EU says ash cloud cost billions

By Pete Harrison

BRUSSELS (BestGrowthStock) – Last week’s volcanic ash cloud cost European Union airlines 1.5-2.5 billion euros ($2-3.3 billion), the EU executive said as it proposed a series of actions to help the cash-strapped industry.

Governments will be able to waive restrictions on night flights and defer charges paid to air traffic controllers to help airlines cope with cash-flow problems, the European Union’s transport chief said on Tuesday.

“We have taken all assessments and valuations of costs from all the different stakeholders and we are working with a number between 1.5 and 2.5 billion euros,” European Transport Commissioner Siim Kallas told a news briefing.

The estimate covers all sectors of the aviation industry, including airlines, airports, tour operators and ground handlers, hit by the cancellation of around 100,000 flights which left about 10 million travellers stranded around Europe.

As an economist, Kallas said he would treat industry estimates with skepticism as he tried to ascertain the final bill.

“Member states should be able to provide temporary derogations from scheduling restrictions — such as night flying restrictions — to bring stranded passengers home as quickly as possible and get freight deliveries back to normal,” said Kallas.

“Temporary measures could also be foreseen to help airlines with short-term cash flow problems, by deferring for a limited period the en-route charges normally paid by airlines to air traffic control,” he added.

LEVEL PLAYING FIELD

ACI Europe, which represents over 400 European airports, welcomed the Commission plan, which transport ministers could sign off as soon as May 4.

“The past 18 months have seen governments bailing out banks and financial institutions from a situation that is increasingly being revealed to be of their own making,” said the group’s director general Olivier Jankovec.

“We urge national governments to grasp the gravity of the situation and to respond appropriately.”

But several airlines warned that subsidies could be used to prop up unhealthy airlines that were already suffering before the volcanic eruption.

“It is now important that these guidelines are applied in a consistent manner in all of Europe so that there is not a distortion of competition between Europe’s airlines,” said Scandinavian Airlines Chief Executive Mats Jansson (SAS.ST: ) (SASNOK.OL: ) (SAS.CO: ).

There is a big risk of support measures for airlines being abused, said Finnair (FIA1S.HE: ) investor relations head Taneli Hassinen.

“Seeking support is a sign that the airline was not in a healthy shape even before the ash cloud,” he added. “It was only a week-long closure, a healthy airline should be able to manage it.”

The European Union executive will soon come forward with guidelines on how the EU countries can offer state aid on a level playing field, said Kallas.

In the medium term, Europe also needs to accelerate its “Single Skies” project, which will streamline the 27 national airspaces to just nine by June 2012 and help avert such crises, said Kallas.

European airline shares were lower by 1450 GMT, with easyJet, British Airways (BAY.L: ), Lufthansa (LHAG.DE: ), Air France (AIRF.PA: ) and Ryanair (RYA.I: ) down 1-1.4 percent.

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(Additional reporting by Mia Shanley in Stockholm, Eva Lamppu in Helsinki, Rhys Jones in London, Writing by Pete Harrison, editing by Dale Hudson and Jon Loades-Carter)

($1=.7508 euro)

EU says ash cloud cost billions