Principles of Communication: 7 Takeaways from United Flight 3411

COMPANY OVERVIEW

United Airlines was founded on March 28, 1931 by the United Aircraft and Transport Corporation. It has now become one of the top three airlines in the world. It operates out of nine different airline hubs located in Chicago, Denver, Guam, Houston, Los Angeles, Newark, San Francisco, Tokyo, and Washington. United airlines as well as United Express average together approximately 4,500 flights per day to 337 different airports across five continents. In 2016, United transported 143 million customers, which was an increase from 2015 where 140 million customers chose this airline to travel. United is growing as a company, with advantages being that they operate in a limited competition field, with only a small number of large commercial airline options.

COMPANY HISTORY   

United strives to provide excellent customer service. On their website, the United Customer Commitment describes, “Our goal is to make every flight a positive experience for our customers. Our United Customer Commitment explains our specific service commitments so that we can continue a high level of performance and improve wherever possible. The commitment explains our policies in a clear, consistent and understandable fashion. We have detailed training programs and system enhancements to support our employees in meeting these commitments, and we measure how well we meet them.”

They also pride themselves in being an extremely diverse company. Chief Executive Officer Oscar Munoz states, “Our fundamental purpose as a company is to connect people and unite the world. That is why we strive to ensure the United family is as diverse as the communities we serve around the globe, representing every background and belief, origin and orientation, color and creed. Our commitment to diversity and inclusion is more than just a core value; it creates excellence, sparking creativity and innovation, and fostering a welcoming environment where talented people thrive.”

However, United Airlines has endured quite a few unfavorable customer service incidents within the past five years.

In 2012, Iraq War veteran Jim Stanek was traveling on United Airlines. He was diagnosed with brain injury due to the war, and severe PTSD. Upon exiting the flight, he was harassed by UA customer service representatives. They asked Stanek if he was mentally challenged, and kicked his service dog. When Stanek complained, the airline replied with a public statement. “We are reaching out to the customer directly to discuss the events he described.” A petition was formed on www.change.org with the intent on obtaining 500 signatures to persuade United to treat veterans with PTSD more appropriately and with more care. The petition reached 434 supporters.   

In early 2015 another incident took place, catching the public’s eye. It concerned a Muslim chaplain who was also the director at Northwestern University. Tahera Ahmad, age 31, was refused an unopened beverage during a routine flight. She had asked for the unopened diet coke due to hygienic reasons. After being refused the beverage with the explanation that she might use the “pop top” as a weapon, a man in the aisle next to her was handed an unopened can of beer. Ahmad felt as though the discrimination was due to her appearance, for she was wearing a Muslim headscarf, a hijab. When she asked a fellow passenger if he had witnessed the discrimination, he replied with rude and hateful remarks, degrading her in front of the entire aircraft. United announced a public apology, denying they knew the full story and calling it a “misunderstanding”. No written or personal apology to Ahmad was issued. She replied “I simply did not expect United Airlines to dismiss the unwarranted and unfortunate rude behavior, discrimination and hateful words but rather acknowledge their accountability and role in the painful experience,” The public responded on Twitter, with the hashtag #unitedfortahera. Many pledged to boycott the airline.    

Another episode in 2015 was including a family traveling with their 15 year-old autistic teenage daughter, Juliette Beegle. Upon boarding the flight, Juliette’s mother asked a flight attendant for a hot meal for her daughter. “She will only eat hot meals”, she explained, “I don’t want her to get frustrated and have a meltdown.” The flight attendant refused. She informed him again that the child was special needs, and would start panicking without food. The attendant returned with rice, Juliette ate, and was clam. All of a sudden, an announcement came over the aircraft that they would be making an emergency landing due to a “behavioral issue”. Upon landing, the police arrived and did not understand the situation when they found Juliette quietly watching a video. The captain then insisted that the family leave the plane, stating that he didn’t feel comfortable traveling with Juliette. News coverage was immediate and national. On social media platform, Twitter, over 10,000 comments were made attempting to boycott United Airlines. Beegle filed a complaint, and United responded with, “We are investigating the situation.”

