More volcano fallout: Who’s going to end up paying?
Last week’s groundings due to the volcanic ash cloud was expensive, and now this week everyone is looking to get paid. Airline passengers are calling on insurance companies to pay their losses, and insurers are pointing them back to the airlines. The airlines were definitely hit the worst by the week-long disruption, the estimated loss by the middle of last week was over $1.7 billion. And the airlines are the least likely to see any insurance indemnification. In order to be paid, material damage has to be present to give rise to a business interruption claim. Some cover for delay and travel abandonment may be available, but it all depends on what coverages were purchased by the policyholder.
It has been reported that Heathrow and some other airports waived fees for parking grounded aircraft and didn’t charge for repositioning flights, and of course there were some savings for not flying such as fuel costs. But airlines still had to continue to pay fixed costs such as salaries and are incurred extra expenses for payments made to stranded passengers.
As airlines keep picking up bills, they will increasingly seek to recover their own costs. Many blame government for the ban and they want governments to pay. We’ll watch closely to see how this unfolds.
Another problem is that the airlines and the jet engine manufacturers have no documented standards for a “safe” amount of dust in the air. Without standards, there is little way to design an insurance product which can be “triggered” by exceeding standards. Hopefully, the airline industry will make this a priority before the next, similar event.