Airlines fly into a cloud of Eyjafjallajökull

The view while jogging along Hong Kong International Airport's southern perimeter this weekend was eye candy for any airline buff. In addition to the normal take-offs and landings, aircraft from such venerable aviation names as Air France, British Airways, KLM and Lufthansa sat parked on the tarmac, their journeys home thwarted by an ash cloud stretching across northern Europe from Iceland to Russia that has left airlines grounded and travellers stranded.

Since Wednesday last week, when British authorities first began closing airports in and airspace over the UK, more than 8 million passengers have had their travel plans disrupted and more than 60,000 flights have been cancelled as a result of an ash cloud produced by the eruption of Icelandic volcano Eyjafjallajökull. The impact has been felt by airlines around the world.

"This crisis is costing airlines at least $200 million a day in lost revenues and the European economy is suffering billions of dollars in lost business," said Giovanni Bisignani, director general and chief executive of the International Air Transport Association (IATA), an industry body, in a statement.

The Centre of Asia-Pacific Aviation estimated that airlines have already lost $2 billion globally.

Asia-Pacific airlines, thanks to their geographical homes, have been largely spared the brunt of the shutdown. According to a report by J.P. Morgan's head of Asia-Pacific transportation equity research, Corrine Png, Cathay Pacific Airways and Singapore Airlines are the two most impacted in the region. She estimates that they could lose 0.5% and 0.4% of their total respective revenue for every week the airspace over Europe remains closed. This includes the financial impact of their equity stakes in Air China and Virgin Atlantic Airways -- two other carriers also hit by the shutdown.

Based on Png's estimates, and using the airlines' 2009 fiscal year revenues and five days of cancelled flights, Cathay Pacific has lost an estimated HK$239 million ($30.8 million) and Singapore Air an estimated S$45.7 million ($33.1 million) thus far. Now, as European airlines are pushing the continent's regulators and safety authorities to reopen airspace, there seems to be little cause for serious financial concern at Asian carriers.

"The earnings impact on the Asian carriers will unlikely be significant if the airspace closure is not prolonged beyond two to three months," wrote Png. She added that there could even be an upside for the region's airlines as passengers postpone trips, boosting revenues in coming months.

This is good news for Asia's weaker carriers, for example Japan Airlines (JAL), which is currently undergoing bankruptcy restructuring.

But regardless of the potential revenue upside later, the airspace shutdown has taken its toll. Nicholas Ionides, vice-president of public affairs at Singapore Air, said the airline has already cancelled "more than 130 flights" and is focused on getting stranded passengers to their destinations and managing the operational logistics of the shutdown. He added that the airline is taking a "what can we operate" attitude to the situation and is following the recommendations of regulators and safety authorities.

Out of 30 scheduled daily flights on Singapore Air to Europe, only flight 378 -- Singapore to Barcelona via Milan -- took off yesterday, but bypassed Milan and went straight for the Catalonian capital.

FinanceAsia has heard about one senior bank executive who was stranded in Hong Kong as a result of the airspace closure and decided to take the long route home. Scheduled to return to London on Saturday, he left last night on a journey that would reportedly take him through Dubai and Greece before travelling overland back to the UK.

As of 9pm last night (Hong Kong time), Air China, All Nippon Airways, Cathay Pacific, Eva Air, JAL, Jet Airways, Malaysia Airlines, Qantas Airways, Singapore Air and Thai Airways had all cancelled today's flights to northern Europe and the UK. Limited services to Rome and Athens were scheduled to resume.

European aviation regulators closed airspace over Europe last week because silica and other particles in volcanic ash can damage aircraft engines, rendering them inoperable mid-flight. A famous example in 1982 saw British Airways flight 9 from Auckland to London lose all four engines after flying through just such a cloud over Indonesia. The plane managed to land safely in Jakarta.

Still, authorities face mounting criticism for their decision to close airspace over the continent. "We are far enough into this crisis to express our dissatisfaction on how governments have managed it -- with no risk assessment, no consultation, no coordination, and no leadership," said Bisignani in a statement. "It is incredible that Europe's transport ministers have taken five days to organise a teleconference."

European air transport officials were scheduled to meet on Monday to discuss the re-opening of airspace over the continent.

The closure is the longest since the US closed its skies for three days following the terrorist attacks of September 11, 2001.

Photo provided by AFP.