Impact of WOW Airlines Collapse

3164 words (13 pages) Business Assignment

2nd Jun 2020 Business Assignment Reference this

Tags: Business AssignmentsAirlineBusinessCrisis Management

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We live in a society that is constantly affected by some sort of crisis. Whether it’s a natural disaster or a crisis in an organization, business or government, each crisis has the potential to disrupt your day to day life. No person, business, or organization is immune to a crisis. It is because of this fact that it is crucial for every organization to have some sort of crisis communication plan. The basis of every business is the people it benefits or serves, and when crisis hits, these consumers and customers should be one of the first people to know, especially when the crisis directly affects them.

On March 28, 2019, WOW Airlines, a budget Icelandic airline company, ceased operations and the company collapsed. Founded in 2011, the airline prided itself on connecting North America to Europe with cheap, basic flights. The collapse didn’t come as a surprise to most people, as it had already been rumored that the company was having financial problems, but what did surprise people is the way the company handled the aftermath. It soon became evident that the WOW Airlines public relations team did not have a crisis communication department. The company likely hadn’t thought about a crisis communication plan or what the company would tell the public if a disaster were to happen in relation to the airline.

After the collapse, passengers became stranded in foreign countries with nowhere to go. The company did not offer refunds and offered little to no remorse to customers. Many customers were not informed of the situation. It was not until the next day that other, unrelated airlines started offering stranded WOW Airline passengers discounted flights home. Airports were also not notified of the collapse, which added to confusion and frustration levels. Thus, airports and their staff had to deal with disgruntled, displaced passengers on their own.

As if the collapse of this Wow Air wasn’t a lesson to airlines all over the world, Thomas Cook, a budget European airline, collapsed on September 23, 2019. The 178-year-old company went bust after a financial rescue plan they had in place fell through. Because Thomas Cook is primarily used by those in Britain, a lot of its stakeholders blame the 2018 heatwave in England for low bookings, because people were staying closer to home, and Brexit for customers lack of trust in many businesses. Ironically, the company had come dangerously close to collapsing in 2007 but was pulled out of debt by the Royal Bank of Scotland, who some blame for its ultimate downfall in September 2019, because of its demand of money from Thomas Cook as payback for bailing them out so many years ago. Regardless of how or why the airlines crashed, whether it was a heat wave, bankruptcy or something totally unrelated, neither company had their passengers, the ones who made these companies money for so many years, in mind. Passengers were left stranded, no one was warned, and there was little to no communication with the press, on social media, or directly with ticket buying and ticket holding passengers. Neither airline warned employees and staff of the potential collapse, leaving most without jobs at the tip of a hat, finding out that the company they were employed under is no longer a running business as passengers were scrambling to find flights home. The object of this research paper is to find out why a crisis communication plan and crisis public relations team is crucial to every company, and what WOW Airline and Thomas Cook should’ve done to ensure their reputation did not collapse with the rest of the company. The paper will primarily attempt to answer two questions:

RQ 1. How does a company’s crisis communication response influence the public’s perception of a brand?

RQ 2. What are the essential aspects of a successful crisis communications plan?

To begin, let’s define a few terms. A crisis can be referred to as a bad experience when used in daily conversation, like forgetting to do something or your favorite sports team losing, but technically these aren’t true crises, it is simply a problem. For example, Selbst (1978 in Faulkner 2001, p. 136) defines a crisis as “any action or failure to act that interferes with an organisation’s ongoing functions, the acceptable attainment of its objectives, its viability or survival, or that has a detrimental personal effect as perceived by the majority of its employees, clients or constituents.” This narrows the word crisis down from being a worldwide trauma to something that each business needs to think about. A crisis is a crisis, no matter how small, and the tourism industry and tourism businesses need to have a plan in place to handle these curve balls. “Three characteristics separate crises from other unpleasant occurrences. These include surprise, threat, and short response time,” (Hermann, 1963, p. 61). Surprise threats are things that humans have no control over. These instances could be tornados, hurricanes, tsunamis, etc. A threat example would be financial instability or placing your company power plant or oil rig near a residential area, which could lead to crises like the BP oil rig explosion in the Gulf of Mexico in 2010. Lastly, short response time means that a company needs to address these issues in the shortest amount of time possible. When a crisis strikes, the sooner an organization can get on the right side of things, the better the outcome will be for them in the end.

