United draws crowds despite social media onslaught
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July 19, 2017
United Airlines may have just shown the world that social media rage doesn’t always matter.
Despite the intense public outcry the carrier suffered following a viral video of a bloodied passenger being dragged from his seat, United reported second-quarter financial results that surpassed Wall Street’s expectations. It also beat its competitors in on-time departures and arrivals during the April-to-June quarter.
Analysts point to a number of reasons people are sticking with United. Industry consolidation limits the number of options, said Mark Ahasic, founder and president of Connecticut-based consulting firm Ahasic Aviation Advisors. This is particularly true in cities like Houston where airports are dominated by one airline.
“There’s very little choice in airlines,” Ahasic said. Plus, he said, many people remain wedded to United because they don’t want to lose the benefits of its frequent-flier program.
Customers may not like flying United, added Henry Harteveldt, founder of San Francisco-based Atmosphere Research Group, but they fly it because it has the best schedule for where they live. Or they likely see the spectacles at United as isolated incidents that won’t affected them, Houston-based airline consultant Pete Garcia said.
So they continue flying on United.
By the numbers
$10 billion quarterly revenue, up 6.4% over 2016
38.2 million passengers, up 5%
$28 million employee bonuses for operational performance
Source: United Airlines
The quarterly passenger count rose 5 percent to 38.2 million. United’s Chicago-based parent company, United Continental Holdings, said its revenue rose 6.4 percent to $10 billion. Its earnings of $818 million also bested the same period a year ago.
To be sure, United faces challenges ahead but not just from public perceptions expressed on social media. Despite reporting solid results, its stock tumbled Wednesday following a weak summer forecast.
United president Scott Kirby predicted the passenger revenue United expects to bring in for each seat that flies one mile – a key performance metric – will be essentially flat in the third quarter that began July 1. He cited increased capacity in the industry and other factors.
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In contrast, rival Delta Air Lines has forecast growth of 2.5 percent to 4.5 percent for the third quarter in the same measure.
By day’s end, United shares had fallen to $74.24, down 5.9 percent. The price remains 54 percent higher than it was a year ago.
Despite the apparent disconnect between online howling and real-world economics, industry experts say companies like United must cope with technology that gives frustrated fliers increasingly powerful tools to air age-old complaints about uncomfortable seats, lousy food and lost luggage.
“There is no question that the combination of camera-equipped smartphones, social media and internet connections has transformed customer perception of the airline industry,” said former airline executive Rob Britton, an adjunct professor of marketing at Georgetown University’s McDonough School of Business. “That is a reality that every carrier must learn to deal with.”
CEO Oscar Munoz acknowledged as much in remarks to investors and media on Wednesday. He said United is revamping its social media team to be more agile in responding to events.
“The advent of social media in our space is particularly notable,” he said. “And I think the best thing that we can do and continue to do is to refine our customer service experience models, training and people.”
Munoz said policy changes made in response to the forcible removal of passenger Dr. David Dao from a United Express flight on April 9 have cut the number of passengers involuntarily denied boarding by nearly 85 percent.
“It really is more of a paradigm shift at our culture,” he said, “a mindset of our employees and our management.”
Still, United remains the object of particular scorn on social media.
“Your customer service people are a disgrace to humanity,” one flier recently posted on the carrier’s Facebook page. “No airlines are good,” ranted another. “But United, you are by far the worst.”
One expert called United, “the airline people love to hate for the moment.”
“Unfortunately, right now for United, the airline could cure cancer and bring about peace in the Middle East, and it wouldn’t get the credit it deserves for that,” Harteveldt said.
It’s unclear to what extent the negative publicity reflects on United’s culture or its customer base, experts say. It’s likely due to a mix of performance issues, perceptions and opportunism, they say.
Ahasic said United has training issues that “are part of a bigger cultural problem that the management there really needs to deal with.”
In a more recent case that stirred passions – in which United employees gave away the seat Shirley Yamauchi had purchased for her 2-year-old son – Ahasic said employees should have recognized that the child was large enough to have his own seat. Or at least asked about it.
The Federal Aviation Administration requires children 2 and older to have a seat because their parents may not be capable of holding them during severe turbulence. He said United needs to update its training and have periodic checks to make sure employees are following the procedures taught during training.
Following the Dao incident, United said it would provide agents with additional annual training. On Wednesday, a spokesperson said United is conducting “listening sessions” with employees to better understand their interactions with customers and how the airline can improve. This week, United started new training for frontline employees.
Harteveldt said United also should be more discerning about who it hires and who it keeps around.
“Are they good enough in terms of evaluating the performance of these frontline employees?” he asked.
That extends to management. Munoz needs to ensure the company’s leaders share his customer-centric vision.
Persistent customer service problems make United vulnerable to losing travelers to other airlines, Harteveldt said. Although he still feels Munoz is the right person to lead United, Harteveldt said large investors’ patience may start to wear thin.
Compounding the customer-service challenges is industry consolidation, Harteveldt said. Following various mergers, United, Delta, American and Southwest Airlines now control more than 80 percent of U.S. domestic flights. Fewer airlines now share the bad publicity.
“United just seems to be the industry’s drama queen of the moment,” Harteveldt said.
It’s also the airline that gave a presumably hefty settlement to Dao, consultant Garcia said. Some travelers may simply be waiting for their own payout or moment of notoriety.
“Everybody has their phone ready to take a picture, to cash in,” he said.
To combat being hammered on social media, United needs to be candid and aggressive in its own social media communications, said Bruce Hicks, who spent nearly 40 years involved with airline communications and is now the owner and CEO of public relations consulting firm The Alliant Group/Houston.
In the future, United should do a better job monitoring social media and responding as an issue begins to go viral, said Erica Ciszek, assistant professor of integrated strategic communication at the University of Houston’s Jack J. Valenti School of Communication.
She also recommended empowering employees to make good decisions rather than adhering solely to a playbook.
The United spokesperson said the airline’s social media and customer care teams are working together more closely than ever to identify and resolve issues.