Presentation
Crisis Management
Tuesday September 29
St. John’s University
Tuesday, September 29
1
Topics
BP Oil Spill Recovery
Chilean Mine Collapse
Jet Blue Airways Disruption
Crisis Planning at U.S. Airways
2
Presentation
BP Oil Spill
3
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 seafloor oil gusher.
 The oil rig sinks.
4
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?
5
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.
6
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.
7
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."
8
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?
9
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.
10
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.
11
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.
12
Outcome
Day 86. July 15, 2010 – Gusher was
capped after releasing 5 million barrels of
oil.
13
Presentation
Chilean Mine Collapse
14
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?
15
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?
16
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.
17
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.
18
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.
19
Find the Miners.
Green. 4 drill
shafts to galley
near shelter.
Blue. 4 drill shafts
to shelter.
2 points of
collapse
Repair shop.
Shelter.
20
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.
21
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.
22
Successful Rescue
Day 70. October 13, 2010
 From midnight to 11 pm.
 One at a time.
 33 times.
23
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.
24
BP Weakness after the Crisis
Weaknesses include:
 Failure to respond decisively to spill.
 Failure to respond decisively to clean
up.
25
Copiapó Situation
Copiapó was different:
 Good. Local risk management.
 Bad. Central risk management.
26
Local Risk Management
Two safety features:
 “Safe” room.
Stocked with provisions.
 Ventilation shaft.
Separate escape route.
27
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.
28
Question
Did BP have the big picture in 2010?
29
Big Picture
Safety
Practices in
Texas
Cost
Cutting
Kevin Lacy
Resignation
Maintenance
of Oil Rig
itself
Board of
Directors
OSHA
Violations
Concerns of
Rig Workers
Big Picture
High pressure
well
Rig
needs
overhaul
Everybody
not ready
Top
Management
Rushing to
complete
drilling
41 miles from
Louisiana
wetlands
Cost Cutting and 41 Miles
Linkages.
Cost
Cutting
leads to
Poor
maintenance
of oil rig
41 miles from
Louisiana
wetlands
for a big loss
creating
Unsafe
practices
while
Everybody is
not ready
when
Rushing to
complete
drilling
32
Question
Did Sebastián Piñera and Andre Sougarret
have the big picture in 2010?
33
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.
34
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.
35
Presentation
Jet Blue Airways Disruption
36
Jet Blue Airways
New York’s Kennedy Airport.
Valentine’s Day 2007.
Ice storm.
Trapped passengers on planes up to 10
hours.
37
Question
Did the company have the Big Picture?
38
Question (2)
What are some examples of disruptions?
39
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.
40
Question
Who should be responsible for disruption
risk?
41
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.
42
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.
43
Answer
A disruption is likely to happen one time in a
9-year period.
44
Question
How severe could it be to have a disruption
of operations?
45
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.
46
Question
What alternatives did Jet Blue have to
mitigate the impact of a disruption?
47
Answer (1)
Bus Contingency Plan. Unload planes
sitting on the tarmac.
48
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”.
49
Answer (3)
Revised Operating Procedures. For
weather or other delays.
50
Question
What were the consequences of the failure
to prepare?
51
Answer (1)
Consequences:
 $30 million in added costs.
 Removed from #4 position in a
customer satisfaction survey published
by Business Week (March 5, 2007).
52
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.
53
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.
54
Question
What happened to Jet Blue in the years
after the Valentine’s Day disruption?
55
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.
56
Presentation
Tower
Request Takeoff
57
Presentation
Crisis Planning at
U.S. Airways
58
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?
59
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.
60
Question
How did it handle the passengers who were
removed from the plane?
61
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.
62
Question
What else did it do?
63
Answer (1)
More action:
 Arranged train tickets and rental cars for
individuals who did not want to get back
on a plane.
64
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.
65
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.
66
Question
Anything else?
67
Answer (1)
Follow-up action:
 Sent letters updating passengers after
they arrived home.
68
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.
69
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.
70
Question
Jet Blue stumbled. U.S. Airways seized an
opportunity. Is life fair?
71
Answer (1)
Is life fair?
• Jet Blue fully recovered.
• American Airlines acquired US Airways.
72
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.
73