An interesting analysis from RBS via FT Alphaville on the potential monetary impact of the ongoing volcanic ash disruption to travel and transport in Europe :
Two assumptions are critical in getting a handle on the short-run impact of the eruption: the fraction of the European workforce who have been displaced, and the amount of time it will take them to get back home and back to work.
According to the latest estimates (ACI Europe and Association of European Airlines), around 7 million people remain stranded abroad, most of whom are likely to be EU citizens. A reasonable working assumption is that 2 million of them were planning to be back at work, approximately 0.9% of the EU-25 workforce. For the UK economy, that would equate to a little under a quarter million workers missing in action. Our current estimate is that it will take around 3 days for this workforce to be back at work. This would imply a daily output loss for Europe of around half a billion euros or around Eur1.5 billion output loss over the three day period.
A fairly hefty loss just from loss of productivity but, in the scheme of things, I was not aware of the small size of the air transport sector as a whole :
At the sectoral level, there are clearly winners and losers. A lot less money will be spent on air travel this month than would ordinarily be the case. The airline industry accounts for about 0.2% of value added across Europe. Assuming activity is down 70%, then the cumulative loss in output over three days amounts to $200 million.
But much of that money will be spent on alternative means of transport as people try to get home: rail, road and sea account for the large majority of passenger journeys in Europe. Not only is the air transport industry small relative to the economy but it is also small when compared to other means of transportation. Indeed, in Europe, 46% of goods are transported via roads. Sea accounts to 37% of goods transportation while rail 11%. Air transport is less than 1%. The same is true for passenger transports in Europe where road accounts by far to the largest share, with 83% of passenger transports being done on roads.
And the final analysis :
Overall, we believe that the economic cost of the disruptions would amount to 0.1% of GDP maximum, should airline activity completely recover by the end of the week.
Negligible really in the face of the financial cost to the worlds economies over the last 18 months I think.
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