Crashing Share Value: Exploring the Link Between Situational Crisis Communication and Shareholders’ reaction

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12-06-2019

CRASHING

SHARE VALUE

Exploring the Link Between Situational Crisis

Communication and Shareholders’ reaction

Julie Glazener

S2338718

j.f.glazener@umail.leidenuniv.nl

Supervisor: Dr. Wout Broekema Second reader: Dr. Sanneke Kuipers

Master Thesis, MSc in Crisis and Security Management Faculty of Governance and Global Affairs

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1. Introduction

This chapter contains a few introductory paragraphs through which I outline the research problem and the main research question. Thereafter, the academic and societal relevance of conducting this study is explained. A reading guide at the end ensures a clear overview of the structure of the thesis.

1.1 Research problem

Flying is supposed to be one of the safest ways to travel (Radio 1, 03/01/2017), yet still every so often the most horrible thing imaginable in the aviation industry happens; an airplane crashes. The causes of these crashes can differ, from the downing of a plane by an external actor, such as we have seen with the horrific accident involving Malaysian Airlines flight MH171, to technical mistakes that cause a plane to stall and crash. Recent examples include the

Boeing 737 technical failures because of which two airplanes crashed, killing everyone inside (Wichter, 2019).

No matter the circumstances, when they occur it is the start of an airline’s worst nightmare. They have to do their utmost best to re-instate consumer trust in its safety procedures so consumers do not lose faith in the airline’s reliability. Otherwise, falling sales for example, as scared travelers steer clear of the airline, could be added to the carrier’s financial woes. In addition, these types of accidents often lead to many casualties. This emotional context warrants an appropriate response in high visibility of the public eye, including the authorities and the media. Aviation accidents make headlines around the world and how airline operators respond to the accident, both in actions and words, is widely reported. Appropriate crisis communication is hence extremely important in this field to shape stakeholder perception, repair reputation, and ultimately to being able to continue operations.

Since reputation is accepted as one of our most valuable commodities, when faced with a threat to our image, we undertake much effort to restore this precarious reputation (Barnett and Pollock, 2012; Benoit, 2015). If an organization is considered to be illegitimate by those it relies upon for survival – its stakeholders -, the company’s future might be in danger. In such a situation, stakeholders could change their perception of the company and their behavior towards

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it, and move away to the competition (Massey, 2001). This legitimacy is especially relevant for industries and companies that work with high safety demands, and with the potential for damaging crisis situations (Stephens et al., 2005). The aviation industry is a perfect example of this. For airlines, a good reputation is paramount, especially when it comes to safety, since the competition in this industry is fierce (Coombs, 2007). Any minor doubt about an airline’s ability to ferry passengers safely from A to B could have catastrophic effects on the airline in question. An event like a crash is one of the most reputation damaging events as it disturbs the airline’s core business of safe transportation. It puts a company’s legitimacy and reliability on the line and the air carrier must do everything in its power to prove that its future customers will be safe. If this is not done effectively, their financial viability and its mere existence may be jeopardized, potentially leading to its demise (Hodgson et al., 2015).

Next to its customers, one of a company’s key stakeholders that need to be considered in the wake of a crisis are their investors or shareholders. They enable access to capital and are therefore of vital importance to a firm’s survival (Tischer and Hildebrandt, 2011). If a company is publicly listed on the stock exchange, shareholder’s sentiment can be observed through their impact on share price, because share price is a continuous reflection of shareholder’s perception on the corporate’s reputation and abilities (Tischer and Hildebrandt, 2011 p.10). This is based on the assumption that market participants can observe every positive or negative event which influences reputation, can adjust their expectations accordingly and take part in setting prices (ibid.).

Following this assumption, we would expect that in the case of reputation damaging event like an aviation accident, shareholders would negatively adjust their perception of the company’s reliability. In terms of financial damage, you would expect that they would respond by selling their shares and consequently lowering share price.

However after such a catastrophic accident in 2008, involving a SAS Group airplane that crashed shortly after take-off and killed all inside, we see a different picture emerging (CIAIAC, 2011). Instead of share prices going down as you would expect following the literature, share prices climbed significantly and exceeded the values even from before the accident. Yet this pattern is not recurrent across the industry. After another catastrophic aviation accident in 2009 with an Air France carrier (BEA, 2012), Air France’s share price did not go up, but did indeed drop after the accident happened. The crash in 2015 involving a Lufthansa carrier that was

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deliberately flown into the ground (BEA, 2016) shows us yet another pattern: not much seems to have changed at all; share price does not notably go up or down after the accident.

We can thus observe a large difference in shareholder’s reaction and incurred financial damage after an equally catastrophic event. The interesting question is, how can we explain for this difference? One of the possible explanations could be a difference in behavior of the company in the aftermath of the crisis. Could the difference in financial damage be attributed to a difference in how both airlines handled the crisis situation and how well they communicated in time of crisis towards their shareholders? Was perhaps one airline more effective in their crisis communication, consequently convincing their shareholders of the company’s trustworthiness and reliability, than was the other? Or is crisis communication not a determinant factor in shaping shareholder perception and decision making and are other factors at play?

There are multiple studies (Benoit, 2015; Coombs, 1998; Coombs and Holladay, 2002; Hearit, 2006) that have examined the crisis communication strategies adopted after reputation damaging events and made inferences about their effectiveness. In their quest for the formula for successful crisis communication, Coombs and Holladay (2002) created the Situational Crisis Communication Theory. They assert that the most effective crisis communication is a communication strategy that is alligned with the responsbility that is attributed to the company for the crisis; the attributed responsibility. The attributed responsibility is determined by the severity of the crisis, the level of control the company has over the crisis, and the company’s crisis performance history. According to Coombs and Holladay (2002), a well-chosen crisis communiaiton strategy in accordance with the attributed responsibility, is most effective in keeping damage to the company at a minimum. However, to what extent different crisis communiaton strategies have in fact achieved their purpose and restored faith in the company’s reliability after a reputation damaging event, is very little researched. How effective is a well-chosen communication strategy in terms of protecting its reputation in the eyes of the shareholers and keeping financial damage at a low? Could a difference in the adopted crisis communication strategy account for the observed difference in financial damage after the accident?

To provide an answer to these questions, this study aims to explore whether a well, - or poorly chosen crisis communication strategy tailored to the attributed responsibility for the crisis, is a determinant factor in shaping shareholder perception and consequently financial damage in

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terms of share price. To investigate this effect, the communication strategies and financial damage in terms of decreased share prices of three airline operators after lethal accidents are chosen to investigate: Spanair after the crash 2008 (CIAIAC, 2011), Air France after the Boeing crash in 2009 (BEA, 2012), and Lufthansa having had to deal with a lethal crash in 2015 (BEA, 2016).

