Shares in British Airways owner IAG skid after IT failure chaos

Passengers outside Heathrow Airport
Passengers queue outside Heathrow's Terminal 5 on Sunday after a power surge knocked British Airways' IT systems out

Investors have taken flight from British Airways' parent company with shares in IAG tumbling on the first day of London trading since an IT meltdown left thousands of passengers stranded.

International Airlines Group saw its shares drop roughly 4pc in early trading to 589p, even greater than the 2.8pc drop it recorded yesterday on the Madrid stockmarket, where the shares are also listed.

The airline has been scrambling to get thousands of passengers stranded at Heathrow and Gatwick Airports onto their flights as well as dealing with passengers overseas.

Chief executive Alex Cruz blamed the IT failure on an “exceptional” power surge, which he said had been so strong it also disabled the company’s back-up system.

The IT system that was hit is responsible for British Airways’ flight, baggage and customer communication systems across 170 airports in 70 different countries.

Mr Cruz has said throughout the crisis that he would not resign and refuted suggestions that the company’s history of cost-cutting had in any way led to the incident or had an impact on its ability to fix the problem.

Unions claimed the company’s move to cut IT jobs in the UK and outsource some of them to India’s Tata Consultancy Services had left the company more vulnerable to this type of incident.

IAG has not yet said how much it expects the power surge to cost it financially but City analysts have predicted the costs of paying customer compensation and repatriating bags to travellers could amount to a bill of €100m (£86.6m). IAG posted adjusted operating profits of €2.54bn last year.

BA is not alone among airlines in having suffered from flight disruption caused by computer system outages in the last year: Delta Airlines was forced to ground planes after its systems crashed last August and again in January.

Howard Wheeldon, an aviation expert and former director of policy, public affairs and media at aerospace and defence trade body ADS, said BA's bank holiday meltdown was the “single worst event in the airline’s post-privatisation history”. BA was privatised in 1987.

He added that while other airlines had also suffered large-scale system failures, the British airline had “failed so far to accept that they have, through their own policies of outsourcing, left the airline far more vulnerable to future IT problems”.

RBS Capital Markets analyst Damian Brewer said BA’s apparent failure to learn lessons from rivals’ problems “suggests fundamental management and planning weakness”.

British Airways has said it will conduct an “exhaustive investigation” into the IT failure and “do whatever is necessary to ensure it cannot recur”.

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