Angry Reactions From Stakeholders. Southwest Airlines promoted five executives as the budget air carrier continues to reel from an operational meltdown that resulted in nearly 17,000 canceled flights over the chaotic holiday travel season. The company said … the moves would “strengthen our operational execution.” […] Nir Kossovsky, an expert on corporate risk and CEO of Steel City Re, told FOX Business that the angry reactions from apparent stakeholders is further evidence that Southwest is going through a “reputational crisis.”
Delayed maintenance creates reputation risk. In the aftermath of a meltdown that led to 16,700 flight cancellations and may cost the airline more than $800 million, blame has fallen on an outmoded crew scheduling system and an unusual point-to-point route network. […] Southwest has acknowledged putting updates to its crew scheduling system behind other improvements, despite long-standing complaints from pilots and flight attendants.
Culture limits risk strategy. Southwest was overwhelmed and unable to adapt as a severe storm swept the US. But behind those specific issues is an insular management team that critics say lacks the imagination and technology expertise to help avoid such crises. […] The carrier has a long-standing reputation of being slow to adopt new technology, and spent years implementing a new reservation system and updating its maintenance operations.
“There is a standard pattern after a major reputational event. It begins with the event that is usually emotionally charged and leaves a lot of people disappointed, and thereafter every different stakeholder group will have their say. Customers will obviously be disappointed, employees will be disappointed, and shareholders will be disappointed,” said Nir Kossovsky, a reputation risk expert. “
Southwest Airlines canceled between Dec. 22 and Jan. 1 around 37% of its schedule. […] The holiday flight disruption is likely to have lasting consequences for Southwest’s reputation, Nir Kossovsky, CEO of reputation risk insurer Steel City Re, said. “In addition to the large swath of customers who are angry and disappointed and likely to act on those feelings in the future, reputational damage of this magnitude often triggers a pile-on of regulators, litigators, and activists,” he said. “It’s no surprise Southwest’s shares are now underperforming the airline index.”
ESG-related false advertising litigation. Since the onset of 2021, there have been multiple class actions filed in federal courts over greenwashing claims targeting companies from the retail industry, such as H&M and Allbirds, and food manufacturers, like Vital Farms. The statements attacked by consumers in these lawsuits varied due to the wide-ranging nature of the marketing techniques used by the companies, including the use of internal sustainability metrics as well as the reliance on benchmarks created by third parties.
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