Exogenous shocks and managerial preparedness: A study of U.S. airlines’ environmental scanning before the onset of the COVID-19 pandemic

Richard S. Brown and William A. Kline

Journal of Air Transport Management, 2020, vol. 89, issue C

Abstract: Managerial preparedness is a constant concern for firm stakeholders. This concern is exacerbated during times of immense stress brought about by exogenous shocks. In this paper, we analyze the preparedness of U.S. commercial airline management teams to the largest systematic exogenous shock to date, namely the COVID-19 pandemic in 2019 and 2020. We do this by underpinning the paper with theory on environmental scanning and managerial dysfunction and then documenting the signals and actions of management around multiple public health scares. These include the SARS outbreak, the Swine Flu outbreak and the COVID-19 outbreak. Our results, based off of corporate filings with the SEC, is that airline management had multiple “dry runs†before the COVID-19 outbreak that should have lead them to prepare for financially catastrophic scenarios such as the one observed in 2020. Instead, management teams failed to learn from these, and other, prior shocks. Instead, they focused on other, less serious threats while diffusing their financial buffers through dividends and share buybacks.

Keywords: COVID-19; Strategic persistence; Environmental scanning; Commercial airline industry; Exogenous shock (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaitra:v:89:y:2020:i:c:s096969972030483x

DOI: 10.1016/j.jairtraman.2020.101899

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