Volcano Cloud's Impact: Some $2B and Counting

The financial impact of that toxic cloud spewing forth from the volcanic eruption in Iceland is already estimated to be about $2 billion, and will surely keep getting bigger, analysts say.

CBS News Business and Economics Correspondent Rebecca Jarvis says the economic ripple effect continues to spread, with things you might not think of being drawn into the mix, such as oil prices, teleconferencing, even organ transplants.

It could be days or even weeks before air travel returns to normal across Europe and Asia, but the financial ramifications could last longer and even affect Americans who aren't traveling, Jarvis says.

The airlines are looking at losses of $200 million a day, according to the International Air Transport Association, putting the total at about $1 billion since the travel nightmare began late last week. IATA says the hit could wind up being worse than the carriers took from 9/11.

And airlines aren't insured for this event, points out CBS New Travel Editor Peter Greenberg. Most insurers consider this an "act of God" that falls outside insurance policies. So, says Greenberg, the airlines are going to have to absorb those losses -- and they're likely to be passed come in the form of higher ticket prices.

We already knew fares were on their way up, he adds. Airlines were limiting the number of planes they were flying to increase demand and send ticket prices higher. It's going to take a few weeks for them to get this all sorted out and, by then, we'll be in the high travel season; and this will likely exacerbate the problem.

British Airways says airlines have asked the European Union for financial compensation for the closure of airspace. The British carrier says it is losing as much as $30 million a day since the volcano erupted last week, sending up an ash cloud that has grounded aircraft for five straight days.

British Airways chief executive Willie Walsh says the situation is extraordinary. He says European airlines have asked the EU and national governments for financial compensation for the closure of airspace.
Walsh says there is a precedent because compensation was paid after the closure of U.S, airspace following the Sept. 11, 2001 terrorist attacks.

British Prime Minister Gordon Brown expressed optimism that other European nations would see the wisdom in drawing on collective EU rainy day funds to help reimburse some of the industry's loses - and possibly those of the individual travelers.

But Jarvis says this is all taking a huge bite out of the pocketbooks of stranded passengers. "You're going to get your air fare reimbursed," Jarvis says. "You're going to get another opportunity to travel on the same airline in the future. But passengers opting to stay at hotels or find other modes of transportation are spending their own money, and probably won't be reimbursed, because the airlines aren't covered for those expenses, Jarvis says. Travel insurance won't help, either - that same "Act of God" exclusion applies to those policies.

Clearly, those costs add up. Jarvis spoke to tourists in London and New York this weekend who figured they'd dish out about $300 a day on hotel costs - and that's before they even considered food and other expenses. Many others, of course, and roughing it in airports, because they can't afford to stay at hotels.

In Europe, trains, ferries are packed and rental cars gobbled up. And there are stories emerging about people paying thousands of dollars to hire a car to drive them from country to country.

Jarvis spotlighted some other areas feeling the pinch:

Oil Market: Analysts say the demand for jet fuel has decreased by 2 million barrels a day. (Source: Reuters) Experts Jarvis spoke to said that shouldn't have a huge impact on oil prices. Tom Kloza of the Oil Price Information Service notes the oil market tends to look further in to the future when it comes to pricing. If the disruption in air travel eases this week, no oil price impact is likely.

Salmon: Apparently, the salmon producers of Iceland can't get their shipments out to the West. So what happens? The U.S. and Canadian fisheries are the now only game in town to get it, and some businesses are reporting that the cost for salmon is going up between 25 and 30 percent as a result. (Source: Baltimore Sun).

Teleconferencing: With executives stranded, and people unable to attend business meetings, virtual office provider Regus has seen a surge in requests for its 2,500 video communications suites across the globe. Regus says bookings are up 38 percent in the United Kingdom and 12 percent across Europe. In the U.S., bookings rose nine percent. (Source: Dallas Business Journal)

Businesses that Depend on Air Shipments from Europe: Think perishables, such as flowers, fruits, Swiss chocolate. Shipping companies such as FedEx and UPS are telling customers they have no way of getting packages to Europe right now, though UPS is exploring flying to Eastern Europe (Istanbul) and trucking shipments. (Source; Dow Jones)

Even Organ Transplants: Some organ transplants in Europe are being postponed because of the travel disruptions. (Source: Times UK)