Airline Responses to the COVID-19 Collapse: Applying Learning to an Unprecedented Crisis

Abstract

Organizational learning is a result of knowledge creation, retention, and transfer. An unanswered question in learning theory is whether learning occurs when firms face an unprecedented and urgent crisis as such events leave little time for knowledge creation, and they complicate knowledge transfer and retention. The COVID-19 pandemic is an example because it saddled firms with consequences ranging from liquidity crises to worsened strategic position, and it required urgent responses. Operational and strategic responses had to be made without recent experience from similar situations and with high uncertainty about the duration and severity of the crisis. This paper extends learning theory by developing an argument that such extreme events allow knowledge transfer and retention that current learning theory would not predict. The new predictions are tested on the airline industry, which was severely affected by the mobility restrictions imposed by states. The findings show organizational learning even when facing an unprecedented crisis, but different learning rules were used for reversible and irreversible actions, suggesting that decision makers search for adaptive choices and are mindful of their strategic consequences. Funding: This research received funding from the Hoffman Global Institute for Business and Society. Supplemental Material: The online appendix is available at https://doi.org/10.1287/stsc.2023.0083 .