A post by the World Economic Forum’s Suppy Chain and Transport Risk Group

Airplane bypasses an ash cloud For those enjoying the beautiful May weather, clouds on the horizon did not just herald the onslaught of bad weather – they brought with them unpleasant memories of 2010.

The unprecedented impact of the Eyjafjallajökull volcano in April last year affected all sectors of society, as flight restrictions left travellers stranded throughout Europe and Asia. The 2010 eruption was even more costly for the business world. Huge insurance premiums, disruptions to deliveries and staffing chaos cost the airline industry alone some £1.7 billion, with losses in freight duties amounting to £330 – £340 million, as the world began to realise just how interconnected transport networks and supply chains really are.

As Grimsvötn, Iceland’s most active volcano, ominously spewed its ash into the air recently, the transportation industry, and its investors, were quick to react. Iceland closed its main international airport, and European flights in Scotland, north-eastern England and Germany were grounded. Airline industry share prices took a hit, as Air-France KLM shares were down some 3.3% and Easyjet’s shares fell by 3.5%.

The worst already seems to be over – German flights restarted on 26 May, and there have been few major delays for logistics companies. Experts explain this to be a result of the different nature of the ash and weather from 2010. Meteorological conditions alone, however, cannot mask the significant changes in risk management and contingency planning, particularly within the airline industry.

This eruption puts a spotlight on lessons learned, including tangible improvements in contingency planning, risk management and mitigation in transport industries and supply chains. Since last year’s eruption, the Civil Aviation Authority (criticised in 2010 for being heavy-handed in their restrictions) have eased legislation, permitting flights to fly in low- and medium-density ash clouds, subject to authorization. Industry-wide mitigation actions, a topic under discussion by the World Economic Forum’s Supply Chain and Transport Risk Group, have been put into play. The activation of the European Aviation Crisis Coordination Cell demonstrated the success of cross-industry collaboration to mitigate risks. The International Civil Aviation Organization’s task force has performed a speedy risk assessment of variables such as the thickness of ash and weather conditions. Communication tools, such as EUROCONTROL’s Network Operations Portal, have been utilised effectively to share coping strategies.

The airline industry has taken the initiative, albeit inspired by bitter experience, to set up an effective system for mitigating the disruption caused by volcanic eruptions. Methods of collaboration, automated risk management and improved communication with customers and suppliers, are proving effective mitigation techniques against the impact of volcanic eruptions. These methods are transferrable, and can be used by other industries to address the occurrence of future environmental risks – opportunities to be tackled in the Vienna Meeting of the Forum’s Supply Chain and Risk Group in June 2011. The potential to bring some sunshine, however, may be too challenging a task for even the airline industry to handle.