We talk a lot about crisis management and how it can damage a brand, but sometimes sheer numbers outweigh the bad news.
On 13th January the Costa Concordia cruise liner was wrecked off the coast of Tuscany with the loss of about 32 passengers and crew lives. The Captain was accused of abandoning the ship as passengers struggled to get off the liner. For several weeks the media covered the rescue of passengers and then the subsequent search for bodies in the half submerged wreck.
That was a very bad news story, but the parent firm acted quickly and agreed to refunds and other payments as well as offering further cruise opportunities.
Then disaster struck again. This time it was the Costa Allegra which found itself adrift in pirate waters near the Seychelles in the Indian ocean after a fire in the engine room. All passengers were safe but suffered for a number of days as the ship was towed into the Seychelles without electricity and therefore no air conditioning, lights or hot food.
In both cases the actions of the management would make or break the cruise line and its future viability. In both cases the cruise line management appear to have acted quickly and compassionately.
In the case of the Concordia they said that they would support the Captain in his legal case although they blamed him for the accident. In the second case they reacted quickly to ensure that people were well looked after when they arrived in the Seychelles.
That is not to say that there haven’t been plenty of bad stories coming out of both accidents, especially around poor management on the ships themselves.
Nevertheless, the Costa Cruises website has in place an easy to find section for each of the accidents and a dated and timed series of press releases giving important details to keep everyone informed. It isn’t the prettiest format ever designed, but the wording is well delivered and is fact rich.
So where do the numbers outweigh the bad news?
The cruise industry has grown massively in recent years and there is the potential for serious damage as a result of these accidents. Indeed one press report suggests that Costa cruise bookings are down by a third. That is not a great surprise because some people will be put off by the two incidents.
Nevertheless a scrutiny of online chat rooms and comments suggests that there are an equal number of cruise fanatics with stories to tell of great cruise holidays. These fanatics are willing to counter the gloom and doom merchants.
The Passenger Ship Association (PSA) website makes a strong case in its press section. They point out that between 2005 and 2011 around 117 million people enjoyed cruises around the world with 21 deaths recorded; a remarkably low rate.
The overall numbers will go up with the Costa Concordia statistics but not dramatically, although as the PSA point out, one death is one too many.
So it seems that this time the industry may well get away with a dip but not permanent damage. The cruise lines are aggressively lowering their rates and countering the news with massive promotions, making a cruise holiday a good deal at the moment.
No doubt at some point in the near future the parent company of Costa, Carnival Corporation, will conduct a low key rebranding of the Costa cruise line. They still have a series of court cases which will continue to remind people of the events of January and February. They should survive the news spillage from these court cases.
A crisis that, for once, appears to have been handled reasonably well, though we should never forget the loss of lives involved.
Read More
On Monday 24th October Seán Gallagher probably woke up feeling pretty good. He was, after all, leading in the opinion polls for the Irish presidential election to take place the following Thursday.
His lead was impressive. According to an Ipsos Mori poll in the Irish Times he was on 40% with Labour Party candidate, Michael D Higgins, on 25% and Sinn Fein candidate Martin McGuinness a distant third on 15%.
A few hours later his campaign was in tatters and Michael D. Higgins went on to win the election. In the end Seán Gallagher took just 28.5% of the vote.
So what happened?
On the Monday evening the Irish television channel RTE there was one of the traditional television debates with all the presidential candidates. During the course of the debate Martin McGuinness accused Gallagher of collecting a cheque from a convicted fuel smuggler on behalf of the opposition Fianna Fail party.
At the time Gallagher was a member of the Fianna Fail national executive and had attended a party or reception at which some photographs were taken. Subsequently it appears that he took a copy of a photograph to the fuel smugglers house and, according to the fuel smuggler, was given a cheque for €5,000 for the party. Gallagher struggles to remember what happened.
Nevertheless the implications were made and the suppositions were drawn.
So what went wrong?
Seán Gallagher is an entrepreneur and a judge on the RTE equivalent of Dragon’s Den. He has more than one business and leads a busy life. He is also very much in the public eye. He goes to lots of events and he does lots of things. It would be difficult for him to remember every event he attended and its details. Despite this, an audience member, the chairperson of the debate and Martin McGuinness all attacked him, on several occasions without giving him time to explain.
