Air Rage in a Turbulent Industry

While it was Alan Joyce, CEO of Qantas who suffered the ignominy of pie in his face, despite the Qantas' otherwise stellar reputation.  He is perhaps an unfair emblem of an industry in the crosshairs of many compounding challenges. Some of these challenges, such as British Airways' global system shutdown, which is eerily reminiscent of Delta’s ground halt of 2016, speak to the general state of vulnerability to cyber events – whether due to external threats or corner cutting in critical infrastructure. Other challenges, like the volley of reputational setbacks and public relations scandals, speak to a tone deafness from some senior industry leaders in the face of empowered smart phone wielding passengers who are ready to catch every airline transgression (and aggression) for the entire world to see. Despite these persistent challenges, set against a backdrop of ongoing security threats and government mandates – such as the likely universal laptop ban from U.S. authorities – the airline industry is not only too big to fail, it is too big to avoid in a globally connected economy. Internalizing lessons from the recent spate of unwelcome news will be key in regaining goodwill and improving organizational resilience.

In 2016, the major airlines safely transported more than 3.6 billion passengers to points and places all over the world. Safety, while paramount in the industry, does not necessarily mean that passengers are ferried around the world peaceably. United, British Airways and Delta, to name three major airlines that have recently attracted negative attention shuttled more than 327 million passengers in 2016 for business and leisure travel – about 9% of the global total. And yet ghastly scenes of violence, like the sad Dr. Dao debacle, when a man was brutally deplaned from a now infamous United flight in Chicago, to the apocalyptic travails of thousands of stranded British Airways passengers stuck in London’s major airports, now seem commonplace. The specter of a major electronics ban on all flights entering the U.S. may very well be an albatross around an already struggling industry’s neck. Given the persistent travel ban attempts from the White House to bar passengers from certain predominantly Muslim countries, transatlantic travel has already started to decline, although this dip may be due in part to fleet right sizing. Indeed, travel to the U.S. is imperiled, including from allies such as Canada, with one school district banning field trips to the U.S.

While we are in the early days of these potentially adverse policy movements, U.S. cities like New York have launched awareness campaigns reminding the world that despite nationalistic rhetoric, New York City is very much home to the world and a great destination for business, conferences and tourism. Persistent security fears, combined with the general state of affairs in congested airports, long security lines and the growing public concern of eroding airline service, require more than speculation of which CEO’s will step down or be sacrificed by their boards at the altar of stakeholder appeal. Indeed, against this backdrop, a video conference never seemed better, especially since airline connections seem increasingly unreliable and the concept of a passenger’s bill of rights seems like laughably little recompense, given the state of play. If the Trump Administration’s laptop ban is successful, it may sound the death knell of the hyper productive business traveler who writes thousands of offline emails from 36,000 feet. Positively, the proposed ban may also herald the return of pleasantries with strangers.

Airlines need to do more than throw “inconvenience money” at the equation. While the costs tend to be linear in terms of quantifying the adverse economic impacts of these events, the toll is certainly mounting. The direct costs associated with British Airway’s weekend woes, for example, are nearing the $150 million mark, without registering the long-range consequences of customers who permanently switch carriers. Likewise, the costs of Delta’s worldwide ground halt were estimated to be around $100 million, under similar system failures as British Airways’. United suffered wild swings in its market value ranging between $250 million and $1 billion, due the customer backlash over the Dr. Dao scandal. What is not being relayed to airline stakeholders, however, are what are the real drivers of these events? Can power outages at operating facilities really be the single point of failure to legacy IT systems as we are being told? What about the trusty backup generators that keep hospitals going during blackouts? Can the level of customer care among airline personnel permit families traveling with children to be forcibly deplaned – all on tape within a month of the United scandal? Whatever the cause, these types of events should raise alarms among the traveling public, regulators and, nowhere more so, than in industry board rooms.

When combating the bout of air rage gripping the airline industry, boards and executive teams should begin by taking a long look in the mirror. While IT teams at British Airways are surely receiving all the internal ire for the system failure, it is Alex Cruz, the CEO of the crestfallen airline, who finds himself representing the firm in front of a none too pleased public, many of whom are already calling for his resignation, which he is vehemently against. As with the United case, calling for a CEO’s resignation may provide short term vindication to angry customers and shareholders. However, these calls obfuscate the real work that needs to be done to ensure both readiness for public setbacks and greater resilience in information systems to acute and attritional threats. Of the two, public discontent is a fleeting risk for which a little “paycheck persuasion” can win back loyalty.  Global system vulnerabilities of the scale shown by British Airways and Delta before it, however, are cause for real concern calling for greater accountability, public disclosure and investments in prevention and redundancy. Until then, a dose of patience is advised for the restive traveler and a dose of diversification prescribed to the airline shareholder.

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