IATA: Volcano cuts airline revenue $1.7 billion

IATA: Volcano cuts airline revenue $1.7 billion    The International Air Transport Association estimates the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue through Tuesday — six days after the initial eruption of Eyjafjallajokull.
   For a three-day period, April 17-19, when disruptions were greatest, lost revenues reached $400 million per day.
   “At the worst, the crisis impacted 29 percent of global aviation and affected 1.2 million passengers a day. The scale of the crisis eclipsed 9/11 when U.S. airspace was closed for three days,' said Giovanni Bisignani, IATA's director general and chief executive officer.

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   IATA noted there are 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,' Bisignani said.
   “The greatest impact is on European airlines. Even before the crisis, we expected airlines to lose $2.8 billion. Of this global total, the largest losses were expected from European carriers — $2.2 billion based on Europe's sluggish economy. This crisis is hitting while the industry is weak and at its weakest point. Once it is over, we will revise our financial outlook at the AGM here in June,” he said.
   'As we are counting the costs of the crisis we must also look for ways to mitigate the impact. Some of our airport partners are setting industry best practice. London Heathrow and Dubai are waiving parking fees and not charging for repositioning flights. Others airports must follow,' he said.
   Bisignani made three specific requests to governments for regulatory relief:
   ' Relax airport slot rules. IATA urged that rules on takeoff and landing slot allocation be relaxed to reflect the extraordinary nature of the crisis.
   ' Lift restrictions on night flights: IATA urged governments to relax bans on night flights so carriers can take every opportunity to get stranded passengers back home as soon as possible.
   ' Address unfair passenger care regulations.
   'This crisis is an act of god — completely beyond the control of airlines. Insurers certainly see it this way. But Europe's passenger rights regulations take no consideration of this. These regulations provide no relief for extraordinary situations and still hold airlines responsible to pay for hotels, meals and telephones. The regulations were never meant for such extraordinary situations. It is urgent that the European Commission finds a way to ease this unfair burden,' he said.
   Bisignani also urged governments to examine ways for governments to compensate airlines for lost revenues. He noted after 9/11, the U.S. 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 extraordinary 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,' he said.
   Meanwhile, the parent company of American Airlines said Wednesday it experienced a loss of about $15 million from the havoc visited upon transatlantic air travel.
   “We are closely monitoring the impact of the transatlantic flight cancellations we have experienced due to volcanic ash,' said Tom Horton, chief financial officer of AMR Corp. Through April 20, the airline cancelled about 350 flights. 'We anticipate this disruption will have negative impact on our second quarter results and we have estimated the cancellations so far have resulted in a loss of approximately $15 million with reduced revenue partially offset by lower fuel and operating expenses. Of course it is too soon to estimate the total financial impact of this event but suffice it to say it was a very unwelcome development in the midst of a fragile recovery.”
   AMR said American’s cargo revenues in the quarter was 6.5 percent higher than in the 2009. Cargo traffic improved 20 percent but yields continue to see some year-over-year pressure, Horton told Wall Street analysts in a conference call.
Logistics firms begin to count the cost of 'crippling' ash cloud
   Richard Mansell, operations manager for The UCS Group, a British courier and logistics company based in Bracknell, said fallout from Iceland's volcanic ash cloud could last for months, 'crippling' smaller businesses within the industry. He said the cost to the U.K. economy as a result of the six-day airspace closure is estimated to be over '100 million ($154 million) a day leaving many small firms to foot the bill.
   'I believe that the government should not have made such a snap decision in closing all U.K. airspace without looking at the facts more closely,' Mansell said.
   Smaller logistics firms may face weeks of disruption as they attempt to clear the backlog, the company said, adding it thought the U.K. government unlikely to compensate companies for loss of trade. ' Chris Dupin