On his part, Gallagher gave long convoluted answers that left the impression that he was trying to avoid the questions. He part admitted that he may have delivered a photograph and he part admitted that he may have received an envelope. The very fact that his answers were ambiguous condemned him.
Even worse, the following day he was forced to abandon his campaign and his ‘meet the people’ visits in order to trail around the broadcasters to explain his version of events. But the damage was done and the campaign was lost.
What might he have done?
This story had been rattling around for a week before the TV debate and it was posted on Sinn Fein’s website. Seán Gallagher’s campaign team should have identified the potential threat the moment it arose and clarified exactly what had happened. From that point on everyone involved in his campaign should have taken the message out and repeated it continuously. The message should have been clear, simple to understand and unambiguous so that further accusations could not be made.
As it was, different people were giving different accounts of what happened including Mr Gallagher himself. That was a recipe for disaster.
It is interesting to note that the accusations came from the convicted fuel smuggler himself along with Martin McGuinness. Seán Gallagher might have expressed amazement that his integrity was being brought into question by a convicted criminal and a former Provisional IRA leader.
Abandoning his campaign at the last minute was also a flawed move. Difficult that it might have been, he should have remembered that his only audience were the people of Ireland and not the broadcasters who were having so much fun with the controversy.
Instead he allowed himself to be drawn into further confrontation with various broadcasters. Inevitably the story moved on; he found himself having to explain why he had not been clear about what had happened from the very start rather than dealing with the substance of the accusation.
Of course, if he had nothing to hide then his first and most obvious reaction should have been to tell McGuinness to prove it or shut up. Such a show of confidence would have killed the story dead.
See a You Tube clip entitled ‘Sean Gallagher just can’t tell the truth’ from an interview the day after the debate.
www.youtube.com
Read More
Last week was a prime example of the way in which crisis communications is having to become faster and smarter when a crisis occurs.
For four days last week the Research In Motion (RIM) Blackberry system collapsed across the world. The problems started on Monday 10th October. In the London based business newspaper, City A.M., on 12th October editor Allister Heath was criticising Blackberry for their slow response to the crisis. This is what he had to say:
‘What’s wrong with Blackberry? I am a heavy user, a genuine addict, which means that I – together with millions of others – have been hugely inconvenienced by the system’s collapse during the past two days To add insult to injury, it came back up on Monday night, just to implode again yesterday. Instead of pro-actively explaining what was happening, Blackberry’s owners, Research in Motion, waited for hours before issuing a statement; for a company that makes mobile phones, its inability to communicate with its users has been astonishing to behold.’
Poor Blackberry. Their system had a catastrophic failure and within hours the editor of a London business newspaper was squealing as though the end of the world had come about.
It does neatly demonstrate the way in which the world has become so immediate. People want things now, not yesterday or even several hours ago. They want explanations and they want them now.
To a point Allister Heath is correct. Blackberry has built its reputation on providing ‘reliable real time communications around the world’. This is the phrase that co CEO of RIM, Mike Lazaridis, used in his videoed apology on Wednesday 13th October.
Lazaridis went on to say that “We did not deliver on that goal this week” and “We have let many of you down. You expect better from us and I expect better from us”.
Lazaridis looked positively distraught in the You Tube video and he spoke in a very wooden manner, obviously reading from a teleprompter. The performance may just about have done the job, but it was barely convincing.
Alas, this is not his first clumsy outing in front of the cameras this year. In April he stopped an interview with BBC reporter Rory Cellan-Jones when he was asked about security issues in the Middle East. In the interview he looks unprepared, even surprised at the question despite its topical nature at the time.
So what should and could RIM have been doing? Well none of it is rocket science.
As a major telecommunications company with around 50 million users across the world they must have an operations room which monitors all traffic. As soon as they realised they had a major problem, which must have been in minutes rather than hours, they should have gone into crisis mode.
That means wheeling out a media savvy spokesperson to present a holding statement, apologise for the inconvenience being caused and answer media questions – even if the answer was ‘we don’t know but as soon as we find out we will let you know’.
If you decide that you need to use the CEO then there has to be a very good reason. It became inevitable by Wednesday because RIM had not reacted quickly in the early stages of the crisis. But by Wednesday, three days in to the crisis, the apology seemed too little too late.
