Carnival Corporation: The Costa Concordia Crisis 1

2 Opening Thought “There cannot be a crisis next week. My schedule is already full.” Henry Kissinger

3 Carnival Corporation: The Costa Concordia Crisis Overview of Carnival Corporation & Costa Concordia Tragedy on the Water Carnival Responds Micky Arison Responds Public & Media Reaction In Defense of Micky Arison Aftermath Application to Page Principles Discussion Questions

4 Carnival Corporation is the world’s largest cruise operator Founded in 1972 by Ted Arison, one of the pioneers of the modern cruise industry; Currently led by Ted’s son Micky Arison (CEO and Chairman) Dual headquarters in Southhampton, Hampshire, England and Miami, Florida, U.S.A. Publicly-traded company - dual listed on the NYSE and LSE Carnival has ten brands and operates a combined fleet of 101 ships Carnival captured nearly 51.6% of worldwide cruising revenue in Carnival attributes its success to its “ability to manage brand autonomy, with each major cruise line maintaining separate sales, marketing, and reservation offices, as well as through the industry’s most aggressive shipbuilding program” 3

5 Carnival Corporation is comprised of ten brands

6 Costa Concordia was a luxurious floating city Carrying 3,206 passengers and 1,023 crew at time of incident Entered service on July 7, 2006 Construction cost of $570 million Maximum speed of 23.2 knots Luxurious amenities, including 1,500 cabins, 5 restaurants, 13 bars, jogging track, 3 pools, spa, and theatre

7 Tragedy on the water on January 13, 2012 Costa Concordia sets sail on Friday, January 13, 2012 for a seven- day cruise under the command of Captain Schettino At 9:45 pm local time, the Costa Concordia collides with a reef off the shore of the island Giglio, Italy At 10:44 pm, the ship comes to a final rest at a 70 degree angle partially capsized and sinking in 20 meters of water Order to evacuate ship is given and evacuation of passengers and crew commences In the end, 32 fatalities as a result of incident

8 Global media immediately begins to report tragedy Images of stranded passengers and a dramatic rescue operation are broadcast Captain Schettino is reported to have abandoned ship prior to the safe evacuation of all individuals, in direct violation of Italian maritime law (along with other stories of inappropriate behavior) Passengers begin to share details of a disorganized and frightful evacuation process in which crew members seemed unaware of the severity of the situation and incapable of expediting the evacuation Costa Concordia sank in a nature reserve, intensifying the severity of a potential oil spill

9 How would you have responded if you had been the CEO of Carnival Corporation?

10 Carnival Corporation responds via social media Carnival first responds via social media with a message offering thoughts of support for guests and crew of Costa Concordia Carnival issues official public statement on January 14 From January 13 – January 19, Carnival engages in dialogue via social media offering sympathy to the victims, thanking the rescue and support workers, and reiterating the safety of Carnival cruise ships On January 19, Carnival abruptly states that it is taking a break from social media to focus on the event and out of respect for those affected On January 24, Carnival resumes use of social media, thanking the company’s supporters

11 Micky Arison responds via social media Finds out about the tragedy via social media while in the Caribbean First responds via Twitter with a message of support for the victims on January 13 After initial post, silent until January 17 when he posts a public statement From January 17 to January 19, posts messages via social media promising continued support for the victims and a safety audit of all the company’s safety and emergency procedures On January 19, states that he will be taking a break from social media to focus on the tragedy On January 24, tweets about inaccurate media reports On January 27, attends a Miami Heat basketball game. On March 10, conducts his first public interview since the tragedy, defending his actions in the wake of the tragedy

12 Negative response to Carnival and Mr. Arison Public reaction to Carnival and Micky Arison’s apparent lack of involvement and inconsistent communications was swift and harsh -“ To give them [Carnival] an ‘F’ acknowledges they even took the test [on crisis management], they haven’t even shown up to take the test.” stated Stephen Fink, a crisis management expert 4 -“The response, or lack of it, by Carnival is disgraceful.” opined the president of the U.S.-based International Cruise Victims group 5 -“Where is Micky Arison?” asked the Wall Street Journal 6 -“Mr. Arison admittedly expressed condolences from the comfort of his 200-foot luxury yacht in the Miami area. But carefully crafted corporate PR statements go only so far.” stated Jim Walker, a leading maritime lawyer 5

13 But there are defenders of Micky Arison Micky Arison’s involvement and actions were defended by some -“He wants to distance Carnival from the disaster. If he talks, Carnival is speaking.” stated a longtime colleague of Mr. Arison 6 -Some noted that his management of the crisis was “in line with Mr. Arison’s management style, which is less hands-on than many chief executives. He gives great independence to executive teams running each of Carnival Corp.’s ten cruise lines…” 6 -Micky Arison defended himself as well, stating “No matter what I would’ve done, I think I would’ve been criticized. I did what I thought was right and in the best interest of the company.” 7

14 What side is right? What do you think of Carnival and Micky Arison’s responses to the tragedy?

15 Aftermath: Costa Concordia still a solemn reminder Costa Concordia still sits off the coast of Giglio a year after the tragedy 1-year anniversary memorial service held to honor victims Salvage operations have commenced but are not expected to be completed until September 2013 Final investigative report expected in early 2013 Trial of indicted officers, including Captain Schettino, expected to commence after release of report Lawsuits filed by both employees and passengers against Carnival Corporation and related parties

