Briefing

British Airways - still the world's favourite airline?

Posted by: Michael Patrick | Date posted : 02/06/2017

It is no exaggeration to say that the recent Bank Holiday weekend was a reputational disaster for British Airways. The incident highlights why everyone needs a crisis plan.

On Saturday 27 May, BA experienced what its Chief Executive, Alex Cruz, described as “a major IT systems failure” affecting all check-in and operational systems. The failure resulted in a near total standstill for the airline leaving tens of thousands of passengers stranded around the world, many far from home.

By any measure the incident has been a public relations fiasco for BA. The company has been the subject of criticism over the past couple of years for seeking to cut its costs and lowering the quality of its service in order to compete with budget airlines. Last year it announced it was axing free food and drinks for economy passengers on short-haul flights in Europe while it has previously been criticised for changing its loyalty points scheme and charging for checked baggage and seat assignments.

The GMB trade union, which represents BA workers, blames the IT issues on the company's decision to outsource hundreds of jobs to India last year to save money. When Mr Cruz finally spoke to the media on Monday (48 hours after the issues began), he denied that outsourcing had been the cause, albeit admitting the company was still trying to determine what had gone wrong. Whilst he apologised for the disruption and pledged that it would not happen again, for many it was too little too late. The airline is reported to be facing a compensation bill of at least £150 million. Additionally the incident has caused undisputable reputational damage to the company that once bullishly advertised itself as "the world's favourite airline".

So why was BA so underprepared?

Crises come in all shapes and sizes. However, this is not the first IT outage to hit BA. Last September, thousands of customers faced delays and cancellations at London City airport after an overnight glitch caused problems checking in and dispatching aircraft. Other airlines have faced similar issues, notably Delta Air Lines which was forced to cancel about 2,300 flights over three days last August after a power cut near its Atlanta headquarters. The problem led Delta to admit that the IT outage would cut its pre-tax income by $150m.

Passengers described chaotic scenes at Heathrow and Gatwick, with many hitting out at the airline for a lack of information and the scarcity of senior management on the ground. One would have expected a company of that size and experience to have a sophisticated crisis management plan for such an eventuality. Whether it did or not is unclear. However, what is abundant is that  if there was a plan, it was not up to date and had certainly not been practiced.

Obviously companies such as BA cannot plan for every eventuality. However, the mere exercise of establishing a crisis communication plan will produce benefits in identifying points of weakness and possible improvements. Moreover, once a crisis starts things can move rapidly, making it imperative to maximise those ‘golden hours or minutes’. The first moments of a crisis can dictate the success or failure of the response and if you are only putting together a plan at that stage, you are already behind the curve. In this case the airline has been criticised for taking too long to communicate with stakeholders, whether that be passengers or staff on the ground left trying to appease customers, angry at the lack of information being passed down.

The managerial behaviour shown by BA over the weekend was typical of many organisations faced with crises: a lack of effective communication; a growth in conflicting information and rumour; an apparent absence of a contingency plan and a sense of confusion among staff. These elements are often displayed in the early stages of a crisis. The fact that social media and other web sites were the main source of information for passengers simply highlighted the poor practices of communication on the ground. Delayed passengers have expressed frustration with the airline, saying it was unclear who had taken ownership of this event. Reports have suggested that journalists were getting the correct information before customers or even staff. When he finally appeared via a video on Twitter, many queried why Alex Cruz was wearing a high vis jacket in an office.

What should be in your crisis plan?

Taking a step back there are lessons to be learned for all businesses from what happened to BA over the weekend, whether you are a large publicly listed company or a much smaller organisation. There are four key stages to managing a crisis or issue: planning, prevention, protection and evaluation:

  1. Planning. A crisis management plan is the exercise of assessing the risks and how to respond to them. This will improve your organisation's response to a crisis, even if it was not one you had identified. Staff at every level often believe that theirs is a tight-run ship. This process of denial invariably results in an attitude of "it will never happen to us".

    Every crisis plan should: (i) identify the crisis team, including internal and external advisers, the likely leader and a back-up option; (ii) identify the keys risks and a response for each, with room for flexibility; (iii) include a crisis communication plan; and (iv) highlight stakeholders who must be advised at the outset of the crisis such as customers, staff, insurers etc.
  2. Prevention. Even before something goes wrong, there are many practical steps that you can take to reduce the risk and make you more resilient in a crisis. Should BA have done more to test its IT systems? We shall have to wait and find out what the root cause of the company’s IT outage was, but the implication is that the company’s surge or virus protection processes were inadequate to deal with the problem and that there was no effective backup.
  3. Protection. When confronted with a crisis, failure to address the issue will compound the problem. Whilst Mr Cruz came across as genuine when he apologised to those passengers affected, the company's near total silence over the weekend clearly compounded the reputational harm caused.
  4. Evaluation. Once you have dealt with an issue, it is vital to evaluate your response. Lessons learned should be fed into the planning processes so that mistakes are not repeated. Could BA have done more to learn from previous IT issues faced by it and its competitor airlines? It may be unfortunate to face one crisis; it is surely foolhardiness for the same or similar issues to arise again.

Summary

It remains to be seen whether this issue for BA will be tomorrow's fish and chip paper. However, the manner in which the company has handled this particular crisis has led critics to suggest there may be fundamental weaknesses in the way the business is run, both from an operational and communications perspective. Whether that is true or not remains to be seen, but in any event there are clearly lessons for all businesses to learn. Catastrophic events such as BA's IT surge do not only happen to big business, they can happen to any organisation. It is best to be prepared.

If you require further information on anything covered in this briefing please contact Michael Patrick(michael.patrick@farrer.co.uk) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, May 2017