Fast-forward two years, and United Airlines appeared all over social media once again. On a March 2017 flight, two teenage girls were banned from the flight due to their apparel. The girls were wearing leggings, and United informed them that the clothing was not permitted for “pass travelers” to wear aboard. United stated that spandex or Lycra, such as leggings, is violating the pass travelers dress code. Pass travelers fly for free. After the father was permitted to board the flight wearing shorts, the public reported a discrimination issue, calling the airline “sexist”. United replied about the pass travelers dress code, “When taking advantage of this benefit, all employees and pass riders are considered representatives of United,” the airline said. “And like most companies, we have a dress code that we ask employees and pass riders to follow. The passengers this morning were United pass riders and not in compliance with our dress code for company benefit travel. We regularly remind our employees that when they place a family member or friend on a flight for free as a standby passenger, they need to follow our dress code.”Using social media, a boycott was again issued towards the airline, with many vowing they would never again use their services.

Timeline of Events

April 9, 2017 – flight 3411 set to take off from Chicago going to Louisville was successfully boarded when four United Airlines’ employees needed to get on that flight. There were no volunteers to change their flight for an $800 compensation so a random selection process was enacted. Dr. David Dao, a passenger who was randomly selected, refused to leave his seat when told he was selected. After several attempts to get Dao to leave, the flight staff called the Chicago Aviation Security Officers. They arrived and pulled Dao out of his seat as other passengers recorded the incident. Dao, once removed from his seat, ran to the back of the aircraft in continued resistance.

April 10, 2017 – United CEO Oscar Munoz made the company’s first response to the incident. Munoz stated that the company was apologetic for having to “re-accommodate” those passengers and made no specific reference to Dao.

April 11, 2017 – Customers and social media knowledge of the incident spreads and threats of a boycott starts. Munoz makes another statement in which he says United has “full responsibility” for what happened on 3411.

April 12, 2017 – Munoz appears on “Good Morning, America” and says, “This can never — will never — happen again on a United Airlines flight. That’s my premise and that’s my promise.” Later that day United offered full refunds to every passenger on flight 3411.

April 13, 2017 – Dao, his daughter, and his lawyer held a press conference in Chicago in which there were strong hints that Dao will file a lawsuit. That same day United said they will “make this right,” and made claim that the company and Munoz have reached out to Dao to apologize.

April 25, 2017 – New footage from United Flight 3411 has been released on the internet and news. Showing Dr. David Dao calmly walking onto the flight, and his wife was right behind him. Once taking their seats, the United crew announced the flight was overbooked and pick Dr. David Dao name was randomly picked. In which he was told to give up his seat, and refused to do so.

April 27, 2017 – Dao’s attorney announces that Dao and United have come to a large cash settlement. He claimed that this was the right thing since United took full responsibility of the incident and did not seek to blame others.

May 2, 2017 – Congress held a meeting with all U.S. Airlines on how to go forward with their customer service experience and that it should be better going forward.

Stakeholders

Looking at the top 10 people who have a stake in United Continental Holdings Inc., ticker marker (NYSE:UAL), ever since the incident of the United Airline flight 3411 they haven’t bought more of the stock to hold their ground from not going under anymore further. As you can see they never sold the stock after the incident either, the stockholders are waiting for the right time to get back their original investment so they won’t lose more money. The biggest shareholder of this company is the king of investing, Warren Buffett. Berkshire (Warren’s firm) bought about 24.42 million United shares during the fourth quarter, to bring his stake to 28.95 million shares, or 9.2% of the shares outstanding, according to the latest filings with the Securities and Exchange Commission.With United’s stock falling to 81 cents, or 1.1% on Tuesday, Buffett could be losing about $23.5 million, if his holding remained unchanged. At the intraday low of $68.36, the stock was down $3.16, or 4.4%, and Buffett was losing $91.5 million at the time.

