Airlines and airports seek compensation for ash chaos | Business| Economy and finance news from a German perspective | DW | 23.04.2010
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Airlines and airports seek compensation for ash chaos

As European air traffic returns to normal, airlines and airports are seeking government reimbursement for their losses. Carriers say the volcanic ash cloud had a financial impact similar to the 9/11 terrorist attacks.

A jet in blue skies

Recriminations fly as European air traffic returns to normal

As airlines resume regular European flights and work through the passenger backlog caused by Iceland's volcanic ash cloud, aviation executives and industry bodies are becoming increasingly vocal about seeking reimbursement for losses linked to the prolonged closure of the continent's airspace.

Member airlines of the International Air Transport Association have lost 1.3 billion euros ($1.7 billion), while the Airports Council International estimates its member airports have lost about 250 million euros ($334.5 million).

David Henderson of the Association of European Airlines in Brussels said his organization has filed a claim with a European Commission task force set up over the weekend, although airlines will ultimately have to file claims with their individual governments.

Eyjafjallajokull volcano eruption

Iceland's volcano is the costliest event for air travel since the 9/11 terror attacks

The scope of financial loss to airlines can only be compared with that which occurred after the September 11, 2001 attacks in New York, when some governments reimbursed airlines, according to Henderson.

"After 9/11 we had governments which had money in their pockets. Right now we have very few governments with money in their pockets, so that in itself might give rise to problems," he told Deutsche Welle.

'Knee-jerk' reaction

Henderson described initial reactions to the cloud of volcanic ash emanating from Iceland as "ultra, ultra cautious."

"The first half of the crisis, when the no-fly zones were being rolled outwards and eventually reached the Mediterranean and the shores of the Adriatic, was being driven largely by knee-jerk political reactions," he said. What followed once the European Commission task force took over was a new approach "containing better science and more realistic models," which showed much more limited danger areas.

Many airlines have been struggling financially for years. But if they were sure to be reimbursed, they could offer booked passengers compensation to delay their trips and free a seat with which to fly stranded travelers home, according to Henderson.

"From our perspective, what we have suffered in the last days has been a shutdown of our business and a cutting-off of our livelihood due to government imposition. We are making a claim based upon the demonstrable losses we have suffered during this period," he said.

A Lufthansa jet takes off

Planes are flying again, but the passenger backlog persists

Some saber-rattling

In the struggle to determine who will be stuck paying bills, individual airlines such as Ryanair have found themselves at odds with European Union regulators. Its stranded passengers are legally entitled to hotel rooms and food along with full reimbursements and alternative travel arrangements.

Ryanair CEO Michael O'Leary

Ryanair CEO Michael O'Leary called out European regulators

Ryanair CEO Michael O'Leary on Wednesday told Irish RTE radio the company wouldn't reimburse customers for any expenses other than their cancelled flight. The company later retracted the statement after the European Commission warned low-cost airlines not to "discount" passengers' rights.

But Ryanair's point was clear: "This legislation is not designed to cover a period of seven or eight days when passengers who paid us a fare of 20 or 30 euros are sitting in hotels for seven or eight days with their families and trying to recover a cost of over 1,000 euros from us," O'Leary said.

Legal interplay

But according to Pablo Mendes de Leon, professor of air and space law at Leiden University in the Netherlands, any legal action by airlines against governments is unlikely to succeed. While government compensation of airlines after 9/11 did not set a legal precedent, it did set a policy precedent in favor of reimbursement, he said.

Closing airspace "is indeed a sovereign power of the European Union states. They have the right to do so in periods of emergency, or in the interest of public safety, and with immediate effect. The condition is that it shall be applicable to all aircraft," Mendes de Leon told Deutsche Welle.

Determining in retrospect that closing airspace was unnecessary is "not an easy path to follow," he said. A judge would have to assemble a panel of experts and override the assessments of government ministers who made legal decisions to do so.

"I think these really are extraordinary circumstances. Whether airlines have a legal basis for their claims has yet to be determined," Mendes de Leon added.

Regardless of who is responsible for the financial damage caused by the flight ban, its ripple effect has spread into all facets of aviation and beyond the geographic areas immediately affected.

Passangers wait in the Frankfurt airport

Frankfurt Airport estimates it lost 15 million euros in the shutdown

Airports also affected

Robert O'Meara of the Airports Council International in Brussels said airports would also be seeking reimbursements.

Airports rely on airplanes coming and going as a source of revenue, and even airports outside of the closed airspace had disturbances in their normal traffic patterns. Housing stranded passengers also cost airports money, according to O'Meara.

"It wasn't just the airlines which were impacted, it was all of aviation. We believe that airports should be included in any compensation measures for aviation which are drawn up in this particular rather extraordinary circumstance," he told Deutsche Welle.

Author: Gerhard Schneibel
Editor: Sam Edmonds

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