Eruption could mean business headaches

April 17, 2010 at 12:00a.m.

Associated Press

LONDON

The eruption of a volcano in the tiny, isolated island nation of Iceland is threatening to turn into a major headache for businesses across Europe and around the world as a spreading ash cloud closes more European airports.

Airlines are already counting the cost of grounded planes, and there are growing fears about the transportation of food supplies and other essential goods should the flight disruptions persist for several days — or longer.

But there also were some early winners from the unprecedented situation, with rail, bus and ferry tour operators all quick to lay on extra services for stranded business and leisure travelers as hotel rooms filled up.

Airline shares took a hit as the Geneva-based International Air Transport Association estimated that the disruption is costing the industry some $200 million a day in revenues. IATA added its forecast was “conservative” and costs will mount further as carriers reroute aircraft and care for stranded passengers.

Eurocontrol, the European air-traffic agency, said some 16,000 flights were canceled Friday, more than half the 28,000 that usually operate. Delays and cancellations will continue today as the ash cloud from the eruption of the volcano beneath Iceland’s Eyjafjallajokull glacier moves south and east. The flight ban was imposed because of concerns about pilot visibility and jet-engine failure from the ash.

Ryanair Holdings PLC, the leading low-cost airline in Europe, said it was extending the cancellations across most of its network through to at least lunchtime Monday to give passengers clarity about the situation and a chance to re-book flights.

Ashley Steel, global chairman for transport and infrastructure at professional services company KPMG, said that the biggest losses would come from trans- Atlantic business traffic, with the impact on economy class revenues muted by the fact that people would likely change their bookings to a later date.

There were few early reports of major impacts on exports and imports, but analysts stressed that the stakes would rise each day of the flight ban.

The pharmaceutical industry is particularly reliant on air freight because of the high value and low weight of their products.

As Europe’s airports emptied, travelers instead crowded train stations, bus depots and rental car offices.

At the Jumbo Hostel — a Boeing 747 remodeled into a 27-room hotel just outside the Arlanda airport in Stockholm — rooms were filling up fast.