Eyjafjallajokull is not a place that most people would be familiar with. In fact, this place in Iceland with the tongue-twisting name has been more familiar to intrepid travelers and backpackers, who for years have trekked up to this scenic volcano-glacier. Now though, after days of travel chaos, Eyjafjallajokull (pronounced ay-yah-FYAH’-tlah-yer-kuh-duhl) has become everyone’s worst nightmare, from ordinary travelers to suffering airline companies to stuttering economies. And the volcanic ash that has spewed from the mouth of Eyjafjallajokull has revealed yet again how nature is so fickle and economies so brittle.
When Eyjafjallajokull erupted this year, its first outbreak since 1823, few could have foreseen the sort of confusion and bedlam that would follow. Airports across Europe shut down in fear that the spewed volcanic ash could harm jet engines. At the time of writing, flights were already operating, but it was clear that the four-plus days of closure would throttle struggling airlines, already hampered by the recession and rising jet fuel prices. It is estimated that around 102,000 flights were canceled and that it may take weeks to resolve the backlog of passengers stranded around the world. The International Air Transport Association (IATA) says that airlines have already lost around $1.7 billion in revenue and this will lead to a damaging $2.8 billion loss this year. The IATA also wants Europe to offer some compensation to beleaguered airlines in a move akin to the payouts that the U.S. offered their airline industry in the aftermath of the September 11 attacks.
Clearly, airlines have suffered. But what impact on Europe’s economy as a whole? Initial analysis of any catastrophic blow to the European economy appears to be premature. While airlines have to bear the biggest cost burden, their loss has been another’s gain. Cab rental agencies, and bus, train and ferry operators have profited enormously. Likewise, tourists may have been prevented from having their vacation, but hoteliers and inns have seen business soar by providing accommodation to stranded passengers. However, movement of foods and other perishable commodities has been definitely affected and the longer the crisis drags on, the more prolonged the impact. In fact, the Dutch Flower Exporters Organization estimates that the flower industry lost around $30 million during the crisis. Expectedly, stock markets have not been kind to airline stocks, but price movements of such stocks have typically been sensitive to such natural occurrences.
Interestingly, what Eyjafjallajokull has done is to bring into sharp focus the strengths and weaknesses of existing infrastructure in Europe, in particular, the railways. Across Europe, there has been a concentrated effort to create more efficient supply chains. The European Union has already promised that it would probe the economic fallout of the volcanic ash, and while the short-term impact of the chaos ranged from canceled FedEx flights to suspension of BMW car production due to a lack of components, what is emerging is that the long-term impact is dependent on Eyjafjallajokull itself. If Eyjafjallajokull fizzles out within the next few weeks, then the monetary fallout would barely create a ripple on the gross domestic product of economies like the U.K. What will worry Eyjafjallajokull watchers, however, is a volcano that simmers for more than six months. This will cause further disruptions to the aviation industry, and may drag down the GDP of several affected countries by 1% to 2%, and even push Europe back into recession.
Whatever Eyjafjallajokull decides, if nothing else, this crisis has shown just how closely integrated this globalized world is. And that really is the lesson from Eyjafjallajokull.
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