Businesses adjust to disruptions to air traffic from ash cloud; airlines hardest hit so far

Impact of volcanic ash surfacing for US businesses

NEW YORK — Overnight shipping, airlines and tourism were just some of the businesses that faced a second day of disruptions as a cloud of volcanic ash emanating from Iceland grounded thousands of flights to and from Europe.

The airline industry is losing an estimated $200 million a day and delays and cancellations are expected to last at least through the weekend. The impact on businesses that depend on air freight to ship products to and from Europe was harder to quantify, but the world’s two largest package delivery companies were seeing a growing backlog.

Both UPS and FedEx had their main European air hubs closed down by the cloud of ash. Shipments that are normally transported by air were being delayed by at least a day, according to UPS spokesman Norman Black. Both companies are taking actions that indicate they’re worried about falling further behind.

On Friday afternoon, FedEx stopped accepting virtually all its lower-priority international shipments, which can include a wide variety of products from auto parts to clothing, in order to “control any backlog that might occur within the system,” spokeswoman Sally Davenport said.

UPS planned to have workers move packages over the weekend — a time when they don’t usually ship — to catch up. Within Europe, both FedEx and UPS are moving packages by truck instead of air when possible.

“Some businesses will be affected by the inability for freight to get in and out of the country,” said Howard Archer, chief European and U.K economist at IHS Global Insight in London. “As long as the disruption is not too long, this should not be a major problem.”

Many businesses that rely heavily on air freight because they ship products of high value and small size expressed confidence that current stockpiles would suffice. A spokeswoman for London-based GlaxoSmithKline, the world’s fourth largest drug maker by sales, said the company has enough inventory to meet demand until European flights resume.

For now, the most obvious impact is on air travel. At least one airline, Ryanair Holdings PLC, the leading low-cost airline in Europe, has canceled flights through Monday.

Eurocontrol said about 16,000 of Europe’s usual 28,000 daily flights were canceled Friday — twice as many as were canceled a day earlier.

Flight cancelations can have a cascading effect because if a plane is grounded in Europe, it can’t get to the United States for a return trip the next day, even if the European airspace is open.

The Air Transport Association says U.S. passenger airlines and cargo carriers cancelled 280 of the more than 330 trans-Atlantic flights on Friday.

Grant Foster, risk consultant for insurance broker Aon Corp., based in Chicago. said issues with travel and products getting delivered “are going to get quite critical over the next couple of days.”

But, he added: “As a whole, the impact isn’t a show-stopper in the short term.”

Sara Johnson, managing director of global macroeconomics at IHS Global Insight, predicts little fallout to the global economy.

“It’s just an unfortunate episode that will cause inconvenience but certainly will not derail the global economic recovery,” she says.

Not everyone is crying foul over the plume of smoke. The aviation disruption has been a boon to train and bus service in Europe.

And thousands of stranded business travelers need temporary offices and virtual conferencing capabilities. Regus, a company that provides meeting rooms and virtual offices worldwide, said it has seen an unprecedented spike in the use of its more than 2,500 video communication suites. Reservations are up 38 percent in the UK, 12 percent across Europe and 9 percent in the U.S.

Hotels and inns have also held up well as stranded travelers find a place to wait it out.

Rachael Solem, owner of the Irving House at Harvard and Harding House in Cambridge, Mass., has had some cancellations. But a few guests had to stay longer because flights weren’t available to Europe.

One guest originally bound for Heathrow returned to stay an extra two days.

“She is visiting a new grandchild, so she has not been too upset over having to extend her visit here,” Solem said.

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AP writers Jane Wardell in London, Jeannine Aversa and Matthew Perrone in Washington and David Koenig in Dallas contributed to this report.