1.2 Research question

To see if we can explain for the different consequences using situation crisis communication theory, the following research question is the main focus of this thseis, the goal of this research is to answer the following research question:

To what extent does the fit of the corporate crisis communication strategy with the attributed responsibility determine the short-term financial damage after an aviation crisis?

1.3 Societal and academic relevance

How a company responds to a crisis can not only affect the outcome of the crisis itself, it can have an enormous impact on the company’s valuable reputation, and even its very survival (Ham, Hong and Cameron, 2012). Communicating successfully is crucial if an organization is to survive and recover from a crisis. For companies, one main question is whether the level of damage to the corporate reputation, dependent on how well they communicated and managed to save face the crisis, impacts investor behavior (Gatzert, 2015). Exploring this relationship will hopefully shed light on the dynamic that underlies this question and can potentially offer crisis managers actionable advice on how to manage a crisis to achieve minimal financial damage.

In terms of academic relevance, the literature on crisis communication is rich. Yet many authors have taken a rather descriptive approach to crisis management, providing overviews of adopted communication strategies in times of crisis (Benoit, 2015; Coombs, 1998; Coombs and Holladay, 2002; Hearit, 2006), but with somewhat subjective conclusions regarding their effectiveness. The authors mentioned above agree that the quality of crisis communication influences the damage done to reputation. The literature also assumes a strong relationship exists between a company’s reputation and shareholder behavior (Gatzert, 2015). The latter is

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attributed to the fact that a good reputation can buffer negative incidents and can hence defend a competitive position (Tischer and Hildebrandt, 2011).

However, to what extent the adopted crisis communication strategies after a (reputation damaging) incident actually change shareholder perception and subsequent behavior is hardly ever explored. The crisis and security domain lacks research that focuses on the financial aspects of changed stakeholder behavior after a crisis and the role crisis communication plays in it. Zero to none have researched the effectiveness of different crisis communication strategies in financial output. Exploring the effect crisis communication has on the incurred financial damage after a crisis is an important avenue for research, as sound financial performance is in the end the main purpose of any company.

1.4 Reading Guide

In the first section, I introduced the subjects and the research question. The second chapter aspires to outline the main principles that define the concepts of crisis communication and financial performance. The third chapter then describes the research design; it describes the methods, the cases, and operationalization of the main concepts by developing concrete empirical indicators. Thereafter, in the fourth chapter I will analyze the selected case. The fifth chapter provides a short recap of the findings and an answer to the main research question. This section also includes a critical discussion of some of the limitations of this this study, and ideas for future research.

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2. Theoretical Framework

This chapter presents the theoretical framework that will serve as the basis and theoretical lens of this study. This will help to clarify the main concepts of research, which will help the operationalization of indicators and categorization of data in the next section of the thesis.

2.1 Crisis & Crisis Communication

2.1.1 Crisis

This thesis aims to explore the relationship between corporate crisis communication and the financial damage that follows a crisis. In order to do so, it is important to distinguish what type of crisis I am going to research.

Even though there exist many definitions of what a crisis entails, they often share similar characteristics. We consider crises as threats or unpredictable events that damage people, property, and/or the environment (Hale et al., 2005; Ham, Hong and Cameron, 2012; Stephens et al., 2005). For organizations, this damage extends to its reputation and chances of survival (Coombs and Holladay 2002; Seegar, Sellnow, & Ulmer, 1998). Common to many definitions of crises, is the component of surprise. Even though corporate crises are more often than not self-generated by internal failures (Hearit, 2006, p.2), they can still come as a surprise (Massey, 2001). Either the triggering event of the itself crisis was unexpected (Hale et al., 2005; Alpaslan et al., 2009), or the triggering event was expected to happen, but not at the time it happened now (Hearit, 2006). Because the triggering event was unexpected, the organization will lose control over the situation for at least a short time (Stephens et al., 2005).

Taking the above into account, corporate crises are in this thesis identified as unexpected and uncommon events that cause an organization to temporarily lose control and that can have severe consequences for an organization’s reputation and its ability to continue operations. The extent of these consequences can differ, depending on how well the organization fulfills its legal and ethical responsibilities towards the harmed stakeholders (Coombs & Holladay, 1996; Alpaslan et al., 2009).

2.1.2 Crisis management

Crisis management is an important task to diminish the damaging consequences to stakeholders and operations (Coombs & Holladay, 2002; Hale et al., 2005; Massey, 2001; Stephens et al., 2005), and hence nearly all organizations have crisis management strategies in place (Wester, 2009).

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We can break crisis management down into three phases; the prevention phase, the response phase and the recovery phase (Hale et al., 2005). The prevention phase comprises the actions aimed at avoiding and averting potential crises through mitigation, planning and warning. Especially in the aviation industry, planning for crises and practicing emergency routines is imperative to prevent damage and loss of lives when a crisis strikes.

If - despite these efforts - a crisis occurs, the response phase takes off. Here the organization’s focus shifts towards responding to the crisis to minimize danger. Once the urgent crisis response phase has ended and the immediate risk for damage is gone, the final stage of the crisis management begins; the recovery phase (Hale, et al., 2005).

This master thesis is limited to the final stage, as in this final stage the organization attempts to learn from the event, manage public perception, and restore any damage it has sustained to its legitimacy and reputation (Hale et al., 2005).

2.1.3 Crisis communication

An important aspect of crisis management is crisis communication. Crisis communication approaches are historically rooted in the rhetorical concept of apologia. The literature defines this as the response strategies individuals can use to protect their image when faced with public attack (Hearit, 2006; Ware & Linkugel, 1973; Coombs, 2006; Benoit, 1995). In current times, against the backdrop of the growing prominence of social media and the ever-growing fast pace of communication - where particularly bad news travels fast - people increasingly have to account for themselves (Hutto, Lee and Shu, 2015). However, crisis communication is not only of importance to individuals, but just as well to organizations (Coombs and Holladay, 2002). Since an organization’s reputation is one of its most valuable resources (Barnett and Pollock, 2012), the purpose of communication during a crisis is to influence the public’s perception of the organization and to maintain a positive image or restore a damaged image (Ray, 1999). Crisis communication can also play a crucial role in resolving a corporate crisis by facilitating communication between an organization and its different stakeholders, such as customers, suppliers, media, employees, stockholders, and official authorities (Ham, Hong and Cameron, 2012; Gatzert, 2015). A well-chosen communication response is paramount to maximize reputational protection and limit the reputational damage after a disrupting event (Coombs, 1998; Stephens et al., 2005). One method for selecting the appropriate communication strategy, is through Situational Crisis Communication.