If you decide to use your CEO then also make sure that he has had some crisis media training. Rather than look as though he is about to jump off a cliff he has to appear concerned about the effect on the individual but he should also look as though he is in control.
The April incident suggests that there is no pre-interview planning or preparation taking place at RIM. As a minimum they should have identified every possible issue that was going to come up and then prepare an appropriate response (what we call ‘lines to take’).
Finally, with a $4.2 billion turnover and corporate reputation to protect they should have the very best of corporate communications departments, a crisis plan and a back up PR agency to support them.
Winging it in the way that they appeared to do it last week simply will not work in this world of instant satiation.
Read More
The News of the World phone hacking scandal has dominated the news for the past week or two with thousands of pages of news and commentary filling every newspaper.
To anyone interested in communications the story is well known and won’t be repeated here. Instead it is worth looking at some wider aspects of the crisis.
Recently Burson Marsteller and Penn Schoen Berland published their 2011 Crisis Preparedness Study. You can find the details of that study here.
It makes fascinating reading. There was one slide in the study which demonstrated the depth and the extent of this particular crisis for the media, police and politicians. The slide examines the impact of a crisis on a company after it has experienced a major crisis.
• 32% saw a drop in revenue
• 24% experienced cut-backs and layoffs
• 18% suffered loss of corporate reputation
• 18% experienced a destabilisation of the entire company
• 17% saw a loss of public trust
• 13% were subject to increased regulatory scrutiny
• 13% saw a drop in share prices
• 12% suffered increased scrutiny from new media
• 11% experienced law suits from individuals or groups
• 10% were subject to increased political scrutiny
• 10% paid extensive fines
• 9% led to inconsistent statements being made to the media
• 8% suffered from loss of media trust.
Perhaps with the exception of the last bullet point every other factor in this list has been prevalent in the phone hacking scandal and subsequent crisis.
First the crisis is not limited to one organisation or one individual. It has embroiled the media (and not just News International) and politicians as well as the police.
It has seen a sensational drop in revenue for News International, resulted in the closure of the News of the World and the subsequent lay-offs as well as the resignations of two senior police officers. The destabilisation of News Corp and probably Rupert Murdoch himself (at the hands of the Board) is happening; the Prime Minister may just have got away with it, but the Metropolitan Police have not.
The corporate reputation of News Corp is badly damaged, as is that of the police and arguably the prime minister’s office and there is a clear and quantifiable loss of public trust in all three institutions. Probably all three institutions are likely to be subject to increased regulatory and political scrutiny.
News Corp has seen a meteoric fall in its share price (although there has been some recovery) and is already committed to settling, out of court, potential law suits from those whose phones were hacked. We shall have to see if fines are on the way, but inconsistent statements are still being made which has led to even more investigative journalism digging up new angles on the story almost every day.
This crisis is the closest you will ever get to death by a thousand cuts caused through poor crisis communications planning, poor management, apparent institutional incompetence and, arguably, gross arrogance at senior levels.
Read More
For one glorious moment I thought that BP had got it right.
I was drinking a cappuccino in Café Nero before going to my first meeting of the day. I turned the page of City AM and there it was, a full page advertisement from BP entitled “One year later. Our commitment continues.”
On the face of it the advert was great. It looked as though BP were being proactive and that they had a great story to tell. The reality was somewhat different. It seems that they have learnt nothing.
At one superficial level the advert was convincing. It told you how much money they had thrown at the problem and how many people, vessels and aircraft had been involved. It talked about the $20 billion they are investing to rebuild the economy.
In other words it did all the things I had criticised them for last year. The advert is a great piece of corporate propaganda planned for the day of their AGM. It talks about money, organisation, equipment (all the things big corporates love) . . . . but not people.
It was not a great piece of reputation recovery. As Nick Hindle, McDonald’s UK vice-president communications, said in a recent PR Week article, ‘Advertising is not the answer. You cannot advertise your way out of operational problems’.
The people and communities affected were not mentioned once. The closest the advert got to an apology was to say ‘This was a tragedy that should not have happened’.
