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EU says ash cloud cost billions, plans airline aid

Last week's volcanic ash cloud cost European Union airlines 1.5-2.5 billion euros ($2-3.3 billion), an EU executive said as it proposed actions to help the cash-strapped industry.
/ Source: Reuters

Last week's volcanic ash cloud cost European Union airlines 1.5-2.5 billion euros ($2-3.3 billion), an EU executive said as it proposed a series of actions to help the cash-strapped industry.

Governments will be able to waive restrictions on night flights and defer charges paid to air traffic controllers to help airlines cope with cash-flow problems, the European Union's transport chief said on Tuesday.

"We have taken all assessments and valuations of costs from all the different stakeholders and we are working with a number between 1.5 and 2.5 billion euros," European Transport Commissioner Siim Kallas told a news briefing.

The estimate covers all sectors of the aviation industry, including airlines, airports, tour operators and ground handlers, hit by the cancellation of around 100,000 flights which left about 10 million travelers stranded around Europe.

As an economist, Kallas said he would treat industry estimates with skepticism as he tried to ascertain the final bill.

"Member states should be able to provide temporary derogations from scheduling restrictions —such as night flying restrictions — to bring stranded passengers home as quickly as possible and get freight deliveries back to normal," said Kallas.

"Temporary measures could also be foreseen to help airlines with short-term cash flow problems, by deferring for a limited period the en-route charges normally paid by airlines to air traffic control," he added.

Scandinavian Airlines Chief Executive Mats Jansson said it was vital that work continued at a fast pace, so that EU transport ministers could sign off the measures at a meeting on May 4.

"It is now important that these guidelines are applied in a consistent manner in all of Europe so that there is not a distortion of competition between Europe's airlines," he added.

EasyJet Chief Executive Andy Harrison said: "Governments also need to ensure that this doesn't become an excuse to subsidize weak airlines."

The European Union executive will soon come forward with guidelines on how the EU countries can give state aid to help ailing airlines recover on a level playing field, said Kallas.

There is a big risk of support measures for airlines being abused, said Finnair investor relations head Taneli Hassinen.

"Seeking support is a sign that the airline was not in a healthy shape even before the ash cloud," he added. "It was only a week-long closure, a healthy airline should be able to manage it."

In the medium term, Europe needs to accelerate its "Single Skies" project, which will streamline the 27 national airspaces to just nine by June 2012, said Kallas.