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2.1.4 Situational Crisis Communication

Situational Crisis Communication is one of the most defining theories in the crisis communication domain and puts forward the idea that the most effective crisis communication strategy depends on the crisis situation, that is the amount of potential reputational damage a crisis may inflict (Coombs, 1995, 1998, 2007; Coombs and Holladay, 2002). The situational crisis communication theory is built up out of two constructs: the crisis communication strategy adopted and the attributed responsibility of the company for the crisis.

This theory posits that crisis managers should select a communication strategy appropriate for the attributed responsibility to the company. Or in other words, the attributed responsibility determines what message strategies are the most appropriate for the organization to use in its crisis communication (Coombs and Holladay, 2002, p.168).

The Crisis Communication Strategies (CCS) as mentioned below show the available crisis communication strategies. They are a combination of the image repair theory as put forth by Benoit (1995, p. 22-29) and Coombs and Holladay's (2002, p.171) framework of Situational Crisis Communication. Crisis managers can choose between crisis response strategies ranging from defensive - putting the organization’s interest first –, to accommodative – putting the stakeholder’s interests first.

CCS Components Description

Defensive Strategy

Attack the accuser

Crisis manager confronts the individual or group who claim the crisis exists. This may involve a show of force against the accuser, such as threats (Coombs and Holladay, 2002)

Denial Crisis manager claims that there is no crisis (Coombs and Holladay, 2002), or tries to shift the blame. This strategy is considered a variant of denial, because the accused could not have committed the offensive act if someone else actually did it (Benoit, 2014, p. 22-31).

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Evasion of responsibility

Another defensive possibility is to evade or reduce responsibility for the undesirable act. In such cases, one may not be able to deny responsibility, but may attempt to reduce perceived responsibility for the act by providing new information that can change the audience’s perception (Benoit, 2014, p. 22-31).

The crisis manager can attempt to minimize organizational responsibility for the crisis by claiming that the organization had no bad intentions (Benoit, 2015). Here the wrongful act is not denied, yet the audience is asked not to hold the actor fully responsible, because it was done with good, rather than evil, intentions. People who do bad while trying to do good are usually not blamed as much as those who intend to do bad (Benoit, 2014, p. 22-31).

Another strategy is stating that the organization had no control, or a lack of information, over the events that led to the crisis (Coombs and Holladay, 2002).

Moderate strategy

Reduce offensiveness

It is also possible to attempts to minimize the perceived offensiveness inflicted by the crisis. One way of doing this is by stating that the damage is less serious than it is seen to be (Coombs and Holladay, 2002; Benoit, 2015).

Another strategy here is bolstering. The crisis manager tries to get in stakeholder’s good graces by praising them, or reminding them of the corporation’s positive attributes and positive actions performed in the past (Coombs and Holladay, 2002; Benoit, 2015). Although the amount of guilt or negative affect from the accusation remains the same, increasing positive feeling toward the actor may help offset the negative feelings toward the

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act, yielding a relative improvement in the actor’s reputation (Benoit, 2014, p. 22-31).

Another example is victimization to reduce the unfavorable attitude towards the company. Here the crisis manager reminds stakeholders that the corporation is a victim of the crisis as well (Coombs and Holladay, 2002)

Accommodating strategy

Corrective action

By adopting accommodative strategies the actor aims to signal that the organization puts the victim’s concerns first (Coombs and Holladay, 2002, p.171). The crisis manager tries to prevent the accident from recurring and/or vows to fix the crisis’ damage (Coombs and Holladay, 2002). This strategy does not mean that they automatically admit guilt.

Compensation The crisis manager offers to compensate the victim to help offset the negative feeling arising from the wrongful act. The difference between this strategy and corrective action is that corrective action addresses the actual source of injury whereas compensation is about (monetary) reimbursement to counterbalance the negative consequences of the incident (Benoit, 2015). Mortification Crisis managers who engage in mortification deliver a

sincere apology, expression of regret, or request for forgiveness (Coombs and Holladay, 2002; Benoit, 2015). Sometimes this also include publicly accepting responsibility.

Attributed responsibility

As mentioned before, important in assessing the reputational threat and hence which communication strategy to adopt, is determining the level of attributed responsibility (Coombs, 2007, p.137). Attributed responsibility is here defined as the level of responsibility the company is perceived to have over the crisis in the eyes of its stakeholders (ibid.).

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Three factors in the crisis situation shape the attributed responsibility: the level of control over crisis, the severity of the crisis and the company’s crisis performance history.

Level of control over crisis. SCC has identified three crises clusters based upon the level of control.

First, a crisis can belong to the victim cluster, where the company is seen to have little to no control over the crisis (natural disasters, workplace violence, terrorism) and the organization itself is just as well a victim of the crisis.

Second, the accidental cluster signifies minimal or moderate levels of control over the crisis, such as accidents because of technical errors. The accident is unintentional and outside of the organization’s control.

Third, the preventable cluster signifies a high level of control over the crisis. This includes crises that place the stakeholders at risk through inappropriate actions or human error that could have been avoided. In the most extreme case, the event is purposeful (Coombs & Holladay, 2002).

Severity of the crisis. Severity of the crisis shows the amount of damage produced by a crisis. This includes financial, human, and environmental damage (Coombs, 2007) .

Crisis performance history. This final component refers to whether or not the company has had similar crises in the past and how well it responded to these crises (Coombs, 2007).

In relation to the reputational threat, stakeholders will adopt a more negative attitude towards an organization when the level of control over the crisis is high, when severity increases, or when performance history worsens (Coombs, 1998; Coombs and Holladay, 2002; McDonald et al., 2010). These factors combined shape the attributed responsibility of the company for the crisis.

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13 Matching Crisis Communication Strategies to the Attributed Responsibility

Depending on the attributed responsibility are different crisis communication strategies assumed to be most effective in keeping damage to the organization at a minimum.

Crises that prompt little to no attributions of organizational crisis responsibility are best managed by using just instructive information. However, when rumors or false accusations are uttered, crisis managers are recommended to adopt a defensive strategy (Coombs and Holladay, 2002, p.172).

Crises that bring about moderate to low attributions of crisis responsibility such as technological accidents, are most effectively managed via moderate crisis response strategies (ibid.).

Crises with strong attributions of organizational crisis responsibility such as organizational misdeeds or human-error accidents, require strong accommodative responses such as corrective action and mortification (ibid.). An accommodating stance shows that the organization takes responsibility for the damaging event, which leads to a more positive stakeholder attitude and less damage to the reputation (McDonald et al., 2010). In addition, it can lead to lower settlements and increased support for the organization (Pace et al., 2010).

