Thursday, March 28, 2024 | Ramadan 17, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

With flights back in skies, BA must repair brand

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Alistair Smout and Victoria Bryan -


British Airways must turn its attention to repairing its brand after a weekend of chaos and criticism caused by a major IT outage that grounded flights from London’s two main airports.


Thousands were left stranded when an IT systems failure on Saturday left the airline unable to allow passengers to check in or board flights.


The meltdown at the start of a school holiday week in Britain unleashed a wave of criticism for BA, which like other full-service airlines has been cutting costs to compete with budget carriers Ryanair and easyJet.


BA had already come under fire in recent months for charging passengers for sandwiches on shorter flights and cutting leg room on short-haul business to help fit in more seats per plane.


Critics 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 the cheapest budget airline would be ashamed of,” mid-market newspaper the Daily Mail wrote.


On customer review site Skytrax, BA had a score of 5/10, with many reviewers saying they feel the airline’s economy class on short-haul is now no better than a budget carrier.


By comparison, low cost carriers Ryanair and easyJet score 6/10, while Lufthansa and KLM score 7/10.


RBC analyst Damian Brewer said the latest BA problems could hit future revenues for parent company IAG.


“This is, in our view, a very unhelpful development for BA customers — and hence IAG shareholders,” he wrote in a note.


Spanish-listed shares of IAG, which also owns carriers Iberia and Aer Lingus, dropped 2.5 per cent on Monday after an outage which is likely to cost tens of millions of pounds in compensation and other refunds.


Analysts said BA needed a charm offensive after being criticised for its response over the weekend.


“There needs to be an important communications exercise after this, to give assurances that the systems, back up systems and risk plan is as good as it can be,” said Davy transport analyst Stephen Furlong.


“But this has happened before with other global airlines, and the stock market effect for these other airlines really wasn’t big,” he added.


BA CEO Alex Cruz said on Monday he was “profusely sorry”, and that the problems were due to a power surge that also knocked out its back-up systems and had nothing to do with outsourcing. The GMB union had blamed IT shortcomings on a decision to shift work to India last year.


Some wondered why IAG Chief Executive Willie Walsh, a former head of BA and better known in Britain than Cruz, had not appeared in public.


Kunal Kothari, UK All Cap equity analyst at Old Mutual Global Investors, a top-10 shareholder in IAG stock, said he did not expect lasting financial repercussions for the group.


“As long as an airline deals with outages in a sensible and customer friendly way, lasting brand damage is unlikely,” he said.


Gil Hecht, the CEO of Israel-based IT outage prevention firm Continuity Software, said that providing such incidents happened no more than once a year, people would probably carry on booking.


Other airlines have swiftly recovered after a one-off financial hit from IT glitches.


Delta had to cancel 2,300 flights over a three-day period in August after a power outage grounded its flights. The incident knocked $150 million off its pretax profit for the quarter.


Hecht of Continuity Software said the Delta outage had spurred interest from firms looking to improve their resilience, and that in the last two years, there has been a 500 per cent increase in demand for business continuity technologies.— Reuters


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