Another Icelandic Volcano, Another Threat to Airline Profits

Another Icelandic Volcano, Another Threat to Airline ProfitsThanks to soaring oil prices, the International Air Transport Association had already cut its estimate of global airline net profits for 2011 by $8.6 billion, which would be down 46% from last year. And 2010 profits were hurt by volcanic activity in Iceland: The ash cloud from Eyjafjallajokull shut down air travel over large segments of Europe in April of last year.

The news this week is eerily similar: Grimsvoetn, one of the most active volcanoes in Iceland erupted this weekend. The eruption closed the country's airports, and its ash cloud is on its way toward the northern U.K. and Europe. Forecasters predict that ongoing activity from Grimsvoetn will effect European air traffic as soon as this Tuesday.

The IATA's estimate for 2011 airline profits may have already been too high, even with its March downward revision. Crude prices are still near $100, which means that jet fuel prices could be high for the balance of the year. All the industry needs is a long period of volcanic activity in Iceland to force them to cancel flights across the Atlantic, as happened a year ago.

Many of the airlines likely to face profit erosion due to the eruption are Europe's flag carriers. British Airways (BAIRY) flights would be particularly affected. But U.S. carriers with routes to and from Northern Europe could be hurt as well, among them American (AMR), Delta (DAL), and US Airways (LCC) . Shares in domestic airlines are already down about 15% over the last six months.

So far, the volcano's largest impact has been to keep air traffic south of Iceland. But, as a story in The Telegraph reads, "The ash could force the authorities to shut airports and close UK airspace, in a move which could disrupt many thousands of passengers almost exactly a year since a different Icelandic volcano closed airspace across Europe."

For airline stock investors, it's worth watching. In Europe, shares have already started to sell off.


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marine1942

NEWS FLASH----Al Gore finds millions of cars causing global warming--mother earth has nothing to do with it

May 24 2011 at 8:11 AM Report abuse +1 rate up rate down Reply
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May 23 2011 at 9:58 PM Report abuse -1 rate up rate down Reply
geosuznun

Learn the difference between "effect" and"affect" - 2nd paragraph.

May 23 2011 at 2:21 PM Report abuse +2 rate up rate down Reply
JR

Global warming at its finest, when are you all none believers going to change? LOL

May 23 2011 at 12:51 PM Report abuse rate up rate down Reply
1 reply to JR's comment
Koz

Do you have any idea how many volcanos have erupted in the last 2000 years. This is climate change no global warming as you Gorers would have us beleive.

Maybe it is actually the beginning of the end as was predicted for May 21 nad end in 5 months.

May 23 2011 at 3:11 PM Report abuse +2 rate up rate down Reply
marine1942

Ah--another chance for Hillary and Obama and their ever present check book

May 23 2011 at 11:03 AM Report abuse +3 rate up rate down Reply
pete

Nasty old "airline profits" are your first worry?

How about the CFCs thrown hight into out atmosphere? You rant and rave constantly about car and factory emissions polluting the air and depleting the ozone, yet you didn't say a word about THAT threat, did you.

In 1991 the pre-eruption smoldering and smoking of Mt. Pinatubo in the Philippines released more ozone destroying CFCs into the atmosphere in the first three days than man has since he first crawled out of oozing slime.

This FACT was mentioned twice in before the EPA got control of the media and threatened to shut them down if they said anything relating to that fact again. The whole thing is about controlling YOU!

May 23 2011 at 11:03 AM Report abuse +5 rate up rate down Reply
1 reply to pete's comment
WILLS

Glad to see I am not the only one that knows (or at least suspects) volcanic acitivity. We also have a couple of researchers at the Univ. of Madrid on our side. Their studies reveal that (what they describe as aeorsols) get stuck in a layer about 2 miles thick from the ground up. and yup, they are talking about Mt. Pinatubo, et. al.
It's the main reason behind the erratic weather. It's why Washington froze his butt off at Valley Forge. That period came to an end when Mt. Tambora blew and I hope that something similar is not on the menu. Anyone not familiar - put Tambora in search.

May 23 2011 at 12:08 PM Report abuse +3 rate up rate down Reply
WILLS

This is a lot more than the present eruption as volcanic activity has been quite extensive for the last 15 years and is the real culprit to to our rather "unusual" weather. If one takes into account the storm and agricultural loses - a few cancelled flights is very minor. P.S. - more to come. These are cycles of nature and occur in the 80-100 year range.
We are presently in one.

May 23 2011 at 10:24 AM Report abuse +5 rate up rate down Reply
scottee

something is always a threat to someone's profits...that's why we need savings!

why is everyone cash strapped???? why does no one, no business, no town, no city, no state, no country have savings to tide them by in an emergency. did we learn nothing from the last depression?? just wondering??

May 23 2011 at 9:26 AM Report abuse +5 rate up rate down Reply
2 replies to scottee's comment
firststatemate

Amen!

May 23 2011 at 9:49 AM Report abuse +3 rate up rate down Reply
Koz

To many blood suckers living of the government. This is not limited to welfare, it also include over paid civil servants.
It is hard to save when to save when every dime goes to living. Thank you obama.

May 23 2011 at 3:14 PM Report abuse +1 rate up rate down Reply