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IT Glitch to Cost British Airways $111m

IT Glitch to Cost British Airways $111mIT Glitch to Cost British Airways $111m

A global IT glitch that leaves thousands of angry passengers stranded does not come cheap.

That’s the reality British Airways’ parent company International Consolidated Airlines IAG will soon face after a far-reaching computer outage over the weekend sparked chaos and frustrations at major airports and left almost all BA flights grounded for most of Saturday, Market Watch reported.

“We estimate (circa) 175,000 passengers were affected by flight cancellations on 27th May and possibly more on 28th and 29th May. We estimate c. €100 million total lost contribution, comprised of €40 million lost revenue for one day and €60 million customer compensation costs based on EU legislation,” analysts at Citigroup said in a note on Monday. That equates to a bill of $111 million.

A representative from IAG said it was too early to put a price tag on the incident at this stage. IAG shares were not trading on Monday due to a bank holiday in the UK, but the company’s Spanish-listed shares IAG, +1.00%  lost 2.8% in Madrid.

Just as the UK bank holiday weekend was about to get underway on Saturday, British Airways canceled all flights leaving from the busy Heathrow airport and Gatwick airport south of London due to a “major IT system failure”.

Many fliers had their holidays canceled, while others were left on the tarmac or in terminal buildings for hours, forced to sleep there, while the issues were being resolved.

The disruptions continued on Sunday and some short-haul flights out of Heathrow were also disrupted on Monday.

Under EU legislation, passengers who are delayed more than three hours because of the airlines own causes—like IT breakdowns—must each be compensated by €250 on flights of up to 1,500 kilometers, €400 for up to 3,000 kilometers and €600 for long-haul flights delayed by more than four hours.

That means a passenger meant to travel from Heathrow to for example New York or Bangkok would be entitled to €600 ($671) in cash compensation.

“There could also be additional hotel accommodation and food/beverage costs for affected passengers,” the Citi strategists suggested.

Travelers, however, sometimes find it difficult to get the airlines to cough up these refunds.

A representative from British Airways said the airline will adhere to the regulations and “we ensure all of our customers are aware of what their rights are”. She didn’t, however, want to put a figure on potential compensation at this point.


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