16 Application to Page Principles 1.Tell the truth. -In the wake of a crisis, it is absolutely imperative to tell the truth. The telling of the truth establishes a company’s character in the eyes of all stakeholders. Carnival Corporation and Mr. Arison practiced this principle in their social media posts and public statements. This helped to build credibility and trust between the different parties. Captain Schettino, on the other hand, did not tell the truth in the aftermath and he immediately damaged his credibility and became untrustworthy to all stakeholders. 2.Prove it with action. -Words are not nearly as valuable as action. It is important in the aftermath of a crisis to back up your words with action. Mr. Arison stated via a press release that Carnival was founded on the principle of “taking care of each and every one of its guests and employees.” The company backed up this statement by voluntarily paying for the lodging and transportation of passengers and employees in the days following the tragedy. However, Mr. Arison’s lack of action, including the absence of in-person appearances, caused individuals to question his sincerity. In the end, Mr. Arison’s lack of public action and the ensuing negative public backlash strongly reinforces the principle that public perception is determined 90 percent by action and 10 percent by words.

17 Application to Page Principles 3. Listen to the customer. -The days following the tragedy illustrate the importance of listening to customers. What were the needs of the stakeholders in the aftermath of the tragedy? The primary need was information and Costa Crociere listened to this concern. The company set up a specific web portal to provide real-time updates. Additionally, what were the needs of other customers not directly involved? Other customers not directly involved needed to be reassured about the safety of cruising. Carnival Corporation listened to these concerns via social media, illustrating that they were effectively listening to the concerns of customers. These are two examples of how certain parties listened to the customer and, as a result, acted appropriately. 4.Manage for tomorrow. -Managing for tomorrow means generating goodwill. Carnival and Mr. Arison had the opportunity to create goodwill through an effective management of the crisis. Additionally, it is important to prepare for the crisis that might occur tomorrow. If a crisis is already occurring and you are not prepared, then you have not effectively managed for tomorrow.

18 Application to Page Principles 5. Conduct public relations as if the whole company depends on it. -The future of Costa Crociere and Carnival Corporation was dependent on the effective management of the crisis. In this instance, public relations, crisis communications, and crisis management were literally crucial to the continuation of the organizations. The tragedy could have resulted in irreparable damage to both companies. 6. Realize a company’s true character is expressed by its people. -Employees are a reflection of a company’s character. Captain Schettino’s words and actions shaped Costa’s character in the days after the incident. His dishonorable abandonment of the ship painted a damaging picture of the captains of Carnival’s ships. It was important for Carnival to recognize that its employees were the true builders of the company’s character and to re-establish the company’s character through its employees.

19 Application to Page Principles 7. Remain calm, patient, and good-humored. -Despite the difficulty of remaining calm, patient, and good-humored in the wake of a crisis, it is absolutely imperative that executives remember that these characteristics will ensure the best communication. Had Mr. Arison made a public statement in the immediate days following the tragedy, it would have been vital that he appear calm and patient. If not, his leadership would have been questioned and the effectiveness of his communication would have been greatly reduced.

20 Discussion Questions – Case A 1.How do you rate the immediate handling of the crisis by the captain and officers of the Costa Concordia? How effective with the crisis communications onboard the ship during the sinking? What went wrong and what was effective? Do you find more fault with the captain, Costa Crociere, or Carnival Corporation? 2.You are Micky Arison. What is your crisis communications plan? You should be specific in your plan. How will you engage with the public, if at all? Will you communicate in-person or via social media? Will you travel to the site of the incident or will you delegate the response of the crisis to the executive team of your subsidiary, Costa Crociere? 3.Imagine you are the Chairman and CEO of Carnival at the time of the disaster. You have chosen to make a short public statement at a press conference the day following the disaster. What will you say in your public statement? 4.What would you communicate to your employees and passengers involved in the crisis? How would you communicate with other stakeholders, including the Italian government, regulatory bodies, shareholders, and your customers? What message would you want to convey to each stakeholder group? 5.What do you think Carnival Corporation should have had in place to effectively deal with this tragedy?

21 Discussion Questions – Case B 1.How would you rate Carnival Corporation’s response to the crisis? Read through Carnival’s social media posts and initial public statement. Were they effective in communicating about the crisis to all of Carnival’s stakeholders? What would you have changed about Carnival’s use of social media? 2.How do you rate Micky Arison’s response to the crisis? Did he make the right decision in not taking a public role in the management of the crisis? What would you have changed? 3.Should Micky Arison have flown to the site of the wreck? Why do you think he chose not to fly to the site? 4.Do you agree with Mr. Arison and Carnival’s decision to “take a break” from social media? Why or why not? 5.Do you agree or disagree with the critics of Micky Arison’s involvement in the communications and management of the crisis? Why or why not?

22 Closing Thought – Words of Encouragement “If you are going through hell, keep going.” Winston Churchill

23 Sources 1 Source for picture: The Atlantic, concordia/100224/ 2 “Market Share Statistics,” Cruise Market Watch, accessed on May 29, 2012, 3 “Mission and History,” Carnival Corporation & plc, accessed on May 29, 2012, ir.net/phoenix.zhtml?c=200767&p=irol-history. 4 “Carnival Fails Crisis 101 in Costa Response,” Fox Business, accessed on May 29, 2012, 5 “Concordia’s Invisible U.S. Owner Branded a ‘Disgrace’”, The Independent, January 25, “Carnival CEO Lies Low After Wreck,” The Wall Street Journal, January 23, “Micky Arison on Costa Concordia Accident: ‘I am Very Sorry It Happened,” The Miami Herald, accessed on May 29, 2012, speaks.html.