Later in the day I sat on a train to go home and opened the Evening Standard. There it was, a headline that read ‘Gulf fishermen take on BP over lost livelihoods. Again, on the evening TV news, there it was. Protesters had come all the way from the Gulf of Mexico to the UK to make their point at the BP Annual General Meeting.
Nick Hindle goes on to say ‘If there is a fundamental disconnect between what you say and what your customers can see every day, you undermine the trust.’
Byron Encalade, president of the Louisiana Oystermen Association is reported in the Evening Standard as saying “Our fishing grounds have been depleted, our oysters are dead and we’re not receiving the funds we need to sustain ourselves. We completely shut down, we lost everything after the spill. We had good faith (BP) were going to make our communities whole, but they’ve gone down the wrong road.”
In just a few passionate words one man destroyed hundreds of thousands of pounds worth of big company corporate advertising.
Even worse, the protesters were refused a meeting with BP boss Bob Dudley and that says it all.
BP is a corporate giant that has been brought to its knees because, in the world of communications it just doesn’t get it. It’s about people, stupid!
Read More
On 20th April 2011 (a Wednesday) BP will be facing the first anniversary of the Deepwater Horizon oil rig disaster. Last week’s blog looked at the areas upon which the media might decide to focus during this first anniversary.
This blog reviews what BP might be doing to minimise the first anniversary impact.
Things to consider
• The BP response will depend greatly upon what they have been doing over the past year
• It will also depend upon the relationship between the corporate communications people and their involvement in strategy development. If they are a ‘send and defend’ team with little influence over strategy then that may limit the approach taken.
Once these are known then the next stage is to consider:
• Should BP be proactive or reactive? Proactive means engaging with stakeholders, reassuring, informing and listening. Reactive means waiting to see if they have escaped an anniversary onslaught and then reacting to any coverage that does occur
• If proactive then what should they be talking about and to whom?
• Even if reactive they should be preparing scenarios for likely attack points and preparing relevant statements or references to third parties
• In this process they might be considering all their stakeholders and their likely reaction to the anniversary.
During the crisis last year I criticised BP for being too corporate. They appeared to be fixated with processes and procedures rather than the human element of the crisis. Their use of Tony Hayward the then CEO as their spokesperson was an object lesson on how not to use a CEO in a crisis.
The proactive approach:
I would always favour a proactive approach to the ‘tin helmet’ hunker down approach. On that basis what might they be doing?
• Remember that crises are about people
• Don’t forget that the first anniversary of a crisis can be stressful to all involved
• BP might want to express regret and sympathy for the lives lost (and mean it). For the families of the eleven men who died they should be listening to what these families want. Some will want no contact, others may want to visit the site of the disaster, yet others may want to talk and remember
• Employees will be stressed and the first anniversary is unlikely to be a normal working day. Those most closely involved in the crisis may need time and space to handle what happened. Others may just want time to talk or to take a little time out to remember. Most important though is that internal communications processes are used to send clear messages of support and understanding from the senior team
• The communities involved in the Gulf of Mexico will be very raw. Depending upon how proactive BP have been since the disaster will determine their level of involvement in those communities at the time of the anniversary. It could be that BP use the opportunity to express regret at what happened and then reaffirm their commitment to those communities. If BP has built a closer relationship with the Gulf communities then it might be a chance to reach out and demonstrate a change in culture between large oil company and the communities in which it operates
• If BP feels really confident that they can demonstrate real change then now would be the time to show what has happened since the disaster. The danger lies in the change being shallow. This is only an option if journalists can see and feel cultural and attitudinal change.
Ultimately it will be BPs actions in the lead up to and during the crisis that will do them most harm or good. If they come across as arrogant and complacent then self harm will happen.
If they show openness, honesty, a willingness to admit human frailty and an admission that more has to be done then they might just be treated more kindly.
It is interesting to note that the BP share price before the crisis was 655.4 pence. Today it stands at 467 pence. In three weeks time it will be interesting to review how BP handled the mini crisis heading their way. Will their senior executives be watching the share price or be more concerned about the human cost of the crisis – that is the real test.
Read More
It is just one month before the first anniversary of the BP Deepwater Horizon oil spill in the Gulf of Mexico. On 20th April 2010 the Deepwater Horizon oil rig exploded, killing eleven oil workers and spreading a deadly slick of oil which took three months to contain and then cap.
