Published: Apr 19, 2010 6:08 PM EDT

PARIS, France - European transport officials have carved up the sky, creating three zones to break the flight deadlock caused by a cloud of volcanic ash flowing from Iceland over Europe.

France said Monday that European countries can resume airline traffic in designated "caution zones" where the threat of ash is considered less dangerous. Under the accord, one area - defined by the European air traffic control agency Eurocontrol - will remain entirely off limits to flights.

Another area will be open to all flights and a third area will be a caution zone in which some flights will be allowed. Jean-Louis Borloo, the No. 2 French Cabinet official, says flights in the caution zone will be "very secure" with many tests on engines.

Airline losses from ash spiral over $1 billion

As airline losses from the volcanic ash cloud spiraled over $1 billion, the industry demanded EU compensation and criticized European governments for relying too much on scientific theory -- not fact -- in their decisions to shut down airspace across the continent.

Shares of some European airlines fell as flight disruptions from the volcanic cloud moved into a fifth day, and the International Air Transport Association complained of "no leadership" from government leaders - one of whom admitted to EU dissension about how to respond. "It's embarrassing, and a European mess," IATA CEO Giovanni Bisignani told The Associated Press.

"It took five days to organize a conference call with the ministers of transport and we are losing $200 million per day (and) 750,000 passengers are stranded all over. Does it make sense?" IATA officials said the $200 million estimate was at the low-end of their projections, and that it could run as high as $250 million-$300 million a day.

Even as airline officials were clamoring for relief - both financial and operational - a senior Western diplomat told The Associated Press that several NATO F-16 fighter jets had suffered engine damage after flying through the cloud, suggesting government caution was warranted.

The official declined to provide more details on the military flights, except to say that glasslike deposits were found in the planes' engines after they patrolled over unspecified European airspace. European civil aviation authorities held a conference call Monday about what steps could be taken toward opening airspace, and transport ministers of all 27 European Union members were conferring by phone and videoconference.

Dominique Bussereau, France's transport minister, told reporters Monday that he had urged EU president Spain. ever since Saturday. to call the ministerial meeting immediately - but Madrid declined.

"Naturally, it would have been better if had taken place Sunday or Saturday," Bussereau said. British Airways said airlines have asked the EU for financial compensation for the closure of airspace, starting last Wednesday.

With London among the first hubs shut down, the British carrier said it's losing as much as 20 million pounds ($30 million) per day. BA Chief Executive Willie Walsh pointed out that compensation had been paid to airlines after the closure of U.S. airspace following the Sept. 11, 2001 terrorist attacks.

"This is an unprecedented situation that is having a huge impact on customers and airlines alike," Walsh said. "We continue to offer as much support as we can to our customers, however, these are extraordinary circumstances that are beyond all airlines' control." Environment Minister Jean-Louis Borloo -- the No. 2 in the French Cabinet -- said a meeting of French airlines, travel agencies and the government was planned for Tuesday to examine possible state aid to the industry.

"This aid will evolve of course based on the severity of the crisis. For that, we need a European pre-accord that we have obtained - an accord in principle so this sector aid can be allocated," Borloo told France's i-Tele.

German Transport Minister Peter Ramsauer said government decisions were based on a "sea of data" - and defended the continued closure of air space in his country. He brushed off airlines' complaints about losses, saying they know about their susceptibility to weather conditions. "It is completely obvious that you have to calculate with such risks," he told Radio station Deutschlandfunk. "And I defend myself right away against any calls to the government," to compensate for the corporate losses.

The IATA, in a statement, called on governments to place "greater urgency and focus on how and when we can safely reopen Europe's skies" - such as through more in-depth study of the ash cloud. "We have to not just use - as the Europeans were doing - a theoretical model, let's try to use figures and facts," Bisignani said." It means sending test planes at certain kinds of altitudes to check what was the situation with the ashes." While the association says "safety is our top priority," Bisignani said in the statement that its member airlines have run test flights with no problems and "they report missed opportunities to fly safely."

Bisignani said that Europe - unlike the United States, for example - is "not well-equipped" when it comes to planes that can test the air quality in the skies. He estimated that once flights in Europe do resume, it would take three to six days for traffic to return to normal.

France's Borloo said disparate analyses needed to be brought together based on "real tests on real planes with real pilots," so some air "corridors" could be reopened. "The issue today is not to reopen all European commercial airspace, the issue today is to increase the ability to reopen corridors to allow the general de-congestion of European traffic," he told reporters. Pierre-Henri Gourgeon, the No. 2 executive at Air France-KLM, said his company is losing euro35 million a day and called for more test flights to see if routes are safe to fly. He said the French-Dutch carrier conducted five test flights on its own Sunday and planned another seven Monday.

Speaking to reporters Monday at Air France headquarters near Paris' main airport, Gourgeon said aviation authorities had relied on "insufficient" information when they imposed a near-blanket flight ban in some countries. The prospect of continued losses and flight cancelations pushed down shares of many airlines. In early afternoon trade Europe, German carrier Deutsche Lufthansa AG was down 3.9 percent to euro12.24 in Frankfurt; Air France-KLM SA dropped 4.5 percent to euro11.87, and British Airways was down 4.4 percent to 224.6 British pence.