The influence of aviation disasters on engine manufacturers:
an analysis of financial and reputational contagion risks
Akyildirim, ErdincORCID: 0000-0003-0102-4111, Corbet, ShaenORCID: 0000-0001-7430-7417, O'Connell, John F. and Sensoy, AhmetORCID: 0000-0001-7967-5171
(2020)
The influence of aviation disasters on engine manufacturers:
an analysis of financial and reputational contagion risks.
International Review of Financial Analysis, 74
.
ISSN 1057-5219
One of the key sub-sectors in the aviation industry includes that of engine manufacturers, who
have long led technological advancement and the battle to reduce airline carbon emissions. However, these same companies have been susceptible to a number of issues that have been central to
international airlines due to higher costs and competition pressures. When an aviation disaster occurs, there is widespread allocation of blame and responsibility, which has left engine manufacturers
exposed until the true cause is identified. This can generate many issues with regards to reputational damage and ability to generate finance. We set out to analyse such interactions over time and
region. Our results indicate that engine manufacturers have had to contend with substantial income
and financial leverage issues in the aftermath of a major aviation disaster, irrespective of whether
they have been identified as a causation factor in the incident itself. Further, we clearly identify
that there exists an average one day loss of 1.64% in the immediate aftermath of aviation incidents.
Substantial corporate instability is found to persist without the company being in any way responsible for the incident. Shortly thereafter, contagion effects increase as speculation diminishes and
more factual evidence arrives. The role of social media is examined as a potential contributory factor