Bailout May Be in Store for Hobbled European Airlines

LONDON (April 20) -- A financial bailout of Europe's aviation industry crippled by the Icelandic volcano is now a real possibility, industry experts say, even as the dangerous ash dissipated today and flight restrictions began to ease across the continent.

The financial damage is already extensive, running into the hundreds of millions of dollars for individual airlines and airport operators, and some analysts believe the eventual losses across the entire industry may run into the billions of dollars.

Irish carrier Aer Lingus claims to be losing upward of $5 million a day, while British Airways said its daily losses amounted to as much as $31 million. Air France-KLM CEO Pierre-Henri Gourgeon, who pushed for several test flights and questioned the earlier blanket ban, announced his airline was losing some $47 million for each day of disruption. Speaking to reporters at a press conference, he said that "500,000 direct employees and three times as many staff employed indirectly could very soon be temporarily laid off."

"I would imagine that most European carriers will request aid, especially in light of the current state of the airline sector," Jim Smith, editor of industry magazine Jane's Transport Finance, told AOL News.

Many airlines have already made public calls for government aid because of the exceptional circumstances, and some have criticized the slow response of both the European Union and national governments. "It's embarrassing, and a European mess," said Giovanni Bisignani, the CEO of airline industry trade body the IATA, in remarks to The Associated Press. "It took five days to organize a conference call with the ministers of transport, and we are losing $200 million per day."

That estimate later rose to $250 million a day, and transport ministers from all 27 EU member states finally took part in a teleconference meeting Monday to discuss -- among other things -- possible solutions to the cash crunch facing the airlines. But speaking at a press conference before that meeting, Siim Kallas, the transport commissioner in the European Union's executive branch, said that airlines were not yet in a position to ask for aid, noting that the industry was "not ready to assess ... what we can do to overcome this crisis."

In Britain, Prime Minister Gordon Brown hinted Monday that his government would consider financial help for operators such as British Airways, and his transport minister, Lord Adonis, told the BBC that "it would be irresponsible to rule out options, given the extent of the crisis that we face."

But elsewhere in Europe, that option seemed to be off the table. "We want to avoid state support, we want to resist," Sweden's enterprise minister, Maud Olofsson, told a Swedish daily newspaper. She expressed concern that smaller European states would be disadvantaged if national governments started to help their flagship carriers.

It would also be against EU competition rules, according to many analysts. "I don't think all European governments would welcome requests for compensation from carriers," said Jane's Transport Finance's Smith. "Those governments inclined to grant aid, or to request aid from the EU, would be home to struggling airlines."

Other industry analysts see a silver lining. "Obviously, the airlines which are smaller or poorly positioned, they will probably run into cash flow problems," David Ploog of Frankfurt, Germany-based aviation consultants M2P told AOL News, citing Italy's Alitalia and Austrian Airlines as two carriers that are likely to face severe financial difficulties in the coming weeks. "But maybe it's a good healing process for the industry if these carriers are washed out by this kind of event."