BA cannot go unpunished
WILLIE Walsh’s stewardship of British Airways has seen the flag carrier fight back against union power and stealthily expand by swallowing other European national carriers.
The group transmogrified from BA to International Airlines Group and in the process increased its stranglehold at Heathrow, where it controls an astonishing 54pc of the arrival and departure slots.
It is unsurprising that this domination at one of the world’s busiest hub airports may have allowed complacency to creep in.
BA’s investment in new long-haul aircraft has been slow and it still operates Boeing 747s which are now more than 20 years old.
As the bank holiday weekend misery demonstrates, its IT systems are simply not robust enough.
A power surge knocked out 200 critical applications and some 2,000 separate servers, including critical back-up systems.
The power surge may have been a once in a blue moon event but that does not excuse the lack of back-up systems capable of minimising disruption. The chaos over the weekend would be understandable if it were down to a cyber hack, but simply blaming power sources is unacceptable.
Alex Cruz, BA’s chief executive, an import from Iberia’s no-frills carrier Vueling, is shouldering most of the blame. He must take responsibility for appalling customer service, sloppy attention to needs and failure to properly look after the young, old and infirm caught up in the havoc.
Not getting away on a half-term holiday may be considered a ‘first world’ problem, but when you pay for BA’s fine service you deserve to receive it.
Among BA’s cost- cutting measures has been to shift some IT off to India. That may not have been part of the weekend’s problems, but it is unwise.
BT is among those service providers now recognising that moving systems to India was a mistake and are reshoring them to the UK. BA is also having to knit British Midland, Iberia, Aer Lingus et al into one carrier and accommodate code- sharing with American Airlines. As a result it has far more complex digital needs.
Legacy systems are extraordinarily high risk. There is a big difference between replacing free refreshments on short-haul routes with M&S sandwiches and failing to invest enough in fool-proof computer systems. BA’s supremacy at Heathrow is a privilege it has been allowed to buy despite the vociferous criticism of, among others, Virgin. It is among the reasons, along with gold-plated costs, that Walsh has been a noisy critic of a third runway. Keeping rivals out of Heathrow has been a big plus for BA, although Dubai, the Emirates hub, is now busier than London’s main airport.
It is important for Britain that it keeps faith with strategic industries. But that does not mean that regulators – in this case the Civil Aviation Authority (CAA) – should give BA an easy ride. Passengers must be fully compensated and the CAA needs to conduct a transparent probe into the events of the weekend, publish the findings and punish IAG as necessary.
IAG shares were down 3pc in latest trading in Madrid. There may be worse to come when London reopens.
Fred’s escape
THE decision by the Royal Bank of Scotland Shareholders Action Group to throw in the towel will be disappointing to all who wanted to see Fred Goodwin, architect of the bank’s downfall, in court.
In many ways it was likely to be underwhelming, since the case was narrowly focused on the £12bn rights issue in the spring of 2008 and unlikely to touch directly on the ghastly takeover of ABN Amro or delve into Goodwin’s peculiar stewardship and the conflicts in his personal life.
Allowing the case to go ahead would only have raised legal costs, already expected to wipe out around half of RBS’s 82p a share offer, and if appeals were lodged it would have drawn out the process of repairing the bank.
There is also the question of whether investors (including this writer) deserve an extra bung from the courts.
After all, without the £45bn plus of taxpayer bailout, shareholders would have lost all residual value in their stock and been last in the queue among creditors.
Sad and cruel, but that’s the risk that people take when they buy shares.
A public tribunal where former directors were forced to answer for their actions would be far preferable.