Passengers wait with their luggage at the British Airways check-in desks at Heathrow airport in London. Neil Hall / Reuetrs
Passengers wait with their luggage at the British Airways check-in desks at Heathrow airport in London. Neil Hall / Reuetrs

Business

British Airways hit by ‘unquantifiable cost’ of IT failure

Under EU flight delay rules, they can claim compensation of between €250 (Dh1,026) and €600, depending on the length of the delay.

Sananda Sahoo

28 May, 2017

The cost to British Airways from the disruption to its flights from London’s two main hubs as a result of an IT disruption since Saturday is expected to be significant, according to analysts.

All BA flights were cancelled on Saturday at Heathrow and Gatwick airports, affecting thousands of passengers. Many who managed to travel had to depart without their baggage. Flights were again affected on Sunday, with a third out of Heathrow cancelled.

The knock-on effects of the major IT failure are expected to continue to disrupt flights today.

“It’s not possible to quantify the cost of this IT failure at this time, but given the scale of British Airways’ operation and the number of customers affected, it will be significant,” said John Strickland, an aviation analyst at the London-based JLS ­Consulting.

Compensation to passengers could add up quickly. Under European Union flight-delay rules, they can claim compensation of between €250 (Dh1,026) and €600, depending on the length of the delay.

The airline must also pay for hotel stays if there is an overnight delay as well as transport to and from the airport and meals.

“As long as British Airways struggles to get passengers in the air to their destinations, this could end up costing the airline millions of pounds quite quickly,” said Saj Ahmad, the chief analyst at London-based StrategicAero Research.

The airline is rebooking passengers or refunding them.

"We have also introduced more flexible rebooking policies for anyone due to travel on Sunday and Monday [and] who no longer wishes to fly to and from Heathrow or Gatwick," a BA spokeswoman told The National.

“Work continues to restore all of our IT systems but we expect some further disruption,” she said. “We are aiming to operate the majority of services from Heathrow and a near normal schedule at Gatwick.”

On Saturday, Emirates was able to take on some of passengers who were stranded.

"We did take some of their passengers on our flights out of our London gateways and I'm sure other airlines did as well and that's a regular industry practice to help affected passengers," an Emirates spokeswoman told The National.

Both of today’s BA flights to London Heathrow out of Dubai are almost full, according to the ticketing office of Al Rais Travel, as there were no cancellations. The flights are expected to arrive and depart on time, according to the Dubai airport website on Sunday afternoon.

All the three departures from Dubai to London Heathrow were cancelled on Sunday.

Both the British Airways flights that were scheduled to arrive on Sunday morning at Dubai International were cancelled while the night flight showed a 20-minute delay on the airport website in the afternoon. The operator of Dubai International Airport declined to comment on the passenger situation at the airport, directing inquiries to BA.

ssahoo@thenational.ae

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Key findings
  • Over a period of seven years, a team of scientists analysed dietary data from 50,000 North American adults.
  • Eating one or two meals a day was associated with a relative decrease in BMI, compared with three meals. Snacks count as a meal. Likewise, participants who ate more than three meals a day experienced an increase in BMI: the more meals a day, the greater the increase.
  • People who ate breakfast experienced a relative decrease in their BMI compared with “breakfast-skippers”.
  • Those who turned the eating day on its head to make breakfast the biggest meal of the day, did even better.
  • But scrapping dinner altogether gave the best results. The study found that the BMI of subjects who had a long overnight fast (of 18 hours or more) decreased when compared even with those who had a medium overnight fast, of between 12 and 17 hours.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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