Iceland Strikes Back – Market Matters

Is it possible the Government ban on airline flights, because of a bit of ash from a volcano, was a bit excessive? It’s certainly been pleasantly quiet in my vegetable patch sitting under the flight path to Luton, but I can’t believe this will go on for much longer. The effect of an Icelandic volcano with an unpronounceable name (Eyjafjallajokul) is being felt all over Europe whilst the volcano itself shows no sign of co-operating and shutting down. 

Mr Giovanni Bisignani, Director- General of the International Air Transport Association was pretty scathing about the reaction of European Governments:

Eyjafjallajokul: Don’t look back...

“The no-fly ban is a mess, based on a theoretical model instead of the facts and a risk assessment. It took five days to organise a conference call between transport ministers. We need to replace this blanket ban with a practical approach”.

Meanwhile the airlines have been mounting test flights above, below and around the ash cloud to see if there really is a threat to safety. Will jet engines fail if they ingest a bit of dust as well as the occasional runway starling? This was just the excuse for Willie Walsh, Chief executive of British Airways to jump onto a 747 test flight from Heathrow to Cardiff (where else?) after calculating it was costing £25 million per day to ground his planes. Many of his recently striking cabin staff were disappointed to see him return safely.

But apart from airline profits and kids being late back to school from their Easter holidays, what real economic impact are flight restrictions having? One effect is to highlight the UK’s reliance on air-freighted imports for high-value perishables and high-value goods like medicines and computer chips. Although the UK imports about 90% of its fruit and 60% of its vegetables, most of that is by lorry so there is no need for panic buying at your local supermarket as yet. It’s more efficient to produce basic vegetables in sunny Spain and Italy then ship them to the UK by lorry. Only fresh and fragile produce with a high value and short shelf life is air-freighted and this comprises only about 1% of our food imports but does represent 25% by value.

So scare-stories about grocery shortages seem fairly hollow as long as lorries can still get onto the ferries. Ghanaian pineapples, Kenyan mangetout and other exotics may soon be in short supply at the wholesalers, but some might say, so what? As Adam Leyland, Editor of The Grocer said, “Some fruit and veg that is normally air-freighted at this time of year may come by boat. As for basic vegetables I doubt prices will go up over the short term.” But this might not apply if you sell fresh flowers (often air-freighted from Kenya) or if you produce high value perishables outside Europe. The Kenyan economy relies heavily on exporting high-value, air-freighted flowers and specialist vegetables to the EU and its farmers are already binning hundreds of tons of valuable product. And all this in the run-up to a general election and the worst economic crisis for 60 years.

IATA: EU response - too late and impractical

Is there a silver lining to this cloud of volcanic ash? Sadly not, as carbon dioxide emissions may have fallen because of flight restrictions, but have been ever-so-slightly overshadowed by the CO2 coming out of what’s-it-called. And, if you and the kids were stuck at an airport, I’ll bet you find your insurers aren’t particularly helpful as most travel insurance policies exclude ‘natural disasters’. The only cheering thought for Gordon Brown may have been that Tony Blair, EU Peace Envoy was stranded in Jerusalem whilst Gordon chaired a meeting of the impressive-sounding COBRA emergency planning committee from which Business Secretary Lord Mandelson emerged to announce the Royal Navy would be drafted in to evacuate plucky British holidaymakers from the shores of Spain. Quite how – given the RN’s lack of ships – was not made clear.

Icelandic Prime Minister Johanna Siguroardottir’s plan to stuff Gordon Brown in the run-up to the general election seems to be working. It has not gone unnoticed that Iceland imports most of its goods from the opposite direction to the ash cloud and didn’t like having its UK assets frozen in 2008 following the collapse of Landsbanki Bank. Maybe Gordon has played right into her hands. What we need is a really rotten spring – lots or rain and southwesterly storms to blow the ash up into the Arctic and onto the polar bears. In the meantime I suggest you dust-off your allotment and start digging.

Jonathan Owen is a director of Quarterbridge Project Management – a specialist consultancy providing business advice and design services to market owners and trade associations. He has a keen interest in the politics of retailing, growing vegetables and eating well.

Market Matters, published in Market Trade News magazine