Reputations were destroyed.
The Beyond Petroleum (BP) logo became a laughing stock as the oil slick destroyed wildlife and wrecked the economy of many communities.
Tony Hayward the CEO of BP at that time was ridiculed, embarrassed and shamed in the most public way by a series of politicians including Barak Obama.
Barak Obama, in turn, was damaged within the US by accusations of tardiness in his response and outside the US for his blatant attempts to move the blame beyond his government and country. His deliberate use of the title British Petroleum condemned him in the eyes of many Brits and destroyed the idea of a special relationship between the US and the UK.
The BP corporate communications team were condemned, probably unjustly, by just about everyone for failing to respond appropriately to the crisis.
There were many more reputations both within the oil company and outside who suffered.
A year on what can we expect?
Well, hopefully BP corporate comms have got their act together and are prepared. Perhaps the saving grace is that the political turmoil in the Middle east and North Africa (MENA) will sideline the anniversary. For BP to hope that it will all be forgotten will be a mistake. They should prepare and here are some thoughts they might be considering.
1. Nuclear power is not oil, but it is linked in the minds of many. The recent events in Japan and the problems with their nuclear reactors have led to more than one article about the dangers around the use of dangerous fuels
2. The relatives of eleven men will be mourning their loss. How have they been treated since the disaster and how have the oil companies involved treated their memories?
3. What has happened to the oil that spilt into the Gulf? Is it lying at the bottom destroying marine life and what is BP doing to clean it up? What about all of the dispersants that were used, how have they affected the environment?
4. What happened to all those communities affected by the oil spill? Are they still suffering, have they received the help promised or are they languishing in poverty forgotten by a Federal government too busy fighting wars in MENA and by BP?
5. What happened to all of the money? Was it spent as expected or are there dozens of court cases enriching American lawyers whilst poor local businessmen struggle?
6. What has BP done since the disaster? Have they cleaned up their act or are they still making mistakes and getting into trouble? They sold a lot of assets after the oil spill. What is their latest strategy, where are they investing and how safe are their sites today?
For sure there will be journalists looking at all of these areas and more over the next month. They will be preparing their articles and finding the controversial aspects of the intervening year.
This blog has looked at the areas that might be rich pickings for the media to investigate. Next week, how BP might seek to respond and prepare for the anniversary.
Read More
2010 was no respecter of brands, with some of the most well known brands in the world being damaged by accidents, mishaps and plain stupidity.
Top of the list has to be BP and the Deepwater Horizon oil rig explosion on 20th April in the Gulf of Mexico.
Oddly, BP did many things right, especially in their response to the physical disaster. They poured money into the local communities and maximised resources for the capping of the well and the clean up. But they failed miserably in their communications.
BP reacted like a big impersonal corporate. Their reaction seemed to be lawyer driven rather than communications driven. They seemed impervious to the human side of the disaster and their apologies came across as unconvincing.
BP made a major error by over using CEO Tony Hayward. He became the face of BP and soon became the hate figure for all the oil company’s wrongs. Not only was he poorly trained in media interviews, he also came across as cool and aloof.
Toyota, who also got themselves into difficulties over accelerator problems in their flagship Prius car, improved on BP – eventually. They used their CEO sparingly but in a very contrite manner. Then they used other spokespeople to handle the day to day media. Their major problem was refusing to accept that they had a problem. They took too long to recall the model for modifications. Subsequently they have been fined $32 million by the National Highway Traffic Safety Administration in the US and seen sales fall.
Both Toyota and BP also suffered from poor responses to social networks. They demonstrated only too well that many corporates still don’t know how to handle this new phenomenon.
The big loser in the social media, however, was Nestlé. They found themselves at odds with Greenpeace who posted an advertisement on You Tube linking Nestlé to the destruction of rainforests in South East Asia. Nestlé reacted foolishly by trying to ban the video from You Tube which in turn led to even more activist agitation on their Facebook site. Further insensitivities led to even more outrage and the story taking off in the mainstream media.
Subsequently Nestlé has reviewed its sources of Palm Oil (the product behind the deforestation). However, its core supplier Sinar Mas Group reacted to the campaign and has subsequently been accused of greenwashing.