As you can see from the chart, from the incident on April 9th 2017, their stock really hasn’t moved much down, and right after it moved back up to restore back some of their market cap. The incident ended up wiping $250 million dollars off of their market cap, I would have to say they probably got back at least half of it already from the incident. Shares were down more than 4% on that day in early trading Tuesday, but they rebounded slightly later in trading session. As the SEC filed its quarter earnings and financial statements for UAL, the company did better than any other quarter since the stock was at an all time high this year and quarter. We have yet to see what their earnings per share will look like next quarter but this quarter was the lowest earnings per share that they have had in awhile at 31 cents. Overall for the stockholders, this event from United flight 3411 hasn’t gone into full effect yet to hurt the their stock and their reputation.

Financial Impacts

Sunday April 9th 2017, passenger David Dao was forcibly removed from an airplane in Chicago. This incident tells the world that United Airlines has failed economics 101. This failure occurred when policies and procedures were in place several years ago. United failed to get four passengers to volunteer off of the plane, what they did is they ordered four passengers off the plane. They were starting at a $400 voucher then upped it to $800 voucher. Some people would have held out for thousands of dollars before volunteering to get off the plane. At some price after the $800 that they stopped at, volunteers would’ve been found in the thousands of dollars range. Also most people don’t understand that these vouchers are less valuable than cash. For that reason they are less valuable for the consumer is that by anyone who has redeemed for frequent flier miles. United should have switched the voucher to cash, I think this incident would have never had happened then. The benefit for the company to raise the voucher price is that this event would have never had happened. From a financial standpoint the money that they offered is like pennies to them, the money isn’t worth to keep to hurt their reputation more.

The executives that offered higher prices would place the airline over a barrel (which would barely affect them, financially): passengers could hold United hostage for unreasonably high compensation. We all know everyone has to be somewhere, United didn’t think it through that the passengers had to be somewhere important also. The Airline had this urgent matter for their employees to be in Louisville. Those urgent matters for the passengers could be a wedding, job interview, family visit, or etc. but all the passengers all have lives with important activities too. The mistake that United first made was to say that it had an urgent need for its employees to board the plane, but they were very unwilling to offer higher compensation to get those four volunteers to leave the plane.

Prior to the incident, United Continental Holdings Inc. stock was at an all time high and was lower in the previous years. United hasn’t had a big dip in their stock since 2016 when they were trading at a low of $42 a share. While in this case, it has affected United significantly April 9th wiping $250 million off of its market cap and just about $800 million off of its value. It is still worth about $21.8 billion, and doesn’t seem to be going anywhere in the near future. It doesn’t exactly seem to be that United is struggling to stay afloat.

United Airlines is the 3rd largest Airline in the industry with 84,000 employees. Last years revenue for United was at 36.5B, and profited $7.1B. Revenue in the first quarter was $8.4 billion, an increase of 2.7% year over year. Ever since 2011, United hasn’t gotten over 100,000 passengers; they have been steady for the past 6 years at just about an average of 95,000 passengers a year. United Airlines does have the 3rd biggest fleet in the world also. They serve over 60 countries, with being the 2nd United States airline company in serving the most countries behind Delta Airlines.

Overall we have yet to see what the financial impacts will be later on down the road for United Airlines. One reason why we haven’t seen much impact yet for the financial sector for United, besides the value from their stock going down, for United is the first quarter just ended. By the time the second quarter ends, their revenue won’t top expectations and same with their earnings per share. The reason why they won’t reach expectations is from all the boycotting from consumers will hurt them down the road now, resulting in a decline of revenue and value in the company.

Industry/Government Stakeholders

The Airline Industries framework consists of marketing, product, the customer, competition, public companies, and economics (revenues and costs). The market for airlines consisted of US commercial flights, cost-safety-growth, and consolidation. When it comes to getting the customers business, time and amenities is what brings business to that specific airline offering the best price and comfort. Due to competition it drives the cost lower for the customer’s money, in which making the airline industry very hard to get into and be a competitor. United Airlines operates more 4,500 flights a day to 337 airports across five continents. Just in the first quarter United Airlines operated more than 1.6 million flights carrying more than 143 million customers.

