLS Consulting, an air transport consultancy firm in London, England said the economic impact could surpass the costs associated with the shut down of air traffic following 9/11 because of the impact on Africa, Middle Eastern and Asian markets.
It is difficult to predict how well the airlines will fare if planes remain grounded, he said.
This is a situation where we are not simply talking about operating costs going up, we are talking about hemorrhaging revenue, said Strickland.
Those who have the least in the bank, the least access to liquidity and loan finance are the ones who are going to be the most exposed.
Air Canada has stopped flights to London Heathrow, Paris Charles de Gaulle, Frankfurt, Munich, Zurich and Geneva.
The loss of the London route is probably costing Air Canada between $2-3 million a day, said Joseph D'Cruz with the Joseph L. Rotman School of Management with the University of Toronto.
When they stop flying the loss in profits is small but the losses that come about because of fixed costs that are not being covered are very substantial, said DCruz. So it is pretty serious, but it is short-term.
DCruz said he doesnt expect revenue generated through economy travel to suffer long term, but when high-end flights are suddenly halted people explore other less costly options.
This event could result in a 5 per cent decrease in business travel long-term on transatlantic flights, which account for 50-60 per cent of Air Canadas revenue on those routes, he said.
Douglas McNeill, a transportation analyst with Charles Stanley Securities in London, England, said larger European airlines, like British Airways, lose more than $15.5 million every day their planes are grounded.
If the disruption continues for many more days then the financial damage will start to get a bit more painful, but for the time being it is limited.
British Airways has nearly ($3.1 billion) in the bank so the loss of ($15.5 million) is neither here nor there in terms of liquidity or solvency terms.
McNeill said there used to be relatively weak players in the European airline industry, but high fuel prices and the recession squeezed them out.
It was carnage, he said.
So the airlines that remain have had their business models tested in adversity and have shown themselves to be resilient.
McNeill said on Friday, European airline stocks were all off a little bit, but described the declines as small falls when taken in context of an industry that has been enjoying a healthy run.
After 9/11 it is greatest interruption in International Air Traffic.
Published On Fri Apr 16 2010
A aircraft maintenance worker covers a jet engine at Belfast City Airport, Northern Ireland, Friday, April, 16, 2010.
A aircraft maintenance worker covers a jet engine at Belfast City Airport, Northern Ireland, Friday, April, 16, 2010.
PETER MORRISON/AP
Ads by Google
Copa Air Seat Sale
Lowest Fare Guaranteed!
Great Tickets Available Now Online
CopaAirlines.FlightNetwork.com
Emily Mathieu Business Reporter
A mountainous plume of ash generated by an Icelandic volcano is costing the global airline industry US$200 million a day in lost revenue, with no clear estimate on when regular service will resume that figure is expected to rise.
On Friday, the International Air Transport Association (IATA), a trade body that serves 230 airlines representing 93 per cent of air traffic, released an early estimate of the financial fallout from the eruption.
IATA called the estimate "initial and conservative." An IATA spokesperson said it was too early to calculate the costs airlines will incur for re-routing of aircraft, hotel costs and care for stranded passengers and the recovery of stranded aircraft at various ports.
On Wednesday, the volcano beneath Icelands Eyjafjallajokull glacier erupted, pushing a cloud of ash and particles 6-9,000 metres into the air.
Concerns the microscopic particles could cause aircraft malfunctions shut down air space over Britain, Ireland, France, Denmark, Norway, Sweden, Finland and Belgium. Flights were halted at Europe's two busiest airports Heathrow in London and Charles de Gaulle airport in Paris as well as dozens of other airports, 25 in France alone.
Planes are also grounded in Germany including Düsseldorf, Cologne, Hamburg, Berlin and the airspace around Frankfurt, and parts of Poland including Warsaw's airport.
On Friday, Eurocontrol, the European air traffic agency, said airline service was cut by more than half, with only 11,000 flights expected to operate in Europe - compared to the usual 28,000.
John Strickland, director, JLS Consulting, an air transport consultancy firm in London, England said the economic impact could surpass the costs associated with the shut down of air traffic following 9/11 because of the impact on Africa, Middle Eastern and Asian markets.
It is difficult to predict how well the airlines will fare if planes remain grounded, he said.
This is a situation where we are not simply talking about operating costs going up, we are talking about hemorrhaging revenue, said Strickland.
Those who have the least in the bank, the least access to liquidity and loan finance are the ones who are going to be the most exposed.
Air Canada has stopped flights to London Heathrow, Paris Charles de Gaulle, Frankfurt, Munich, Zurich and Geneva.
The loss of the London route is probably costing Air Canada between $2-3 million a day, said Joseph D'Cruz with the Joseph L. Rotman School of Management with the University of Toronto.
When they stop flying the loss in profits is small but the losses that come about because of fixed costs that are not being covered are very substantial, said DCruz. So it is pretty serious, but it is short-term.
DCruz said he doesnt expect revenue generated through economy travel to suffer long term, but when high-end flights are suddenly halted people explore other less costly options.
This event could result in a 5 per cent decrease in business travel long-term on transatlantic flights, which account for 50-60 per cent of Air Canadas revenue on those routes, he said.
Douglas McNeill, a transportation analyst with Charles Stanley Securities in London, England, said larger European airlines, like British Airways, lose more than $15.5 million every day their planes are grounded.
If the disruption continues for many more days then the financial damage will start to get a bit more painful, but for the time being it is limited.
British Airways has nearly ($3.1 billion) in the bank so the loss of ($15.5 million) is neither here nor there in terms of liquidity or solvency terms.
McNeill said there used to be relatively weak players in the European airline industry, but high fuel prices and the recession squeezed them out.
It was carnage, he said.
So the airlines that remain have had their business models tested in adversity and have shown themselves to be resilient.
McNeill said on Friday, European airline stocks were all off a little bit, but described the declines as small falls when taken in context of an industry that has been enjoying a healthy run.
After 9/11 it is greatest interruption in International Air Traffic.
