Volcanic ash grounds flights in Europe

A cloud of smoke and ash is seen over the Grimsvoetn volcano on Iceland on May 21, 2011.

UPDATED REPORT

JEREMY HOBSON: Now to that volcano that's erupting in Iceland and the havoc it's wreaking on some of the busiest airspace in the world. British authorities say 500 flights could be affected. That means thousand of travelers could be delayed -- and millions of dollars could be lost by the airlines.

Marketplace's Stephen Beard joins us live from London with more. Hi Stephen.

STEPHEN BEARD: Hello Jeremy.

HOBSON: Well I guess the big question is will this year's ash cloud be as bad as last year's?

BEARD: Well, last year was bad, remember -- 10 million passengers were stranded. The airlines paid out $1.7 billion in compensation. But there's reason to think that it's not going to be anything like as bad this time. In fact, the U.K. weather office has just said that the worst of this ash cloud is over. And there's another reason for optimism -- last year for example the U.K. grounded aircraft as soon as any ash was detected in the atmosphere.

That, says U.K. transport secretary Philip Hammond won't happen this time.

PHILIP HAMMOND: There will be no blanket closures of air space. Airlines are now able to fly in low and medium ash density conditions which they weren't able to last year.

HOBSON: Stephen last year, the airlines didn't really like the government response to the ash cloud. Do they feel its better this time around?

BEARD: Well, better marginally, but they're still not happy. Or at least their lobby group is not happy. It's complained that the U.K. government doesn't have its own light aircraft that can go up and test the ash density to see whether its safe to fly. The U.K. is relying solely on the forecasts of its national weather service. The airline lobby group says that's is astonishing and unacceptable.

HOBSON: Marketplace's Stephen Beard in London, thanks.

BEARD: OK Jeremy.


ORIGINAL INTERVIEW

JEREMY HOBSON: European airlines are cancelling flights this morning as that volcanic eruption in Iceland sends an ash cloud into some of the busiest airspace in the world. So far the cancellations aren't as bad as the travel disruptions from last year's Icelandic volcano. But there are over 30,000 flights within Europe every day -- so travelers and investors are worried things could still get worse.

Let's bring in Marketplace's Stephen Beard, who's live with us from London. Good morning.

STEPHEN BEARD: Hello Jeremy.

HOBSON: Well what's the impact on air travel thus far?

BEARD: Well, as you say, relatively small so far. Scotland in the northern part of the U.K. has been affected. Most flights in and out of Scotland have been cancelled this morning. Some flights in and out of Ireland have also been affected. In fact, President Obama -- who was in Ireland yesterday -- flew to the U.K. earlier than planned in order to dodge the cloud. So far, this is, as you say, nothing like as bad as last year's event. But weather conditions are volatile and it's too soon to say what the eventual impact will be.

HOBSON: And Stephen I remember last year, the airlines took a big financial hit with the Icelandic volcano. Are analysts thinking it'll be as bad for them this time around?

BEARD: Perhaps not as bad, but the airlines are understandably nervous about this. Last year's cloud cost them $1.7 billion in compensation. The air traffic controllers are taking a much more flexible approach this time -- not blanket banning flights. But, there will certainly be some cancellation costs.

And says Brian Torra of JM Finn Investment Managers, there will be other costs too.

BRIAN TORRA: The reality is that even if you are able to fly through an ash cloud you may well damage the aircraft, so its not something you can ignore.

However, on a positive note, this year's ash is thought to be lighter and less dense than last year's. So hopefully it may not cause too much damage.

HOBSON: Marketplace's Stephen Beard in London, thanks Stephen.

BEARD: OK Jeremy.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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