The Airline industry can be separated into four categories by the U.S. Department of Transportation: International, National, Regional, and Cargo. International is 130+ seat planes that can take passengers just about anywhere in the world. Companies who are in this category typically have annual revenue of $1 billion or higher. National can usually have seats up to 100-150 people and have revenues between $100 million to $1 billion. Regional are companies with revenue less than $100 million that focus on short-haul flights. Cargo airlines are airlines that generally transport goods and services around a country or even the world. Looking at geographic areas that an airline targets is also very important. More market share is better for a particular market, and also important at the same time to stay diversified. The airline industry is extremely sensitive to costs also such as fuel, labor and borrowing costs.

On May 2nd, 2017 United Airlines CEO Oscar Munoz faced pointed questions as Congress examines their customer service by U.S. airlines and how air travel can be improved. The hearing by the House Transportation Committee comes amid worldwide outrage sparked when a passenger was dragged off a United flight after refusing to give up his seat to a crew member. The April 9 incident ignited a debate about poor service and a lack of customer-friendly policies on U.S. airlines.

Transportation Committee Chairman Bill Shuster of Pennsylvania said the hearing will give lawmakers “an opportunity to get much-needed answers about airline customer service policies and what is being done to improve service for the flying public.”. United moved to head off criticism last week by reaching a settlement with passenger David Dao and issuing new policies designed to prevent customer-service failures. United President Scott Kirby also joined Munoz at the hearing, along with top executives of American Airlines, Alaska Airlines and Southwest Airlines.

Public Reactions

When news broke of David Dao’s forceful removal from United Flight 3411, the social media reaction was immediate and widespread. The story was picked up and picked apart by people framing it as part of a larger sociopolitical problem, be it racism, capitalism, unnecessary use of force, international tension, or more broadly as a fundamental issue of ethics. As more details of the story came forward, they were repeated, analyzed, disputed, and defended by a variety of commenters ranging from ordinary people on social media to celebrities and political leaders.

Many people chose to frame the story as one of racial tension and discrimination, focusing on Dao’s Asian-American heritage and placing the incident into the larger context of American anti-Chinese sentiment, possibly exacerbated by various comments from President Trump during his 2016 campaign that painted China as a major economic threat to the United States. Some Asian-American leaders questioned whether the process that United used to select Dao for removal was truly as “random” as they claimed, or whether his race may have played a role in the selection.

More broadly, the racial dynamics of the situation were analyzed in the context of black/white relations in the US, as in one opinion that compared media reactions to black victims of police violence to victims of Asian descent and described how the incident was being used as a lens through which various communities saw evidence of racial injustice. The incident was compared to a similar one that took place on a Delta Airlines flight in December, just four months previous, in which a black woman passenger was dragged off the plane for failing to comply with orders. The question of why one incident went viral and received so much attention while the other barely even registered in the public consciousness may have come down to differences in public attitudes toward Asian and Black Americans.

Others focused more philosophically on the ethics of the situation, as in one blog which explored the possible motives and consequences of Dao’s decision not to leave his seat when asked, a decision which led to his being terribly injured. The blog concluded that regardless of Dao’s motives or reasons to make that decision, it inspired positive changes to United’s policies and is therefore to be commended.

Aside from public reactions that placed the incident into a larger social, political or ethical context, many also focused on United’s conduct specifically and how they as a company contributed to the problem and individuals’ calls to boycott or otherwise sanction the company. Jokes about United’s brutal treatment of Dao went viral, including a clip from the movie “Airplane!” in which a hysterical passenger is slapped, shaken, and beaten by a long line of people; the clip was accompanied by a caption saying “United Airline Training Video.” Other images and jokes continued trending on social media for weeks after the incident.

In the weeks following the event, two other bizarre incidents were reported as having occurred on other United Airlines flights, and each time news media and social media linked the more recent events to the Flight 3411 incident. On April 13, a United passenger was stung by a scorpion that fell from an overhead luggage bin. In United’s immediate response, they were careful to portray themselves in a positive light, saying “Our flight attendants helped a customer who was stung by what appeared to be a scorpion on a flight last week.” A few weeks later, a record-breaking rabbit being transported on a United flight died of mysterious causes.

