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Recent Flight European Cancellations Creating Significant Economic Implications

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Jennifer Glasse

The closure of airspace over Britain, Northern Europe and Scandinavia is having economic repercussions around the world.  It has halted the transport of goods, stranded hundreds of thousands of passengers and dealt a severe economic blow to the airline industry.

Nearly 100,000 flights were canceled or delayed as volcanic ash forced the closure of European airspace.  The International Air Transport Association says the crisis has cost airlines more than $1.7 billion and is devastating an already beleaguered industry.

British Airways Chief Executive Willie Walsh says his company lost between $20 million and $30 million a day.

"My personal belief is that we could have safely continued operation for a period of time," said Walsh.  "I think there were occasions when the decision to close airspace could have been justified."

Walsh says canceling everything was unnecessary and that after the unprecedented delays and cancelations there will still be complications with air travel.

ADDITIONAL INFORMATION
Volcanic Ash Stops Europe Flights—Why Ash Is Dangerous (National Geographic)
An eruption in South Iceland (Icelandic meteorological institute
Volcanic Gases and Their Effects (U.S. Geological Survey)

"I think to get back to normal levels of operation, from an industry point of view, I think will take weeks," he noted.

About 20 percent of airline revenues comes from air freight.  

Aramex logistics company managing director Jim Armour says the shutdown cost his company about a quarter of its daily revenue.  The real problem is the uncertainty he says.

"If someone said this was going to last for two weeks like a strike, you could make your plans, you could think about what you do with your people.  I think the concern is the unknown really," said Armour.

Armour says the implications are not just economic.

"[There are] terrible impacts.  [For example,] you want to move blood plasma around and you need it badly, you want to move kidneys around… There [are] some disastrous consequences apart from the economic ones," he explained.

Flower growers in Kenya and Israel have had to destroy tons of roses and other flowers that are too wilted to have any economic value. Fruit and vegetable producers have also lost crops that could not travel to Europe. Jo Tanner, with Britain's Freight Transport association says there are lots of untold costs.

"The impact economically is really difficult to judge at this stage, because we do not know how much has been able to be salvaged, how much extra cost there has been in terms of the contingency planning, so moving stuff to particular hubs by air and then picking up the rest of the journey by road, rail or sea," said Tanner.

Airlines are asking European governments for financial and logistical compensation to help alleviate some of their losses.  Many businesses will not have the same option and it may take some time before the full economic impact of the volcanic ash cloud is known.

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