Tags: Volcano | Cloud | European | Economy

Volcano Ash Darkens European Economic Recovery

Tuesday, 20 Apr 2010 01:05 PM

Could the volcano hamper Europe's shaky economic recovery?

The ash cloud from Iceland's volcanic eruption is battering airlines, with officials warning of losses like the ones after the Sept. 11, 2001, attacks.

And European tourist operators are losing business, while each new day of closed airspace is costing jobs or revenues for those dealing in perishables such as roses and mozzarella.

But the volcano disruption is also creating some winners, such as fully booked Scandinavian ferries, hotel owners charging $800 a night, and taxi drivers pocketing $5,000 fares.

And while airlines wait, business is booming for ferry operators from the English Channel to the Baltic Sea, where the regular party crowd is competing with stranded air travelers for tickets on "booze cruises."

For both winners and losers, much depends on how long the travel chaos goes on, leaving the ultimate effect on Europe's unsteady economic recovery unclear.

"A temporary volcanic eruption should have virtually no impact on activity in the long run," said Jacques Cailloux, an economist at the Royal Bank of Scotland, equating the situation of stranded travelers to a European strike of 2 million workers. "Once people are back to work, production can get back to normal," he said.

By the numbers, the situation appeared bleakest for airlines.

The International Air Transport Association claims carriers are losing over $200 million a day, and the European Union's transport chief Siim Kallas said Monday that the ash plume covering much of the continent has already been worse for the industry than the constriction of travel after al-Qaida's attacks on the U.S. nearly nine years ago.

Government bailouts may be necessary, he said, and the prospect of continued flight cancellations drove down airline shares.

But for an industry that has lost nearly $50 billion in the last decade, public help is already a regular occurrence. The real sufferers may be countless smaller enterprises deprived of staff, regular customers or the vital nuts and bolts they need for their products.

The ash cloud is "impairing economic activity on a significant scale," warned German Economy Minister Rainer Bruederle, citing hampered exports in sectors from chemicals to automobiles. BMW AG, for example, flies components and transmissions from Germany to its plant in Spartanburg, South Carolina, where it builds the X5 and X6 SUVs.

Travel operator TUI Travel PLC said it has lost at least 20 million pounds ($31 million), and shares in Swiss-based tourism specialist Kuoni fell 7 percent.

At Geneva's airport, shops were deserted and unsold newspapers piled up around a bookshop. "Yesterday we made 1,000 Swiss francs. Normally we take 15,000 francs a day," said Mariejo Cardoso, the shop's manager.

Social safety nets may help in most European countries, but some 5,000 workers have been temporarily laid off in Kenya following $12 million in losses in flowers and produce. For people selling products from Kenyan roses to Ghanian pineapples, European markets are a key to survival.

Meanwhile, Swiss supermarket Migros warned of diminishing supplies of green asparagus during the beloved vegetable's peak season amid halted air deliveries from the United States. Cod from Iceland and fresh tuna filets from Vietnam and the Philippines could also run out, it warned.

Italian farmers' lobby Coldiretti said each workday without flights costs 10 million euros (about $14 million) as mozzarella and fresh fruits risk going bad.

"There are knock-on effects all the way down the food chain," said Kate Gibbs, spokeswoman for the Road Haulage Association in Britain. "We are going to see shortages of fresh food stuffs in our supermarkets and those that do get through will be more expensive."

Still, express delivery services Federal Express and DHL said they have shifted many deliveries onto trucks and rail to limit their losses, even if they declined to say how much they were losing. And most international commerce remained unaffected, since it is largely routed by sea, said Keith Rockwell, spokesman for the World Trade Organization.

"I wouldn't envision this affecting high-tech or other services trade, but it is terrible for those sectors that are affected," Rockwell said, citing tourism, and exports of fresh produce and flowers.

