1 Presentation Crisis Management Tuesday September 29 St. John’s University Tuesday, September 29

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Presentation

 Crisis Management

 Tuesday September 29

St. John’s University

Tuesday, September 29

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Topics

BP Oil Spill Recovery

Chilean Mine Collapse

 Jet Blue Airways Disruption

Crisis Planning at U.S. Airways

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Presentation

BP Oil Spill

The BP Crisis

Day 1. (April 20, 2010)

Transocean is preparing to move the Deepwater Horizon: Leased to the BP Group. Finished drilling a high pressure well for

BP. Explosion creates an out-of-control sea-

floor oil gusher. The oil rig sinks.

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In Fairness to BP

Horizon Deepwater was a very successful rig until April 20, 2010: Seven-year safety record. Drilling some of the deepest wells in the

world. Never fail or mostly working? Should BP have known?

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Mostly Working in Normal Times

2005: Texas City Refinery explosion. 15 deaths. 180 injuries. Cause: Hydrocarbon overflow. Maintenance

was cut as a cost-saving measure.

2009 post-disaster inspection findings: 270 unfixed safety violations. 439 new violations.

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Mostly Working

At the BP Texas City refinery in : 2006. Worker crushed between a pipe stack

and mechanical lift. 2007. Worker electrocuted. 2008. Worker killed by a 500-pound piece of

metal.

In the North Sea in good weather: 2009. BP helicopter ferrying workers from BP

oil platform crashed killing all 16 on board.

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Mostly Not Working

From 2007 to 2010, (Occupational Safety and Health Administration) OSHA reported: 851 willful safety violations by U.S. oil

refiners. 829 by BP.

February 2010. OSHA reported that “BP has a serious, systemic safety problem in their company."

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Information not Shared

On the Horizon Deepwater, workers were surveyed prior to the oil spill: Concerned about safety practices. Feared reprisals if they reported

problems. Unreliable equipment. “Run it, break it, fix it.” Did BP have access to the information?

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Failure to Collaborate

On the Horizon Deepwater, Transocean did a 112-page equipment assessment report: Unsafe conditions and practices. Rig had never been in dry dock. Blowout preventer rams and fail-safe

valves not inspected. 26 components and systems in “bad” or

“poor” condition.

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Lacey Resignation

Kevin Lacy was a drilling engineer who had implemented a rigorous drilling safety program at Chevron.

He was hired by BP in 2007 senior vice president for drilling operations.

He tried to improve and standardize the BP drilling policies and practices.

He resigned in 2009 believing BP was not committed to improving safety in offshore drilling.

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Ready to Respond?

Slow progress. It was one thing to be surprised. It is another thing to not be ready to respond. The crisis was attacked in stages.

Close blowout preventer valves. Add a containment dome. Pump in heavy fluids Pump in mud and cement.

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Outcome

Day 86. July 15, 2010 – Gusher was capped after releasing 5 million barrels of oil.

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Presentation

Chilean Mine Collapse

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Copiapó Mining Accident

A quite different picture

Day 1. August 5, 2010 Copiapó, Chile. Collapse of San José copper-gold mine Trapped: 33 miners 770 meters below

ground. Did they survive?

Quick Response

Day 4. Chilean President Sebastián Piñera

took charge. Andre Sougarret, head of El Teniente

mine put in charge. Flew immediately to Copiapó. Took charge. Did they survive?

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Situation at the Mine

Day 5. Sougarret: Found a nest of confusion with rescue

workers, firefighters, police officers, volunteers and relatives.

Sent rescue workers home. Talked to escaped workers. Inspected the mine. Gathered maps.

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Gathering Information

Day 6. Findings: Huge block of stone closed the 4-mile

corkscrew shaft to the miners. Collapse involved 700,000 tons of rock. Reopening the shaft could cause

another collapse. Nobody knew if the miners were still

alive.

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Hope for the Miners

Day 7.

Sougarret talked to miners who had escaped the collapse. Learned: Maps were not up-to-date. Likely location of trapped miners. Safe room with 48-hour supply of food and

water. Also repair shop. Ventilation shaft.. Miners had a chance to be alive.

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Find the Miners.

Green. 4 drill shafts to galley near shelter.

Blue. 4 drill shafts to shelter.

2 points of collapse

Repair shop.

Shelter.

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Start of Success

Day 17. The 8 drills are getting close. One drill broke through into the shaft near

the safe areas. Banging on the drill head. Rescue team retrieved note.

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Step 2. Prepare for the Rescue.

Days 18 to 69 Drill two 28-inch wide shafts. Send food, water, oxygen, messages,

progress reports. Monitor health conditions.

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Successful Rescue

Day 70. October 13, 2010 From midnight to 11 pm. One at a time. 33 times.

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BP Weakness Before the Event

Before the extreme event: Safety information identified but not

shared. Failures to comply with regulations not

in organized systems. Collaboration not encouraged.

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BP Weakness after the Crisis

Weaknesses include: Failure to respond decisively to spill. Failure to respond decisively to clean

up.

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Copiapó Situation

Copiapó was different: Good. Local risk management. Bad. Central risk management.

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Local Risk Management

Two safety features: “Safe” room.

Stocked with provisions. Ventilation shaft.

Separate escape route.

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Central Risk Management

Weakness before the crisis: Failure to maintain safety standards in a

dangerous place. Failure to install ladders after failing a

safety inspection that closed the mine. Opportunity lost. A second collapse

closed the shaft.

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Question

Did BP have the big picture in 2010?