Others fell foul of new technology too. BAA were not at all keen to allow cameras into their terminals as the recent snows brought chaos to Heathrow. So the BBC, amongst others, used mobile phone video footage taken by passengers in the terminals. The publicising of the BAA policy as well as the nimbler response by GIP owned Gatwick airport, left BAA looking clumsy and insensitive.
Airlines and associated industries have also found themselves wrong footed in 2010. British Airways (BA) had suffered from strikes at the beginning of the year, a volcanic ash cloud and continuing unrest by some cabin crew.
BA CEO Willie Walsh has become pretty accomplished in his media outings; he shows indignation, even anger, towards the disruption to ‘our passengers’ and promises to do everything to minimise that disruption (and then publicises the action taken). His is careful to praise cabin crew who didn’t strike, to target authorities who overreacted to the ash cloud and to condemn Union activities. Crucially though, Willie Walsh is not the only spokesperson for BA and his presence in front of the cameras appears carefully choreographed. The latter is a lesson BP should have learnt in their use of Tony Hayward.
Rolls Royce, like Toyota, appeared to go into denial at first when one of their engines blew up on a brand new Airbus A380. Unlike Toyota, Rolls Royce continue to play the incident down and have given little information to the media. The coming months are likely to see how badly Rolls Royce has fared as new sales figures for aero engines are announced.
Meanwhile the airline involved in the Rolls Royce incident, Quantas, was quick to point the blame at Rolls Royce. The incident caused a reaction from activists who pointed to a number of incidents on Quantas airliners in the past couple of years. The renowned Quantas safety record and management have taken a hit as a result.
Others who were quick to blame everyone but themselves were the team leading the England World Cup bid for 2018. Football always evokes strong emotions and none more than this failed bid. The English bid team were less than magnanimous to the successful Russian bid team. They may be right in their assertion that corruption lay at the heart of the FIFA decision, but to the rest of the world we look like bad losers. The England brand has come out of this fiasco as damaged and soiled.
One company with a few problems is Boeing. The aircraft manufacturer has had a torrid time with their revolutionary 787 Dreamliner. Problems have delayed the project time after time. It has become so bad that Qatar Airways have talked about cancelling their 30 orders and 30 options. If they do, it may open the flood gates to more cancellations. The programme is in the air once more but more than two years late.
So far though, the Boeing brand has looked remarkably resilient despite the ever new revelations. It is interesting to note that Airbus have not sought to take advantage of the Boeing problems. After the A380 development problems perhaps they appreciate how difficult it is to put a new aircraft in the air these days; and, after all, they are in the process of launching the A350.
There are many more examples of corporate brands that have suffered in 2010, but some damaged brands are more personal. The Tiger Woods brand continues to suffer a year after revelations about serial mistresses. In 2010 Tiger hasn’t won a single golf tournament and many of his previous sponsors have deserted him, the latest being Gillette.
So what are the lessons from 2010?
• When a crisis happens, be quick to react and don’t pretend it hasn’t happened
• Be very wary of listening to the lawyers, they will always want to play it down and that approach is never a safe route
• Choose your spokespeople carefully. Yes, it is important to have the CEO in front of the cameras, but they must be well trained and they should be used sparingly and carefully. Use other spokespeople as appropriate and make sure that they understand that crises are always about people
• Don’t blame others, it just makes you look cheap and nasty
• Don’t be cocky with online activists. Social media is like the many headed Hydra. It is real, live, inventive and spreads faster than you will ever be able to react. So treat them with respect and be open and honest
• Don’t just do the right thing because someone has advised you to do so, do the right thing because you know it’s the right thing to do!
Read More
Complacency is a dangerous thing. Looking like you are complacent when your reputation is on the line is even more dangerous. And that is exactly how Rolls Royce is starting to look over the Quantas A380 engine blow-up incident on 4th November.
This week will see the publication of the Australian Transport Safety Bureau (ATSB) report on the 4th November incident. If the weekend newspapers are to be believed, then it is going to reveal that the incident was much more serious than first portrayed. There are suggestions that up to 50 warnings of system failures were dealt with by the flight crew, and fortunately for them they had two extra pilots present. There are also indications that fragments of the engine penetrated the wing and severed fuel lines whilst narrowly missing a fuel tank.