Another term that is important to know the definition of is crisis management. Crisis management is when a company or organization plans for a crisis. Having a plan in place in case disaster strikes take out some of the uncertainty of what would happen during a crisis, allowing the company to have a bit more control when things begin to downwardly spiral. Crisis management is a natural and essential part of the organizing process. When it comes to crisis management, you can never be too prepared.  Any organization, small or large, should have a plan in place that includes things like evacuations, worksite maps and equipment operations/maps in case anything were to happen, but they should also know how they are going to relay their messages to their employees in a calm, cool and collective way that does not spark crisis like reactions. This plan should be looked at as one of the first steps in crisis preparedness, and every organization should have something in place. Crisis management involves reacting to negative events during and after they have occurred, unlike risk management which involves planning for such events. Unfortunately, even with a plan in place, a company may receive backlash and may not ever be truly prepared for or anticipate the ripples this crisis may cause. Crisis management has evolved from just emergency preparedness into four factors: prevention, preparation, response, and revision (Coombs, 2014, p. 5).

Most importantly. Crisis communications and a crisis communication plan should be defined. Crisis communication outlines how an organization should communicate and relate to its publics after a crisis takes place, so that the most minimal amount of damage is done to its image and reputation. The need for effective crisis communication understanding and skills continue to grow. Although this form of communication is a new concept, many organizations recognize the need for crisis communications as part of their public relations and human resources departments. Crisis communication is essential for a brand, company or organization, as the aftermath of a crisis can be fatal in some cases. A crisis weakens a business, in terms of reputation and credibility, so if the right words and voice are not conveyed properly, it could mean the end of a business or organization. A crisis communication plan is a set of guidelines used by a company to outline what to do when crisis strikes. These guidelines tell employees the first steps, how to communicate with the public, and how to prevent the crisis from ever taking place again.

How do we know when crisis is about to strike an organization? There are signs, or prodromes, to warn of a potential crisis. Defining a prodrome and recognizing what the different types of prodrome’s there are can be crucial when tracking the development of a crisis. Organizations should make attempts to stop a crisis at the prodrome stage before it turns into something much larger, but it’s not that simple. One way companies are trying to recognize these signs is by hiring employees to detect these warnings and help combat them. This person would work closely with the crisis communications team. A good example of prodrome comes from the 1982 Tylenol tampering case, which was a series of poisoning deaths as a result of Tylenol tampering in the Chicago area. The Tylenol branded, over the counter medicine has been laced with potassium cyanide, leading to many people’s deaths. Although there were no prodromes that showed Johnson and Johnson how to handle this sort of crises themselves, they became a prodrome for many over the counter drug companies.

When it comes to airlines, there are a plethora of complications and problems that could eventually lead to a crisis. The plane could malfunction, it could crash, the vessel could be hijacked, or it could run out of gas. Additionally, an airline could go under and have to cease operations, because of no money to fund the flights, at any moment, like what happened with WOW Air and Thomas Cook. There were many prodromes, or cases of airline crises, that happened before 2019. For example, on May 11th, 1996, 110 people boarded a ValuJet flight at Miami International Airport bound for Atlanta at Hartsfield-Jackson Atlanta International Airport. This flight was Flight 592, a ValuJet plane, which was a three-year-old discount airline based in Atlanta. The plane had only traveled 100 miles west of the airport before the crew reported smoke from the cockpit. The pilots turned around and tried to make it back to Miami, but unfortunately did not make it. Flight 592 disappeared from radar at 2:13 p.m. (Gabino, 2016). It crashed in the swamp of the Everglades Park in Florida seconds later. Soon after the crash was reported by journalists and discovered by crews, the company spokesperson Marcia Scott received a beep on her pager with a ValuJet phone number followed by “911.” This showed the young airliner had a solid crisis management plan in place. ValuJet’s plan called for the company to show compassion for the victims, take responsibility, and demonstrate what the airline learned (Boyd, 2008). The company also had crisis management teams available and a CEO who was ready to show his face if anything ever happened. The company worked before the crisis to ensure the public trust was kept after earlier incidents, which never affected the company as a whole prior to the crash. ValuJet should be a model to other airlines about how to handle a crisis properly.

There are many theories that support a business having a good crisis communication plan, but three that really stand out.  First, the WOW Air and Thomas Cook should have been using the situational crisis communication theory (SCCT). SCCT can provide recommendations for constructing a strategic crisis response. It suggests that in time of catastrophe, organizations need to respond appropriately to protect reputational belongings. “The type of response, though, depends on the crisis type, the severity and the responsibility stakeholders will attribute to the organization,” (Barbe, 2018, p. 258). There are three levels of crisis responsibility attribution, in relation to the beliefs about the cause of the events and the responsibility of the business, in situational crisis communication theory. They are minimal, low, and strong. Minimal level crises would be situations like natural disasters, rumors, or product tampering. Low level crises would indicate technical errors or industrial accidents. An organization that had a strong level of crisis responsibility would mean the crisis was human error, human misdeeds, or the organization had a history of crises. When it comes to WOW Air and Thomas Cook, each airline had a history of financial instability, and neither let their employees in on this fact, so their level of crisis responsibility attribution should be strong, but it was not. The airlines did not take responsibility for what happened after their airlines crashed, which led to major backlash in the press and on social media, ruining each brands reputation for years to come.

