AirAsia & Dealing with Disaster's Aftermath

Partly due to appropriate post-crisis response, AirAsia stock has retained much value post-December 28 (Sunday).

It behooves me that attention is seldom paid to businesses operating in Southeast Asia unless extraordinary things happen. Such was the case with Malaysia Airlines prior to the two tragic incidents that occurred last year [1, 2], and so it is now with budget carrier AirAsia. In terms of profitability, both have had differing trajectories as Malaysia Airlines had to deal with significant "legacy" costs whereas AirAsia has been relatively free from those in running a young, dynamic operation. Prior to recent incidents, both also had sterling safety records. Recall, too, that both were momentarily connected in 2011 until Malaysia Airlines' vested interests vetoed the idea of a slimmer, trimmer Malaysia Airlines that emulated AirAsia's business model.

With the crash of an AirAsia jet, we are unfortunately back to circumstances everyone would much rather avoid. Nobody likes these things to happen, but they do. An interesting if unusual topic of interest in this regard concerns airline responses to air disasters. How should executive leadership respond to such events? Also, how is firm performance affected by these responses in the aftermath? The Nikkei Asian Review has an article that sheds some light on the matter. Given the charismatic leadership of Tony Fernandes, it appears that his firm is responding better than Malaysia Airlines did in terms of promptly disclosing available information and empathizing with those affected. Taking responsibility has helped:

Fernandes has won praise and support for his proactive communication with relatives of the crash victims via Twitter soon after the jet was confirmed missing in the early morning of Dec. 28. He asked his employees to remain strong, consoled the families of the crew and passengers, and alerted the media to upcoming company statements. Fernandes also took care to reflect the solemnity of the incident, changing the airline's bright red logo to a somber gray online.

 "I, as your group CEO, will be there through these hard times," Fernandes wrote on Dec. 28. He flew to Surabaya from his base in Kuala Lumpur within hours after the flight vanished from Indonesian air traffic control. There he met the families of the passengers and crew, and later flew to Jakarta to meet with authorities overseeing the rescue operation.

 AirAsia's response stands in sharp contrast to that of Malaysia Airlines, the country's flag carrier, which lost two of its jets last year. In an incident on March 8, it took the airline several days to publish an accurate version of the passenger list on its Flight MH370, which vanished with with 239 people on board and is still missing.

Not being aloof helps, as well as interacting in a timely manner with various stakeholders:

A newcomer to the airline business when he started, Fernandes said the secret of AirAsia success has been his ability to get close to his staff. "Thirteen years ago 'till now, I am still the same, willing to meet the staff and hear their problems out," he told The Nikkei Asian Review days before the crash.

When one of the bodies was identified as a crew member, Fernandes wrote Jan. 2 that he would personally escort the body to its final resting place. "I'm arriving in Surabaya to take Nisa home to Palembang," he said. Many of Fernandes' nearly 1 million followers on Twitter have responded with praise and admiration.

To be sure, the facts are not yet fully known about the causes of this accident. That said, the performance of AirAsia stock seems to reflect the proprietor's conviction that AirAsia will remain a viable concern. Contrast this situation with Malaysia Airlines that had to be nationalized yet again in the aftermath of its 2014 accidents.

The narrative that seems to be emerging is this one: AirAsia was in relatively good shape financially prior to its accident, whereas Malaysia Airlines was not. In the face of adversity, the former is better able to deal with adversities that may arise in the form of paying indemnities to passengers and so forth. That AirAsia's public relations has handled its crisis better-=likely in response to what happened to its fellow Malaysian carrier--bodes well for its longer-term prospects. Successfully dealing with adversity, after all, distinguishes those who thrive from the also-rans.