BA to cut £45m off IT

Analysts question the feasibility of airline's far-reaching cost-cutting programme

Analysts question the feasibility of airline's far-reaching cost-cutting programme

British Airways is set to slash its IT budget, ordering managers to find £45m in cost savings over the next 18 months.

The drive for costs savings in IT operations is part of a sweeping two-year review of BA's Information Management (IM) department, which soaks up about two-thirds the of the airline's IT budget.

Although the savings are thought to be less than 10% of BA's annual IT budget, the airline could still struggle to meet the target, analysts have warned.

Companies in other hard-hit industries will have to follow BA's example and squeeze savings from their IT spend.

BA has reassured IT staff that the review is not an excuse to cut more jobs amid the global crisis in the airline industry following the 11 September attacks in the US.

"We haven't had this sort of review before and it's long overdue," said a BA spokesman. "There are ways we can deliver the cost savings. It's about improving efficiency in the business."

IT operations staff could receive improved training and clearer roles and responsibilities within the division, he added. About 2,500 staff work for the IM department. The shake-up, codenamed IT21, focuses on the operations division. Triggered by a review from management consultancy Accenture, it aims to streamline business processes and rationalise hardware.

The target of about £45m in costs savings is due to be met by spring 2003. Industry experts said BA's proposed IT savings would still be hard to meet. The bulk of an airline's IT budget is tied into maintaining existing legacy systems and sophisticated scheduling and revenue management packages.

One senior analyst with a leading research firm, who asked not to be named, said, "Any mature player will have lots of legacy systems and about 70% of their IT budget will be spent on keeping those systems going. There is pretty limited room for manoeuvre."

The only alternative would be scrapping planned e-business projects, the analyst added. However, BA insisted that the review would not affect new projects in the strategy division.

The technology review will see the airline continue a radical approach to managing its IT business.

BA has outsourced its airline reservation service and departure control system to European IT services company Amadeus. It also split the IT department into two earlier this year, creating operations and strategy divisions.

BA's chief information officer (CIO) at the time, Brian Wilson, resigned after the restructuring. In September, director of technical operations, Colin Matthews, left to join gas company Transco. CIO Paul Coby now heads the IM department.

BA is also in negotiations with private equity investor Warburg Pincus to sell a majority stake in its offshore data management company World Network Services. The firm provides IT services to industry sectors including insurance and charities

BA's IT review
  • Two-year review, begun in the summer, covers the operations side of the BA's Information Management division

  • About £45m in cost savings due by spring 2003

  • Savings to come through rationalisation of hardware, streamlined business processes and clearer roles or responsibilities within IM operations

Read more on Operating systems software