Thursday, February 02, 2012

Carnival CEO Using Intriguing Strategy to Protect Brand in Costa Concordia Ship Crisis

By Richard E. Nicolazzo

Nearly three weeks after the $538 million, 950-foot cruise ship Costa Concordia struck rocks off the Italian coast, shock waves are still being felt in the executive suites at Carnival Corporation & plc in Miami, the publicly-traded company that owns Costa Crociere SpA, operator of the ship.

The accident, which came at the height of the booking season for winter cruises, put a spotlight on an industry giant that generates $16 billion in annual revenue and has a market capitalization of $18 billion.

Like any senior executive in a crisis, Carnival chairman and CEO Micky Arison had a critical decision to make when the accident occurred on the evening of January 13:  Should he act as spokesperson, or should communications be delegated to someone on the ground in Italy?

Given the magnitude of the situation and potential brand damage, the stakes were exceedingly high.

Arison, who is known as a delegator in that all 10 Carnival-owned brands operate autonomously, stayed true to his management style when the role of spokesperson went to Pier Luigi Foschi, chairman and CEO of Costa Cruises, the operating company that runs the Costa Concordia.

Foschi, it turns out, was no shrinking violet when he threw Captain Francesco Schettino under the bus and blamed him for charting an unauthorized course right onto a rock ledge near the island of Giglio.
So far, 17 bodies have been recovered, with another 16 still missing and presumed dead. Due to dangerous conditions on the ship, the search for bodies was called off on January 31.

The essence of Arison’s communications strategy may lie in the complexity of Carnival itself. The company operates more than 100 ships, but they’re spread across 10 different cruise lines. Some of the other more well-known lines are Holland America, Princess Cruises, and Cunard. This is a huge business. The Wall Street Journal reported that as many as 200,000 guests and 70,000 employees travel aboard Carnival ships on any given day.

Arison’s personal fortune is also tied to the business. He owns nearly a third of outstanding shares and was recently ranked as the 75th richest American by Forbes, with $4.2 billion in assets.

With a worldwide customer base, the crisis communications challenge was to separate the Costa Concordia from direct association with other brands in the Carnival fleet.

In short, what would be the best strategy to avoid “contaminating” the Carnival brand with the unfolding disaster in Italy?  Carnival has 101 ships, but only 15 sail under the Costa brand, which was acquired 25 years ago and is headquartered in Italy.

In my view, Arison’s crisis management strategy is worth studying. During the first few days following the disaster, here’s what happened without Arison making one public appearance:

  • January 14: Statement by Arison, “…this is a terrible tragedy and we are deeply saddened…we want to express our deep gratitude to the Italian Coast Guard and local authorities and community members who have gone to extraordinary lengths to assist in the evacuation of the ship and provide support for our guests and crew.”
  • January 16: Company discloses financial consequences of accident, stating the impact on 2012 earnings for loss of use of the vessel is expected to be approximately $85-$95 million or $0.11-$0.12 per share, with additional expenses still not known.
  • January 17: Another Arison statement offering “heartfelt condolences to all of those families affected by this tragedy.” Emphasizes that he and his senior management team “have been in continuous contact with the Costa executive team in Italy.”
  • January 18: A third statement, “…I give my personal assurance that we will take care of each and every one of our guests, crew and their families affected by this tragic event.”
  • January 19: In another key strategic action, the company announces that Carnival and its nine other leading cruise lines around the world will perform a comprehensive audit and review of all safety and emergency response procedures across all of the company’s enterprises. Captain James Hunn, a retired U.S. Navy Captain, will head the initiative.
These actions, in particular naming Captain Hunn, show a thoughtful, yet decisive, strategic approach to crisis management from behind the scenes.

Arison controls the message via company statements and press releases, but avoids the cameras and scrutiny by the press if he stands up in public. Having Foschi, the Italian-based executive, on the front lines also keeps the issue “European-centric.”

Images of Wreck are Relentless

The Costa Concordia crisis has another dimension that likely prompted Arison to remain low-key. With the ship being in such a precarious position (resting on a ledge with a 200-foot drop nearby) and leaking fluids, the broadcast and print images are relentless.

The salvage company estimates that it may take up to a month to remove 2,000 tons of fuel from the vessel’s below-deck tanks.

After that, there’s the issue of what to do with the ship. The New York Times recently reported that no object this size has ever been towed in the ocean. Many years ago, a car-carrying vessel ran aground and was cut in four pieces for scrap. That ship was only one-fourth the size of the Costa Concordia.

A recent Bloomberg news report indicated it may take up to 10 months to remove the ship. This means that the Costa Concordia, or parts of it, will still be visible when the summer tourism season comes around. This is not the sight the cruise line wants passengers to see as they approach Tuscany.

The course Arison has taken is intriguing in today’s business landscape. The conventional crisis playbook would likely recommend that the CEO personally take control. In this instance, Arison has yet to make a public appearance and talk about the Costa Concordia. 

So far, there doesn’t seem to be much consumer outrage directed at Carnival. Costa Crociere agreed to pay 11,000 euros ($14,500) to every passenger who was on the ship, plus reimburse expenses, including the cost of the cruise. Wall Street has been a bit less relenting, with the stock now trading at just over $30 a share, well off its 52-week high of $47.

At the end of the day, Arison’s fiduciary responsibility is to all stakeholders, but especially shareholders. To get the stock climbing again, Arison may have to shift his strategy a bit and assume a more public posture on Wall Street and with the general public.

Time will tell if Arison’s strategy to stay out of the limelight worked.

Meanwhile, until the ship is salvaged and the agonizing images go away, Carnival has public relations issues that present new and ongoing challenges in the field of crisis management.
# # #

Richard E. Nicolazzo is Managing Partner of Nicolazzo & Associates, a strategic communications and crisis management firm headquartered in Boston, Mass.
Joe M. Grillo, Partner, and Linda C. Harvey, Client Services Director at Nicolazzo & Associates, contributed to this blog.




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