A government bailout for airlines after Iceland volcano?

Citing the government bailout after the Sept. 11 shutdown of US airspace, European airlines are seeking government compensation over groundings caused by the ash cloud released from an Iceland volcano. So are some stranded passengers.

For six days, Lisa and John Hogan, and their 1-year old son, Simon, have been stuck in London – waiting to board a flight home to Australia.

Although airspace opened Tuesday at some airports in some parts of Europe – in France, Germany, and the Netherlands, for example – British skies remained mostly closed, and this, compounded with the massive backlog of flights, means that the Hogans, like hundreds of thousands of others, are still stranded.

Every extra day in transit, complains Lisa, is costing them “at least” 300 dollars, money they can ill afford. “What I want to know” says Lisa, is who is going to pay for all this?”

IN PICTURES: Iceland volcano

It’s a question on many lips now.

With airline losses from the volcanic ash cloud now more than 1 billion dollars, several leaders of the airline industry are demanding compensation from their own governments or from the European Union. They argue that the airlines were forced to comply with national edicts.

“This is an unprecedented situation that is having a huge impact on customers and airlines alike," British Airways chief executive Willie Walsh said to the Associated Press, making a case for compensation. "We continue to offer as much support as we can to our customers, however, these are extraordinary circumstances that are beyond all airlines' control.”

Such compensation, continued Walsh, has a precedent – as money was paid to airlines after the closure of US airspace following the Sept. 11, 2001, terrorist attacks.

The Airports Council International (ACI) Europe echoes this argument. ACI Europe director-general Olivier Jankovec said in a statement the impact on the aviation industry was “devastating,” and “already worse than 9/11.”

With London among the first hubs shut down, and now, it would seem, one of the last to re-open, British Airways has taken the lead with claims for compensation, arguing it is losing as much as 20 million pounds ($30 million) per day, between the lost passenger and freight revenues and the need to support passengers trapped abroad.

In London Tuesday, airline executives met Britain's transport secretary, Lord Adonis, to call for financial support and press the case for more say in future safety decisions on whether they should fly.

But neither Lord Adonis nor the EU has indicated that any government would be giving financial assistance to the industry at a time when budgets are still tight in the aftermath of the global recession.

EU avoids bailout issue

When EU transport ministers met Monday – via video conference, because they could not fly to actually sit down together – they shied away from the matter. They stressed that they were looking for a “European solution” to the crisis, but the EU is composed of 27 separate airspaces and the decision to close or reopen airports lies only with national governments.

"Aerospace is national competence, not the commission giving orders," EU Transport Commissioner Siim Kallas explained, adding that member states were working to coordinate their actions and allow flights to resume, volcano permitting.

The ministers agreed to establish three types of flying zones comprised of: no-go areas; safe corridors where all flying is permitted; and flight paths that contain ash but do not pose a danger.

Armed with reports from airlines that had carried out assessment flights and the latest data from Eurocontrol on the ash cloud movements, the EU ministers rejected claims that the response had been excessive, and stressed that safety remained the top priority and could not be compromised. They did not respond to questions about compensation.

EU slow to respond?

Meanwhile, the fact that it took until Monday for the transport ministers to even convene was causing an uproar.

The slow reaction reminded many Europeans of the lack of coordination between EU countries during other recent disasters, manmade and natural, such as the Greek economic crisis and the Haiti earthquake.

Dominique Bussereau, France's transport minister, said he had urged EU president Spain to call a ministerial meeting immediately, but that Madrid dawdled. "Naturally, it would have been better if it had taken place Sunday or Saturday," admitted Bussereau.

An increasingly furious International Air Transport Association put out a statement from CEO Giovanni Bisignani raging at the lack of leadership. "We are far enough into this crisis to express our dissatisfaction on how governments have managed it – with no risk assessment, no consultation, no co-ordination, and no leadership,” he said.

"It's embarrassing, and a European mess.… It took five days to organize a conference call with the ministers of transport…. Does it make sense?"

As for the Hogans and other stranded passengers, the question of compensation is, in theory, easier to answer. Under the EU's passenger bill of rights, airlines who cancel their flights are obliged to refund travelers for the price of their ticket – or provide hotel, food, and other amenities until they are rerouted.

But whether or not this will actually happen remains unclear as passengers rarely need accommodation for more than a night, and many insurance companies do not cover airline or individual claims arising from "adverse weather conditions."

IN PICTURES: Iceland volcano