BA holds back on new flights at Terminal 5
LONDON (Bloomberg) - British Airways plc. (BA) will delay shifting more flights to London Heathrow airport's Terminal 5 following the chaotic opening of the building last month.
A plan to move most long-haul services to the £4.3 billion ($8.5 billion) concourse will be deferred from April 30 to June, the London-based carrier said in a statement today. The shift would have doubled the number of passengers handled at the new terminal to 80,000 a day.
British Airways canceled more than 600 flights in the first 12 days of operations at Terminal 5 after a glitch in the automated baggage system and what the company called "staff familiarisation" issues. The decision to delay the second stage of the move will disrupt plans of other airlines that are moving into the free space.
"We are making this decision in the interests of customers," CEO Willie Walsh said in the statement. "Though Terminal Five is now working well, we need to have confidence that good service can be maintained when the terminal is handling larger numbers of customers."
British Airways, Europe's third-biggest carrier, fell 3.75 pence, or 1.7 percent, to 223.5 pence in London. The stock has declined 28 percent this year, reducing the company's market value to £2.58 billion. Larger rivals Air France-KLM Group and Deutsche Lufthansa AG are down 21 percent and 5.7 percent respectively.
"Operationally it's prudent to buy some breathing space," said John Strickland, director of aviation-specialist JLS Consulting Ltd. "In some ways it also protects revenue because people could have been booking away from BA around the scheduled April 30 date."
Terminal 5 opened on March 27 with British Airways shifting its domestic and short-haul services into the concourse. Normal flight schedules have been operating only since April 8 and airport owner BAA Ltd. said today the decision to stall the next move is a "wise precaution" to avoid further turmoil.
"We will be working very closely with BA in the intervening period, as well as working with the other airlines to mitigate as much as possible the knock-on effects," BAA CEO Colin Matthews said in today's joint statement. The airport- operator will meet with airlines next week to discuss the delays.
The opening of Terminal 5, which took almost two decades to plan and build, will eventually result in 54 of Heathrow's 90 carriers moving between buildings, allowing airline partners to work in close proximity and improving efficiency, according to BAA, a unit of Spain's Grupo Ferrovial SA.
Operators including Air France-KLM, Europe's biggest carrier, Alitalia SpA and OAO Aeroflot are scheduled to move services from Terminal 2 into Terminal 4 once British Airways vacates. Terminal 2 is to be demolished and replaced by 2012.
BMI, the second-biggest user at Heathrow after British Airways, criticized the decision to delay the move. The carrier is housed in Terminal 1 and its Star alliance partners were scheduled to join it there by November 2008.
"It is an absolutely outrageous announcement by BAA and done with no thought, consideration or consultation of any other airline other than BA," BMI CEO Nigel Turner said in a statement. "BA, through their mismanagement of the move to Terminal 5, will materially disadvantage all other airlines at Heathrow."
Mr. Walsh, speaking on a conference call, declined to comment on whether other airlines will be able to claim compensation over the delay.
The UK carrier has returned about three quarters of the 20,000 bag-backlog that ensued when Terminal 5 opened, Mr. Walsh said. He declined to provide an update on the expenses of the difficulties at the new concourse. British Airways said on April 3 that the disruption would cost it £16 million.
The carrier has been criticised by shareholders and its own pilots for opening Terminal 5 prematurely. Management's "arrogance" turned the airline into a "laughing stock," the British Air Line Pilots Association said in a letter on April 7.
"I'd make it clear that the decision to go forward on the 27th of March was a decision I agreed to," Mr. Walsh said on the conference call. "I was confident we could make it work."