The Terminal 5 Baggage Scandal

Presented By:Shashi Kishore

Joseph Abraham

AGENDABrief History of British AirwaysTerminal 5The Crisis Reason for the crisisAnalysis of the crisisSteps taken by British AirwaysSteps recommendedLessons learnt

British AirwaysFounded in 1924 as Imperial Airways.In 1974 BOAC & BEA merged together to

form British Airways plc.Largest airline in the UK based on fleet size

(>239, excluding subsidiaries).Was the largest UK airline by passenger

numbers from its creation in 1974 until 2008.Main hubs-London Heathrow Airport &

London Gatwick Airport.Privatized in 1987.

Continued…Destinations- ~37o in more than 75

countries.Revenue approx. £8 bn (2010).Will become third largest airline after

merging with Iberia airlines.CEO- Willie Walsh.

TERMINAL- 5Heathrow airport terminal five was built exclusively for

BA.Terminal 5 is one of the most technologically advanced

airport terminals in the world.Cost of the project -€4.3 bn, time duration – 19 yrs from

conception to completion.Capacity- 35 million passengers a year.Inaugurated 0n march-14, 2008, by Queen Elizabeth-II.Opened to passengers on march-27,2008.Introduced most advanced three-stage luggage

processing system.Opening of T5 is one of the biggest operational disaster in

recent business history.

The Crisis34 flights were cancelled & baggage check-in

was suspended on the very first day of operation

More than 500 flights were cancelled & about 42,000 bags failed to travel with their owners over the period of next ten days.

More than 73 staff member went on strike after first day of operation.

T5's computer system didn't recognize staff ID hence had to reconcile bags manually, causing flight delays.

Out of 275 lifts, 28 were not working .

Continued…Passengers had to wait for about 3-4 hrs for

their bags.Very few staff members to serve large

number of impatient passengers ( 4 staff members for about 1000 passengers).

Poor customer services.Complete contradiction with the positioning

of the brand (reassurance & reliability.)

Analysis of the crisisAccusation – true. Nature of crisis – severe.Customer association of the brand- very high

( BA is national airline).

Reason for crisisPoor training of staffs.Logistics & planning.Lack of pretesting.PR Fiasco.Lack of proper communication ( internal &

b/w BA & BAA).No contingency plan & lack of anticipation of

any possible crisis.

OutcomesBA's shares fell 3% on T5 opening day, wiping

£90m off BA's value.BA lost £25 mn due to this crisis.According to a research agency the brand

value of BA slipped down significantly.BA’s loss was competitor’s gain.Two of the BAA directors were sacked

immediately.The crisis became a matter of national

shame.

Steps taken by BABA officials offered an immediate apology &

promised that services will be back to normal soon.Poor compensation to the affected passengers.Lack of communication & transparency in

operation.BA & BAA played the blame game.Transferred the entire load from terminal-5 to T-1

& T-4.Advertisement on social media & search engines.Later on CEO Mr. Willie Walsh took the

responsibility of the entire incident.

Recommendations & lesson learntDon’t let it happen at the first place.Don’t overpromise & underperform.Take responsibility & take noticeable actions.Adopt proper service recovery system

(proper compensation policy).Keep internal customers happy.