Attacks only partial cause of business woes

Many businesses and industries are blaming their current woes on the terrorist attacks of September 11.

I will not argue that the attacks had zero impact on business life as we know it, but I will argue that the events of September 11 were only a partial cause of the problems.

United Airlines' ex-CEO told its unions that UAL was a candidate for bankruptcy. The reason: September 11.

True, the airline lost substantial revenue when all flights were grounded by the Federal government on, and immediately after, September 11.

So did all airlines.

But they also didn't spend on between flight maintenance nor were there any fuel charges; a grounded plane doesn't need fuel. Indeed, from a maintenance point of view, the airlines had an excellent opportunity to perform required maintenance on aircraft that would soon be flying again.

Bottom line: United had problems before September 11.

Moreover, passenger slumps almost always occur after an aviation accident. While September 11 was a disaster of a magnitude never seen here before, the airlines should have had some financial reserves to cover temporary losses of passenger revenue. That is the cost of doing business and should have been included in every airline's Business Continuity plan.

How much is the business (function) worth

Which brings me to my point: listen to the Business Continuity planner when he or she presents a risk that "simply can't happen."

When a planner creates a plan for a mundane operation such as a production environment, business function managers are asked how much revenue is generated by the business function in

• an hour
• a day
• a week
• a month

Managers also are asked how long the company can survive without the regular revenue stream and how long it will take to "catch up" (eliminate any backlog) once "business as usual" is restored.

Another item that should be in the plan is a loss of the corporation's paper value ... the worth of its stocks and its bond rating.

This information goes back to management in one of the planner's deliverables; management has a responsibility to read and seriously consider the information. In the case of a public company, there is a legally actionable fiduciary responsibility to read and consider the information.

I will admit that even I never anticipated an airline shutdown of the duration we saw from September 11. I do consider loss of corporate value, but it the company is otherwise solid, I expect the company will recover; the market does, after all, go up and down according to the whims of a select few on Wall Street.

The "flip side" of the federal grounding is that the Feds are bailing out all the airlines. If other airlines are able to survive with this additional government handout, United should be able to survive - were it not in financial trouble before September 11, 2001.

I can't accept United's whine that September 11 was straw that broke its financial camel's back. Other airlines survived the disaster.

Part of the reason the whine falls on deaf ears is because I sit here wondering how it planned to survive work actions (and yes, I know the air line is employee owned - so was TWA). Work actions is a risk category that must be addressed in a comprehensive Business Continuity plan - what UAL had was a "work stoppage" this time caused not by unions but by the government. None-the-less, a work stoppage is a work stoppage - period.

The best thing that comes from United's plight is that other airlines can learn from its mistakes (and El Al's security).

United's mistakes - particularly in security which, then and still today are the individual airline's responsibility - are obvious. El Al's security procedures are less obvious, as they should be.

Terrorism - a sad fact of life

Terrorism has been a fact of life for centuries^*.

Terrorism in the air has been a fact of life for at least three decades. (Ships at sea are not exempt either, nor - as we sadly learned - are buses on the highways.)

To his credit, United's new CEO said he didn't come on-board to orchestrate the company's bankruptcy. Since the new man comes from a company that had, albeit as an on-the-side business, a Business Continuity practice, I hope he will have United's plan reviewed and updated to reflect the world as we now know it.

This isn't really a matter just of United Air Lines; this is basic Business Continuity planning for any organization, for every organization. Are there financial resources available - guaranteed available - to cover an extended loss of revenue?

As for the movie theatres?

I lived in Zefat^**, Israel and remember standing outside a theater as katusha's (long-range mortars) were fired at us from the other side of the nearby border. We stood in line, listening to the whine and the thud as the missiles fell short. When we got to the ticket window we paid and went inside and forgot about our ill-tempered neighbors.

It is not the threat of terrorists that turns most people away from the movie houses here, it is the price of admission, the prices of goodies at the snack counter, and the insult of the pre-feature advertisements that keeps theater seats empty.

And my head cold . . . APC's and GI gin. (You had to be there.)

NOTES

* Terror tactics have been recorded since at least 512 bce (War in the Shadows; Asprey, Robt. B, Doubleday, c 1975) Back to source

** Also known as Sefad Back to source