In sum, the greater the attributed crisis responsibility generated by the crisis, the more accommodative the crisis response strategies must be, and vice versa. Crisis managers must outweigh the potential risks and benefits, and chose the communication strategies strategically.

2.2 Financial damage

The damage done to a company’s financial situation after a crisis can be measured through a plethora of calculation choices. What measurement you consider to be important depends on the stakeholder one is interested in. Relevant stakeholder groups typically include customers, investors, suppliers/contractors, and employees (Chakravarthy et al. 2014). If we want to investigate the impact of crisis communication on consumers for example, a potential measurement could be changed revenues. Financial damage after a crisis might then be visible in decreased operating cash flows from current customers and future customers who choose a competitor (Roberts & Dowling, 2002; Gatzert, 2015). A measurement for measuring financial damage from the supplier perspective could be increased transaction costs, leading to lower profits in the long run (Tischer and Hildebrandt, 2011).

However, this thesis aims to explore the relation between crisis communication strategies and the investor’s or shareholders’ reaction. A good measurement for financial damage from the shareholders’ perspective is the change in share price after the crisis.

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Share price is the price of a company’s single share or stock2. The value of the share changes

every day by market forces. By this I mean that share prices change as a function of supply and demand. If more people want to buy a stock (demand) than sell it (supply), then the price moves up. Conversely, if more people wanted to sell a stock than buy it, there would be greater supply than demand, and the price would fall. Share prices hinge on investors’ expectations. If they think a company has a positive outlook, then they would presumably buy more stock in it. As such, it would rise in value (Gatzert, 2015). A company's stock price thus reflects investor perception of its ability to grow its profits in the future and maintain steady business operations. Typically, the higher the stock price, the more optimism about the company's prospects (Caves and Porter, 1977; McGuire, et al.,1990; Black and Carnes, 2000; Knight and Pretty, 2001; Roberts and Dowling, 2002; Tischer and Hildebrandt, 2011).

Financial damage is in this thesis defined as a loss in share price, representing the shareholder’s loss of belief in the company’s ability to grow its profits in the future. Since I have narrowed down here what type of financial damage I will investigate, in the remainder of this thesis the terms financial damage and decrease in share price are used interchangeably.

2.3 Relationship situational crisis communication and financial damage

The ultimate purpose of crisis communication is to restore stakeholder perception of the firm and repair reputation after a crisis or reputation damaging event (Benoit, 2015). Therefore, before digging deeper into the relation between crisis communication and financial damage, an important link between these concepts needs to be explored further; corporate reputation.

Many recognize reputation as an important intangible corporate asset that is directly linked to success in an ever-growing, and competing market (Gray and Balmer, 1998). The literature on corporate reputation and the amount of different definitions are manifold. Yet in all

definitions, three themes concerning corporate reputation seem to overlap; (1) the perceptual nature of reputation, (2) the aggregate perception by all stakeholders, and (3) the comparison to some standard – whether that is past performance, industry standard, largest rival, etc. (Wartick, 2002).An example is Fombrun’s (1996) definition, who defined corporate reputation as “a perceptual representation of a company’s past actions and future prospects that describes the firm’s overall appeal to all of its key constituents when compared with other

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leading rivals” (p. 72).Corporate reputation is in this thesis defined as a valuable intangible asset, reflecting the relevant stakeholders’ aggregate perception on the quality of a firm’s products or services (Klein & Leffler, 1981; Shapiro, 1983), and allowing competitive advantages for firms with higher perceived reputational status (Fombrun and Stanley 1990; Fombrun, 1996; Hall, 1992; Gatzert, 2015).

But how does financial damage relate to corporate reputation? Theory postulates that share price reflects corporate reputation continually. This approach is based on the assumption that market participants can observe every positive or negative event which influences reputation, can adjust their expectations accordingly and take part in setting prices (Tischer and Hildebrandt, 2011 p.10). Cooper, Dimitrov and Rau (2001) confirmed that investors are willing to pay higher prices for companies with good reputations, even if reputation did not influence firm profitability. A company's reputation also has an impact on customers' actions in the sense that it has a strong positive impact on purchase intention (Keh and Xie, 2007), or willingness to pay, which is in turn relevant for profitability (Yoon et al., 1993; Homburg et al., 2005). Favorable reputations also allow firms to charge premium prices (Black and Carnes, 2000; Anderson and Smith, 2006; Freiesleben, 2006) , and access to capital and to investors may be easier for firms with a good corporate reputation (Gatzert, 2015).

A strong corporate reputation thus creates value for the firm’s shareholders and gives the shareholders confidence in the firm’s ability to generate cash flow. As mentioned before, a higher share price reflects this expectation (Caves and Porter, 1977; McGuire, et al.,1990; Black and Carnes, 2000; Knight and Pretty, 2001; Roberts and Dowling, 2002; Tischer and Hildebrandt, 2011). The corollary, however, is that should a firm’s reputation be damaged through a crisis, shareholder value is just as quickly destroyed.

Crises or reputation damaging events often entail disruptions that lead to losses (Weick&Sutcliffe, 2007, p. 18). These losses are in the worst case connected to the loss of lives, but in corporate terms also to the loss of market share, sales, and purchase intention (Dawar, 1998; Siomkos & Kurzbard, 1994). Reputation damaging events can thus have a significant impact on corporate reputation, legitimacy, credibility, and trust. Moreover, a crisis can have a significant financial impact on share price (Tischer and Hildebrandt, 2011). There are two elements to the negative impact.

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The first is the immediate estimate of the associated economic loss. Although the cash flow impact is unknown at the time of the catastrophe, the stock market will form a collective opinion and adjust price accordingly. These direct factors usually will have a negative impact on stock price (Knight and Pretty, 2001, p.15). Investors may downgrade their estimates regarding future cash flows, sell their shares, and cause a downward stock price pressure (Gatzert, 2015, p.493). The second element of impact of a reputation damaging crisis could be that the investors lose faith in the managerial control within the firm (Knight and Pretty, 2001, p.15) or no longer want to be associated with the firm because of its lower corporate reputation, and sell their shares as a result (Gatzert, 2015, p.493). This mechanism leads to the following expectation:

Expectation 1: Shareholders will react negatively to a corporate crisis with falling share prices for that company as a result.

