EC To Consider Letting Countries Compensate Ash-Battered Airlines

The European Commission next week will consider allowing airlines to receive state aid because of the volcanic ash crisis when it hosts a meeting of European Union transport ministers in Brussels on May 4. Airlines have been clamoring for compensation after the April 14 eruption of Iceland's Eyjafjallajokull volcano led to the cancellation of 100,000 flights in the following six days and left 10 million passengers unable to travel.

Transport commissioner Siim Kallas said the disruption cost the travel industry, including airlines, an estimated €1.5 billion to €2.5 billion. State aid to airlines normally is disallowed under EU competition law but Kallas said he would discuss a temporary waiver, as long as it could be done without giving "unfair assistance."

Another option to be considered at next week's meeting is whether governments could defer the route charges airlines pay to air traffic control authorities to help ease their cash-flow problems. Also back on the agenda is the push for a single European ATC system, a suggestion warmly endorsed by the International Air Transport Association. "The plans are in place," said IATA director general Giovanni Bisignani. The Single European Sky project has been delayed by member states anxious to reserve sovereign airspace for military use.

"The closure of airspace in the EU justifies the adoption of measures to introduce, on a temporary basis, flexibility in the application of current rules and policies to ease the pressure on airlines and help with immediate cash-flow problems," said Kallas of the entire package to be discussed next week.

Even if member states receive the green light to administer state aid, however, it is doubtful many will act on it, as European governments are introducing swingeing public spending cuts after borrowing heavily during the recession. Ireland has already ruled out any financial assistance.

Another problem with sanctioning state aid will be deciding who is entitled to compensation. European travel agents' and tour operators' association ECTAA this week told the European Commission that its members should also be authorized to receive potential compensation after claiming the sector lost €450 million in the first six days of the crisis. Hoteliers have suffered too. London's tourism body VisitLondon said occupancy rates in the United Kingdom capital plummeted 25 percent last week.

One transport sector that gained from the crisis was rail. The number of train tickets purchased with AirPlus International corporate cards soared 50 percent in the early part of last week, the company said, also noting flight booking volumes have been unaffected.