IAG: British Airways parent company shares fall after IT chaos

Shares in International Airlines Group were trading as much as 4 per cent lower before recovering slightly

Josie Cox
Business Editor
Tuesday 30 May 2017 09:31
Comments
Operations largely returned to normal on Monday
Operations largely returned to normal on Monday

Shares in British Airways’ parent company fell sharply on Tuesday morning, the first day of trading since the airline was hit by a massive IT outage, plunging tens of thousands of passengers into travel chaos and evolving into a full-blown public relations disaster.

Early in the day, shares in International Airlines Group were more than 4 per cent lower, sending the group to the bottom of the FTSE 100 stock index. Later they recovered somewhat to end the session around 1.5 per cent lower.

A major outage caused the airline’s IT system to completely collapse over the weekend grounding flights at hubs Heathrow and Gatwick and scuppering travel plans for an estimated 75,000.

“British Airways faces all kinds of questions in the wake of its IT failure and investors are rightly turning a bit cautious,” said Neil Wilson, an analyst at ETX Capital.

He added that far worse than the financial cost will be the “reputational damage to the brand”.

On Monday, Alex Cruz, the chief executive of British Airways, apologised “profusely” to passengers but denied the disruption had anything to do with cost-cutting in the business or outsourcing jobs.

Operations largely returned to normal on Monday, but flight compensation website Flightright.com said that with around 800 flights cancelled on Saturday and Sunday, BA would likely have to pay approximately €61m (£53m) in compensation under EU rules, according to Reuters. That figures does not include the cost of reimbursing customers for hotel stays.

Mr Cruz on Monday said that BA would honour all compensation obligations.

“BA certainly will find it tough to hold on to passengers now,” Mr Wilson said.

The GMB union said in a statement on Saturday that the carrier’s “disastrous computer systems failure is another example of the shortcomings of BA IT systems since they made a number of staff redundant, and outsourced their work to India in 2016”.

The weekend’s chaos deals a sharp blow to the airline at a time when it is already battling fierce competition from low-budget rivals, especially on its short-haul flights.

Travel companies have generally been struck by muted demand for holidays in Europe after a string of deadly terror attacks that have rattled the region.

Several airlines have been hit by computer glitches over the last year, but analysts said that the duration and scale of BA’s outage was unusual.

In August last year, Delta Air Lines cancelled and delayed thousands of flights after an outage hit its computer systems. Last month, Germany's Lufthansa and Air France suffered a global system outage which briefly prevented them from boarding passengers.

Additional reporting by Reuters

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