Iceland Volcano Cloud Costs Airline Industry $200 Million A Day

From the IATA (International Air Transport Association), an estimate of what the Iceland volcano is costing the airline industry per day–$200 million. The IATA represents 220 airlines comprising 93% of scheduled international air traffic. Bloomberg recently reported that the “Volcanic eruptions in Iceland which this week caused thousands of flights to be canceled may continue for months.”

Based on the flight routes of the airlines with the most traffic in the North Atlantic, it is likely that most of these costs are being borne by British Air, which has bled red ink, has laid off 8,000 people in the last year, and has an under-funded pension. BA is merging with Iberia.

Also almost certain to be affected are AMR Corp (NYSE:AMR), parent of American, and Continental Air (NYSE: CAL) which flies in and out of the U.K.’s Heathrow and Gatwick. Delta (NYSE: DAL) has had to cancel a number of flights from the East Coast to Amsterdam. According to Reuters, “United Airlines, a unit of UAL Corp, said it had halted 30 arrivals into Europe and 32 departures from Europe.” Several news reports say that on routes to the East toward Asia, JAL, Korean Air, and Singapore Air have large numbers of flights some of which go over the North Pole.

The IATA release

Date: 16 April 2010

Statement – Financial Impact of Icelandic Volcano Ash

The air transport industry is experiencing major disruption of services following the Iceland volcanic eruption.

IATA’s initial and conservative estimate of the financial impact on airlines is in excess of US$200 million per day in lost revenues. In addition to lost revenues, airlines will incur added costs for re-routing of aircraft, care for stranded passengers and stranded aircraft at various ports.

IATA has set up its crisis center in Montreal and is closely coordinating with Eurocontrol and European air navigation service providers.

Douglas A. McIntyre