14:26: Malév loses HUF 1 bn on air traffic suspension

After local air navigation services Hungarocontrol lifted airspace closure over Hungary from noon until midnight today, Malév has decided to launch flights to Warsaw, Prague, Zagreb and Bucharest.

Considering the short free-fly period and the fact that a number of airports remain closed all over Europe, Malév cannot launch more flights, the carrier said in a statement.

It hopes air traffic will normalize further on Tuesday and more flights could be launched.

The carrier estimates the five-day disruption to have caused it losses in excess of HUF 1 billion (EUR 3.77 m). This sum excludes costs of the cancellation of direct flights, as the repayment of ticket prices and re-booking generate further expenses.

Malév will be able to assess its total losses only when air traffic is fully restored in Europe and it starts to operate with a normal schedule again.

13:38: State aid for airlines?

European Union lawmakers are preparing to meet today in an emergency session to discuss measures to reduce the mounting losses on businesses and the economy as a flight ban over much of Northern and Central Europe continued into a fifth day.

2010.04.19 09:28
European recovery may choke on volcanic ash

EU transport ministers were set to hold a video conference on the volcanic ash cloud blowing across Europe, as airlines insisted that the flight restrictions that have so far led to the cancellation of over 63,000 flights needed to be reassesed after several flew successful test flights over the weekend, the Wall Street Journal reported on Monday.

A spokeswoman for the European Commission said today that the airline industry had not yet applied for any compensation for revenues lost because of the ash cloud.

Any aid provided by EU governments for airline companies would have to be proportionate to the damage suffered because of the crisis, she said. Requests for aid would be reviewed "rapidly," she added, ABC news reported.

EU competition commissioner Joaquin Almunia confirmed today the the EU executive is considering loosening stringent EU rules for state aid to help airlines hit by millions of euros in lost revenues due to the volcano crisis.

The International Air Transport Association (IATA) said on Monday the closure of most of Europe's airspace could cost the airline sector more than USD 200 million a day.

"I am looking carefully at what we did after Sept. 11. We can use similar instruments. We are indeed facing exceptional circumstances," he said.

"If member states would decide to help with state aid and provided conditions for receiving state aid were not discriminatory, we are ready to think in a framework similar to after Sept. 11," Almunia added.

Under current regulations EU member states may be allowed to help out corporates if damages are caused by natural disasters, which is the case now and in the current circumstances it could be applied to airlines. This way the carriers would have at least some of their losses offset.

13:21: Airlines may go down

According to UBS estimates, European airlines are making losses of EUR 50-60 million a day due to flight cancellations, losing revenues of EUR 120-140 m daily.

The Association of European Airlines (AEA) believes some airlines in Europe are not going to be in business in the next week or two due to the disruptions the volcanic ash cloud has caused.

"There are probably 100 to 150 airlines in Europe, some large, some small, some tiny, and some which are not going to be around in a week or two's time, that's for sure," David Henderson, the manager of information for the AEA, which represents 36 leading European airlines, told Reuters.

"At any given time, and particularly at the end of 18 really really tough months, there are a number of airlines which are clinging on with their finger nails. A five-day, 10-day suspension of service is not going to be sustainable for them."

"With 313 airports paralysed at the moment, the impact is already worst than 9/11. More than 6.8 million passengers have been affected so far and European airports have lost close to EUR 136 million," Airports Council International (ACI) Director General Oliver Jankovec said on Sunday.

The AEA said its carriers had sustained cumulative losses of EUR 625 million (USD 874 m) in the past five days, including compensation for stranded travellers. The group expressed its disappointment at the European Commission's decision to focus on passenger rights first, saying the focus of attention should be that a major sector of European business simply is not operating at all.

European Commission response

European Commission President José Manuel Barroso on Sunday decided to set up an ad-hoc group to assess the impact of the situation created by the volcanic ash cloud on the air travel industry and the economy in general.

He ensured that the EU has the right analysis to be able to respond appropriately, if needed, and that any measures taken across the EU to respond to economic consequences of this situation are properly coordinated.

The Commission will continue to liaise with Eurocontrol and the competent national authorities on the development in the airspace and decisions on flight suspensions, which are the competence of the national authorities.

"We are faced with an unprecedented shutdown of Europe's airspace. This situation not sustainable. It is now clear that we cannot just wait until this ash cloud dissipates," said Commission Vice-President Siim Kallas, responsible for transport today.

He said there are three main areas they are focusing on:

* The most urgent task is to see if stronger European co-ordination of airspace management can maximise the airspace available without compromising safety;
* Work has started to address the economic consequences of this crisis.

The other main priority is passengers.

"[...] this is an unprecedented and difficult situation. Faced with a crisis of this scale, I believe Europe must break new ground. We must intensify European co-ordination in order to facilitate: a) opening up the maximum airspace possible, within safety requirements; b) finding solutions for passengers and industries hit hard by this crisis," Kallas added.

Kallas is meeting with European ministers on Monday afternoon at 15:00."

Source: Portfolio Online Financial Journal