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Volcanic Eruption Disrupts Airlines and Business Again

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The Grimsvotn volcano, Iceland’s most active, began erupting Saturday, sending large plumes of ash into the atmosphere and halting air traffic in the region. As of this morning, Iceland’s main airport in Reykjavik remained closed while airlines and airports across Europe brace for possible disruptions. This brings back unpleasant memories of last year’s volcanic eruption as Europe clings to hope that the effect will not be nearly as dreadful.

Officials appeared to be responding to the ash with a radically different approach than last year, when European aviation authorities were sharply criticized for closing large swathes of airspace in response to the April 2010 eruption of another Icelandic volcano. Many airlines said authorities overestimated the danger to planes from the abrasive ash, and overreacted by closing airspace for five days. Thousands of flights were grounded, airlines lost millions of dollars and millions of travelers were stranded, many sleeping on airport floors across northern Europe.

Though meteorological officials predicted the ash to miss the European mainland, recent news reports claim that the Civil Aviation Authority expects disruption to UK flights.

We here at the Monitor followed last year’s eruption of the Eyjafjallajökull volcano very closely, posting about it’s amazing power with pics and video, about airports closing and how it was one of the top 10 disasters of the past decade, according to Zurich.

Stay tuned as we continue to post about Grimsvotn’s most powerful eruption in 100 years and its effects on travel and business. And visit The Atlantic for some amazing images of the eruption.

Top Ten Disasters of the Past Decade

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Zurich has unveiled its list of the “Top Ten Megadisasters” of the past decade. The usual suspects pretty much (listed chronologically — not by their “overall business impact,” which is the basis for the list).

1. 9/11 – 2001
2. SARS – 2003
3. 2003 U.S. / Canada power outage – 2003
4. 2004 Indian Ocean earthquake and tsunami – 2004
5. Hurricanes Katrina, Rita and Wilma – 2005
6. Financial crisis – 2008
7. China earthquake – 2008
8. H1N1 pandemic – 2009
9. Iceland volcano – 2010
10. Floods in Europe and Pakistan – 2010

I have to admit, I would have probably completely forgotten the 2003 blackout if I was playing Family Feud and had to come up with all 10 — and I even wrote a cover story for Risk Management magazine about it.

Obviously, catastrophes that weren’t included like the Haiti earthquake, Cyclone Nargis and Bam earthquake were horrific tragedies, but the insurance penetration in those areas is so minimal that the ghastly human tolls did not have a large affect on the industry.

Let’s all dearly hope that the next decade is tamer.

katrina ninth ward

Ninth Ward. New Orleans. Post-Katrina.

Airlines Lose Millions, Taxi Drivers Make Thousands

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The numerous airlines that have been grounded since a volcano under an Icelandic glacier erupted Wednesday are not covered by insurance.

Typical airline insurance policies would cover damage to planes if they flew through a volcanic ash cloud, but so far no plane has been damaged because of the ban on flights in the vicinity of the cloud, insurance companies and experts said. And airlines don’t have insurance for grounding planes due to natural events because policies would be very expensive, they said.

Thousands of flights have been cancelled into and out of Europe and hundreds of thousands of passengers have been stranded at airports throughout the world since Wednesday. Though those passengers may have trip insurance, the airlines cannot file a claim for this major business interruption (their business interruption insurance, if they have it, only covers the grounding of planes due to physical damage to the aircraft).

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The airlines are facing huge losses in revenue at a time when the industry is still struggling with reduced demand.

The Air Transport Association, or IATA, which represents some 230 airlines and 93% of scheduled international global air traffic said that at current levels of disruption, its initial and conservative estimate of the financial impact on airlines is in excess of 0 million per day in lost revenues.

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However, it said airlines would be hurt further as it they will incur added costs for re-routing of aircraft, care for stranded passengers and aircraft at various ports.

But there is a silver lining, however thin. Scandinavian ferries are fully booked and hotel owners are charging upwards of $800 a night while taxi drivers pocket $5,000 fares. So while airlines lose millions, stranded passengers confront desperation and the European economy takes yet another hit, there are those making the best of this natural catastrophe.

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