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

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  • Brown, Richard S.
  • Kline, William A.

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.

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  • Brown, Richard S. & Kline, William A., 2020. "Exogenous shocks and managerial preparedness: A study of U.S. airlines’ environmental scanning before the onset of the COVID-19 pandemic," Journal of Air Transport Management, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jaitra:v:89:y:2020:i:c:s096969972030483x
    DOI: 10.1016/j.jairtraman.2020.101899
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    Cited by:

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    2. Sabina Veršič & Polona Tominc & Tjaša Štrukelj, 2022. "SME Top Management Perception of Environmental Uncertainty and Gender Differences during COVID-19," Sustainability, MDPI, vol. 14(6), pages 1-34, March.
    3. Santos, Luca J. & Oliveira, Alessandro V.M. & Aldrighi, Dante Mendes, 2021. "Testing the differentiated impact of the COVID-19 pandemic on air travel demand considering social inclusion," Journal of Air Transport Management, Elsevier, vol. 94(C).
    4. Liao, Maozhu & Wu, Chuntao & Yan, Hongmeng, 2022. "Recovery of Chinese low-cost carriers after the outbreak of COVID-19 pandemic," Journal of Air Transport Management, Elsevier, vol. 105(C).
    5. Teeris Thepchalerm, 2021. "Impacts of COVID-19 on Airline Business: An Overview," GATR Journals jber202, Global Academy of Training and Research (GATR) Enterprise.
    6. Kim, Myeonghyeon & Sohn, Jeongwoong, 2022. "Passenger, airline, and policy responses to the COVID-19 crisis: The case of South Korea," Journal of Air Transport Management, Elsevier, vol. 98(C).
    7. Budd, Thomas & Suau-Sanchez, Pere & Halpern, Nigel & Mwesiumo, Deodat & Bråthen, Svein, 2021. "An assessment of air passenger confidence a year into the COVID-19 crisis: A segmentation analysis of passengers in Norway," Journal of Transport Geography, Elsevier, vol. 96(C).

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