Effects of volcano unclear

Among the casualties of the flight interruptions are roses from Van Den Berg Flowers in Kenya.

Khalil Senosi

GENEVA -- Could the volcano hamper Europe's shaky economic recovery? The ash cloud from Iceland's volcanic eruption is battering airlines, with officials warning of losses like the ones after the Sept. 11 attacks.

And European tourist operators are losing business, while each new day of closed airspace is costing jobs or revenues for those dealing in perishables, such as roses and mozzarella.

But the volcano disruption also is creating some winners, such as fully booked Scandinavian ferries, hotel owners charging $800 a night and taxi drivers pocketing $5,000 fares.

And while airlines wait, business is booming for ferry operators from the English Channel to the Baltic Sea, where the regular party crowd is competing with stranded air travelers for tickets on "booze cruises."

For winners and losers, much depends on how long the travel chaos goes on, leaving the ultimate effect on Europe's unsteady economic recovery unclear.

"A temporary volcanic eruption should have virtually no impact on activity in the long run," said Jacques Cailloux, an economist at the Royal Bank of Scotland, equating the situation of stranded travelers to a European strike of 2 million workers. "Once people are back to work, production can get back to normal," he said.

By the numbers, the situation appeared bleakest for airlines.

The International Air Transport Association claims carriers are losing more than $200 million a day, and the European Union's transport chief Siim Kallas said Monday that the ash plume covering much of the continent already has been worse for the industry than the constriction of travel after al-Qaida's attacks on the

U.S. nearly nine years ago.

Government bailouts might be necessary, he said, and the prospect of continued flight cancellations drove down airline shares.

But for an industry that has lost nearly $50 billion in the past decade, public help is already a regular occurrence. The real sufferers might be countless smaller enterprises deprived of staff, regular customers or the vital nuts and bolts they need for their products.

The ash cloud is "impairing economic activity on a significant scale," warned German Economy Minister Rainer Bruederle, citing hampered exports in sectors from chemicals to automobiles.

Travel operator TUI Travel PLC said it has lost at least $31 million.

At Geneva's airport, shops were deserted and unsold newspapers piled up around a bookshop. "Yesterday we made 1,000 Swiss francs. Normally we take 15,000 francs a day," said Mariejo Cardoso, the shop's manager.

Social safety nets might help in most European countries, but some 5,000 workers have been laid off temporarily in Kenya following $12 million in losses in flowers and produce. For people selling products from Kenyan roses to Ghanian pineapples, European markets are a key to survival.

Meanwhile, Swiss supermarket Migros warned of diminishing supplies of green asparagus during the beloved vegetable's peak season amid halted air deliveries from the United States. Cod from Iceland and fresh tuna filets from Vietnam and the Philippines could also run out, it warned.

Italian farmers' lobby Coldiretti said each workday without flights costs about $14 million as mozzarella and fresh fruits risk going bad.

"There are knock-on effects all the way down the food chain," said Kate Gibbs, spokeswoman for the Road Haulage Association in Britain. "We are going to see shortages of fresh food stuffs in our supermarkets and those that do get through will be more expensive."

Still, express delivery services Federal Express and DHL said they have shifted many deliveries onto trucks and rail to limit their losses, even if they declined to say how much they were losing. And most international commerce remained unaffected, since it is largely routed by sea, said Keith Rockwell, spokesman for the World Trade Organization.

"I wouldn't envision this affecting high-tech or other services trade, but it is terrible for those sectors that are affected," Rockwell said, citing tourism, and exports of fresh produce and flowers.

Cailloux said the total economic costs of the volcano eruptions would amount to no more than 0.1 percent of GDP if airline activity rebounds later this week. In the case of an indefinite grounding, companies and individuals would have to make costly adjustments to other transportation sources, but the impact on growth would be far less than the persistent effects of the financial crisis, he said.