Airline turbulence could extend into the summer

THE airline industry, which is losing around €150 million a day, could suffer even further this summer as consumers worry about potential disruptions.

Analysts said airlines’ earnings are also being hit by fewer passengers making late bookings as a result of the disruption from the volcanic eruption in Iceland. Since the markets closed on Wednesday evening, almost half a billion euro has been wiped off the value of Ryanair and Aer Lingus.

Goodbody stockbrokers said daily losses for Ryanair could be as much as €12m and around €4m for Aer Lingus.

It is estimated that the number of stranded Ryanair passengers is likely to be tens of thousands.

Ryanair shares have fallen from €4.06 at close on Wednesday to €3.78 last night, while Aer Lingus has dropped from 75 cent to 72c.

Davy analyst Stephen Furlong said the effect on airline shares, if sustained, could be similar to events such as 9/11 and SARS. He does, however, expect a quick bounce-back in airline stocks when the volcano cloud dissipates.

The International Air Transport Association’s (IATA) initial and conservative estimate of the financial impact on airlines is just over $200m (€150m) a day in lost revenues.

Meanwhile, EU Commissioner Joaquin Almunia said the EU competition watchdog is likely to consider the framework it adopted after September 11 when exceptional aid from the state was allowed to companies affected.

British Airways said the airport closures are costing it around £15m (€17m) to £20m a day. The airline said however that it had “significant funding” available to it to “sustain a considerable period of closure of the UK’s airspace”.

The airline said the £15m to £20m estimate included lost passengers and freight revenue, plus costs incurred supporting passengers abroad unable to fly home. Dubai-based Emirates said that costs for food, refreshments and accommodation are more than $1m (€750,000) each day for its 6,000 stranded transit passengers.

IATA said it estimated that, once flights in Europe resume, it would take three to six days for traffic to return to normal.

This year, airlines have already been hit by strike action with British Airways indicating an impact of £40m to £45m in March, while Lufthansa has mentioned a €48m bottom-line effect for February.