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United Airlines CEO takes apology to investors after passenger dragging fiasco

LiveMint logoLiveMint 18-04-2017 Michael Sasso

Atlanta: United Airlines chief executive officer (CEO) Oscar Munoz, pivoting from a public apology to face investors, assured Wall Street that the carrier would rebound from the uproar that followed the dragging of a passenger off one of its planes.

“This will prove to be a watershed moment for our company, and we are more determined than ever to put our customers at the center of everything we do,” Munoz said in a statement Monday. “We are dedicated to setting the standard for customer service among U.S. airlines, as we elevate the experience our customers have with us from booking to baggage claim.”

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The comments were the CEO’s first to investors since the 9 April incident, when security officers forcibly removed David Dao from a flight after he refused to give up his seat to make room for airline employees. Munoz, who also announced a first-quarter financial performance that topped expectations, is trying to maintain momentum for his plan to catch up to Delta Air Lines Inc. and American Airlines Group Inc. in profitability and operational performance.

“United said the right things regarding its need to upgrade its customer service and should be able to move past its PR nightmare,” Jim Corridore, an analyst at CFRA Research, said in a note to clients in which he reiterated a “strong buy” rating on the shares.

The shares rose less than 1% to $71.20 before regular trading hours Tuesday in New York. The company plans to hold a conference call Tuesday to discuss the financial results.

Earnings performance

Munoz’s sober tone contrasted with a better-than-expected financial performance. Adjusted earnings of 41 cents a share beat the 38-cent average of analyst estimates even as higher fuel and labour costs caused profit to fall from a year earlier. Sales were $8.42 billion, topping the $8.38 billion that analysts anticipated.

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Passenger revenue for each seat flown a mile will rise by 1% to 3% in the current quarter, the Chicago-based airline said. That would be the first increase since the first three months of 2015.

“We are most interested with how each region is performing,” Cowen & Co. analyst Helane Becker wrote in a note to investors. “We suspect the underlying improvement is being driven by the domestic and Latin American markets. It will be interesting to see how the Pacific and Atlantic are performing, given both regions have been drags” on profit.

Domestic capacity will climb by as much as 5.5% in the second quarter while total capacity will rise by a maximum of 4%, United said.

‘Humbling experience’

Munoz said Dao’s treatment was a “humbling experience” for United and accepted full responsibility.

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The CEO’s initial reaction drew scorn worldwide last week when he called the incident “upsetting” and apologized for having to “re-accommodate” the passengers who were asked to leave the plane. Hours later he told employees that Dao had been “disruptive and belligerent” after being asked to leave the plane, based on early reports.

He finally went on ABC’s Good Morning America with a more contrite message and promised a full review of United’s policies regarding oversold flights.

Dao suffered a concussion, broken nose and two lost teeth, and “probably” will sue the carrier, his lawyer, Thomas Demetrio, said at a press conference last week. Bloomberg

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