Delays Continue At New Heathrow Terminal

Terminal 5 was supposed to be the saving grace for British Airways and London Heathrow, one of the most congested airports in Europe.

Instead, as the glitzy new terminal enters its second week, passengers are bracing for more chaos.

British Airways canceled another 54 flights at the new terminal Monday as it struggled with the computerized baggage-handling system that has already led to at least 15,000 pieces of misdirected baggage. The airline, which has canceled more than 250 flights since the gleaming terminal opened Thursday as its main hub, said Monday that the situation was improving and that it hoped to fly at full capacity again soon.

But the disruptions, which are set to last for at least the rest of this week, could not come at a worse time for British Airways, which had enjoyed a turnaround under its chief executive, Willie Walsh, who cut jobs and focused on the more lucrative premium travel business between the United States and Britain.

In addition to higher oil prices and declining consumer confidence that weigh on the entire industry, British Airways is facing increasing competition on the North Atlantic routes — its most important long-haul market — as the “open skies” treaty with the United States took effect Sunday night.

“It’s a mess,” Gert Zonneveld, an analyst at Panmure Gordon in London, said. “The reputation damage from Terminal 5 is their biggest headache and there’s a real chance that people will book away from British Airways.”

Mr. Zonneveld estimated that the disruptions and flight cancellations could cost British Airways more than 25 million, or $50 million.

Analysts at Goldman Sachs cut their recommendation for British Airways shares from “buy” to “sell” on Monday, suggesting that the shares could drop sharply because of weaker consumer demand and “ongoing operational challenges of Heathrow.” They also cited more competition on the North Atlantic.

The stock fell 2.4 percent in London.

British Airways had promised that the glass-walled Terminal 5, designed by the well-known British architect Richard Rogers, would bring back the joy to air travel that has been lost by the long lines at security checks that followed window-less corridors at some of Heathrow’s other terminals. But the troubled first days of Terminal 5, which cost 4.3 billion to build, were expected to cost British Airways more than just money.

“The whole point of the exercise was to bring British Airways out of the situation where they had to deal with the least popular airport among business travelers,” Marko Lukovic, an analyst at Frost & Sullivan, done.

As of Sunday night, British Airways also had to deal with new guidelines on air routes as the European Union and the United States abandoned decades-old rules that had restricted competition on routes between the two continents. All American air carriers now have the right to offer flights into Heathrow, while European airlines are now permitted to fly to any United States destination from any Europen airport.

Until now, only British Airways, Virgin Atlantic, United and American Airlines had the right serve routes between the United States and Heathrow. But on Sunday, the American carriers Delta Air Lines, Continental Airlines and Northwest Airlines all began flights into Heathrow, while Air France-KLM flew its first nonstop from Heathrow to Los Angeles under a code-sharing deal with Delta, its partner in the Skyteam alliance.

“Without a doubt, there is going to be a dilution of revenues from premium passengers for British Airways because of open skies,” said Peter Morris, chief economist with Ascend, an aviation industry consultancy in London.

He noted that the new entrants to Heathrow will also be under pressure to keep fares low, which will reduce any near-term profit margins on trans-Atlantic routes. Delta, Air France, Continental and the others are going to have to buy their way into this market, he said.

Despite other recent problems at Heathrow, including the terror alerts that disrupted travel in August 2006, Mr. Morris noted that, until now, British Airways “seemed to have retained its brand and a high degree of loyalty from business passengers.”

“Now you have a situation when even Sicilian shepherds are aware of what’s going on,” Mr. Morris said. “I can’t see how it cannot start to chip away at the B.A. brand.”

The long lines of passengers in the Terminal 5 check-in area Thursday brought back exactly the image of an overcrowded and over-stretched airport that the new terminal was supposed to change.

By Monday, a British Airways spokesman said, the lines were clearing and “the atmosphere is calm.”

In the meantime, some passengers have filed complaints with the Civil Aviation Authority about how British Airways compensated them after their flights were canceled and luggage not returned. In a letter last week, the authority reminded British Airways of its obligation to compensate passengers and said Monday it would follow up with the airline this week.

Walsh, the airline chief executive, last week acknowledged that the opening of Terminal 5 “was definitely not British Airways’ finest hour” and said he accepted responsibility for the problems.

On Sunday, he apologized again and pledged not to rest “until our service has been restored to the high standard customers rightly expect.”

Robert Cullemore, an airports analyst at Aviation Economics in London, said the situation could damage the credibility of Walsh and other senior British Airways managers if flight schedules did not return to normal soon.

Teething problems are not unusual for large new airports. In Madrid, the new Terminal 4 struggled with luggage handling after it opened in 2006 but is now cited in surveys as being among the more popular airports.

Chek Lap Kok Airport in Hong Kong, which opened in 1998, suffered various technical and organizational hiccups for its first three months.

Similarly, when the new Denver airport was built, its opening was delayed more than a year until early 1995. Its automated baggage system was ultimately abandoned.

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