Volcanic clouds and ash from an ongoing eruption in Iceland shut down airports in the UK, France, Germany and other hubs in the northern EU last week. Airlines are losing $200 million a day, and they are not insured from this type of loss. Most airports are planning to reopen this week, but the outcome is highly uncertain. The last time the volcano under the Eyjafjallajokull glacier erupted, it lasted more than a year.
The volcano will cause losses to more than just airlines. It couldn't have come at a worse time for the the travel industry, which contributes $1 trillion to the economy, as the summer vacation season is just starting up. The volcano costs this industry $5 - 10 billion a week.
Forty percent of the world's goods by value moves by air. Drug companies, time-sensitive high-tech imports and premium products such as the finest Scotch whiskeys are all sitting on tarmacs. The most severely affected will be African exporters of fruit and flowers that quickly go bad if not shipped.
What This Means for You
This will hurt stock prices of European airlines, other travel-related and possibly other shippers such as FedEx and UPS that rely on hubs in France and Germany. On the other hand, it helps land and sea shippers. It could lower oil prices if it continues, as the shutdown reduces demand for jet fuel by 2 million barrels a day. (Source: "Economy Impact to Rise Sharply as Ash LingersReuters, April 19, 2010)
Other Related Natural Disasters
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- How Global Warming Affects the Economy
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(Photo Credit:Matt Cardy/Getty Images)
Comments
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It would be difficult to predict such that a volcanic eruption would have such a chilling effect on the airline industry. Check out our recent blog post on managing the future at http://gbr.pepperdine.edu/blog/.