Volcanic ash cloud casts economic gloom on Israel

Steinitz says if clouds don't dissipate soon, he'll be forced to call special Finance Ministry meeting to assess situation.

April 19, 2010 04:27
4 minute read.
The volcano in southern Icelands Eyjafjallajokull

ash cloud 311. (photo credit: AP)


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The effects of the volcano that erupted in Iceland last week could have negative influence on the Israeli economy, because it is interfering with trade and tourism, Finance Minister Yuval Steinitz said on Sunday.

“The volcanic cloud over Europe casts a heavy gloom over Israel,” said Steinitz, adding that if the ash clouds hovering over Europe didn’t dissipate soon, he would be forced to call a special meeting of the Finance Ministry to assess the situation and offer possible action plans.

Israel’s overall trade with the European Union amounted to $29.8 billion in 2009, $12.3b. of it in exports.

In the morning cabinet meeting, Steinitz spoke about Israel’s dependence on Europe as its major trading partner and as a transit hub for its exports. He particularly noted the harm that could be caused to Israel’s flower growers and produce farmers, who market their commodities to Europe by air and who will face heavy losses if their goods remain on the ground for too long.

Steinitz added that foreign trade with North America could also be in jeopardy, because air traffic between it and Israel passes over Europe.

Other industries that expected to be harmed are Israel’s incoming tourism sector and its airline industry.

Several government ministries have already held evaluations on how to deal with the looming economic losses. Industry Trade and Labor Minister Binyamin Ben-Eliezer called an emergency meeting with ministry officials over the weekend, and instructed director-general Sharon Kadmi to prepare a contingency plan in case the ash cloud continue to disrupt trade.

“The ministry and its various units must be prepared for the possibility that the eruption will continue for days and even weeks, and lead to a severe crisis to Israel’s industry and business sectors,” said Ben Eliezer.

“Even though it is a force majeure, we must do everything to ensure minimal harm to the citizens of Israel,” said Kadmi.

Kadmi told the director of the ministry’s Foreign Trade Department to write up a plan, to be presented within days, outlining the ministry’s solutions to the harm to Israel’s foreign trade and businesses due to the cessation of flights.

Yitzhak Kimchi, the commissioner for consumer affairs at the Industry, Trade and Labor Ministry said airlines should not charge passengers for canceled flights.

“Consumers who don’t want alternative flights are entitled to their money back…. Airlines need to open information centers and keep them updated so citizens can access the information easily. The companies must do everything they can to find alternatives for the canceled flights and aid the stranded passengers until a solution is found.”

Kimchi noted that the law does not obligate airlines to pay for hotels for its stranded passengers.

The Transportation Ministry held two assessment meetings with meteorological experts to determine which airports were safe to land in and to authorize flights to these destinations, after noting that the cloud was making its way to northern Turkey.

Meanwhile, Transportation Minister Yisrael Katz authorized foreign ships sailing in the eastern Mediterranean to board Israeli tourists stranded in Europe and bring them back to Israel. The ship Magic 1 will be the first to arrive in Ashdod, Thursday morning, with passengers they picked up in Prague.

The Tourism Ministry announced it was helping tourists who were stranded here to find hotels in the Tel Aviv and Jerusalem areas, and was providing information on the other services they require in Israel.

“The mayors of Jerusalem and Tel Aviv answered the call of the Tourism Minister Stas Meseznikov and today will produce an information booklet for those tourists stranded in Israel,” the ministry said, in a statement.

“This booklet, which will include information about services in the city, as well as places of entertainment and any events taking place at this time, will be distributed at hotels in Jerusalem and Tel Aviv by the relevant Hotels Association.”

El Al’s spokeswoman said it was too early to evaluate its losses yet.

“Right now we aren’t dealing with losses. We are only focusing on bringing Israelis back home.

“El Al is the only airline that is acting to bring passengers to Israel,” she said. “We understand how important it is for people to make it back to Israel in time for the holidays and are operating airlifts from the few European airports that still allow it.”

On Sunday, an El Al flight on its way to Barcelona was forced to turn back mid-flight when it received notice that it, too, had been shut down because of the ash cloud. Flights to Rome, Athens and Madrid are still operating regularly.

Israir also sent planes to Rome to pick up stranded Israelis.

Experts estimate that global airline industry is losing upwards of $200 million a day while flights are grounded across most of Europe.

The Israel Hotel Association also said it was too early to tell the extent of the losses, as each hotel or chain of hotels was determining its own policy regarding refunds.

“A lot depends on what the European Hotel Association recommends and they still haven’t decided on it. Most of the hotels aren’t approving refunds as the crisis has cost them a lot of money, but some are showing a great deal of flexibility,” said the association’s spokeswoman.

“While the tourists who were forced to stay need hotel rooms, many opt for cheaper places since the added expenditure wasn’t budgeted for. I know that many travel agents are pressuring the hotels to offer discounts,” she said.

“At the same time, thousands of tourists who had booked rooms failed to arrive. Generally speaking, we are talking about major losses.”

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