Airlines feel heat of Icelandic volcano

AIRLINES grounded by the eruption of an Icelandic volcano are set for further losses if airspace is closed again, with the airline industry yesterday reporting daily losses of more than £5m.

“If the shutdown of the airspace in the UK and large parts of Europe [returns], it will almost certainly lead to some carriers, especially those with a small footprint, becoming financially stressed,” said Ashley Steel, global chair for transport and infrastructure at KPMG.

Steel said high fixed costs in the airline industry mean that significant decreases in revenue will have an immediate impact on financial viability, with short-term cash flow coming under pressure.

His comments came as Europe’s main airlines began reporting the daily financial impact caused by the eruption of the Icelandic volcano, which halted air traffic since Thursday.

British Airways (BA) said that it has lost up to £20m a day after grounding its flights, while Air France KLM reported lost revenue of €35m (£30.8m) a day.

European carriers Lufthansa and Iberia are said to have lost up to €45m (£39.6m) and €5m (£4.4m) respectively a day.

Discount airline easyJet is estimated to have lost £5m a day, while rival Ryanair is thought to have lost up to €8m (£7m) a day.

John Cridland, deputy director general at the CBI said: “The aviation sector is bearing the brunt of the impact from restrictions placed on UK and European airspace.

“The UK’s significant dependence on air freight, especially for high-value manufacturing and ‘just in time’ deliveries, means that contingency plans will be needed to tackle these challenges.”

The International Air Transport Association estimated over the weekend that European airlines swallowed $200m (£130m) in losses a day due to the disruption.