Flight Centre’s COVID-19 response was a flight plan to failure

In the midst of the COVID-19 crisis, Flight Centre flip-flopped on its cancellation fee policy, closed hundreds of stores, and forgot to tell its staff they were out of work. Here, Managing Outcomes' Tony Jaques explains why the travel agent needed to refer back to the lessons of Crisis Management 101.

The travel industry has been massively hit by the coronavirus pandemic, and it’s an evolving calamity. However, one company seems to have set the bar for how not to respond to a crisis.

When the virus first started to impact his business, Flight Centre CEO Graham Turner announced he would close up to 100 stores – not a surprise given the flood of similar announcements. But it was a surprise to his store staff, who reportedly only heard about it after he told the media. And the statement was strangely equivocal. Turner declared: “It would have happened anyway … the coronavirus just makes it that we’ll shut them a little bit sooner than we would have otherwise.”

Why say that? No expression of regret or empathy. Then he went on to explain: “We’ve got $1.3 billion in cash on our balance sheet, so we’re feeling fairly strong.”

Imagine how motivating that was to his struggling frontline staff having to face the public. In a personal message to customers he wrote: “These employees are people that we do not want to lose. We hope to bring as many of them as possible back on board when conditions improve. They are being stood-down out of necessity, not removed from our business permanently.”

Flight Centre’s Graham Turner said store closures ‘would have happened anyway’

A fair sentiment. Yet just weeks later Flight Centre announced it would “permanently close” 428 stores and would seek $900 million in fresh equity and debt. So much for “feeling fairly strong.” And again, no regret or empathy for staff or customers. Just a message aimed to calm the market.

But these tone-deaf messages were overshadowed by the company’s mishandling of its cancellation policy. In the face of public outrage over a $300 cancellation fee, the company justified the cost by explaining the work involved. As travel writer Quentin Long told Channel Nine: “If you look at the terms and conditions in the contract there is a charge in there, and it’s as plain as day. But in terms of public opinion, they may have something to answer for.”

They certainly did have something to answer for. With public outrage spreading, an online petition, and a pending class action lawsuit, Flight Centre announced a $600 “cap” on cancellation fees. But it was too little too late.

Just days later, with legal action threatened by the government competition regulator, Flight Centre finally capitulated and agreed to abandon the cancellation fee. Hopefully they were not expecting any praise. The headlines said it all. ‘Flight Centre waives cancellation fees after consumer watchdog threatens legal action‘; ‘Flight Centre bows to fee storm, avoids ACCC lawsuit‘; ‘Flight Centre caves on cancellation fees‘; ‘Flight Centre buckles and drops cancellation fees‘.

Respected travel commentator Martin Kelly concluded that what he calls “Flight Centre’s money-first approach” was doomed to failure in the court of public opinion. Moreover, the company’s backflip was an inevitable outcome which could have been avoided by a realistic, consistent strategy from the start.

Even in the face of an evolving crisis, the Flight Centre experience reinforces some important lessons.

  • Demonstrate empathy and regret for your staff and customers. The crisis is not all about you.
  • Don’t keep changing your position or offer half-hearted compromises.
  • Don’t try to defend what has become indefensible.
  • Don’t wait until the threat of penalties before agreeing to do what’s right (even if it costs a reported $80 million)

Sadly, every one of these principles is no more than Crisis Management 101. Meantime, latest reports suggest the class action customer lawsuit is still proceeding. Watch this space.

Tony Jaques is the director of Issue Outcomes


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