Volcanic ash threat hits airline shares

May 23, 2011
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, PARIS, May 23 – Airline shares dived on Monday in fright at a new threat to traffic from an Icelandic volcanic ash cloud, a year after month-long ash chaos closed the skies over Europe.

Shares in German airline Lufthansa had plunged by 4.11 percent around midday, and Air France-KLM stock was down 3.83 percent.

Shares in International Airline Group (IAG), the owner of British Airways and Iberia, fell by 3.68 percent.

Stock in Scandinavian airline SAS dropped 4.02 percent and Finnair fell 3.32 percent.

Iceland\’s Grimsvoetn volcano began erupting late on Saturday. Ash from the eruption is expected to reach Scotland and Scandinavia on Tuesday, and might reach France and Spain on Thursday.

In April 2010 Iceland\’s Eyjafjoell volcano erupted, spewing a massive cloud of ash that caused the planet\’s biggest airspace shutdown since World War II with more than 100,000 flights cancelled and eight million passengers stranded.

The costs in terms of lost revenue and compensation to passengers hit the airline industry hard, particularly in Europe.

Iceland closed its main airport over the weekend, Denmark has since closed some airspace over Greenland, and Norway said it would cancel flights to the country\’s Arctic archipelago of Svalbard.

France\’s junior transport secretary Thierry Mariani warned that flights would be cancelled if an ash cloud from Iceland\’s Grimsvoetn volcano blew over Europe.

"One thing that is certain … is that if Europe is affected then flights will be cancelled," Mariani said on Europe 1 radio, adding that it was too early to say for certain if it would.

"If the ash isn\’t noxious then the planes will fly. If the ash is noxious or presents a risk, then the planes won\’t fly," he added.

Concerns that the ash could damage aircraft engines led authorities to cancel flights as a precaution.

"The priority should always remain safety, without of course abusing the principle of precaution," said Mariani.

However the chief executive of low-cost airline Ryanair forecast that there would be no large-scale closure of airspace from volcanic ash.

"I think the widescale airspace shutdowns won\’t be repeated," said Michael O\’Leary, who was highly critical of the authorities\’ response last year.

"What they tend to do is to let the airlines continue to fly. We do inspections every time there is a landing," he told BBC radio.

"If we notice any dust on the aircraft then we take appropriate procedures."

So far European airlines and airports have not begun taking special measures.

"We not concerned at the moment by the volcanic eruption in Island," a Lufthansa spokeswoman said.

"Our north Atlantic flights are making a slight detour when they fly through the area, but that is not causing delays and we have not cancelled any flights for the moment," she added.

She said that although Lufthansa had not taken any special measures, the airline was always ready to react to a change in flying conditions.

Air France meanwhile said it was confident aviation authorities would strike a proper balance in restrictions due to the ash cloud.

"Air France is confident the French and European civil aviation authorities will work to find a balance between safety and the precautionary principle," said a company spokesman.

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