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Hitt og þetta 16. ágúst 2006

DJ THE SKEPTIC: Airline Compensation Woes



By Howard Wheeldon
A DOW JONES NEWSWIRES COLUMN

LONDON (Dow Jones)--It's understandable that airlines like British Airways, Ryanair and Virgin are saying BAA must take its share of the blame for the recent U.K. airport disruption. But they're wrong to think about claiming compensation from BAA alone.

Flights delays and cancellations caused by heightened security at U.K. airports over the last week will mean huge additional costs and revenue losses for the airlines affected.

Of course, the airlines have a reasonable complaint against BAA. The operator of the U.K.'s largest airports appears to have had no contingency plan to cover increased security measures and was too slow to bring in extra staff.

But the government must also shoulder its share of responsibility.

Between them, BAA and the government need to pick up most of the tab, leaving airlines to cover the cost of their own inability to communicate well enough with passengers.

Of course, you could argue that by discovering the alleged plot to blow up several aircraft and by acting so fast to increase the level of security, the government has saved the airlines a potential fortune in lost revenue, not to mention loss of life.

Maybe so, but that argument just doesn't wash. The airport operator should have been ready to meet an increased level of security demanded by government at any time.

And there's a precedent in the U.S., where the government has compensated airport operators and airlines for the cost of additional security measures.

So far at least four airlines have made noises about claiming compensation on BAA.

Virgin Airlines' chairman, Sir Richard Branson, has offered his services as a mediator between the airlines and BAA on the compensation issue.

That's a start. But rather than threatening to make individual claims against BAA, all the airlines at Heathrow, Gatwick, Stansted and other BAA-owned airports affected would do much better if they spoke with a single voice.

Only a large group of airlines will have the clout to persuade the government to change its view that neither the airlines or BAA is due compensation.

The airlines no doubt will be hoping to avoid litigation, which would as well as being costly would take considerable time and management effort with no guarantee of success.

It's worth emphasizing that a healthy airline and airport industry is hugely important to the economy. Though it seems the government has no legal obligation to help out, by offering additional support it could win back the confidence of air travelers.

None of this takes away any for the blame for BAA's lackluster performance. But if the airlines do have a claim against BAA, it's hard to argue that BAA doesn't have any right to claim from the government.

(Howard Wheeldon was a senior equities analyst for 20 years, and has been a columnist at Dow Jones for the past four years. He can be reached at +44 207-842-9251 or by e-mail: howard.wheeldon@dowjones.com)

(END) Dow Jones Newswires

August 16, 2006 06:23 ET (10:23 GMT)

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