But the public responds not only to the perceived physical threat and its potential consequences, but also to the perceived credibility and trustworthiness of senior corporate management (Knight and Pretty, 2001, p.15). The crisis response and communication of top management therefore has a crucial role to play in restoring’s the public’s faith (Coombs, 2007). The ability to restore faith hinges on management’s ability to deal with the aftermath of the crisis. Success in doing so gives investors’ confidence in managers’ ability to manage risk and maintain operating cash flow (Gatzert, 2015; Knight and Pretty, 2001). Effective crisis communication plays a major moderating role in repairing damage to reputation, restoring investor’s faith in the company and consequently preventing shareholders from selling their shares (Chakravarthy et al., 2014; Coombs, 2007). This assertion from the literature, combined with the literature on effective situational crisis communication leads to the following expectations:

Expectation 2: A corporate crisis communication strategy that is well-matched to the attributed responsibility leads to less financial damage for that company in terms of falling share prices.

Expectation 3: A corporate crisis communication strategy that is poorly matched to the attributed responsibility leads to more financial damage for that company in terms of falling share prices.

In this study I will test these hypotheses. In the following section I will explain my methods of data collection and analysis.

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3. Method

This chapter provides information on the chosen research and case selection methods. Thereafter, I will show how the literature concepts are operationalized, while in the following parts I explain how the data will be collected and analyzed. This chapter will end with a discussion on the research’s internal and external validity.

3.1 Research design and case selection

The main focus of this research is to determine whether, and if so, to what extent crises and SCC strategies impact shareholder behavior. Since the aim is to explore the potential linkages behind a given issues, rather than to describe the symptoms of the problem and how frequently they occur, a qualitative research method is deemed most appropriate (Flyvbjerg, 2006, p.229). The nature of the research is explorative. When choosing a qualitative research design, we have the choice between comparative, and single-case study design. Comparative case studies are often used when one is interested in accounting for the particular characteristics and outcomes of different cases (Toshkov, 2016). Consequently, a comparative case study approach will be employed to explore the different crisis communication strategies and their consequences for the firm’s financial damage. The intensive comparative analysis of a few cases allows the in depth analysis needed to answer the research question instead of a superficial analysis of many cases (Lijphart, 1971, p.685; Yin, 2003, p.58).

To maximize the utility of information from a few cases, cases are selected based on the expectations about their information content (Toshkov, 2016, p.269; Flyvbjerg, 2006). In case selection, it could be helpful to focus on cases similar in several important characteristics that can be treated as constants (Lijphart, 1971). It is therefore opted to look at corporate crises that have all taken place in the same industry. This to increase comparability and to correct for a difference in market dynamics you would encounter across industries. The chosen industry is, as mentioned before, the aviation industry.

Because we want to explore the link between a difference in outcome in terms of financial damage and the crisis communication strategy adopted, two cases with vastly different outcomes formed the bases for this research and are certainly included. These are the Spanair – and parent company SAS Group - crash in August 2008 that led to the death of 154 people, as a result of a crash into the ground shortly after take-off in Madrid (CIAIAC, 2011), and after which share price went up notably.

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And a contrary case after which share price seems to go down notably, namely the Air-France-KLM crash in 2009, where the scheduled Air France 447 flight from Rio de Janeiro to Paris stalled and eventually crashed over international waters, killing all 228 passengers and crew on board (BEA, 2012).

Before final case selection, I created a list of all potential cases3 to guarantee that the most

appropriate cases for the purpose of this research were selected and important ones not overlooked. I have created the following parameters for case selection to verify that they are comparable:

o The accident involves a public transport airplane belonging to commercial European-based airline companies.

o The airline operator in question is publicly listed.

o The accident resulted in a hull loss of at least one public transport airplane. o The accident resulted in a considerable number of deaths (50 or more) o The accident took place during the last two decades

Table 1: Possible cases for case selection

Cases Date of accident # of fatalities Publicly listed Selected

Lufthansa (Germanwings) 24-03-2015 2762 yes yes

Air France-KLM 01-06-2009 228 yes yes

SAS Group (Spanair) 20-08-2008 154 yes yes

Scandinavian Airlines 08-10-2001 118 yes no

Air France 25-07-2000 115 yes no

After studying the research population, I decided to include the Germanwings - parent company Lufthansa - crash in 2015 as well. The accident was caused by a co-pilot suffering from multiple disorders, who intentionally drove the airplane into the Alpes. He killed all 150 inside (BEA, 2016). Even though their share price does not go up or down notably after the accident, increasing the research selection allows for more extensive testing of the hypotheses (Toshkov, 2016). By including this accident, a study of three different situations in term of financial damage – share prices goes up, goes down, and does not change considerably - will help to

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draw more valuable conclusions about the link between crisis communication and financial damage.

The plane crashes I did not choose for this research were the Scandinavian Airlines Flight 686 crash on October 8th 2001 (Agenzia Nazionale Per La Sicurezza del Volo, 2004) and the Air

France Concorde Flight that crashed on July 25, 2000 (BEA, 2002). Because of the changed digitalized landscape since the internet took off during the early 2000’s, and the implications this has had for communication speed, channels and intensity, I deem these cases too deviant from the cases that took place during later decades. On account of comparability, these cases are not weighed in the analysis.

3.2 Operationalization

3.2.1 Data collection and analysis

For data collection I will use two of the six common sources of case study evidence; documents and archival records (Yin et al., 2003).

Information and data used in this study are exclusively from public sources. I collected the data on the crisis communication strategy from the airline’s official press releases, both verbal and written statements. The main data sources are put in the table below. I have done extensive research to find all the press release, press conference and other relevant information available, but it is important to note that there is no guarantee that every historical source is found. The completeness of the data collection can therefore not be guaranteed and is limitation to this research.

I collected the data to analyze financial damage from financial websites that provide historical data on stock prices, trends and trades, such as https://www.tradingview.com/. I looked up the company’s “ticker” or stock exchange code and entered it in the Trading view database. I then collected the share price values from the stock exchange with the large volume of trades for that particular stock. The higher the volume – number of shares traded - of a stock market, the stronger and more significant that market is. Collecting data from the stock market with the largest volume allows us to draw more valid conclusions regarding the change in stock price.

