Threat of Volcano Ash Cloud Hits Airline Shares

The threat of ash from an Icelandic volcano shutting European airspace hit airline shares on Monday.

Shares in German airline Lufthansa plunged by 4.56 percent while the DAX slid 1.5 percent.

Air France-KLM fell more than four percent at the opening of trading, the biggest loser on the Paris stock market.

Shares in International Airline Group (IAG), the owner of British Airways and Iberia, plunged 3.55 percent in early trading while London was down 1.34 percent overall.

Shares in Scandinavian airline SAS dropped 3.02 percent while Stockholm’s exchange was down 1.55 percent.

The Grimsvoetn volcano began erupting late on Saturday, with the first ash expected to begin hitting Europe on Tuesday.

In April 2010 Iceland’s Eyjafjoell volcano erupted, spewing a massive cloud of ash that caused the planet’s biggest airspace shutdown since World War II with more than 100,000 flights cancelled and eight million passengers stranded.

The costs in terms of lost revenue and compensation to passengers were a harsh blow to the airline industry, particularly in Europe.

Denmark has already closed some airspace over Greenland and Norway said it will cancel flights on Monday to the country’s Arctic archipelago of Svalbard.

France’s junior transport secretary Thierry Mariani warned on Monday that flights would be cancelled if an ash cloud from Iceland’s Grimsvoetn volcano blew over Europe.

“One thing that is certain … is that if Europe is affected then flights will be cancelled,” Mariani said on Europe 1 radio, adding that it was too early to say for certain if it would.

“If the ash isn’t noxious then the planes will fly. If the ash is noxious or presents a risk, then the planes won’t fly,” he added.

Concerns that the ash could damage aircraft engines led authorities to cancel flights as a precaution.

“The priority should always remain safety, without of course abusing the principle of precaution,” said Mariani.

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