COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

Teaching Notes
CASA Clips Tigers Wings

Case Summary
Tiger Airways Australia was grounded for five weeks due to a series of unsafe
landings between May and June 2011. This happened despite a warning from
Australias regulatory authority, Civil Aviation Safety Authority (CASA), on 24 May
regarding Tigers safety issues.

To make matters worse, the medias investigation into this matter slowly revealed that
Tiger had been experiencing a slew of customer complaints regarding frequent
cancellations and delays, which hinted at a poor communications and corporate
strategy. Now that Tigers flights have fully resumed, the new CEO, Chin Yau Seng,
faces the difficult task of convincing the public that Tiger Airways can be trusted
again.

Main Problem
Tiger Airways was never really in the good books of their stakeholders. Share prices
were falling consistently since its inception, employees did not receive their wages on
occasion and despite their low budget fares, consumers were dissatisfied with their
service and lack of two-way communication. The grounding of its flights only
aggravated matters share prices were taking a plunge, some employees were
redeployed to other bases or put out of a job in an instant and consumers were left in
the lurch when Tigers customer hotlines were left ringing with their burning
questions unanswered. In a nutshell, there was already a lot of unspoken tension
between Tiger and its stakeholders, and the grounding saga only served to bring
stakeholder dissatisfaction and grievances to the fore.

While most cases have a clear-cut reputational risk in terms of reputation-reality gap,
weak internal coordination or changing beliefs and expectations, this case is more
than just one-dimensional in its problem definition. The problem presented at the end
of this case shows Tigers weak internal coordination as well as their ineffective
corporate strategy. While the grounding of the planes was due to a failure in
corporate strategy, the unhappiness experienced by their stakeholders was no doubt
due to weak internal coordination.

Similar to the Wal-Mart case study, Tiger failed in their corporate strategy because
the budget carrier was too focused on its cost-cutting measures that it neglected the
welfare of their employees and their flights safety. The companys weak internal
communication was also highly apparent in the way they handled communications
with their stakeholders. Tiger had a seemingly non-existent communication strategy,
much like that of Sherman McCoy in Bonfire of the Vanities. On the rare occasions
that the company deigned to communicate, their communication strategy proved to be
weak.

Therefore, the main reason for Tigers five-week grounding can be attributed to a
failure of corporate strategy but the fact that the companys communication strategy
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

was flimsy served to worsen their reputation with stakeholders. The failure of these
two strategies has led to a dip in public confidence. With a two-dimensional problem
such as this, a two-pronged approach would be required by the company to deal with
the crisis effectively and ensure results in the long term.

Key Stakeholders
Various stakeholders have a vested interest in Tiger Airways grounding as well as the
aftermath. From most affected to the least:

1. Consumers
Due to the grounding, many consumers were affected as their flights were cancelled
and they had to search for alternative flights on other airlines. The safety concerns
leading to the grounding also raised consumer doubts about Tiger Airways reputation
as a safe budget airline. Both events have caused consumers to lose confidence in
Tiger Airways as a trusted airline that provides safe and cheap flights. Australian
consumers now prefer to fly on higher-priced airlines like RyanAir, favouring safety
over price.

2. Employees of Tiger Airways Australia

Employees greatly affected by the grounding were the crew based at the Avalon
Airport and the Adelaide airport as they lost their jobs due to the closure. Tiger
Airways was also inefficient in compensating them for the losses, which intensified
the media spotlight on Tiger. With all the negative publicity surrounding Tiger
Airways, the morale of the remaining employees might be affected and doubts about
job security may arise due to Tiger Airways Australias bleak-looking prospects.

3. Investors
The stockholders are also obviously very affected by Tiger Airways grounding and
the aftermath with shares dropping immensely on the Stock Exchange. Suffering a
huge loss from the grounding and lower flight occupancy due to consumers lack of
confidence, earnings have slowed down and losses are being incurred instead.
However, they do continue to hold some power as they are able to sell their stocks. As
SIA holds majority of the shares, it would be unlikely that the company would sell off
their shares as it would mean incurring a huge loss for them.

4. CASA
CASA has the responsibility of making sure that Australias airline industry operates
under safe conditions. Hence, they played a huge role in the grounding of Tiger
Airways Australia as they identified safety concerns and conducted investigations
regarding Tigers operations. Other than working closely with Tiger to ensure the
safety of their flights, CASA was not really affected by the grounding.

