(Adds detail, union reaction)
LONDON, March 28 (Reuters) - British Airways said it will retain its in-house call centres in Newcastle and Manchester, dashing Capita's hopes of winning contracts to run the operations.
BA said on Wednesday that the two centres, which employ 1,100 people, would receive millions of pounds in extra investment, a decision that won praise from Britain's biggest trade union.
"I am pleased that following a very detailed review, we are planning to retain both of our long-standing UK call centres in Newcastle and Manchester," British Airways Chief Executive Alex Cruz said.
BA has been trying to cut costs in recent years, and Capita had been in a period of "exclusive engagement" with the airline to support BA's global customer contact operations, which it said handles around 9.5 million calls a year.
BA began talks with Capita in June last year and the talks became public just days after a massive IT outage grounded flights from London's Heathrow and Gatwick airports over a public holiday weekend, which drew public scrutiny onto BA's cost-cutting. The airline has denied any link between outsourcing and the outage, which it said was caused by a power surge.
The Unite trade union welcomed the fact BA had decided to keep the call centres in-house rather than use a third-party outsourcing group. The use of outsourcers has come under greater scrutiny since the collapse of Carillion earlier this year.
"I think there is a new mood across business and other organisations in the UK that, following the recent Carillion debacle, outsourcing is not necessarily the best option if you wish to develop your business successfully," Unite officer Oliver Richardson said in a statement.
British Airways said it would retain a further 900 people in its other call centre operations in Germany, Hong Kong and India, and was exploring a possible new centre in Cape Town, which would be run by a third party such as Capita.
"Capita is continuing to work with British Airways about elements of global customer contact transformation and support. This includes discussing a potential new contact centre site in Cape Town," a spokesman for Capita said. (Reporting by Alistair Smout; Editing by Kate Holton and Susan Fenton)