To be human is to be prone to error. It is not easy to rectify an error when you are a mass producer or working on a project that was paid millions of dollars. One wrong move or a simple metric system calculation mistake can cost companies and the government millions and billions of dollars. Here are the 10 costliest mistakes in history that took a lot to recover from.
1. Alitalia Airlines, based out of Italy, once in 2006 accidentally listed the fare from Toronto to Cyprus as $39 instead of $3,900 for their business class service. They accepted their mistake and let as many as 2,000 people fly with that ticket rate. It cost the airline $7.72 million.
The original price of a ticket from Toronto to Cyprus was $3,900 on the Italian airline Alitalia. A clerical error on the reservation system made the mistake of dropping the last two zeros of the fare and was one of the costliest mistakes they ever made as an airline. Even though the error was quickly detected, 509 people had already purchased a ticket at the advertised price. The airline issued the tickets at that price to all those who booked.
Such costly mistakes in the airline industry are not unheard of. There were instances where Independence Air accidentally sold tickets for $0, and Sabre Holdings Corp. sold tickets to Fiji for $51. Alitalia Airlines was financially struggling during that time and would have received about $1.32 million more for these 509 tickets at the correct fare. (source)
2. NASA lost around $125 million on its Mars Climate Orbiter in September 1999 due to a slight confusion of the engineering team using English units whereas the team at Lockheed Martin used the metric system. As a result, some important information failed to be transferred into the Mars Climate Orbiter, and it was lost after completing a 10-month journey.
The Mars Climate Orbiter team used the metric system when another team used the English system of measurement on the same mission which played a key role in the operation of the spacecraft. The team blamed the system engineering team for not carefully balancing the process by finding such a grave error. The transfer of information between the Mars Climate Orbiter Spacecraft team and the navigation team failed.
NASA’s Jet Propulsion Laboratory showed that the failed transaction led to scrambled commands reaching the navigation system which led the Orbiter to go too close to the planet’s atmosphere where it was broken into pieces. The mission was killed just a day before the successful entry to Mars and remains one of the costliest mistakes in space missions. Internal peer review was carried out and the loss was estimated at $125 million. (source)
3. The Chernobyl disaster occurred due to inadequately trained professionals operating a reactor and ignoring safety regulations. The economic damage caused by the infamous Chernobyl disaster was more than $235 billion over the thirty years since the incident. Because of relocation, loss of life, and isotopes being released at the site, the catastrophe lasted longer causing more damage.
The policies imparted by the government to deal with the huge loss of disaster led to huge charges for the Soviet Union, the Russian Federation, and Belarus. A high degree of estimation is required to calculate the impact on the Soviet Union. Considering the magnitude of impact from the 1990s, the loss at the end of two decades is estimated to be above hundreds of millions of dollars.
Apart from direct damage caused by the accident, which was using untrained professionals to carry out an experiment, many other factors affected this type of loss. This included shutting off the reactor and sealing the place, relocation of people, and new housing and infrastructure. Social health care was provided to the affected. The disposal of radioactive waste also caused a huge cost for the government. (1, 2)
4. AT&T lost $60 million as their whole network operations center went down, which led to 75 million unanswered calls because of a small switch in one out of the 114 network centers that suffered a mechanical problem. This disruption for American Airlines alone cost them an estimated 200,000 reservations.
AT&T tried to install software that could help speed up the process of long-distance calls. A single line of code from the whole upgrade led to the long-distance calls being shut down on January 15th, 1990. Approximately $60 million was lost in this mistake. One of the switches at one of AT&T’s switching centers caused mechanical congestion due to the code.
Nine hours of service time was lost on this day along with 75 million missed calls and 2,00,000 airline reservations. This is a case of a bug in the software upgrade that caused such havoc in the network with around 60,000 people losing their telephone service completely. AT&T’s long-distance network was the most reliable and strongest network, and it carried 70% of the nation’s long-distance call traffic, which is over 115 million telephone calls. (source)
5. General Motors ignored an ignition switch problem that shuts off the engine when the car is in motion, and that problem killed 124 people. The problem existed in around 30 million cars worldwide. The company ignored it as it was too expensive to replace it. The company ended up paying $900 million to the US government as a fine.
In 2014, GM faced a serious uproar that cost them millions. A defective ignition system in their small cars led to 13 deaths. The issue was known to the company since 2005, but they ignored it because of a slow-fix and the expense it would require to recall the sold cars for fixing their faulty ignition switches, which led to several deaths.
In May 2014, GM was fined $35 million for delaying recalling cars that had faulty ignitions. GM admitted to breaking federal law. As of 2015, the company has set aside an estimated $550 million for victim compensation as the fund amount was reviewed 4,000 times with 95 total victims. The company also issued rental cars for car owners who had their cars recalled.
About $1.7 billion was the total expense on the recalls in the first half of 2014 alone. The company went into bankruptcy during a crucial time of the scandal, and the government-owned 60% of the shares. (source)
Also read: 10 Biggest Mistakes That Companies Have Made