I’m pleased with British Airways’ response to crisis, says Walsh

The airline is putting profit before service and it seems to be run for the benefit of a clique of senior managers

THE BOSS of British Airways’ parent company has defended the airline, heaping praise on staff and insisting it did all it could in the wake of a catastrophic power failure.

Willie Walsh, appearing in public for the first time since the incident, said he was “pleased” with how the airline had dealt with the disruption that grounded 75,000 passengers. He apologised to those whose holidays were disrupted.

However, board members indicated they would demand an independent inquiry into how the fiasco was handled.

Two very different interpretations of the chaos emerged yesterday as mystery over the “power surge” that left passengers stranded over the Bank Holiday weekend deepened.

Mr Walsh, chief executive of International Airlines Group (IAG), said: “I think the team under the leadership of Alex Cruz [BA chief executive] has done everything possible to get it back to flying a full schedule as quickly as possible. We know the cause of the problem. It was not about IT. The problem was caused by the failure of electricity power to the IT systems.

“We understand what happened but are investigating why and that will take some time.”

Mr Cruz could be headed for a standoff with senior board members, furious at the hammering the company’s reputation has taken and the ongoing chaos

‘I think the team has done everything possible to get it back to flying a full schedule as soon as possible’

amid a lack of a full explanation. The board is expected to demand an inquiry led by third-party investigators to establish what went wrong and why contingency plans failed to kick in.

A source in the company told the BBC: “It would be impossible to pretend that it was great. We need to figure out how, and why, decisions on how to deal with it were taken.” The airline is facing questions over the “power surge” said to have been responsible for the chaos, which has been denied by energy providers.

BA was accused of greed after the GMB union suggested the chaos could have been prevented if the airline had not cut hundreds of IT staff. A BA computer worker accused the company of ignoring warnings about outsourcing and cutting jobs. He said 600 IT jobs had been lost since March last year, with work being outsourced to India.

“We have been warning that to rip out the knowledge and experience from what is a very complex IT estate would have serious consequences in terms of long-term maintenance of the system as well as any recovery from any hiccups,” he said.

Bill Francis, head of group IT at IAG, sent an email to staff saying an investigation so far had found that an uninterruptible power supply to a core data centre at Heathrow was over-ridden on Saturday, resulting in the power loss.

Corporate crises come in many forms, but in my experience, it is the way they are managed and the wider problems they highlight, as much as the crisis itself, which does the damage. I was at a conference in Portugal when news of the British Airways IT outage broke. Fortunately I had flown there with easyjet because all the BA flights were fully booked. Those that had somehow managed to get a seat on BA were not so lucky.

Speculation quickly spread that BA had been the subject of a terrorist hack, forcing it to close all its systems for fear that the perpetrators would attempt to bring down a plane.

As it happens, it might have been better for BA had this been true, even if incredibly scary for everyone else. In fact the worst disruption since an Icelandic volcano erupted in 2010, grounding all airlines, was entirely BA’S fault, and not down to the actions of some malign external force. So the reputational damage was multiplied.

Inability to explain exactly what went wrong and why, together with failure to communicate with the 75,000 passengers affected, further exacerbated an already dire situation. Worse, Alex Cruz, who to virtually everyone’s surprise turns out to be BA’S chief executive, failed to appear in person until day three of the crisis, and then only to insist he wouldn’t be resigning.

As if BA couldn’t fall any further into the abyss, Willie Walsh, chief executive of BA’S holding company, International Airlines Group (but still widely thought of as the man who actually runs BA), took even longer to show up. When he did, he proceeded to talk about the episode as if an impartial outside observer commenting on an event for which he bore no responsibility. Either he’s in charge or he’s not, and if the latter, what is the point of him?

Mr Walsh’s last recorded annual pay was, by the way, £6.5 million, and however much he might like to think power is devolved to his growing collection of individual airlines, he is indeed responsible, since IT is one of the functions shared across the group as a whole. The cost savings so achieved were one of the justifications for merging BA with Spain’s Iberia to form IAG.

Like many such corporate calamities, BA’S predicament can, I suppose, be put down to a series of unfortunate and bizarrely unusual accidents that could possibly have happened to almost any company.

What makes it so disastrous is that it feeds into a wider concern about penny-pinching management and declining standards of service. If selling yourself as a premium product, which BA does, you cannot afford for things to go wrong or lower your standards of service to those of lesser rivals.

In an industry subject to vibrant levels of competition, it wouldn’t matter too much if the market leader slips on a banana skin. Companies that cut corners are digging their own graves; customers soon vote with their feet and the company fails. Yet flag-carrying airlines cannot properly be described as subject to the usual disciplines of the market, despite the advent of the low-cost operators. Thanks to the legacy of public ownership and government-allocated monopoly rights, BA commands more than half the take-off and landing slots at Heathrow. That’s one of the reasons the company is so lukewarm on the idea of a third runway; BA’S current monopoly is its biggest asset.

Too many major corporations seem these days to be run for the benefit of a small clique of senior executives, with customers taken for granted and scant attention paid to the long-term needs of the business.

A fast-buck, short-termist mentality has spread from finance and the City into the wider commercial world, where it may have become a major cause of declining rates of innovation, growth and productivity gain.

At the same time, there has been a growing concentration in market power across sectors, again crimping diversity, enterprise and growth. The market share of America’s four biggest grocery chains, for instance, has risen from 17 per cent 25 years ago to nearly 40 per cent today.

This has been great for investors and executives – at least among the winners – but it cannot be healthy for the economy as a whole. Huge effort is expended ruthlessly keeping potential rivals out of the market, while simultaneously milking the customer for all she’s worth. People are being taken for a ride.

All this might seem to have little to do with a power surge at one of British Airways’ data centres, yet last weekend’s chaos speaks to much the same complaint. Somewhere along the line, profit has been put before service. For this crime, BA and its top executives should, logically, be made to pay the highest possible price. But don’t hold your breath. If you expect heads to roll, you’ll likely be waiting a long time.

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