United Airlines and Reputation Risk

As United Airlines hits a completely avoidable yet violent bout of reputation turbulence over its aggressive customer disservice, we must ask how one of the world’s largest airlines could suffer such a terrible self-inflicted wound. The now infamous case, involving the hapless Dr. David Dao, who was violently dragged in an unconscious state from a United flight at Chicago’s O’Hare airport, has captivated the media cycle, which oscillates from very serious calls for boycotts, to comical parodies of the airline’s alleged customer hostility. What is not funny, however, is how quickly this tragic case revealed a tone deafness from Oscar Muñoz, the CEO captaining United through this turbulence, whose initial response quite literally added insult to injury and did little to assuage the problem for United’s customers, employees and shareholders - let alone for Dr. Dao.

Further compounding United’s woes, the company’s market value entered rapid descent, wiping away $250 million since the scandal emerged, highlighting the growing economic cost of reputation risk. When a simple apology – combined with some “blood money” to prevent inevitable lawsuits – would suffice, United’s response has angered many of its stakeholders, elevating crisis response efforts to a board-level priority. This is particularly challenging, because the global airline industry is a fiercely competitive market and regaining lost customers will be a difficult task for the airline. Unlike Volkswagen’s emission-rigging scandal, which was carried out under the cover of darkness and from which Volkswagen has reemerged as the world’s largest automaker (although battered and largely due to sales in China), United’s recovery will likely be a more protracted affair. This is in part due to the violent, visceral and videoed nature of the scandal, which will be hard to forget.

As many cases of excessive force have taught us, when people carry smartphones, they represent a new breed of citizen journalists and an important source of forced accountability. The screaming and outraged passengers on United’s flight 3411 may have only shown the world one perspective of this case, skipping the critically important initial appeals for Dr. Dao to deplane. However, in the eyes public opinion – and to many investors – and in no small measure because of the fumbled public relations response, United will need to show greater contrition and accountability as the crisis unfolds. At this point, the only task at hand is to create distance between the event and “market memory.” United’s board may also weigh asking their CEO to step down, which may seem excessive given that his apparent peccadilloes are a poor apology, a distinct lack of empathy and low situational awareness.

CEO’s would do well in remembering that sincerity, contrition and empathy are all free. In a crisis, the faster they emerge along with genuine accountability, the faster the crisis will pass reducing economic, social and environmental impacts. Indeed, in some examples, enlightened leaders gain from scandals by proving that values matter most when they are least convenient. Vincent Herbert, CEO of Le Pain Quotidien, a casual bakery and restaurant chain, offers valuable guidance for how to handle a crisis with both empathy and accountability, while at the same time reinforcing the chain’s business model. The well documented “mouse in the salad” incident of 2011 was potentially as calamitous as United’s Dr. Dao debacle. However, Mr. Vincent owned the issue outright, reinforced their pesticide-free business model – in which the occasional field mouse is a business risk – and did so without vilifying their customers. Critically, unlike United, Le Pain Quotidien does not enjoy a fortress balance sheet to shield it from surprise events.

For an airline that carried 143 million passengers in 2016 to 339 domestic and international destinations, bad things are bound to happen. Passengers will be inconvenienced, luggage will be lost and, as in the sad case with Dr. Dao, there will be a violent exception to the rule that the vast majority of air travel is risk free. Coming out quickly and empathetically with these facts, while calling for accountability in this case, may have spared United a preventable crisis and Mr. Muñoz the public’s ire and quite possibly his job. United’s 87,800 employees and all their stakeholders deserve a second chance, or as the boycotters will soon learn to avoid such a systemic airline may be impossible. In this appeal, United would be wise in remembering that inviting customers armed with smart phones to fly the friendly skies should be free of violence and physical harm, lest the airline inflicts grave harm to its reputation, morale and financial results.

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