Thousands of passengers in Australia and New Zealand were affected when airlines suspended flights today as an ash cloud from an erupting volcano in southern Chile spread, threatening to damage engines.

Australia's national carrier, Qantas Airways, said all its flights in and out of the south-eastern city of Melbourne would be grounded.

Qantas also cancelled 22 flights to and from New Zealand and the Australian island-state of Tasmania, as well as eight flights within New Zealand's South Island, as the dust cloud from Chile's erupting Cordon Caulle volcano spread across the atmosphere.

About 8,000 people would be affected by the cancellations, a Qantas spokeswoman said.

Virgin Australia later announced it was suspending 34 domestic flights and one international one from Melbourne tonight.

"We have been closely monitoring the situation all day," Virgin's Sean Donohue said in a statement. "Safety is always our number one priority."

Australian budget carrier Jetstar said it cancelled domestic flights to New Zealand's South Island airports.

National carrier Air New Zealand did not cancel or delay any flights but adjusted flight routes and altitudes to ensure aircraft remain clear of any ash, company spokeswoman Tracy Mills said. The drifting clouds of fine grit can severely damage aircraft engines.

New Zealand's Civil Aviation Authority said the ash plumes could affect cruising levels for both jet and turboprop aircraft at between 20,000 and 35,000 feet (6,000-10,600m).

The agency said the ash would probably disrupt flights for the next week.

The volcano in Chile began erupting on June 4. Flights in the South American countries of Chile, Argentina, Uruguay and Brazil were grounded for some days following the eruption.

The flight warnings and disruptions come 14 months after air traffic was grounded across Europe after the eruption of Iceland's Eyjafjallajokull volcano.

Private weather forecaster WeatherWatch.co.nz said today that ash from the volcano had spiralled clockwise around Antarctica at a very high altitude.

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