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Study Finds Link Between Airlines' Profitability And Accident Rates

Airlines' accident risk is highest when they are performing very close to their financial targets, according to a study by a professor in BYU’s Marriott School of Management. “The accident risk went down as they got further away from their financial goals in either direction,” said Peter Madsen, assistant professor of organizational leadership and strategy. “Speaking generally, airlines are safest when their financial performance is either much better or must worse than it has been in the… ( さらに...

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It sounds reasonable although there isn't much to change about the accedents ocouring when they are nearest to their finacial goals.
Without seeing the raw data that was used to conclude that financial performance affects safety, it is hard to imagine how an airline that was performing extremely well financially would have the same deviation from "the norm" as would an airline experiencing severe financial problems. If that is the case that would tend to suggest that the airlines didn't change their operating standards based on financial performance.

The number or accidents is so small that one accident that happened to occur at a particular time could greatly skew the reports. In a good portion of the accidents weather is a factor, and I don't think that is caused by financial performance, or that pilots take a different approach to weather based on the financial performance of the company.The people doing the maintenance on the planes have no financial incentive to shirk their duties to help meet financial targets, in fact they are probably not aware of the finacials until they read them in the newspapers after the fact.

It could be that the results of this study mirror the fact that the stock market happens to perform differently in years when the super bowl is won by the national conference than when it is won by the American conference.Simply a coincidence
Correlation is not causation. I agree with Larry on the point that number of accidents is very small which can swing the correlation greatly. I would also like to think that airlines meeting targets are doing more the "right" way than the "wrong" way compared to their peers.. Maybe just fanciful thinking.
Failing to meet the financial performance could reasonable lead to poor performance in safety as well as other metrics. But the most intriguing result is why an airline that was exceeding it's performance goals might have a higher "accident risk". The full article will be an interesting read when it comes out in a forthcoming issue of "The Journal of Management".

What is meant by "accident risk"? Accidents? Derived from the number and size of FAA fines? Some other metric?

The phenomenal safety record of scheduled airline travel provides scant opportunities for improvement, but one should always look for the lowest of the 'high hanging fruit'.
For a possible clue, think of two things at once:
Air France, and,
Pilot training (hint: woefully inadequate)
jim lou 0
There is too much pressure on airlines today. Too many airlines are chasing after a limited number of passengers and thus offer "low" fares.

With low fares that means that revenue might be impacted. How much money will be there be for regular maintenance? Pilot Training?

There is too much pressure to return a plane to service. It is very easy to rush and thus to overlook things.
@Jim Lou
I agree in principal however as in life in general, a managed degree of stress is not bad. At a high level we are transitioning from the glorious years of the 50's and 60's when flying was a luxury and as such premium fares were in place based on supply and demand. Today, things are much changed with flying approaching the definition of "a bus / train at 32,000 feet". As with any technology / service air travel has commoditized (how much did you pay for your first cell or pc, how much do you pay now?) with the resulting downward pressure on pricing. It's a reality of any commoditized market. Company's find business models that are acceptable to market demands and their stock holders (ex: Southwest, Westjet) while others (often legacy airlines with much financial baggage (ie: pension funds, unions) have a struggle on their hands (ex: American, Air Canada). At a macro level the customer wins - financially speaking - and with a little bit of common sense / luck travels safely. Let's remember that it is still much safer to fly than drive so risks are very minimal. Spectacular when something goes wrong but still statistically much safer than driving.

Actually I am bit surprised in one sense and not so much on the second part. My initial reaction would have been, the deeper in the hole a firm, the more apt they were to cut corner and couple that with low employee morale I would have seen that as a recipe for disaster. On the other hand, those in experience in meeting shareholder expectations can understand that as the target is in sight extra efforts (ie shaving costs) could be a scenario played out. Considering no airline is making BIG money these days, can one expect an increase in the accident rate? Based on the studies findings, I have to assume that is safer to fly an airline on the skids which seems counter-intuitive. That said, numbers can be spun many many ways - ask any good accountant :-) !
Does this mean that when the airlines are experiencing financil difficulty, they deliberately cut back on safety features and standing operating procedures?
No, it says the opposite. When they're suffering financial difficulties they're safer than when they're hitting financial targets.

This study only addresses correlation, not causation.
@Haleem Ahmed
What I could see would be activities directly involving any "significant" expenses such as delaying overhauls and some PM (preventative maintenance) work to the next fiscal year. This would have a direct link to safety. I doubt if SOPs would be changed are they are engrained in the airline's base culture.
jim lou 0
I don't that any airline will deliberately cut back. I think that we are seeing is trying to stretch a low budget to cover more.

There is often pressures on getting planes back into service. This leads to rush jobs. It is easy to overlook things.


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