Next, there is the apologia theory. This theory is an effort to defend reputation and protect image, but it is not necessarily an apology. “With apologia theory, the organization may deny, explain, or apologize for the action through communication discourse,” (Fearn-Banks, 2017, p. 16). Both airlines could’ve used this theory after the news of their collapses broke. There was nothing either of them could do once it reached breaking point, but each organization could’ve used their social medias and public relations team to apologize to passengers, putting themselves out there before news stations could break their bad news for them. This would’ve saved some face and allowed the companies to be seen as more personal and apologetic, permitting stranded passengers and disgruntled, out of job employees to be a bit more understanding. As stated in the introduction of this paper, neither airline described the extent of their financial situation to its employees or passengers, and neither took responsibility for what happened after their passengers were left stranded and their employees were out of jobs.

Finally, there is the image restoration theory. This theory is an approach for use in developing and understanding messages that respond to corporate image crises. The key to understanding image repair strategies is to consider the nature of attacks or complaints that prompt such responses or instigate a corporate crisis. An attack has two components: the accused is held responsible for an action and that act is considered offensive. “This theory provides five broad categories of image repair strategies that respond to threats. These five are: denial, evasion of responsibility, corrective action, reducing offensiveness and mortification,” (Benoit, 1997, p. 177). Both airlines evaded responsibility, but neither took corrective actions to reduce backlash or make things right with those affected. The way that passengers were left stranded in foreign countries and employees were suddenly out of jobs without any sort of compensation for the sudden collapse could be considered offensive by a lot of people.

Not taking responsibility for their financial troubles led to major ramifications when it comes to reputation for each airline. The

Based on theories, background research and similar crises, it has become apparent that both airlines in discussion should have had a crisis communication plan in place, should disaster strike. If these airlines would’ve had a crisis communications plan in place, they could’ve relayed the closing of their airlines in a timely manner, in the correct voice, and could have saved some face in the weeks following their crises. There are many factors that go in to having a successful crisis communications plan. First, a good crisis communications strategy/plan will have a spokesperson. This will be someone who understands the brand as well as the people it provides its services for. In the airlines case, this should be a CEO or someone close to the top, who can take some responsibility for the crises at hand.

Internal communications. Identify your key spokesperson and brief them on what’s happening as well as how your brand is going to move forward. Then move quickly to respond internally with those messages to your employees. The point here is to quickly alleviate any internal fears or concerns in the workforce.

Understand the potential impact. In Volkswagen’s case, the crisis had a major impact on the company’s brand reputation in addition to an impact on its shares as they took a major hit on the stock market. As a decision maker, you’ll always want to understand what the immediate impact could be on your business. As you begin to think about key messages and your overall corporate communications strategy, which should include message delivery on social media, you’ll want to determine how your decisions will impact business, revenue and overall brand reputation.

Position yourself. Now that you have a thorough understanding of the impact a crisis can have on your company, you should have a clearer idea of how to position your corporate stance accordingly. Begin drafting your messaging and ensure you get buy-in from the executive team and key decision makers. Be prepared for a bit of back and forth (naturally), but rest assured, your research in understanding any potential impact will help ensure alignment during this process. Alignment, especially from a PR perspective, is necessary in order to avoid inconsistences within your corporate response that could further damage your reputation or appear dishonest. As aforementioned, all public outreach should remain honest, consistent and focused on addressing the crisis as it relates to your strategy.

Create a means for monitoring. Once you’ve determined the channel of distribution for your message, monitoring your publics’ responses is equally critical. The one question you should ask, “Is our PR crisis still a crisis?” Know that this type of fire doesn’t diminish over night; sometimes it can take a business months before customer inquiries and questions have diminished.

Learn the lessons. Mitigating the negative connotations of your brand is only one aspect of a PR crisis strategy. You’ll need to take a deep-dive and reflect into any events that caused this crisis to occur. By considering how certain events affected your organization, you will be better prepared to have an appropriate and timely response should another conflict arise. Additionally, we recommend developing a standard protocol or training guide to better help employees efficiently manage a future crisis.

Based on this research, there are three major takeaways that can be derived and applied to future strategic communications plans and practices. The first is —–

References

  • Hermann, C. F. (1963). Some consequences of crisis which limit the viability of organizations.
    Administrative Science Quarterly, 8, 61–82.
  • Fearn-Banks, K. (2017). Crisis Communications: A Casebook Approach. New York, NY: Routledge.
  • Coombs, T. (2014). Ongoing Crisis Communication: Planning, Managing, and Responding. Thousand Oaks, CA: SAGE Publications.

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