News reports of both of these new incidents reiterated details of David Dao’s removal, implying that the three events were somehow connected or revealed a disturbing trend in United’s mishandling of passengers and their possessions. When viewed as a series of connected events rather than as isolated incidents, they present an image of United as an airline that makes little or no effort to ensure their passengers’ safety. The proximity of these events, as well as their strangeness, made it easy for social media users and news media outlets to repeat them and add them to the snowball of social commentary revolving around the David Dao incident.

All the news and buzz has resulted in United’s name becoming increasingly linked to images of violence, danger, racial tension, and disregard for health and safety. While most of the commentary focuses on the incident as part of a larger social context rather than as a problem with United Airlines specifically, it has nonetheless resulted in changes to United’s reputation among its passengers and the public in general. Whether the airline sees a dramatic change in their financial position or market share as a result of this attention, their reputation among many has surely been tarnished. If United wishes to conduct its public relations as if their whole enterprise depends on it, in adherence to the Page principles, it is in their best interest to take this public discourse seriously and make a concerted effort to address any and all concerns about safety on their flights.

 

New Policies

In response to the flight 3411 incident, United has made several policies changes to avoid incidents in the future. Since the over-booking of flight 3411 was caused by employees trying to get on with very short notice, United has created a new policy that states employees must request flights a full 60 minutes before the departure time. United has also pledged to limit the use of law enforcement. They have decided that law enforcement will only be called in when safety and security are at risk. To avoid not having any volunteers change their flight when overbooking occurs again, United has bumped up its compensation limit to $10,000 to provide great incentive for a customer to change flights. They have also added that if a has already been seated the only thing that can make them give up their seat involuntarily is a safety or security risk. United also plans to do whatever it can to reduce overbooking altogether so that there is less opportunity for customers to be put in the positions to decide whether they want to change flights or not. They have decided the best way to do this is by establishing a customer solutions team that will assist gate agents. The team will come up with creative ways to assist the customer in unexpected circumstances. The agents will be taught to provide alternative travel plans that include transportation is problems are to occur. Training for the agents will start in August and will provide them with the tools they need to assist customers on the front line. Along with this United will also create an automated system selection system that will gauge each customer’s willingness to give up a seat for compensation. In addition to the seat change compensation, United has also decided to guarantee customers $1,500 on lost luggage, or more if proper documents prove that the lost amount is valued higher than that. So overall United will train its employees to handle frontline issues more effectively and efficient while offering customers higher compensation for inconveniences.  

Litigation

On April 30, 2017 in Chicago Dao along with his daughter and lawyer Thomas Demetrio went in front of the press and announced Dao’s plans of filing a lawsuit. Demetrio is a well renowned aviation lawyer who has handled several lawsuits regarding personal injuries on airplanes. United, who did not have much leverage in winning this case, paid Dao a settlement on April 27, 2017. In Demetrio’s statement to the public regarding the settlement he stated “Mr. Munoz said he was going to do the right thing, and he has.” According to him United took full responsibility for the incident and did not put blame on others for what happened. The monetary amount of the settlement has yet to be disclosed.

Competitive advantage

The passengers are the backbone of airline industry; it is customers loyalty to the brand that every airline desires. The concern is that passengers are divided into several categories and certain group of people (like, first class passengers) are given more importance than the other. Current United Continental’s tagline quotes, “Fly the Friendly Skies”, but is it actually friendly with “all customers”? The airline industry works under oligopoly market, where very few firms controls the whole market and practice immense power over the customers. Recent incident of United airline, flight number 3411, where due to the overbooking of United’s flight a random passenger name David Dao was dragged out of the airplane. Such behavior not only put a negative impact on the brand image but also outraged the common public. Regardless of United’s treatment with its passenger, it is not surprising that the company regained its economically strength. Seems like airlines mistreatment to its passenger does not stop it from generating hefty revenue. What happens when an airline puts their image on stake in an oligopoly market? In this case, Two-thirds of United’s revenue is generated through first class passenger. It gives the company a “profitable” advantage. It is in United’s benefit to treat these passengers right, as they cannot afford to lose the source of big profit. Customer experience of non-premium passengers is neglected, given they are so unprofitable. It seems that customer experience is outweighed by the profits. It is not the services that United seeks to provide but the source of revenue.