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Table 2: Main data sources

Cases Type of source Sources

Lufthansa Press conferences Lufthansa (2015): https://www.youtube.com/watch?v=ma-iZUQRX3c&t=811s

Lufthansa (2015): https://www.youtube.com/watch?v=Plnhh1QELag Share price overview https://www.tradingview.com/symbols/XETR-LHA/

Air France Press releases Air France (2009): https://alphasite.airfrance.com/en/s01/press-releases/ Press conference Air France (2009): https://www.youtube.com/watch?v=4S6qwfrhk2E TV appearance https://www.youtube.com/watch?v=F3qcZGWg-EA

Share price overview https://www.tradingview.com/symbols/EURONEXT-AF/

SAS Group Press releases SAS Group (2008): https://www.sasgroup.net/en/category/newsroom/press-releases/

Spanair (2008):https://news.cision.com/spanair/?q=Spanair

Press conference SAS Group (2008): https://www.youtube.com/watch?v=MUFTAe0AwsU https://www.youtube.com/watch?v=_nM_RHsxoi8&feature=related Share price overview https://www.tradingview.com/symbols/OMXSTO-SAS/

Data analysis will take place on multiple levels. First, I will conduct a content analysis on the sources mentioned above. Content analysis is used to objectively and systematically describe the content of communication (Krippendorff, 2004 p.19). The aim is to systematically categorize the crisis communication efforts, so this research method lends itself well. The usage of this research method will increase reliability, as it allows easy opportunity for a replication of the research (Krippendorff, 2004). Interpretation of the financial data will be done through clear graphs that allow for comparable analysis of all three cases.

Second, I use the results of the content and data analysis to explore the relationship between the dependent and independent variable using process-tracing. Process-tracing in social science is defined by its ambition to trace causal mechanisms (Beach and Pederson, 2013; George and Bennett, 2005). Process-tracing aims at identifying the causal relationship between an independent variable and the outcome of the dependent variable (Beach and Pederson, 2013). Since the aim of the research is to investigate whether a link exists between different crisis communication strategies and share price after the crisis, this analysis method fits the research purpose well.

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3.2.2 Operationalization of variables

Table 4: Operationalization table

Variable Definition Dimensions Indicator

Financial Damage A loss in share price,

representing the shareholder’s loss of belief in the company’s ability to grow its profits in the future

(Caves and Porter, 1977; McGuire, et al.,1990; Black and Carnes, 2000; Knight and Pretty, 2001; Roberts and Dowling, 2002; Tischer and Hildebrandt, 2011).

Loss in share value Change in share price within one month after the accident.

SCC part 1: Crisis

Communication Strategy

The communication strategies used in the short-term period following a crisis with the goal to repair or preserve reputation (Coombs, 1995; Coombs and Holladay, 2002; Benoit, 2015) Defensive strategy Moderate strategy Accommodative strategy Attack accuser

Denial or shifting blame Evasion of responsibility Reduce offensiveness Corrective action Compensation Mortification SCC part 2: Attributed Responsibility

The level of responsibility the company is perceived to have over the crisis in the eyes of its stakeholders

(Coombs and Holladay, 2002)

Level of control the company has over the crisis

Severity of the crisis Company’s crisis performance history

-

3.2.2.1 Financial damage

To assess whether a difference in crisis communication strategy has led to a difference in financial damage, appropriate measurement is necessary. I will calculate the change in stock price by comparing the stock price after the incident - for the timeframes of one month and one week after the crisis - with the stock price the day before the event.

The specific value of the shares is not of interest to the researcher, since the goal is to explore to what extent different crisis communication strategies impact relative share price change. I will therefore present the results of the analysis as relative changes expressed in percentages. This is calculated as follows:

∆ Stock price month = ((Stock pricet + 31 days)– Stock pricet)/Stock pricet) * 100%

∆ Stock price week = ((Stock pricet + 7 days)– Stock pricet)/Stock pricet) * 100%

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I will not limit the analysis to these two points of measurement as this would deliver us a rather skewed and limited image of the performance of a stock price. Instead, the information from these calculations will be stepping stones to analyze the relative change in stock price in relation to the long-term performance of that same share. I will look for a significant, directly observable short-term effect that could potentially be generated by the announcement of the crisis. This way, the causal relationship would be more evident (Tischer and Hildebrandt, 2011). Through the visualizing of the stock price changes into a graph, we can analyze the relative stock price performance over the course of one year and one month. This way we can see the longitudinal trends which will allow us to put the short-term share price change in perspective and draw more valuable conclusions about the stock price change.

I consider a change in share price significant when there is a large sudden drop or increase that deviates notably from previous or future market trends. An example of such an event in the case of Lufthansa is illustrated in figure 1. On the horizontal axes are the time frames, while on the vertical axes the monetary value features.

Figure 1: Example of notable change in Lufthansa’s share price. The square shows a one-month period. Source: https://www.tradingview.com/symbols/XETR-LHA/

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Figure 2: Example of notable change In Lufthansa’s share price. The square shows a one-week period. Source: https://www.tradingview.com/symbols/XETR-LHA/

On the 10th of June 2014, share price sharply declines probably after a news driven event: the

carrier announced that it would not reach its profit target for the next two years (BBC, 11/06/2014). Compared to the volatility – the intensity at which the stock price rises and falls - before and after the announcement, this change is share price is deviant from the share’s performance throughout the year. It clearly demonstrates a rather extreme and negative market reaction, that is not part of a recurring cycle, and from which Lufthansa has a hard time recovering for quite some months after.

For the case analyses, the change in share price will be illustrated by two similar graphs like the one above. In the first, the variation in stock price over the course of one month is highlighted in relation to the stock performance of one year (six months before, and six months after the accident). In the second, the share price change over the course of one week following the accident is accentuated in relation to the share price performance one month before and after the accident.

A difference in currency across the different cases will be corrected for by looking at the percental changes and overall trends instead of the specific monetary values of the shares.

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24 3.2.2.2 Situational Crisis Communication (match CCS with attributed responsibility)

First, the crisis communication strategy. I will classify the crisis communication strategy according to the categories presented in chapter two. Analyzing along pre-established categories facilitates a systematic and consistent analysis across cases. The communication efforts are in the analysis ordered according to their prominence in the entire crisis response strategy per case. From the crisis communication strategies combined it will follow that the predominant strategy was either defensive, moderate, or accommodative.

To determine the attributed responsibility of the firm for the crisis event, the level of control the firm has over it, the severity of the crisis, and the firm’s crisis history have to be operationalized.

As mentioned in the literature, the level of control the firm has over the accident can be categorized in three categories; low, moderate, and high. I will elaborate on this to relate the categories to specific accidents in the aviation industry. If the cause of the accident is outside the organization’s control, such as weather circumstances or terrorism, the level of control is low. If the event is one which the organization could not entirely have controlled, such as technical failures or accidents, the level of control is moderate. Finally, if the event is one which the organization could control, such as one caused intentionally or by human error, the level of control is high.

For the severity of the crisis I will look at the number of deaths. Intensifying factors that will increase the severity are whether third parties were hurt and/or killed by the accident, and whether the accident has led to extensive damage to the environment.

