United Airlines, (UAL) CEO, Oscar Munoz has taken a beating on social media lately. On Sunday, April 9, 2017, a passenger was forcibly removed from an overbooked plane leaving Chicago’s Ohare International Airport.
The footage was posted on social media and the video went viral. As a result, United Airlines stock dropped 4%, wiping out a 500 million dollar market cap.
Initially, Munoz and his team, defended the United Airlines team, stating that his company was investigating the incident and that his employees went “above and beyond.” Munoz said he was “upset” to hear about the news, but that the “facts and circumstances are still evolving, especially with respect to why this customer defied Chicago Aviation Security Officers the way he did,” according to AP.
Audra Bridges, a Louisville inhabitant, posted the video on Sunday night to Facebook and gave her record of the flight Sunday night. Travelers were told at the entryway that the flight was overbooked and United offered $400 and a lodging stay. According to Bridges, not enough volunteers stepped forward and the offer was expanded to $800. Still there were not enough takers. At that point, Bridges stated, an administrator got on the plane and said a computer would choose four individuals to be removed from the flight. One couple was chosen first and left the plane, she stated, before the man in the video was approached by authorities.
I don’t personally know Munoz. We both share the same MBA program at Pepperdine, but beyond that, we don’t have much in common.
But, I think there is more to blame than to simply toss the CEO aside. We live in a free marketplace. United’s agreement of carriage gives them the capacity to continue expanding its offer cost until it got enough volunteers.
If United had increased their offer, eventually, there would have been a point within the market where several passengers would rush to surrender their seats. Whatever that price is anyone’s guess: It could have been $1,000, $2,000 or even $5,000. But what we do know from basic economics is that there would be a price point that would get the results.
The U.S. Department of Transportation said it is reviewing the incident. “While it is legal for airlines to [involuntarily] bump passengers from an oversold flight when there are not enough volunteers, it is the airline’s responsibility to determine its own fair boarding priorities,” the DOT said in a statement.
I agree that the CEO should be held accountable, but I also believe the short – sighted, outdated business practice of ejecting passengers with some airlines needs to be re-examined.
It is a business practice embedded into the airline industry’s culture. JetBlue Airways promotes that it doesn’t overbook flights, yet the carrier still saves the privilege in its agreement.
Delta Air Lines considers check-in requests and loyalty status, and which traveler is selected to sit in. The airline transporter says it makes special cases for individuals with disabilities, unaccompanied minors and individuals from the military.
American Airlines says it denies boarding based on order of check-in, but will also consider “severe hardships,” ticket cost and status within the carrier’s loyalty program.
Social media is not going anywhere. Airlines and corporate culture need a basic review of economics.
Pay the price now to ejected passengers or risk of having PR fiascos, and falling stock prices.