British Air meltdown feeds outrage at tight-fisted airlines:
British Airways' epic meltdown
over a busy holiday weekend further fanned public outrage of an industry
infamous for its focus on cost cuts over customer service, leaving the U.K.
carrier scrambling to explain how a local computer outage could lead to thousands
of stranded passengers.
Amid United Airlines' dragging
fiasco, mass cancellations at Delta Air Lines and U.S. concerns about terrorists using
laptops to down planes, the global aviation industry hardly needed another
blow. But then on Saturday morning, a brief power surge knocked out British
Airways' communications systems grounding the carrier's entire London
operations, leading to days of chaos and putting the new chief executive
officer in the hot seat.
With
nearly 600 flights canceled and luggage unable to be dispersed, images and
horror stories quickly coursed through social media. Damages for rebooking and
compensating customers is estimated at about $112 million, or about 3 percent
of the annual operating profit of parent IAG SA.
The image
damage could be even greater as British Airways appears to have no idea how it
all happened. "We're absolutely committed to finding out the root causes of
this particular event," a grim looking Alex Cruz, the airlines' CEO, said in an
interview with Sky Television. He did, however, rule out a cyber attack, which
suggests the faults are homegrown.
"It is
tempting but increasingly questionable to view this as a one-off,"
said Damian Brewer, an analyst with RBC Capital Markets. "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 U.K. carrier is still
processing thousands of passengers who missed flights or lost their luggage.
The airline said about 75,000 people were affected, while analysts said the
number was likely closer to 170,000. About 95 percent of flights are running,
and more than two-thirds of the 75,000 affected passengers will reach their
final destination by the end of the day, Cruz said in a YouTube message posted
on Monday.
The crisis
puts the spotlight on Cruz, who took charge a year ago after running IAG's
Spanish budget unit Vueling for more than nine years.
While
Cruz helped Vueling expand into Spain's second-biggest airline, the airline
suffered repeated flight cancellations and delays last summer due to a lack of
available aircraft and crews. Vueling was the only airline in IAG's portfolio
where profit declined last year.
His
four-year cost-cutting program at BA includes eliminating almost 700
back-office jobs, outsourcing some technology operations and switching to
paid-for food on short-haul flights. The excessive focus on costs is to blame
for the latest mess, according to the GMB union.
"They
started on this journey to outsource and offshore this work and there have been
a number of incidents now that have culminated in what has taken place this
weekend," Mick Rix, national officer for civil aviation at GMB,
said in a phone interview on Monday.
For passengers, workers and
tabloids that have criticized the industry's ruthless cost reductions for
years, the disruptions seemed to prove that airlines have gone too far.
Daily
Mail blamed Cruz and chastised his methods at Vueling, where he outlawed color
printing, banned paper towels from washrooms and offered visitors to business
meetings only tap water. Critics on social media, meanwhile, questioned whether
British Airways deserved to claim itself as the U.K.'s flag carrier after the
perpetual cutbacks.
Cruz and
the airline were keen to distance themselves from any notion that penny
pinching led to the meltdown, saying instead that the outage was caused by
damage at U.K. data centers, where work wasn't outsourced.
"Two days
later, they are not all back up and running completely, but we are making good
progress in our recovery," the airline said in a statement. "We do have
a back-up system, but on this occasion
it failed."
It's
not the first problem involving British Airways. Last September, a computer
network failure brought down the carrier's check-in system, causing worldwide
service delays, while earlier this month, London Gatwick airport reported
problems with its baggage-sorting system.
The
latest gaffe hits British Airways as it faces increasing competition on
lucrative transatlantic routes. Low-cost competitor Norwegian Air Shuttle ASA
is ramping up service to the U.S., while Ryanair Holdings Plc is increasing
feeder operations to connect with long-haul flights to destinations such as New
York and Havanna.
Customers
who were sent away from Heathrow and Gatwick on Saturday were told to
find hotels on their own for reimbursement later by British Airways. Payments
will include 200 pounds ($260) per night for lodging, 50 pounds round trip
between the airport and the hotel, and as much as 25 pounds for refreshments,
according to leaflets from the company. Operations were gradually recovering by
Monday, when just 50 flights to and from its main London Heathrow hub were
canceled and operations were back on schedule at Gatwick.
"It's
a tragedy," Cruz said. "We do apologize profusely for the hardship
that these customers of ours have had to go through."
By: Richard
Weiss, Rebecca Penty
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