5. Competitors
Jetstar, Ryanair and Virgin Australia were affected by the grounding in a positive way
as they jumped on the bandwagon when Tigers flights got by providing seats on their
flights at a discounted fare. Coupled with the fact that Tigers reputation was not
promising during that period, consumers switched to these other airlines for a safer
budget flight alternatives, which in turn increased their sales. However, the grounding
has put the entire Australian airline industry under scrutiny for possible unsafe flight
operations, forcing them to maintain the best safety operations for consumers.
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

6. Media
The media has fed off Tigers mishaps by delivering every single piece of news to the
public sphere. They revealed different perspectives on the grounding, creating more
tension and generating greater media spotlight on Tiger in the process. Tigers
grounding was a perfect opportunity for creating news value. Given that the media
has a lot of power in influencing the publics opinions, Tiger should capitalize on the
media coverage by updating the media about their future plans in light of the
grounding.

7. SIA
Being a world-class airline linked to Tigers currently bad reputation, SIA faced
criticism as to why their good reputation did not rub off on Tiger Airways. However
in this case, they are not largely affected by the situation and should not be paid much
attention to.

Critical Issues and Possible Solutions

1. Improving Tigers Communication Strategy

i. Relationship with Consumers

Tiger Airways did not seem to have a very good relationship with their consumers.
For one, despite attempts to connect with them through social media sites like
Facebook and Twitter, consumers were regularly complaining about the company on
these sites. Instead of clarifying matters and executing a good customer relations
strategy, Tiger deleted negative comments off their official Facebook page and
remained silent for 72 hours after the grounding took place. Tiger also allowed an
Australian television channel to air a program documenting all the negative and
dismal areas of Tigers operations. All these actions (and more) only served to reduce
consumer confidence and trust.

With consumers being the driving force behind Tigers profitability, the company
should focus on building goodwill and trust, and in light of the grounding, to also
reassure them of their values of low cost and safety.

Possible Solutions:
A. Offer complimentary flights to affected consumers and make use of this
opportunity to build good relations with them. Tiger can also turn this into an
opportunity for positive media coverage showing the companys sincerity in
righting their wrongs. (Mortification)

B. Encourage two-way communication between Tiger and its stakeholders. Start

being more proactive in communicating with consumers and anticipate their
grievances. Come up with a contingent communication strategy and how to
deal with consumers to build goodwill and trust.

C. Improve the customer hotline and reassure customers about their safety by
hiring a third party to vouch for them (ingratiation strategy).

ii. Relationship with Investors

As soon as the grounding took place, Tigers SGX stock price plunged, showing a
lack of confidence on the part of investors. Interesting to note was that share prices
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

continued to plummet even after Tiger resumed its flights. This would most probably
be because airline capacity was still low due to consumer doubts about the airlines
safety. The only way investors confidence can be improved is by first gaining the
support of consumers because they are the ones fuelling Tigers profitability. With a
lack of consumer support, investor confidence will be equally weak as they would not
see any growth prospects or returns from their investment. Hence, this problem can
only be fixed over time and is dependent on Tigers ability to convince consumers of
safety of their flights. It has to work on building strategic credibility in the long run.
In the meantime, Tiger should provide a short-term solution to calm investors and
convince them their investments will be worthwhile.

Possible Solutions:

A. Communicate to all shareholders about what exactly Tiger Airways is trying

to do to gain consumers confidence and increase transparency, whether
regarding Tigers financial losses or the real reason behind the grounding.
Assure investors that Australia is a profitable region worth investing in and
thank them for their loyalty to the company.

B. Capitalize on SIAs reputation to gain investor confidence. Inform investors

that SIA holds majority of the shares in Tiger Airways and they still have
confidence that Tiger Airways will be able to get back on its feet soon. As
CYS is taking over as CEO, Tiger can capitalise on his reputation by
mentioning that the company will be in good hands given that CYS is from
SIA and has experience leading a world class airline.

