British Airways meltdown; a penny wise, pound foolish

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The statistics from British Airways’ meltdown this past weekend are pretty awful on their own. Thousands of flights were cancelled and thousands upon thousands of passengers were displaced and delayed.

On the technical side, one hopes that more details will emerge about what actually failed (the latest reports suggest a contractor accidentally switched off the power) and why an “always on” system managed to find itself “off” on a major holiday travel weekend.

But it is the human side where BA’s failures were most profound. By policy, by action and by inaction BA exacerbated a bad situation, leading to a far worse outcome overall.

Interline agreements – the contracts by which airlines are able to sell seats on each other – are popular in the news these days. On the one hand, these agreements are a means for airlines to sell more tickets to improve revenue. They are also used, at least in theory, to help carriers address operational issues like oversells and cancelled flights. And they’re precisely the sort of thing that BA could have used to help reroute customers once it became clear that it would be unable to operate most flights on Saturday or many short-haul flights on Sunday.

But BA customers were asked to wait out delays and transit Heathrow airport, instead of being rerouted around the problems — even when they specifically asked to be. Yes, the company would have had to pay other airlines for those seats – meaning such a decision would not be particularly cheap – but it is very much in the “penny wise, pound foolish” category.

That foolishness is even more pronounced when one considers that IAG owns Iberia and Aer Lingus as well, making the increased costs there more an accounting exercise than a real loss of money. BA’s joint ventures, including with Iberia, American Airlines and Finnair over the Atlantic, JAL and Finnair to Asia, and with Qatar Airways over Doha, could also have been useful in this case. Yes, planes are more full than ever but there are many airlines, each with a few empty seats here and there. Diligent regulators, largely persuaded into approvals of joint business agreements, should be following up on why these partnerships were not used to greater effect.

Unfortunately, interline rebooking options are routinely blocked to BA call center agents. If Air France or United or Lufthansa had seats available, the BA reps fielding calls from stranded travelers would not be permitted to buy them. I know because I’ve been there myself, stranded overnight because the airline couldn’t operate while others were flying. Presumably the policy is there to help control costs.

But it is a customer service mess, especially when customers were asking to be rerouted onto other airlines before leaving their departure airport, only for BA to refuse, fly them to Heathrow, and get them stuck overnight with scarce hotel rooms and fewer customer service options.

BA faces EU261 claims from affected passengers. Such claims are eligible to be denied when caused by situations outside of an airline’s control but EU courts have been mostly customer-leaning. The Independent reports that BA intends to meet all claims for compensation stipulated by the EU rules. And some of the carrier’s latest tweets suggest this indeed the case.

If any early claims were denied, it is lamentable. There should be an additional penalty to airlines for inappropriately denying valid early claims. It puts significant additional burden on the consumer to realize their due rights.

The other major failure in customer service came in the ability of the company to reasonably and quickly disseminate information to the traveling public. The carrier today is on an apology spree on Twitter, responding to customers who asked for assistance days ago.

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 Faced with long delays between updates, insufficient details and efforts to sugarcoat the incident, passengers were left ill-informed and ill-prepared to plan for themselves. Ultimately this leads to higher expense claims against the company versus third party insurance programs helping to cover some costs. Plus it makes the company look stupid, which is never good.

And even after all of that the stock price for IAG closed down only 1.4% after dropping as much as 4% early in the trading day. Much like United Airlines after the Dr. Dao incident or any other “major” SNAFU for a carrier, the investors believe that the long-term impact to company financials will be relatively small. Given the current lack of broad competition in many markets they are probably correct, at least for now. Which makes being a consumer in all of this that much worse.

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