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Big Picture

Board of Directors

Safety Practices in Texas

Cost Cutting

Concerns of Rig Workers

Maintenance of Oil Rig itself

Kevin Lacy Resignation

OSHA Violations

Big Picture

Top Management

High pressure well

41 miles from Louisiana wetlands

Everybody not ready

Rig needs overhaul

Rushing to complete drilling

Cost Cutting and 41 Miles

Linkages.

leads to creating

while

for a big loss when

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Cost Cutting

Unsafe practices

Rushing to complete drilling

Everybody is not ready

41 miles from Louisiana wetlands

Poor maintenance of oil rig

Question

Did Sebastián Piñera and Andre Sougarret have the big picture in 2010?

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Lesson Learned

Risk management has value. We cannot predict extreme events. We can look for the big picture. We can avoid some situations. We can prepare for others.

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Lesson Learned

Severity Trumps Frequency The value of risk management is not the

occurrence of extreme events. We may just be lucky. Who knows? But we should be ready.

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Presentation

Jet Blue Airways Disruption

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Jet Blue Airways

New York’s Kennedy Airport.

Valentine’s Day 2007.

Ice storm.

Trapped passengers on planes up to 10 hours.

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Question

Did the company have the Big Picture?

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Question (2)

What are some examples of disruptions?

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Answer

Examples: Ice storm. Police action. Terrorist act. Congestion. Maintenance. FAA regulations. Technology. Fuel shortage. Employee absence.

Strike.

Crazy person.

Power outage.

Communications outage.

Airport closing.

Improper training.

Absence of linguists.

Missing parts.

Accident/Crash.

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Question

Who should be responsible for disruption risk?

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Answer

Highest level. This risk is assigned to the Executive

Vice President for Flight Operations.

Next level. It is further assigned to Kennedy Airport

Operations Center.

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Question

What is the likelihood of a disruption of operations?

•An ice storm hits New York once every three winters.

•33%. The chance of hitting at a busy time.

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Answer

A disruption is likely to happen one time in a 9-year period.

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Question

How severe could it be to have a disruption of operations?

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Answer

Could be: A public relations nightmare if

passengers stranded on planes for long periods of time.

Financially costly to reimburse passengers for losses or time spent.

Harmful to long-term and cherished reputation for the highest quality of customer service.

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Question

What alternatives did Jet Blue have to mitigate the impact of a disruption?

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Answer (1)

Bus Contingency Plan. Unload planes sitting on the tarmac.

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Answer (2)

Additional Personnel. Train nearby headquarters staff.

"We had so many people in the company who wanted to help but who weren't trained to help,"

David G. Neeleman, CEO quote, New York Times”.

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Answer (3)

Revised Operating Procedures. For weather or other delays.

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Question

What were the consequences of the failure to prepare?

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Answer (1)

Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).

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Answer (2)

Consequences:$30 million in added costs.Removed from #4 position in a customer satisfaction survey published by Business Week (March 5, 2007).Jet Blue was the cover story in Business Week on March 5.

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Answer (3)

More consequences. Jet Blue endangered: Top choice in national airline quality

rating (4 years in a row). Condé Nast Traveler reader’s choice

award (5 years in a row). High J.D. Powers ranking for quality.

Question

What happened to Jet Blue in the years after the Valentine’s Day disruption?

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Answer

Jet Blue recovered: Implemented a Customer Bill of Rights. Created a database to track crew

locations and contact information. Cross trained employees and had on

call in the event of a crisis. Created a Web-based rebooking

system to reschedule flights.

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Presentation

Tower

Request Takeoff

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Presentation

Crisis Planning at

U.S. Airways

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Question

U.S. Airways flight 1549 landed on the Hudson River in 2009 with no loss of life.

•Landing by pilot Sullivan was called the “Miracle on the Hudson.”

•How did U.S. Airways prepare for a crisis?

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Answer

Preparation: “Dry Runs.” 3 times a year at every

airport it serves. “Care Team.” Gates agents,

reservation clerks, and other employees dispatched on a “moment’s notice.”

800 Number. For families to call for information.

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Question

How did it handle the passengers who were removed from the plane?

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Answer

The airline took action: 150 employees from headquarters (Arizona)

to New York. Employees credit cards to buy medicines,

toiletries, and personal items. Bag of cash. Suitcases with prepaid cell phones and sweat

suits (dry clothes). Escorted passengers to hotels with 24-hour

buffets.

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Question

What else did it do?

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Answer (1)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

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Answer (2)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.

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Answer (3)

More action: Arranged train tickets and rental cars for

individuals who did not want to get back on a plane.

Reached out to high-level executives at Hertz and Amtrak so no hassle getting the tickets.

Retained locksmiths to help passengers who had lost keys for cars and home.

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Question

Anything else?

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Answer (1)

Follow-up action: Sent letters updating passengers after

they arrived home.

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Answer (2)

Follow-up action: Sent letters updating passengers after

they arrived home. Refunded the airplane ticket and

gave each passenger $5,000 to replace lost possessions.

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Answer (3)

Follow-up action: Sent letters updating passengers after they

arrived home. Refunded the airplane ticket and gave each

passenger $5,000 to replace lost possessions.

Paid additional monies to passengers where $5,000 did not cover losses.

Question

Jet Blue stumbled. U.S. Airways seized an opportunity. Is life fair?

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Answer (1)

Is life fair?

•Jet Blue fully recovered.

•American Airlines acquired US Airways.

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Answer (2)

Is life fair?

•Jet Blue fully recovered.

•American Airline acquired US Airways.

•U.S. Airways management will run the combined airline from the American headquarters in Fort Worth, Texas.

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