TT. Tui Travel

Shares of European airlines and travel operators fell Monday as fears grew that the weekend eruption of Grimsvotn volcano in Iceland would lead to widespread disruption, as in April last year, when airlines were forced to ground flights and carry the costly burden of looking after stranded passengers.

At 0945 GMT, Air France-KLM (AF.FR) and Deutsche Lufthansa AG (LHA.XE) were both trading down 4.2%, while International Consolidated Airlines Group S.A.'s (IAG.LN) shares were 3.6% lower. Europe's largest travel operator TUI Travel PLC (TT.LN) was down 3.1% and its rival Thomas Cook Group PLC (TCG.LN) was off 3.5%.

The volcano erupted late Saturday, sending ash plumes 17 kilometers into the sky, and forcing the closure of Icelandic airspace.

Norwegian airport operator Avinor said on its web site that ash would move into airspace between mainland Norway and Svalbad this afternoon and that it expects flights to and from Svalbad could be affected from 1200 GMT, and canceled after 1800 GMT.

The ash cloud will have its biggest impact on those intending to fly to and from Iceland, but also international flights to and from the U.S. that follow jet streams close to Iceland as they look to keep fuel costs to a minimum.

Still, none of the major European airlines were expecting a drastic impact to their operations Monday morning.

Air France Sunday was force to reduce the altitude of a Paris to San Francisco flight that goes over the area where cloud is, a spokesperson for the French airline said Monday, adding that those actions added a mere five minutes to the duration of the flight.

KLM said it also changed some flight paths to the west coast of the U.S. Sunday and Monday, which would lead to delays of about 15 minutes.

The U.K.-based Civil Aviation Authority said any potential disruptions would be minimal and that there wouldn't be a repeat of last year's events when blanket airspace closures were imposed over the U.K.

A spokesman for the CAA said current forecasts indicate that ash clouds could enter U.K. airspace by Tuesday morning but they were still waiting for confirmation from the U.K. Met office.

According to graphics on the Met Office web site, it expects ash to enter north-west U.K. airspace by midnight and at between 8 kilometers and 12 kilometers, altitudes at which some aircraft fly.

Still, the CAA said it was better able to cope with ash this time around, "with processes in place and lessons learned," the spokesman said.

Under what airline authorities deem dense conditions, where there is 4 grams or more of ash per 10 cubic meters of air, aircraft will be excluded from flying. However, they will be allowed to fly where ash is between 2 gram and 4 grams per 10 cubic meters, provided they have a safety report and the approval of their engine manufacturers that the plane can cope.

The CAA spokesman added, "Safety is still our number one priority."

Ryanair Holdings PLC's (RYA.DB) Chief Financial Officer Howard Millar said he wasn't concerned, adding that there wouldn't be as much disruption as caused by the eruption of another Icelandic volcano, Eyjafjallajokull, last year--which forced 34 countries to shut their airspace--as the ash this time is "heavier and falling more quickly".

He added the degree of "panic and hysteria" shown by European regulators and governments last year wouldn't be repeated as lessons had been learnt.

But some airlines have already adopted methods to mitigate any potential impact. Ryanair, for example, started imposing a EUR2 levy per passenger to protect itself against costs relating to duty-of-care legislation.

(David Pearson in Paris, Bart Koster in Amsterdam and Charlie Duxbury in Sweden contributed to this story)

By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; kaveri.niththyananthan@dowjones.com

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