To bargain or not to bargain: Airlines, legitimacy and nonmarket strategy in a COVID-19 world

Abstract

Nonmarket strategy - strategic actions directed at influencing the governmental, legalregulatory, and societal environment of business - is a key factor in an airlines' competitive position yet remains relatively under-analyzed in aviation research. The COVID-19 crisis has created a heightened role for nonmarket strategy and our paper argues that in deciding how to respond to a variety of policy measures introduced by governments, airline executives need to take into account the perceived legitimacy from the flying public of their response to governments. Our paper presents an integrative framework to analyze airlines' nonmarket response to COVID-19 governmental policy measures. Using a two-by-two matrix, we identify key conceptual links between industry's nonmarket response, the health impacts of a given policy measure as well as its economic costs for the airlines. Our study concludes that, unless economic stakes in a given policy measure are high, airlines do not risk active bargaining with governments over the content of that measure. Such bargaining could trigger a delegitimation cascade: a self-reinforcing process in which key stakeholders reassess their view of airlines' conduct and the industry's broader societal impact. Bargaining is pursued when economic impacts of policy measures are high, and in that case, the choice between cooperative and adversarial posture towards the government depends on the health impact of a given policy.

Keywords: Airlines; Bargaining; COVID-19; Legitimacy; Nonmarket strategy.

Fig. 1

Nonmarket strategic approaches of airlines in response to governmental Covid-19 measures.