Hundreds of UK flights have been halted today and there are fears the ash cloud could reach northern and central Europe by the end of the week. Last year, airlines worldwide suffered massive losses as a result of a similar volcanic eruption in Iceland.
Ryanair – which appears in the top-10 holdings of four open- and closed-ended vehicles, including the £252m European Investment Trust – lost £26.2m as a result of last year’s volcanic ash cloud.
According to our data, the airline lost around 21 per cent in the 40 days that followed the initial eruption on 14 April.
Performance of stock over 1-yr
Source: Financial Express Analytics
A repeat of last year’s disaster would come as a particular blow to Ryanair, the share price of which slumped by more than 6 per cent yesterday.
A flat earnings forecast for 2011 and confirmation that it would be cutting capacity for the first time in its 25-year history were the biggest contributors to the fall.
BAA, the Spanish-owned operator of Britain’s biggest airports, was also affected by the ash cloud. The £1.3bn L&G Fixed Interest and £941m M&G European Corporate Bond funds are among 11 fixed interest open-ended funds that hold BAA in their top-10 holdings.
Two open-ended funds – Aegon UK Equity Absolute Return and IM Matterley Regular High Income – hold British Airways in their top-10, while L&G European Absolute and FF&P US All Cap Value Equity have significant exposure to Air France.
International Consolidated Airlines, the holding company formed by the January 2011 merger between British Airways and Iberia, appears in the top-10 holdings of three funds, including Trustnet Alpha Manager Alex Savvides’ JOHCM UK Growth fund.
Although the cloud is expected to halt thousands of flights, international ratings agency Fitch says it expects this ash cloud to have a more muted effect on the airline industry than last year’s.
"Compared to the disruption caused by the April 2010 ash cloud, which closed European airspace for two weeks and resulted in 100,000 grounded flights, the European airline industry is in better shape this time round," said associate director Sabrina Ran.
"The impact is likely to be limited as the agency expects better co-ordination between European air-traffic control authorities and the commercial airlines would occur this time round to keep any travel disruption to a minimum."
"It is too early to forecast any potential financial damages from the new eruption. Nevertheless, we believe that any disruption is likely to be temporary, with no further material delay on the [airline] sector's gradual path to recovery," she finished.