C. Focus on building consumer confidence and assume investor confidence will

improve from there. In other words, maintain status quo and remain silent.

iii. Relationship with Employees

Being a budget carrier, low fares are of priority to Tiger. Just like Wal-Mart, this
drive to attain lower and lower costs results in employee neglect. Pilots became
overworked and underpaid, and employees were either offered redeployment to other
bases or given redundancy packages during the period of the grounding. Some
employees even threatened legal action against the company when Tiger did not make
the payments required of them. Employees are no doubt an important group of
stakeholders in any company, as can be seen from recent cases of worker strikes
causing huge airlines such as Qantas to halt operations and experience significant
losses.

As a company already in the red, anymore losses resulting from employee mistakes or
strikes will not bode well for the future prospects of Tiger, especially with it being a
budget carrier. There is no other option for Tiger but to build up their relationship
with their employees, and fast.

Possible Solutions:
A. Provide greater benefits to employees such as off-days for a flight lasting x
number of days, to prevent employees form being overworked and making
unnecessary and costly mistakes.
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

B. Improve employee welfare by providing channels for them to air their

grievances and implement a two-way communication system where their
problems or difficulties can be sorted out.

C. Apologise for the inconvenience and mistakes made in the handling of the
situation and assure the employees of the steps the company is taking to clean
up the crisis. Engage employees help to build up the reputation and trust of
the company by first treating them better and allowing them more channels to
communicate with management.

D. Thank remaining employees for their service to the company and ask for their
help to get through the crisis together. Take the stand that the company is not
financially strong and this is therefore their rationale for providing redundancy
packages during the period of the grounding.

2. Improving Tigers Corporate Strategy

Tiger Airways is a low-cost airline whose corporate strategy is centred on cost-cutting
measures. The grounding, however, serves as a reminder of the importance of the
airlines safety. Tigers flawed corporate strategy could also be seen when they failed
to take CASAs show cause notice in May seriously, leading to the eventual
grounding of their entire fleet.

Although it can be said that Tigers reputation is derived from their low fares, it is the
basic prerequisite for airlines to ensure safe operations. This is where they differ from
Wal-mart, which has a similar Everyday Low Price strategy. Improving their
strategy would serve to improve Tigers reputation in the long run.

Possible Solutions:
A. Increased transparency of Tigers operations. Update stakeholders regularly
with a list of actions that Tiger Airways will undertake in the following
months to improve safety.
B. Prepare a crisis communication plan that is updated regularly.
C. Work with CASA to come up with safety regulation guidelines that
complement Tigers low-cost strategy.

Recommended Solutions and Actions

Relationship with Consumers:

It is in the best interest of the company to choose option B. Tiger should understand
that two-way communication and dialogue is pertinent in establishing mutual trust
and loyalty amongst consumers. Neglecting their social media feeds in their time of
crisis resulted in a missed social media opportunity for the company. Tiger should
have taken advantage of the instant communication provided by these social media
outlets to convey important messages to consumers during the crisis, answer all their
queries and allay concerns immediately. This would definitely reduce the frustrations
felt by consumers arising from the silent approach employed by the company.

A two-way communication strategy can also help the company gain understanding
from the consumers, when the cause of the grounding and the steps taken to rectify
the solution are clearly conveyed to the consumers. It would make Tiger seem more
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

transparent, and consumers would appreciate the honesty and openness as they are
more assured, thereby increasing public confidence. Anticipating customer grievances
and coming up with a contingent communication strategy will further allow the
company to be quick and responsive in times of such PR crises, preventing the
companys reputation from falling in the eyes of consumers.

Relationship with Investors:

Our group decided that the best solution for Tiger is A. What investors want is
transparency and this can only be achieved if Tiger communicates with all its
shareholders regarding the reality of Tigers financial situation. This will allow them
to reevaluate their investment decisions on a fair basis. At the same time, Tiger should
pay special mention to what they are doing to help gain consumer confidence, so as to
convince their investors that Tiger is making constructive efforts to either improve
their profitability or mitigate their losses. By assuring investors that Australia is a
profitable region, probably through statistics or market findings, investors can feel
more at ease about the long term prospects of Tiger instead of just focusing on the
short term losses they are currently making due to the grounding. By thanking them
for their loyalty to the company, investors will feel appreciated for standing by Tiger
through the hard times.

