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British Airways Brings in FedEx to Reduce Bag Backlog (Update2)

By Tracy Alloway

April 1 (Bloomberg) -- British Airways Plc canceled 50 flights at London Heathrow airport's new Terminal 5 and brought in U.S. courier firm FedEx Corp. to help reunite passengers with about 20,000 delayed bags.

The airline scrapped 13 percent of scheduled flights from the terminal on the sixth day of disruption at Europe's busiest airport. Another 50 flights will be abandoned tomorrow, British Airways spokeswoman Sophie Greenyer said.

Cancellations caused by snags in the 4.3 billion-pound ($8.5 billion) terminal's computerized baggage system total more than 300 since it opened on March 27. The number of bags waiting to be returned to their owners has risen by about one- third in the past two days, though British Airways is now beginning to reduce the backlog, it said.

``We are making progress on the backlog but getting bags back to passengers is complicated and quite time-consuming,'' spokeswoman Greenyer said. Hundreds of volunteers from the London-based carrier and courier firms including FedEx have been drafted in to forward the luggage to its owners, she said.

British Airways, whose Chief Executive Officer Willie Walsh says he accepts responsibility for the chaos, rose 15 pence, or 6.4 percent, to 249.25 pence. The stock has dropped 20 percent this year, reducing its value to 2.87 billion pounds.

The airline had been counting on Terminal 5, which took 20 years to plan and build, to help ease journeys and retain passengers put off by Heathrow's overcrowding. The company took possession of the complex in September from BAA Ltd., which is owned by Madrid-based Grupo Ferrovial SA, starting what it described as ``exhaustive'' customer trials that month.

Management Under Pressure

``From a publicity point of view clearly, this is very bad,'' Stephen Furlong, an analyst at Davy Stockbrokers in Dublin with British Airways on his ``focus list,'' said yesterday. ``It does put a bit of pressure on management.''

Following a technical glitch in the computerized luggage system that saw handlers unable to log-on, bags that have been unloaded at Heathrow are being re-screened manually. In some instances, this requires the luggage to be driven to London Gatwick airport for the security checks.

``I'm sorry about the problems at Heathrow,'' U.K. Prime Minister Gordon Brown said today at a press conference in London. ``BA and BAA have to take responsibility.''

`Firebreak'

British Airways has yet to give guidance on flight cancellations for the rest of the week. Today and tomorrow's reduced service is intended to act as a ``firebreak'' to allow the carrier to contain the disruption and get Terminal 5 running as originally planned, spokeswoman Amanda Allan said yesterday.

The disruption may cost the carrier as much as 50 million pounds, Andrew Fitchie, an analyst at Collins Stewart in London with a ``buy'' rating on the shares, said in a note to clients yesterday. It will clip annual earnings by three-to-five pence a share, he said.

Cancellations are being restricted to short-haul locations to which British Airways has multiple flights, according to the airline, so that passengers may be able to book on later services.

British Airways, Europe's third-biggest carrier, is already the continent's worst for lost luggage and the second-worst for delayed bags, according to the Air Transport Users Council.

To contact the reporter on this story: Tracy Alloway in London at [email protected]
Last Updated: April 1, 2008 12:16 EDT