Remembering the Kegworth Air Crash

Last Saturday marked the anniversary of the Kegworth Air Crash. On 8th January 1989 a British Midland Boeing 737 developed an engine fault shortly after taking off from East Midlands Airport bound for Belfast. The pilots mistakenly shut down the wrong engine and the plane crashed onto the M1 just outside the airport perimeter. Of the 126 people on board, 47 were killed and 74 injured. Remarkably, nobody on the ground was hurt.

Whilst the crash will always be remembered as a terrible tragedy, it is also remembered for the skill and compassion with which British Midland’s Chairman, Michael Bishop, handled the crisis. He was quickly at the scene of the crash and immediately established credibility by clearly explaining what had happened and what British Midland was doing about it. He continued to communicate effectively throughout the crisis as well as demonstrating compassion and empathy in his visits to survivors of the crash. The narrative could have easily focused on the fact that a British Midland pilot made a terrible mistake, but the effectiveness of British Midland’s crisis response means that few people even remember that point. Needless to say, the company recovered very quickly as passengers were reassured that it was a very well run airline.

Some years later, Oxford Metrica conducted an analysis of 22 mass-casualty aviation disasters (Kegworth was not included in the sample), focusing on the effect on firms’ share prices of such a crisis. Unsurprisingly all airlines’ share prices fall sharply in the days after a fatal crash. But whilst many airlines’ share prices continue to fall, ending up an average 20% down after a year; a subset of airlines recover strongly, ending the year 30% more valuable than they were prior to the crash. As with the example of British Midland, a tragedy well handled is evidence of a well run organisation and gives customers, investors and other stakeholders confidence in doing business.

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