More Volcanic Ash Overspreads Europe

The ash problems aloft over Europe created by an Iceland volcano worsened as the cloud from the eruption began to wander. When the same volcano erupted early in the 19th Century, it belched ash into the air off and on for two years.

The new clouds have moved from Scotland to France and Spain, threatening to close airports in that region. As airports close, reopen, and close again, it creates a cascade of interruptions of the entire system. The long eruption a month ago cost the industry $1.7 trillion according to the IATA.

On Monday, European fights were cut by over 27,000. That is a very modest number, but it may grow quickly, as aerial photos of the eruptions show that they are intermittent but powerful, And the weather patterns above Europe tend to push the ash west.

The airline industry in Europe and transatlantic carriers face what is likely to be months of intermittent interruptions. That not only affects carrier profits. It also affects tourism and business travel, each of which cut into GDP in the nations effected by the volcano. During the last eruption, several carriers turned to the governments for capital. Those requests will only increase in size and frequency. After a month of respite, the volcano has returned and history shows that it may stymie the airline industry for a very long time

Douglas A McIntyre

Sponsor: 5 best investments for 2010 – The next nine months represent a bold new era for investors.