IAG Chief Walsh Stands Behind Embattled British Airways Manager

(Bloomberg) -- British Airways owner IAG SA defended BA boss Alex Cruz’s handling of a massive flights outage over the weekend that’s estimated to cost the carrier as much as 100 million euros ($112 million)

“It has been very unfair of people to try and blame Alex,” IAG Chief Executive Officer Willie Walsh said at a press conference in Barcelona to celebrate the first flight by the group’s new budget brand, Level. “It was not a problem of his making.”

After a computer failure grounded hundreds of flights and stranded at least 75,000 passengers, Cruz came under fire for cost cuts and outsourcing he’s led since taking over British Airways a year ago. The carrier blamed the outage on a power surge at its data hub near London’s Heathrow Airport, and says it was caused by hardware and not by the center’s outsourced software functions.

“We understand what caused the problem and we’re still investigating exactly why some of these issues happened,” Walsh said. “Cruz has done a great job.”

The data center’s hardware and maintenance are provided by an outside vendor, which may allow BA to reclaim some of the damages, Goodbody Stockbrokers analyst Mark Simpson wrote in a note.

Goodbody estimates the weekend’s fiasco could cost British Airways 82 million euros, including 36 million euros of lost revenue and 46 million euros of possible compensation costs. Citigroup Inc. pegged the bill at 100 million euros.

British Airways, IAG’s biggest earnings driver, is on a mission to boost its profit margin amid stiff competition from discount carriers including EasyJet Plc and Norwegian Air Shuttle ASA. Cruz has tried to reduce costs by cutting legroom, charging for meals on short-haul flights and outsourcing IT functions to firms outside the U.K.

The cancellations highlight the increasing risk in airlines’ technology systems, according to Fitch Ratings. Delta Air Lines Inc. and Southwest Airlines Co. had similar failures in 2016, while Air France-KLM Group and Deutsche Lufthansa AG experienced outages earlier this year.

To contact the reporters on this story: Benjamin Katz in London at bkatz38@bloomberg.net, Thomas Gualtieri in Barcelona at tgualtieri@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Dalia Fahmy