Category Archives: Corporate greed

Corporate Greed Comes Back to Haunt United Airlines

I have recently seen a number of opinions on social media where people have blamed the passenger who was dragged off of a United Airlines flight which was overbooked for causing the problem. These people seem to agree with the early statements of the company’s CEO, Oscar Muñoz, who claimed in a letter to United employees that his agents were “left with no choice” but to call airport security to remove a “disruptive and belligerent passenger” from an United Airlines flight.

I disagree wholeheartedly!  I put the blame on Oscar Muñoz, the United CEO, and the culture of corporate greed which permeates the company he leads.

In this case the company used the procedures they have in place to deal with situations where flights are overbooked. Let’s understand up front that airlines overbook flights for one reason and one reason only – money. They want to fly with the maximum number of passengers so they can make the maximum amount of money from each flight. They know that on every flight some people will not show up, will take a later flight, or they will cancel. So they overbook and all too often they get caught when too many people show up. In such cases, they usually offer incentives such as money, flights etc. Usually they get enough volunteers to take a later flight without too much incentive being offered. If they don’t get the volunteers they usually raise amount the incentive until they do.

Now, I don’t see anything wrong with overbooking in general if the airlines use the fair approach of offering incentives to deal with situations where to many people show up for a particular flight. That is as long as the incentives are real – i.e. they are not vouchers for another flight that can only be used 5% of the time.  If the airlines want to take risks to make the most money on each flight, it sees fair that they should have to pay out compensation on those risk don’t work out in their favor.

However in this situation, United raised the incentive up to $1,000 and there were no takers.  It was the last flight of the day to flight’s destination and apparently that amount wasn’t enough incentive wasn’t enough to convince any of the passengers decide to wait until the next day for a flight.

Now this is where the corporate greed kicks in.  Evidently there is a limit to how much United is willing to lose when their bet of overbooking goes against them. Following company policy, instead of raising the incentive until enough passengers took the deal, the United employees in charge instead opted to remove four random passengers from the plane.  One wasn’t cooperative.

Let’s put aside for a moment that the fourth passenger was roughed up and dragged off of the plane feet first.  Four people who had contracted with United for seats on that flight were kicked off of the plane. Imagine if you were one of those passengers.  Well, contrary to popular believe it isn’t federal law which allows airlines to do this, it the fine print inserted by the company’s lawyers on your ticket which no one bothers to read.

Later we learn that while the United Airlines employees on the scene used the company’s procedures for an overbooking situation to remove four passengers form the plane, they were clearing the seats not for other passengers, but for four of United employees.  Evidently these were crew members needed at the last minute at another airport and United was still not willing to pay passengers whatever it took to give up their seats voluntarily to accommodate them.  This is a prime example of pure corporate greed.

Well, sometimes attempts by greedy corporations to save a little money ends up costing them many times that amount in lost revenue, and this is one of those times.  Today, everyone seems to have a smart phone with a video camera and someone is sure to video someone being dragged off a plane. United, which already had one of the worst reputations in the airline business suffered a huge public relations blow when that video went viral on social media and then cable TV.  That bad PR is expected to translate into a millions of dollars loss in revenue.  Investors, anticipating that revenue loss dropped the price of the stock by 5.5% the next day equating to a loss of several hundred million dollars in market cap.

Apparently Oscar Muñoz eventually got the message loud and clear.  After displaying a dismissive attitude early on he was all apologetic today promising to change his company’s procedures for dealing with situations when flights are overbooked and never again to remove passengers from their seats involuntarily.

And let’s not forget the passenger, Dr. David Dao.  It was the video of him being dragged off the plane bleeding that drew national attention United’s mistreatment of theired customers.   The same company lawyers who wrote the fine print on the tickets which allow United to kick him off of the plane will be scared to death to face Dr. Dao’s lawyers in front of a jury.  Rather than have the incident remain in the news cycle, United is going to want to settle the expected lawsuit as quickly as possible, and for the reason it is going to cost them a lot of money.  The amount United Airlines will pay Dr. Dao to make his lawsuit go away will probably never be known.  However, I’ll estimate the amount in the million dollar range, but that is but still but a small percentage of the ultimate costs of company’s stupidity.

Incidents like this don’t happen to companies that treat their customers with respect.  They are financially successful because they respect their customers, not in spite of their customer first attitude. Company’s who care more about their bottom line than their customers often pay through the nose for their greed and arrogance.  United Airlines is the latest example of one of those companies.

Cajun    4/12/17