Abstract
This research investigates the impact of reputational events on the financial performance of airlines, with a particular focus on differential behaviour regarding the types of events—environmental, social, and governance (ESG), and the economic cycle, whether recessionary or expansionary. Based on a sample of 6288 events, our findings reveal a distinct pattern of depressed returns and increased variance in the aftermath of high severity and novel reputational events—more pronounced during periods of domestic economic crisis. Interestingly, our results show that reputational damage tied to environmental issues does not carry the same weight as those in social and governance categories. Further, contagion effects are identified within the industry, with significant spillovers observed during periods of stability and crisis. This research holds important implications for corporate reputation management, ESG investing, and regulatory policy, underlining the need for transparent communication and stringent oversight across the aviation industry.
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