Iceland Volcano Cost Airlines Nearly $2 Billion in Lost Revenue

The International Air Transport Association (IATA) estimates that the Icelandic volcano crisis cost airlines more than $1.7 billion in lost revenue in the week following the initial eruption. For a three-day period, when disruptions were greatest, lost revenues reached $400 million per day.

“At the worst, the crisis impacted 29% of global aviation and affected 1.2 million passengers a day. The scale of the crisis eclipsed 9/11 when US airspace was closed for three days,” says Giovanni Bisignani, IATA’s director general and CEO.

IATA notes there were some cost savings related to the flight groundings. For example, the fuel bill was $110 million a day less compared to normal. But airlines faced added costs, including from passenger care. “For an industry that lost $9.4 billion last year and was forecast to lose a further $2.8 billion in 2010, this crisis is devastating,” says Bisignani.

Bisignani urged governments to examine ways to compensate airlines for lost revenues. Following 9/11, the US government provided $5 billion to compensate airlines for the costs of grounding the fleet for three days. The European Commission also allowed European states to provide similar assistance.

“I am the first one to say that this industry does not want or need bailouts. But this crisis is not the result of running our business badly. It is an extraordinary situation exaggerated with a poor decision-making process by national governments. The airlines could not do business normally. Governments should help carriers recover the cost of this disruption,” says Bisignani.

IATA represents 230 airlines comprising 93% of scheduled international air traffic