Last, the companies’ crisis performance history is operationalized by looking at the airlines previous record of commercial airplane accidents in the ten years leading up the accident, and how it has resolved these. Looking at the total numbers of crashes an airline has lived through would give a skewed image and minimal ability to compare because of the difference in total number of years an airline is operational. Taking ten years as a parameter for investigating thus increases comparability and validity of the outcome.

From the three factors combined it will follow that the attributed responsibility is either high, moderate, or low.

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25 3.2.2.3 Match between crisis communication strategy and attributed responsibility

Thereafter, I will match the level of attributed responsibility the firm has over the crisis against the chosen crisis communication strategy. This way, we can determine whether the optimal crisis communication strategy given the attributed responsibility has been undertaken. The options are:

Table 3: Match between crisis communication and attributed responsibility Low attributed responsibility Moderate attributed responsibility High attributed responsibility Defensive strategy 2 1 0 Moderate strategy 1 2 1 Accommodative strategy 0 1 2 2: Optimal strategy 1: Sub-optimal strategy 0: Least optimal strategy

3.3 Internal and external validity

Using predetermined frameworks increases the internal validity a great deal. However, the categorization of content still asks for subjective interpretations from the researcher. In an ideal situation, two researchers or more would examine the same content, compare the categorization of both and cooperate on an integrative categorization of the content to increase validity. For a master thesis this not a viable option, but it is nonetheless a limitation that should be considered.

In terms of external validity, the primary challenge of this research is the generalizability from a few cases in one single industry, thereby making it difficult to generalize and draw broader conclusions across industries. However, it is important to note that even if newly generated knowledge cannot be generalized, this does not mean that it cannot add to the existing collective knowledge base accumulation (Flyvbjerg, 2006, p.227).

Another important consideration is the reliability aspect. The high complexity of the different factors that have an influence on a company’s financial performance make it difficult to draw valuable conclusions about the reliability of the research conclusions. However, it is not the aim of the researcher to establish empirically sound evidence of a connection, but to explore whether such connections even exists in the first place. The “force of example” as Flyvbjerg (2006, p.228) points out can in this sense be a valuable source of scientific development.

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4. Analysis

4.1. The Case of Lufthansa (Germanwings)

4.1.1 Case description

The company

The Lufthansa Group, founded in 1953 is a globally operating aviation group with operations worldwide and the largest airline in Europe when it comes to passengers as well as fleet size. It is composed of the segments Network Airlines, Eurowings and Aviation Services. Until 2015, Eurowings was known as Germanwings, but in late 2015 the Germanwings brand was discontinued as a result of a merger with sister company Eurowings. Germanwings became a wholly owned Lufthansa subsidiary in January, 2009 4.

In the remainder of this thesis I will refer to Lufthansa only. Even though the accident involved a Germanwings carrier, since Germanwings is a subsidiary of Lufthansa, the ultimate responsibility of the crisis and subsequent crisis communication lies with Lufthansa.

The crash

On the morning of 24 March 2015 at 10:41, an Airbus 320 bearing the flight number Germanwings 4U9525 and en route from Barcelona to Düsseldorf came down in the French Alps, 140 kilometers to the northeast of Marseilles. All 144 passengers and six crew members perished in the crash. The victims were from 17 different countries, although most hailed from Germany and Spain (BEA, 2015)

The final report of the French Bureau of Enquiry and Analysis for Civil Aviation Safety (BEA) concluded that the aircraft was intentionally brought down by the co-pilot. In the cruise phase of the flight, the co-pilot waited until the captain had left and he was alone in the cockpit. He then intentionally changed the autopilot settings so the airplane would descend. He kept the cockpit door locked during the descent, despite requests for access made multiple times by the crew on the other side of the cockpit door and air traffic controllers on the ground. He did not respond to the calls from the civil or military air traffic controllers, nor to knocks on the door. Security requirements that led to cockpit doors designed to resist forcible intrusion by unauthorized persons made it impossible to enter the flight compartment. Ten minutes after the captain left the cockpit, the aircraft impacted the terrain in the French Alps (BEA, 2016, p.9).

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4.1.2 Financial damage

In this section, I will describe what we observe in the share price graphs. Then, in the section 4.1.4 I will link these observations to the chosen crisis communication strategy to see if we can detect a link between the two variables.

Figure 2: Lufthansa’s share price from September 2014 to September 2015. The square shows a one

month period following the crash on 24/03/2015. Source: https://www.tradingview.com/symbols/XETR-LHA/

∆ Stock price month = ((Stock pricet + 31 days)– Stock pricet)/Stock pricet) * 100%

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Figure 3: Lufthansa’s share price from 24/02/2015 to 24/04/205. The square shows a one-week period following the crash on 24/03/2015. Source: https://www.tradingview.com/symbols/XETR-LHA/

∆ Stock price week = ((Stock pricet + 7 days)– Stock pricet)/Stock pricet) * 100%

= ((13.085 – 13.535)/ 13.535) * 100 = -3.32%

When we take a look at Lufthansa’s stock evolution over the course of one year, we see a general declining trend happening since the beginning of 2015. Very visible is the regularity of the stock price volatility. While gradually decreasing, every two months or so stock price climbs slightly. In contrast to what happened from September 2014 to December 2014, when the share price enjoyed a steep increase in value, from January onwards the cyclic downward trend takes off.

In the month after the disaster the share value drops by almost ten percent; 9.6% to be exact. Even though share price drops, in comparison to the other drops we can observe in for example June, and August, this drop around the time of the accident is not extraordinary. In this context, the careful selection of the word “around” the time of the accident is very important. The negative downtrend - or descent - we see happening since the last two weeks of March can in fact be seen as the final leg of the descent initiated in February. Despite one small peak outlier mid-March, which makes it seem as though the drop in March is a “new” drop, the entire range

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of the descent is from the beginning of February until the end of March. This makes it difficult to ascribe the falling share price around the time of the accident, to the disaster. A counter argument could be that the peak in March was the beginning of a new upwards trend until the disaster struck and made the share price plummet again. However, the start of the descent from the peak does not coincide with the date of the accident; two days prior, share price already started to decrease (figure 3).

Interesting to observe also is that it took only two weeks from the disaster for the share price to increase in value again and quickly reach the original share value from before the accident. This relatively quick recovery of Lufthansa shares could suggest that the company managed the crisis effectively, was able to convince its shareholders and avoid longer lasting negative effects. But since the negative trend continues shortly after again, and because of the difficulty to ascribe the descent in share price to the accident in the first place, it could just as well be the case that the ascents and descents are part of a general trend independent from the accident or the way the company handled it.

