Volcano impact bigger than Sept. 11-IATA

Ashes, smoke, and rocks are thrown skyward as a volcano continues to erupt near Eyjafjallajokull April 17, 2010.

PARIS (Reuters) - The International Air Transport Association (IATA) said on Monday European governments' response to the volcano crisis was inadequate and estimated its economic impact on airlines to be greater than the 2001 September 11 attacks.

Giovanni Bisignani, head of the IATA airline industry body, estimated airline revenue losses were now reaching $250 million a day, up from an earlier estimate of $200 million (131.2 million pounds) on Friday.

Bisignani called for urgent action to safely re-open airspace and called for a meeting of the International Civil Aviation Organisation, the United Nations aviation body.

"I would say that in a couple of weeks this will be a very embarrassing story for Europe," Bisignani told a news briefing in Paris.

"It took five days to organise a conference call with transport ministers with an emergency situation all over Europe and now expanding all over the world."

Most of Europe's airspace has been closed since Thursday after a huge ash cloud from an Icelandic volcano spread out, stranding millions of business passengers and holidaymakers and paralysing freight and businesses worldwide.

"This volcano has crippled the aviation sector, firstly in Europe and is now having worldwide implications. The scale of the economic impact (on aviation) is now greater than 9/11 when U.S. airspace was closed for three days," Bisignani said.

But Bisignani added that the U.S. September 11 attacks had triggered a loss of confidence in air travel that was not present today. He also predicted that recovery from the current crisis would be quicker once the clouds dispersed.

"We have predicted at least $200 million a day in lost revenue that is a conservative number. Today, that is more like $250 million. On top of this you have the additional cost for re-routing and compensation," he said.

European officials said they hoped to significantly increase take-offs to up to half of scheduled flights on Monday from over a fifth on Sunday while the EU summoned ministers for talks as pressure for a solution to the travel crisis built up.

Some European countries announced partial airspace re-openings but others kept no-fly decrees in place.

The Dutch airline KLM (KLMR.PK) (AIRF.PA), which has flown several test flights, said most European airspace was safe despite the plume of ash and dispatched two commercial freight flights to Asia on Sunday.

Shares in European airlines were hit hard on Monday with shares in Air France down nearly 7 percent at the start of trading and by 0815 GMT, they still had lost 4 percent at 11.96 euros.

Meanwhile, shares in British Airways BAY.L were down 3.11 percent, in Lufthansa (LHAG.DE) they were down 4.6 percent, in Air Berlin (AB1.DE).

The STOXX Europe 600 Travel and Leisure Index .SXTP was the top sector loser on Monday, down 1.6 percent. (Reporting by Tim Hepher and Matthias Blamont; Editing by Charles Dick)