What they can also do is to capitalize on the CEO credibility of Chin Yau Seng. As
we know, CEOs have a demanding role of balancing national interests, regulatory
regimes, environmental concerns, political, social, technological and commercial
pressures some of which are often in conflict with each other. As he is from SIA, a
very reputable airline, Tiger can leverage on his reputation and reassure investors that
Tiger will be in safe hands if they choose to stay.

By taking the two actions above, Tiger can improve strategic credibility by increasing
CEO credibility as well as encouraging a more open way of communication to
investors (refer to IR model). This will make shareholders happoer and improve
relations with them. Thus, such actions will attract the right kind of investors to will
help to stabilize Tigers share price.

Relationship with Employees:

Option C is the best choice as it recognises the importance of employees as a resource
in building up the companys reputation in this crisis period. To do so, however, Tiger
has to first ensure that they have a good and open relationship with their employees,
built around trust. As mentioned, relationships with employeees can be improved by
taking steps to apologise for the mistakes made and the inconvenience the companys
actions have brought upon the employees.

The company can further show their sincerity in making amends by putting in place
certain channels to allow two-way communication with the management. Similar to
building up relationship with consumers, a two-way dialogue is important in this case
as it allows employees to feel valued and derive a greater sense of job satisfaction
when they given a voice and are allowed to air their grievances. Fewer costly
mistakes will be made as the employees will now feel like they are part of a team, and
it would be easier to engage the help of this stakeholder group when crisis hits.
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

Certain examples of two-way channels include weekly or bi-monthly meetings where

employees meet with their superiors to talk about frustrations or problems they may
be facing in their job, and the possible solutions to the problem. Basically, it would be
a channel to allow employees to express themselves, and to give them a chance to be
heard. These channels would not prove to be very costly (it may even come at no
expense!) and it would help build up loyalty and satisfaction among employees, who
would be more willing to help the company when crisis hits. In the long run, Tiger
will eventually gain a reputation for treating its employees well, gaining an important
ally for difficult times.

Building up Tigers Corporate Strategy

Tiger Airways should choose Option C. By involving CASA in formulating its safety
guidelines, Tiger will be able to leverage on CASAs favourable reputation while also
displaying their willingness in taking action to improve the safety of their operations.
Consumers will hence be able to place more trust in Tiger because of their
commitment to the consumers safety.

As mentioned earlier, Tiger is faced with a situation where their business model is
centred on low costs but they face the need to improve safety of their operations. If
they were to ensure safe operations, these efforts might increase costs and eventually
their fare prices, thereby affecting their core competency as a budget airline. By
working with CASA, Tiger will be able to have a set of guidelines that is specifically
catered to such a business model, with the assurance that their costs will not increase
significantly.

Additionally, Tiger can also consider cooperating with CASA to ensure that all their
competitors in the industry are subject to the same requirements in order to prevent
the loss of this competitive edge. This strategic move will eventually gain a reputation
for Tiger as an airline that has set a new golden standard for budget airlines safety,
increasing Tigers reliability and credibility.
COMM340: Managing Corporate Reputation Prepared for Professor Michael Netzley

Additional Teaching Materials

Timeline of events

1 July 2011 - CASA suspends Tiger Airways domestic services until 9 July due to safety
concerns

4 July 2011 - Appointment of Mr Chin Yau Seng as Acting Executive Director

6 July 2011 - Appointment of Mr J Y Pillay as Independent Director

- CASA seeks to extend suspension of flights till 1 August
- Tiger Airways refund fares to passengers holding reservations between 6
August to 31 August
- Announced that CEO of Tiger Airways Australia, Crawford Rix, will leave
airline on 31 July and Tony Davis will take over.

8 July 2011 - CASA appeals to extend suspension till 1 August. Hearing of application has
been fixed on 22 July

19 July 2011 - Appointment of Captain Chris Manning as Safety Advisor

22 July 2011 - Adjournment of hearing from 22 July to 28 July

28 July 2011 - Adjournment of hearing from 28 July to 1 August

- Refund of passengers travelling between 1-4 August

1 Aug 2011 - Adjournment of hearing from 1 July to 3 August

3 Aug 2011 - Adjournment of hearing from 3 August to 5 August

5 Aug 2011 - Adjournment of hearing from 5 August to 11 August

10 Aug 2011 - Reinstatement of Tiger Airways Australia

- Ticket sales will commence on 12 August