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Air travel chaos from volcano ash cloud could have unprecedented effects on world’s economy

The volcano ash cloud continues to roll out into Europe for the fifth day, extending over the weekend and creating dramatic effects on air travel. More than 16.000 flights were cancelled yesterday in Europe and many capital city airports remain closed. All major European airlines including British Airways and Air France are confronting an unprecedented situation which is made even worse by the fact that this is a nature driven cause, which cannot be predicted or estimated. This is adding to the immense pressure which, in such crisis situations, is building up hour by hour. As this is purely depending on nature’s call, each additional day, is likely to generate far greater losses than 9/11 or Bird Flu, both crisis situations having a timing limitation.

Several test flights carried out by KLM, Lufthansa and British Airways have revealed that there was no damage to the planes because of the ash clouds. However, since this is a unseen situation and rigurous testing could take up to weeks, if not months, E.U. Comission and Governments are facing the daunting task of opening air space without any safety guarantees. A meeting of EU transport ministers on Monday is supposed to bring some more clarification, yet it is a false expectation. The pressure the airlines have been putting on authorities is immense, many airlines such as Alitalia or Austrian Airlines being already in very difficult financial situations before the debut of the volcano eruption.

CPP Luxury Industry Management Consultants Ltd estimates that world luxury hospitality will see a further decrease, in addition to the effects of the economic crisis, an additional 10% sales drop is likely to be registered for the rest of 2010. CPP also estimates that world luxury goods sales will drop by 2 to 3 % due to the current travel crisis.

updated Monday 04/19/10 02.00 GMT

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