Oscar Munoz really shot himself in the foot yesterday when brushing off the forced removal of a valid paying passenger by staff wanting his seat and somehow trying to deflect blame for the incident back onto the passenger by calling him belligerent and disruptive (not in that order).
No matter who you are or if you hold United shares or not it is likely that “what an idiot” might have crossed your mind after seeing that statement from the United CEO and then looking at the video footage. The result of that statement today was an outpouring of support for the passenger across all major western news services – and why not too, I would not stand for someone trying to drag me out of my seat for a stewardess in a rush and neither would any other self-respecting person. United shed close to $1bn from its value at one point yesterday before shares recovered to close 1% down. But as investors see value and plough back in, maybe a thought should be spared for why some investors bailed and why short plays are increasing across all US airline majors today.
Now the matter is being discussed on Capitol Hill, it is likely that the next phase of this saga will see mention of the USA following the lead of Canada in looking to ban overbooking on flights. If this comes to pass it should not be underestimated, the US majors and all major domestic airlines will suffer greatly from any such move by US legislators. United might just have got the ball rolling on the biggest corporate self-harming incident since Gerald Ratner got up in the Royal Albert Hall and declared the goods being sold in his shops to be “total crap”. United was starting to turn the corner and catch-up with the other US majors after falling behind, now in its all-important core US domestic market, we should expect a significant dent in bookings at the very least, but make sure you watch this space regarding overbooking.
The Canadian federal government is planning to introduce new legislation this spring to address the problem of travellers being bumped from flights. New bumping rules will be included in an air passenger bill of rights to establish clear, minimum requirements for compensation when flights are oversold or luggage lost.
Will the USA and other countries now follow the Canadian lead? We shall see, but lobbying has begun on Capitol Hill and the Trump administration might just take this up as a quick populist victory to curb airlines and prevent any such incident reoccurring.
United has dropped a real clanger this week and it might in the end cost Oscar Munoz his job as pressure on him continues to build. Munoz, after issuing a statement yesterday “fully backing” his staff has now back peddled and issued the following statement:
“The truly horrific event that occurred on this flight has elicited many responses from all of us: outrage, anger, disappointment. I share all of those sentiments, and one above all: my deepest apologies for what happened. Like you, I continue to be disturbed by what happened on this flight and I deeply apologize to the customer forcibly removed and to all the customers aboard. No one should ever be mistreated this way.
“I want you to know that we take full responsibility and we will work to make it right.
“It’s never too late to do the right thing. I have committed to our customers and our employees that we are going to fix what’s broken so this never happens again. This will include a thorough review of crew movement, our policies for incentivizing volunteers in these situations, how we handle oversold situations and an examination of how we partner with airport authorities and local law enforcement. We’ll communicate the results of our review by April 30th. I promise you we will do better.”
Best of luck to Oscar Munoz and United senior staff – can they turn it around?Date: April 12, 2017