Tuesday, April 20, 2010

The Volcanic Cloud's Lost Silver Lining

In a tumultuous week that saw hundreds of thousands of passengers stranded across the world and the leading Wall Street institution's reputation possibly permanently damaged, there were certain industries that were smiling. The eruption of a volcano in Iceland that nobody had ever heard of before and whose name no one can pronounce and no one is likely to remember a month from now, caused the already fragile airline industry to loose hundreds of millions of euros as a result of massive flight cancellations across Europe. While the conversation has revolved mainly around the troubles of the airlines and of stranded passengers, little attention has been paid to those that have greatly benefited from this exceptional weekend. Certainly, hotels, ferry operators and car rental and coach bus companies have had the best few days in a long time. The question that follows is whether those that stood to benefit from this adverse situation did so as best they could? The answer to this question depends in large part in how we define a company's success.

Despite the lessons that should have been learned as a result of the recent economic crisis from which we are emerging, it seems that we still live in a world ruled by short-term results: hotels across Europe began to charge more for rooms and bus and ferry tickets became more expensive as these companies looked to maximize their immediate revenues. While these price hikes can be explained by the simple law of supply and demand, the fact is that stranded passengers will surely not have taken well to these extortionist pricing policies. Had the goal of these companies been to maximize long- rather than short-term profits, surely alternative measures would have been taken. Sympathizing with passengers and offering them a break in these already tough times might have gone much further towards increasing the overall bottom line rather than aiming to reap immediate rewards. Beyond pricing policies, there are other things that these companies could have done.

As one of the hundreds of thousands of stranded passengers - my flight from London to Dublin on Sunday was cancelled - I looked for alternative travel plans and decided on a train-ferry combination offered by a British operator. When I attempted to book the journey, I encountered a message stating that payment for travel dates within 7 days of the booking date could only be made by telephone and upon calling the ticketing number I obtained a message saying that the offices were closed on Sundays. Surely, on what was set to be the company's busiest Sunday in, perhaps, its history, it would have done well to open their offices on that day in expectation of the increased volume. Whether their failure to open their offices was due to a lack of flexibility or disdain for passengers looking for alternative travel arrangements, it was the wrong action to take.

All in all, it seems that through their collective actions, the industries that were set to profit from the otherwise extremely negative effects of the volcanic ash cloud that paralyzed European air travel most certainly did so in terms of this weekend's bottom line but miserably failed to do so in terms of their longer term brand perception. What this signals is faulty strategic thinking that values short-term results over long-term viability. Unfortunately, this faulty strategy is one that seems to plague all sorts of businesses across myriad industries.

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