British Airways owner IAG says IT chaos cost £58m

  • Published
People queuing at Heathrow after BA IT chaosImage source, Getty Images

The IT failure at British Airways in May that left thousands unable to check in baggage cost it 65m euros (£58m), the airline's owner, IAG, has said.

About 75,000 passengers faced severe disruption when BA's system failed over the second Bank Holiday weekend in May.

BA said it was caused by an engineer who disconnected a power supply.

Despite the extra cost, IAG still managed to report a 13.8% increase in half-year operating profits to 898m euros (£804m).

Operating profits at British Airways rose to 741m euros from 631m euros a year earlier.

IAG, which also owns Aer Lingus, Iberia and Vueling, said it expected operating profit for the whole of 2017 to show a double-digit percentage improvement.

Revenue per passenger was up 1.5%, the first rise since 2014.

'Isolated event'

The cause of May's power cut has not been fully explained. The company has asked an independent company to investigate.

IAG chief executive Willie Walsh defended the company's effort to compensate passengers for the disruption caused by the IT failure.

"We are doing everything we can to make good the disruption that the customers experienced, but it was an isolated event and I think you've got to focus on the fact that BA's passenger numbers continue to increase," he told the BBC's Today programme.

"BA's underlying performance is actually very good, as are the performances of the other airlines within the group, so this is a very strong set of results and reflects a focus that IAG has on providing customer service at prices that customers are willing to pay."

Price war

Earlier this week Ryanair said that fares could fall by as much as 9% this summer, as competition among budget carriers grows.

But with its focus on longer-haul routes, IAG has some insulation from those falling fares.

"At the budget end of the market, capacity is expanding. As more planes take to the sky, short haul airlines are having to cut prices to keep them full. With its long haul focus that's not a problem for IAG," said Nicholas Hyett, equity analyst at stockbrokers Hargreaves Lansdown.

"The result is that while rivals are seeing the gains from lower fuel prices frittered away in an aggressive price war, at IAG they're dropping through to the bottom line and profits are taking off," Mr Hyett said.

Employee costs were down 3.9% across the group as a whole, thanks to what the company called productivity and efficiency improvements.

BA has been affected by a series of strikes by mixed-fleet cabin crew, who are paid less and employed on different terms to those of longer-standing staff.

Mr Walsh said Level - its new long-haul, low-cost airline which is based in Barcelona - was proving a success and the group planned to expand the operation.