Guess the year in which a City analyst wrote this introduction to a research note on British Airways’ parent company, IAG: “BA suffered yet another operational failure yesterday, this time larger than the spate of rumbling issues over the last year. As yet the cause is not known.”
Congratulations if you answered 2017, the year of the airline’s mega IT meltdown. RBC Capital Markets’ analysts judged it “increasingly questionable” to view the affair as a one-off, and they have been proved correct in spades. Subsequent failures have been smaller but the “rumbling issues” of half a decade ago are still rumbling.
On Wednesday this week, BA cancelled 50 flights at Heathrow because of a “network connectivity issue”, and the same number on Thursday as it managed the knock-on effects. On the last weekend in February, the figure was 252 when a different “technical” problem was blamed. In total, there have been three IT failures in six weeks. While the percentage of affected passengers in that period is calculated to be only 2.5%, the figure won’t feel small to those affected. BA is lucky that P&O Ferries has a monopoly on “travel chaos” stories.
Every incident brings forth gushing apologies from BA but never a prediction of when its systems will be robust – or sufficiently resilient to withstand all but extraordinary events. You won’t find anything of that description in IAG’s annual report for 2021. The IT highlighted in BA chief executive Sean Doyle’s two-page summary of how the airline is “building a brighter future” is a new app that allows passengers to order food and drink to their table in the lounges. Punters would surely prefer greater confidence that their plane will take off.
Even luddites understand that upgrading multiple legacy IT systems is not simple, especially when you have to keep an international fleet aloft at the same time. What is harder to fathom is why BA and IAG didn’t throw the kitchen sink at deep-rooted problems a decade ago. Short-termism? Complacency? An arrogant belief that the customers will coming back anyway? We’re at the point where IAG shareholders, as much as BA customers, deserve an explanation.
S4 mini-drama may amount to nothing – but Sorrell may want to reflect on setup
Mystery surrounds, as they say, the latest delay in publication of full-year results of S4 Capital, Sir Martin Sorrell’s comeback vehicle after his acrimonious exit from WPP in 2018.
Benign explanations include the one S4 offered at the start of March when announcing the initial delay: PricewaterhouseCoopers needed more time to complete its audit because of Covid’s impact on “travel and resource allocation, particularly in the Netherlands”. An alternative nothing-to-worry-about theory says S4 is merely complicated by its rapid pace of acquisitions.
Sorrell tried to encourage calm. “The company believes that the results for 2021 remain within the range of market expectations and continued to trade strongly in the first two months of 2022,” said S4’s late-afternoon statement on Wednesday.
The shares crashed by a third anyway, and kept falling on Thursday. That’s 40% off in virtually no time, and one can’t call the nervousness perverse. There’s was no line about Covid or a lack of Dutch number-crunchers in the latest update; the delay was announced on the afternoon before intended publication; no new date was set.
The mini-drama may signify nothing, in which case Sorrell would be entitled to put a rocket under PwC. But he might also reflect that companies with conventional governance setups – as opposed to his golden-share gig – are more likely to be given the benefit of the doubt before the facts emerge.
Does rush of takeover interest in UK wealth managers come down to fees?
The board of Brewin Dolphin, a UK wealth manager with £55bn under management, will not have had to ponder hard. Royal Bank of Canada, a big and serious international outfit, is bidding £1.6bn in cash, representing a mighty 62% takeover premium. That is easy to accept.
Rather, one puzzle is whether the UK contains enough wealthy individuals to satisfy everybody’s expansionary ambitions. It’s only a few weeks since Charlie Nunn, new chief executive of Lloyds Banking Group, unveiled his data-driven plan to cater for the needs of the “mass affluent”, meaning those with investable assets of more than £70,000.
Then there’s the US financial group Raymond James, which bagged Charles Stanley, another venerable UK name. Other Americans have arrived and private equity firms are playing a consolidation game. The mass affluent themselves should ask whether this rush of interest is because managers’ fees in the UK are too fat.