LONDON • British Airways' (BA) epic meltdown over a busy holiday weekend further fanned public outrage at an industry infamous for its focus on cost cutting over customer service, leaving the British carrier scrambling to explain how a local computer outage could lead to thousands of stranded passengers.
A full flight schedule was due to resume yesterday. With nearly 600 flights cancelled and luggage unable to be dispersed, images and horror stories quickly coursed through social media.
Damages for rebooking and compensating customers are estimated at about €100 million (S$155 million), or about 3 per cent of the annual operating profit of parent company IAG.
The image damage could be even greater as BA appears to have no idea how it all happened.
"We're absolutely committed to finding out the root causes of this particular event," said chief executive officer Alex Cruz, looking grim, in an interview with Sky Television.
Adding further pressure, British Prime Minister Theresa May called on BA to compensate passengers and to fix its information technology system.
"It's important that, of course, British Airways has a compensation scheme... for people who were travelling," she told an election campaign event in central England yesterday.
"It is up to them to sort their IT out and to ensure that they're able to provide the services that people expect them to provide as British Airways."
RBC Capital Markets analyst Damian Brewer said: "It is tempting but increasingly questionable to view this as a one-off. Coming after a spate of other issues, the bad PR and potential reputational aftermath will likely hit future revenues beyond the likely material impact."
The crisis puts the spotlight on Mr Cruz, who took charge a year ago after running IAG's Spanish budget unit Vueling for more than nine years.
While Mr Cruz helped Vueling expand into Spain's second-biggest airline, it suffered repeated flight cancellations and delays last summer because of a lack of available aircraft and crews.
Mr Cruz's four-year cost-cutting programme at BA includes eliminating almost 700 back- office jobs, outsourcing some technology operations and switching to paid-for food on short-haul flights.
Ryanair was quick to try to capitalise on last Saturday's incident, using references to comedies Airplane and Little Britain on social media to suggest that passengers book flights with it instead.
Critics in the British media questioned BA's strategy and the way it was positioning itself in a competitive market.
"How long will passengers continue to pay through the nose if they are receiving a service that the cheapest budget airline would be ashamed of," newspaper The Daily Mail wrote on Monday.
The latest incident hits BA as it faces increasing competition on lucrative transatlantic routes.
Low-cost competitor Norwegian Air Shuttle is ramping up service to the United States, while Ryanair is increasing feeder operations to connect with long-haul flights to destinations such as New York and Havana. Ryanair yesterday reported record profits of €1.32 billion for last year, €800 million more than in 2015.
Analysts said BA needed to launch a charm offensive.
"There needs to be an important communications exercise after this, to give assurances that the systems, backup systems and risk plan are as good as they can be," said Davy transport analyst Stephen Furlong.
Airlines' reservations and IT systems are often a combination of modern systems built on top of technology from the 1960s. The need to keep systems running round the clock means it is hard to shut them down for a full overhaul.
BLOOMBERG, AGENCE FRANCE-PRESSE, REUTERS
