T5 chaos to cost BA up to £25-million

Baggage handling chaos at London Heathrow’s new Terminal Five (T5) is likely to cost British Airways up to £25-million ($49,7-million), analysts at Citibank said on Monday.

Nearly 250 flights have been cancelled since Thursday’s troubled opening of the $8,6-billion showcase terminal, with thousands of bags left stranded in its vast underbelly following problems with the baggage system.

The size of 50 soccer pitches and billed by BA before its opening as the best facility in the world, T5 has quickly turned into a public relations disaster for the company.

Analysts say the financial impact will also be costly.

“Based on daily revenue of £23-million and disruption costs of £100 to £200 per passenger, we estimate the earnings impact so far to be 15 to 25-million,” Citibank analysts said in a note.

They added that the firm’s financial results may not be impacted too heavily, however, due to the structure of its bonus scheme.

“Most losses are likely to be borne by staff because it reduces the likelihood of a bonus (based on a 10% operating margin target) being paid.”

BA said it was too early to comment but it plans to announce its March traffic statistics on Thursday, at which point it would normally give some comment on the strength of future bookings. - Reuters

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