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THE MOODIE REPORT: Travel Retail Sector Reels As Icelandic Volcano Ash Crisis Deepens


LATEST UPDATES:

– Joint call: Airports Council International (ACI) Europe and the Association of European Airlines call for an immediate reassessment of the flight restrictions caused by volcanic ash dispersion from Iceland that has paralyzed European airspace in recent days.

– Retail ‘disaster’: “This is (another) disaster for retailers. We have shops closed all over Europe and reduced pax all over the world. Just when things were starting to improve…” – A leading travel retail executive underlines the gravity of the situation to The Moodie Report.

– Flight cuts: Eurocontrol reports that approximately 5,000 flights took place on Sunday in European airspace compared with the usual 24,000.

INTERNATIONAL. The travel retail channel is counting the escalating cost of the closure of European airspace due to the volcano ash cloud from Mount Eyjafjallajökull drifting from Iceland – and beginning to fear the longer-term consequences.

The crisis has had a devastating impact on travel in and out of Europe with a commensurate knock-on effect to airport commercial revenues, especially retail. The extent of the shutdown is already undoing much of travel retail’s strong early 2010 recovery from the 2009 economic crisis. Airport retailers such as World Duty Free, Dublin Airport Authority, Aelia, Nuance and Gebr Heinemann have run up heavy losses and things are set to get worse in coming days.

By the end of Sunday four days of trading will have been hit (the last three severely for many retailers). One seasoned observer of the business noted that Northern Europeans are among travel retail’s best spenders and estimated the losses to date as representing around 1% of European sales (factoring in seasonality). “If you are trying to show +5% growth year-on-year you just lost a big chunk of it,” he commented.

Worryingly, the volcanic eruptions in Iceland could continue for weeks or months, leading to protracted travel chaos for millions. Volcanologists told The Press Association that it was impossible to predict when the activity might cease.

n the UK, the National Air Traffic Service(NATS) advised today that the restrictions in place across UK controlled airspace will remain in place until at least 1300 on Sunday 18 April. British Airways has cancelled all short and long haul flights in and out of the UK until at least Monday morning.

Airspace across central and northern Europe is largely in shut-down mode, with an estimated two-thirds of European flights cancelled on Friday.

European air navigation safety agency Eurocontrol said it expected approximately 5,000 flights to take place on Saturday, 17 April. “On a normal Saturday, we would expect 22,000,” it said, adding “Yesterday, 16 April, there were 10,400 flights compared to the normal 28,000.”

Germany has shut down all of its international airports, Paris and 23 further French airports are closed until further notice as are those in northern Italy, including the two Milan airports and Venice.

Airspace has also been partially or totally closed in a host of European countries, including Austria, Belgium, Bosnia, Croatia, Denmark, Estonia, Finland, Hungary, Latvia, Montenegro, Norway, The Netherlands, Poland Romania, Serbia, Sweden, Switzerland and Slovakia.

Other regions are being hit by the European airspace closure. Some 150 flights scheduled to leave Ben-Gurion International Airport In Tel Aviv, Israel to 30 destinations in Europe were cancelled, leaving a reported 30,000 travellers stranded. James Richardson’s duty free sales were hit badly on Saturday, according to local reports.

According to the Icelandic Meteorological Office, the ash cloud could linger over much of Europe for up to five days with the UK, Ireland and Scandinavia worst impacted. Millions of Europeans are believed to be trapped abroad – including many travel retail executives (four members of The Moodie Report are currently stranded in locations from New York to Hong Kong) – while many more travellers of other nationalities are unable to depart from European airports.

Even if flights do get under way in coming days the disruption is likely to linger for some time beyond that. If Eyjafjallajökull remains active many travellers, both leisure and business, are likely to cancel or postpone flights until the activity eases.

Already one major brand company has told The Moodie Report that the company is reviewing its short-term international travel policy given that a number of its executives are stranded abroad.

The most frightening aspect of the situation is that it could go on for weeks or even months. Scientists even fear that the nearby sister (and much bigger) volcano Katla could erupt.

Cardiff University Volcanology Professor Chris MacLeod told Sky News that the last recorded eruption of Eyjafjallajokull continued for over a year, “but we don’t know if it was as intense as this eruption”.

For financially stretched airlines such as British Airways the volcano cloud is desperately bad news. A Deloitte spokesman told Sky News that the cost to British and Irish scheduled airlines from the closure of airspace is likely to be around £28 million per day.

For travel retail, Eyjafjallajokull is just the latest in a bewilderingly unpredictable chain of external events in recent years that have had a brutal impact on revenues. With the industry’s recovery from the global economic malaise seemingly set fair, everyone in the business will be hoping that this is one crisis – and one volcano cloud – that blows over soon.

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