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Icelandic volcano costs airlines US$1.7b

Six days after the initial eruption airlines are counting the cost.
Bisignani is calling for governments to provide airlines with financial support
Bisignani is calling for governments to provide airlines with financial support

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The Icelandic volcano crisis is estimated to have cost airlines more than US$1.7 billion in lost revenue, according to the International Air Transport Association (IATA).

Most of Europe’s airspace remained closed for six days after the initial eruption on April 15.

For a three-day period (April17-19), when disruptions were greatest, lost revenues reached $400 million per day, IATA said.

“Lost revenues now total more than $1.7 billion for airlines alone. At the worst, the crisis impacted 29% 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,” said IATA director general & CEO Giovanni Bisignani.

IATA noted there were some cost savings related to the flight groundings. For example, the fuel bill is $110 million a day less compared to normal. But airlines face added costs including from passenger care.

“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,” said Bisignani.

In order to mitigate the impact of the crisis, Bisignani said governments’ worldwide needed to play a larger role. The director general made four specific requests – relax airport slot rules; lift restrictions on night flights; address unfair passenger care regulations.

In addition Bisignani also urged 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,” said Bisignani.

During the height of the crisis, Bisignani criticised the European authorities for the way airspace closures were handled, arguing that decisions were being made on theoretical models, not on facts. The European Commission has announced that revised measures will be implemented should a similar event occur again.

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