Cailloux said the total economic costs of the volcano eruptions would amount to no more than 0.1 percent of GDP if airline activity rebounds later this week. In the case of an indefinite grounding, companies and individuals would have to make costly adjustments to other transportation sources, but the impact on growth would be far less than the persistent effects of the financial crisis, he said.

Howard Archer, chief U.K. and European economist at IHS Global Insight, agreed.

"The overall impact on business confidence should be slight and there should be little, if any, impact on consumer confidence," he said.

The Viking Line passenger ferries between Finland and Sweden have sold out all cabins until Friday, company officials said, and demand is so high that passengers are being taken without a reserved cabin.

"We've opened the conference rooms and removed all chairs and desks so they can be used as places to sleep," said Thomas von Hellens, reception manager aboard a Viking Line ferry from Stockholm to Helsinki.

"They sleep on the floor, but no one's complaining," he said. "They are just happy to get across."

Scandlines said it was running at peak summer levels for passenger ferries between Germany and Denmark, while saleswoman Victoria Vallersved said Polferries ferries between Stockholm and Gdansk, Poland, were "running out of tickets."

Throughout Europe, rail cars were packed with people crowding into every available seat or standing in aisles. Train operator Eurostar said it was carrying almost 50,000 passengers between London, Paris and Brussels. Germany's Deutsche Bahn said long-distance traffic has risen 30 percent in recent days, but a strike in France compounded. travelers' misery.

Some taxi companies sought to cash in with massive fares.

British comedian John Cleese needed a $5,100 taxi ride to get home from Oslo to Brussels, while Swedish taxi firm Taxi Kurir said it has taken around 50 clients to destinations in continental Europe over the weekend for prices ranging between $3,480 and $4,700.

"One person called and wanted to be picked up from Barcelona, and we solved that somehow," said spokesman Magnus Klintback.

Bus company Swebus cited a tripling in traffic between big cities in Scandinavia, while old-fashioned carsharing enjoyed a revival with the chief executive of German ridesharing website mitfahrgelegenheit.de noting a 30 percent rise in demand.

"We're also getting more and more requests from abroad, especially holidaymakers stuck in Spain and Italy," said Michael Reinicke, whose company arranges up to 20,000 shared rides each day.

Users of short messaging service Twitter were flocking to the hashtag "getmehome" in a frantic search for available seats or other options. Businessman Michel Novovitch was giving up his holiday to help stranded travelers get home from Geneva for a price of 0.70 euros per kilometer (over $1.50 per mile).

"I have a free week and I just want to be a little useful," he said. "I don't want to make a profit. I just want to collect enough money to cover my costs."

Rental car agencies charged more. In Barcelona, Marta Hurtado said one agency was demanding 1,400 euros ($1,880) before mileage charges for a one-day drive to Switzerland.

Brett Barnett, an American resident in Geneva, was stuck in Copenhagen with dozens of colleagues but found a Swiss rental car that a similarly desperate traveler left in the Danish capital.

"Even though we're taking the car back for them, the company is charging us the one-way fee," Barnett said by telephone from the road. "But it's better than being stuck on an overflowing train. And there are hitchhikers all over the highways with signs saying 'Going to Germany? Going to France?'"

While travelers managed as best they could within Europe, those waiting for long-haul connections had less options. Rising hotel prices weren't making it easier.

"Yesterday, we had a hotel room at 250 euros. At midday, it was 460 euros, and in the evening, the price was 800 euros for a room — we can't pay that," said Busi Daniel, a 39-year-old French tourist, as he waited at Hong Kong's airport.

Daniel planned on sleeping in the airport.

© Copyright 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

1Like our page
2Share
InvestingAnalysis
Could the volcano hamper Europe's shaky economic recovery? The ash cloud from Iceland's volcanic eruption is battering airlines, with officials warning of losses like the ones after the Sept. 11, 2001, attacks. And European tourist operators are losing business, while...
Volcano,Cloud,European,Economy
1360
2010-05-20
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved