Air Crashes

Impact of fatality & crisis management

on firm performance
Wang Ke, Tiffany
Wang Xiao Hui, Shawn

CONTENTS
Part One

01 Background & Objective

02 Research Methodology
03 Findings(Data results )
04 Limitation & Conclusion
Part Two

Part Three

Part Four

Part 1

Background
&
Objective

1
Part

Background & Objectives

Detrimental effect
After missing plane MH370 and air crash
MH17, Malaysia Airline was delisted
Background

Seldom
covered by
the study

1
Part

Background & Objectives

Analyze the impact
The impact of different scope of accidents
& different approaches of handling the
crisis on firm performance
Objective
Investor
Provide guidance

Predict stock price of airline

companies after crash
Airlines company
Provide a basic crisishandling model

Research Methodology

Part 2

Part 2

2
Part

Research Methodology
Data Description
Air Crashes information Aviation Safety Network
(Year 2000 2015)

Find out listed companies

Get stock prices from Reuters, Bloomberg & Yahoo

Finance

2
Part

Research Methodology
Data Description
Response time: time difference between the crisis
and the first press report on Factiva
Presence of top management: dummy variable
(within 5 days or not)
Response time--effectiveness of the firm in dealing
with crisis
Presence of top management--the emphasis the
company places on the crisis

2
Part

Research Methodology
Step 1: Fatality VS Stock Return

Investigate
impact of fatality
on stock return

Calculate stock
return

+
=

Calculate
abnormal return
(AR)

Adopt analytical model

= + +

Linear Regression
(X: Fatality, Y: Stock AR)

2
Part

Research Methodology
Step 2: Qualitative Analysis in Crisis Management

Identify different crisis management approaches

influencing AR

3
Part

Research Methodology
Step 3: Multilinear Regression Analysis

1
Quantify the
factors identified
in Step 2

Add variables into

regression models

3
Interpret the result
of multilinear
regression

Economic magnitude
analysis

Key Findings

Part 3

3
Part

Key Findings
Data Results

Relationship between fatality and AR

0.1

50

100

150

200

250

300

-0.1

AR

-0.2

-0.3

-0.4

-0.5

-0.6

-0.7

Sample Size

47

Fatality

Positive AR Samples 17
Minimum AR

-64% (239)

Maximum AR

2.96% (1)

Key Findings
Data Results
Linear relationship between fatality and AR

Price-Weighted or Equally Weighted?

0.05

0
0

20

40

60

80

100

120

140

160

180

-0.05

-0.1

AR

3
Part

y = -0.0007x - 0.0105
R = 0.3465

-0.15

-0.2

YOUR TITLE

YOUR TITLE

-0.25

-0.3
Add your
text here and write
down your opinion here

Fatality number

200

3
Part

Key Findings
Data Results

0.07%

Per Person Died

48

3.36%

50.04b
HKD
1,680,000,000 HKD
Average Fatality Number

3
Part

Key Findings

Response time & Presence of top management

Crisis Management

Relationship between fatality and AR

Price-Weighted or Equally Weighted?

0.1

0
0

50

100

150

-0.1

AR

-0.2

-0.3

-0.4

-0.5

YOUR TITLE

YOUR TITLE

-0.6

-0.7

Add your text here and write

down your opinion here

Fatality

200

250

300

3
Part

Key Findings
Response Time

Received automated messages 22 minutes after the

crash

Malaysia Airline did report 6 hours after MH370 lost

connection

Activated immediately its crisis communication plan

and activated a dark website

The delay of spreading information might result in the

missing of the rescue time

Released six press releases on the same day

Intentionally hide the truth?

3
Part

Key Findings
Presence of Top Management

Million
CEO acted as the spokesperson during the crisis

The CEO did not come forward until six days later

He gave the first public statement on the same day

of the crisis

Malaysia Airlines mainly used press statements

to address the public.

He spent time with the families of the victims and

expressed sympathy

Even when holding the press conference, the

CEO did not show up

He met with journalists to provide updates about

the condition

insufficient to comfort the relatives

3
Part

Key Findings
Multilinear Regression

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.682207
R Square
0.465407
Adjusted R
0.42811
Square
Standard Error
Observations

0.082306
47

ANOVA
Regression
Residual
Total

Df
3
43
46

MS
0.084532
0.006774

Significance F
0.000005288

t Stat

P-value

0.025678
-0.11426

Standard
Error
0.024845
0.047265

1.033512
-2.41745

0.307142
0.019942

0.040037

0.026406

1.516238

0.136777

-0.00112

0.000196

-5.68701

0.000001

Coefficients
Intercept
Response Time
Presence of Top
Management
Fatality

SS
0.253596
0.291295
0.54489

Summary
R = 2.57% - 0.11%Fatality - 11.43%Time +
4.00%CEO
R Square--- linear relationship
Significance F--- confirming the validity of the
regression output
P-value--- the coefficient is valid

3
Part

Key Findings
Response Time

458m HKD
Mean: 8.5 hours
SD: 6.2 hours

SkyWest Incorporation

7.75b HKD
R = 2.57% - 0.11%Fatality - 11.43%Time + 4.00%CEO

2.3

8.5

14.7

hours

(6.2*2/24)*11.43%*7750m = 457.68m

Limitations & Conclusion

Part 4

Limitations
4
Part

01

02

Potential problem due to the lack of sample

Many airline companies are unlisted

We limit ourselves to secondary data

Collected from a wide variety of sources
Secondary data is incomplete by its nature
Colored by the biases of those who produced it

4
Part

Conclusion
Fatality

01

AR
PPT

Response Time

Presence of Top Management

PPT

PPTPPT

PPTPPT

Immediate response

Proper action taken by airlines

03

02

Training spokesperson
Strong leadership

PPTPPT

PPTPPT

Expectation on the follow up studies

Collect more data regarding crisis management

PPT

THANKS