To test these different ideas, and see if a connection can be made to the appropriateness of the crisis communication, Lufthansa’s crisis communication strategies are evaluated in the following section.

4.1.3 Situational Crisis Communication

To assess the match between the crisis communication strategies and the attributed responsibility, I have broken the analysis down into two parts. First, I will systematically analyze the adopted crisis communication strategy. Thereafter, I will explore the attributed responsibility for the company. Inferences about the match of the situational crisis communication efforts are made in the final sub-section. This structure will be equal along all three cases.

4.1.3.1 Crisis Communication Strategy

Gathering data on the communication strategies of Lufthansa has proven to be quite a hassle. The Lufthansa official press releases database only goes back to 2016 and historical press release searches through search engines like “waybackmachine” or the internet in general did not yield any results.

The only available information sources are:

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- Press conference by the executives from Lufthansa and Germanwings on 26/03/20155

Because of the lack of other press statements, either because of their current unavailability or because Lufthansa simply did not release any other statements, the researcher is aware of the fact that the analysis might not be all-encompassing. Nonetheless, the press conference is quite extensive and offers enough information to do the analysis. In addition, I assume that even if there were any other press releases available, the content would be quite similar to Lufthansa’s discourse in the press conference and would not deviate tremendously in terms of communication strategy adopted.

In the following section, I will systematically analyze the above-mentioned crisis communication actions and categorize them along the three dimensions of crisis communication (accommodative, moderate, defensive). The adopted strategies by the company are ordered from most used to least used.

Accommodative strategy - Mortification

Throughout their communication strategies, one of the most prominent strategies is mortification and the testimony of deep sorrow. They place a lot of emphasis on the horrible situation the bereaved have to go through and answer many questions at their discretion. Examples are: “Our thoughts and prayers at this very moment are with the relatives of the passengers and crewmembers who lost their lives.” (Annex 1). “We emphasize and mourn together with the bereaved and the families and friends of the victims and probably with us millions of people. We are sad and we must do everything in our power to understand what happened here.” (Annex 2)

They take a very accommodative stance, which is strengthened by their emphasis on placing the relatives’ needs before the company’s needs. After being asked about future strategies for the company, Spohr respectfully replies that it is not the right time to discuss strategies, but that their priority lies with understanding what happened, “supporting the bereaved” and helping wherever possible (Annex 2). He also states that in complex situations like these, there are so much strain on a company from so many different parties. To the question how they deal with

5_{The press conference on 26/03/2015 was entirely in German. To the best of the researcher’s abilities the press}

conference is translated and transcribed. It must be noted that the transcription is hence not a literal translation of the press conference and can at times be subject to translation mistakes.

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all of these demands, he replies: “it is the least of our worries to comply with all of these different demands and we want to help now first and foremost where we can.” (Annex 2). This again testifies that Lufthansa’s priority lies first and foremost with solving the crisis and assisting wherever possible instead of adhering to the company’s needs.

Moderate strategy - Reduce offensiveness

Another strategy Lufthansa adopts is reducing offensiveness. The main component of this strategy is the boosting of their safety image; “Safety always comes first” (Annex 2). Ensuring that safety is a top priority and that this tragic event is a stand-alone accident that has nothing to do with their commitment to safety is the core strategy. They are doing everything in their power to convince the public from the safety of they company and flying in general “Flying is the safest mode to travel and over the last few years has only become safer” (Annex 2). they are very transparent and give out extensive details about the pilot’s education, training procedures at Lufthansa and all available tests.

Lufthansa states that safety and quality make up their core values, and they therefore often mention the company’s impeccable safety record in their sixty years of history with 100.000 flights per year. “Safety in aviation is not a given, its something which we have to work hard for everyday and every night. And this is why this terrible accident hits us in Lufthansa even more. Because in our sixty years of history, we have always said safety is our top priority” (Annex 1). “As far as Lufthansa did not already have a completely stringent focus on flight safety and security, it has only been strengthened now. Maybe the feelings have changed slightly, but the professional focus on flight safety is unbroken and remains one of our top priorities.” (Annex 2).

Next to boosting the safety image of flying, they make a lot of effort to isolate the wrongdoing of the co-pilot from the quality of their cockpit personnel. They pride themselves on the high standards of training - “Everyone in the industry knows that we select our cockpit personnel very seriously and very carefully. That is what we stand for, what we believe in at Lufthansa” (Annex 2) - and state that the Lufthansa pilots “were and still are the best in the world” (Annex 2). Spohr states that the quality of the pilots is part of Lufthansa’s core identity as a brand, hence “What happened here can only be interpreted as an unbelievably tragic, but individual case [..]. We still completely and utterly trust in our pilots.” (Annex 2).

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Nonetheless, Lufthansa does not deny something did go wrong here and ensures to look into what can be improved, but continues to stand strong with their current personnel, proclaiming the complete and utter trust they have in their abilities.

In addition, short mention is made of Lufthansa’s current effort to solve the crisis. They shortly mention they are continuously working in the South of France since the onset of the disaster to clear up the wreckage, and what they have done to accommodate the bereaved (Annex 2). However, since such little mention is made of their efforts, this seems more informative than an attempt to get in the stakeholder’s good graces and is therefore not considered to be a bolstering strategy.

Defensive strategy - Evasion of responsibility

Lufthansa also engages in evasion of responsibility strategy. This strategy overlaps with the reducing of offensiveness strategy – in which they try to boost their safety image by stressing the uniqueness of the event. This could also be interpreted as an evasion of responsibility, since it is framed in such a way that the event is not because of internal mistakes within the company, but because of the crimes of one individual, outside of the company’s span of control; “It is a single unique event that no safety measure in the world could have predicted or stopped” (Annex 2). The notion of the “single event” is of extreme importance throughout Lufthansa’s entire crisis communication strategy; “What happened here can only be interpreted as an unbelievably tragic, but individual case” (Annex 2).

In addition, during the training phase of the pilot and during the lethal flight itself, all of the procedures were strictly followed. He did not only pas all medicine tests, but also all the flight school trainings, examinations and checks, attesting to the fact that the accident was not internally generated, nor could it have been prevented. “He was 100% fit to fly without any restrictions, without any doubts. His flying performances were flawless without any conspicuousness” (Annex 2). The trust in the selection and training process of the pilots is often stressed, and an “individual case like this has not made us doubt that” (Annex 2).

Accommodative strategy - Corrective action

The final strategy is corrective action. Even though Lufthansa does not announce any concrete measures that will be taken, they do promise to “work day and night also in the next days and weeks to make sure that flying is once again made even safer” (Annex 1). To that end, they