If this is all true then Rolls Royce can expect an uncomfortable time ahead.
Amazingly Rolls Royce have issued just two statements about the incident (8th & 12th November). In my blog of the 13th November I suggested that Rolls Royce were playing it cool. Today it looks more like they have donned their tin helmets and are hoping that the problem will go away.
You may be fooled by the recent announcements of various deals, the latest being a £1.1bn deal with Air China and another with Emirates for a servicing agreement. Despite this good news the real impact of the A380 incident will be felt some months into the future. The sale of tried and tested engines (as in the Air China case) as well as service agreements do not demonstrate confidence in the manufacturer.
A drop of about 9% in Rolls’ share price is much more indicative.
Of course, so far we have talked about the industry reaction; but what of the passengers? Well if two conversations last week are anything to go by then Rolls Royce and Airbus have a problem. One person I was talking to was very nervous about a pending flight to Australia on a Quantas A380 and another person, although complimentary of the A380, was planning to use airlines not operating the Airbus giant for the immediate future.
To prevent further damage to both reputation and future engine sales Rolls Royce will need to respond swiftly and positively to the publication of the ATSB report. They will need to explain what went wrong and what they have done about fixing the problem. It might also help if they give out some simple statistics about the number of Rolls engines in the air at any one time and the number of hours operated without incident.
To keep their heads down is hardly an option.
Read More
It’s been an amazing few days in aviation with several incidents reported. It has been interesting to note how each of the players reacted.
On 4th November a Rolls Royce Trent 900 engine had a catastrophic failure on an Airbus A380. Despite the aircraft returning to Singapore safely the incident was reported on all the main news channels.
Because the engine failure had not been contained and debris had struck the wing and fallen into a built up area below, the incident took on a more sinister meaning.
The more excitable sections of the media talked about a lucky escape for the passengers. Quantas pointed the finger at Rolls Royce. Airbus kept a low profile. Quantas grounded all its A380s. Singapore Airlines (another Trent 900 user) did urgent checks on their A380 fleet but restored all flights within 24 hours. Lufthansa kept their fleet of Trent 900 powered A380s flying whilst doing checks.
Rolls Royce said that they would investigate, cooperate with the authorities, work with Quantas and report back as soon as possible. This they did on 12th November.
The day after the A380 incident a Quantas Boeing 747 had another engine problem as it climbed out of Singapore. This was played down by all concerned.
Investors reacted quite normally. Quantas shares fell in this, their 90th Anniversary week and Rolls Royce shares lost £1.2 billion in value.
In this same week a report came out that on 19th June a Thomas Cook Boeing 757 powered by Rolls Royce engines survived a major bird strike whilst climbing out of Dalaman in Turkey. The flight landed safely in Manchester where ‘significant bird remains were found still adhering to the nose and main landing gear assemblies’ according to the Air Accidents Investigation Branch(AAIB).
Rolls Royce also announced £750m worth of orders for Trent 700 engines for China Eastern Airbus A330s and a servicing deal with Egyptair worth $350m causing their share price to recover.
This turbulent period closed with Boeing announcing that an electrical fire on board their Dreamliner had caused loss of primary electrical power during a test flight. Boeing has grounded its fleet of test Dreamliners until the cause is known.
The public reaction of every one of the players in these dramas and good news stories was predictable. The speed with which they reacted, the nature of their reaction and the words used tell a slightly different story.
Following on from several other incidents over the past couple of years and another incident on 12th November, Quantas looked distinctly uncomfortable and many commentators are saying that the brand is damaged.
Rolls Royce, on the other hand looks decidedly cool. Their statements have been crisp and businesslike and they have refused to make panic comments. This is amazing considering their recent run of bad luck which has included a catastrophic failure of a Trent 1000 for the Boeing Dreamliner in August. This incident caused further delays to that already troubled programme. At the same time they are fighting a patent lawsuit with Pratt & Whitney.
So far the Rolls Royce brand appears unharmed, but having problems in service on the Airbus A380 flagship, and test-bed problems on the much anticipated Boeing Dreamliner will hardly endear them to the two major aircraft manufacturers in the world.
So far none of these events have developed into a full blown crisis, but reputational damage looks like it’s just around the corner.
Read More