Customers has very less power to be able to influence the market as they have to travel from one place to another regardless of any condition. In this case, competitors play a crucial role, as United’s bad image is in competitor’s interest. It is an advantage of competitors over United airline’s competitive advantage. In Airline industry, almost every company has the identical services and thus they do not have any notable advantage over each other. This is the reason why Brand awareness and cost structure matters a lot in the airline industry, which make it preferable for customer.

As United received negative comments and critics from dissatisfied customers, the competitors saw an opportunity and reminded the people that there are more companies that provide better services than United. One example of such company is Delta who recently responded to the tweets of outraged public, reminding their presence. The biggest competitor to any company can be one which can provide good value service at low rate. The United Airlines already faces threat from low cost carriers offering services at discounted prices. Making a “drag” mistake in a market with constant competition is proven dangerous for the whole company. Competitors of United Airlines, domestic and international, did not take long to take an advantage of United’s destroyed public relations and bad reports. Airlines like Royal Jordanian mockingly tweeted, “We are here to keep you #united Dragging is strictly prohibited”, while trying to gain advantage over United’s negative reviews.

7 Takeaways from United Based on Page’s Principles of Communication

Arthur W. Page developed seven principles of communications that enhances the corporate understanding of the company’s actions and how they were received by the public. These principles are: tell the truth, prove it with action, listen to stakeholders, manage for tomorrow, conduct public relations as if the whole enterprise depends on it, realize an enterprise’s true character is expressed by its people, remain calm, patient and good-humored.

  1. Tell the truth: An overbooked flight on United Airlines 3411 on April 9, 2017 had no volunteers to give up a set for exchange of a monetary value. As a result, the airlines went to automated system that randomly selected a passenger to be removed for a later flight. David Dao, a doctor from Kentucky, was selected. When asked to leave, Dao refused stating that he had business that could not be delayed. This promoted officer James Long to use force to remove Dao. In the process of pulling Dao out of the seat, Dao lost his balance and hit his face on an armrest. Dao’s attorney claims that he suffered a broken nose, a concussion, and the loss of two teeth.
  1. Prove it with action: Videos taken by several passengers surfaced which show the incident. The public did not react well to these videos at all because they depict a defenseless and weakened Dao being dragged off the plane. In the video viewers can also hear the screams coming from Dao, which can be unsettling to some. As a result, United as suffered public image issues since.
  1. Listen to stakeholders: Following the event stocks dropped as much as 6.3% by April 11th. This dropped $1.4 billion from the $21 billion market cap. This did not last long at all though. The next day the stocks recovered the majority of its losses opening up at .15% higher than the closing cost that previous Monday. Wall Street analysts predict that regardless of the public response to United’s poor handling of the situation, stocks were likely to remain unaffected.
  1. Manage for tomorrow: Since the flight was overbooked because unexpected United airline employees wanted to fly last minute, United has changed its policies so that staff and crew must check in at least 60 minutes before a flight to avoid this issue in the future. Other policy changes include increased training and new system to more efficiently solve front line issues.
  1. Conduct public relations as if the whole enterprise depends on it: The CEO of United, Oscar Munoz, publicly apologized to Dao and his family, but this was not received well by the public because he apologized for having to “re-accommodate” Dao. Later, other statements by Munoz included him saying that the company takes full responsibility for the incident.
  1. Realize an enterprise’s true character is expressed by its people: Munoz backed his employees stating that they were only acting on policy and procedure. Munoz has also stated that the company takes full responsibility for what happened. Refunds were offered to the passengers of that flight.
  1. Remain calm, patient and good-humored: Overall, United’s response was not deemed appropriate by the public. Especially the humor of the response when Munoz apologized for having to “re-accommodate” Dao. This was seen as insincere in the public’s eyes.

 

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