United Airlines (UAL) didn’t just have a massive public relations disaster in which a paying passenger was dragged off a plane—it had a public relations disaster right before an earnings call, a public forum where the CEO and other executives can be put on the spot.
First quarter earnings reported yesterday were strong, beating expectations of sales and earnings, but if CEO Oscar Munoz’s quote in United’s press release is any indication, the scandal is still overshadowing all else and the company is still in alarm mode. The quote from Munoz has a single sentence about the financial performance, and the rest related to “taking full responsibility” for the “incident.”
Stock price was down around 3% on Tuesday.
On the call, the tone was conciliatory, with Munoz putting aside celebrations for another edition of his apology tour.
“The incident from flight 3411 has been a humbling experience,” said Munoz. “We will make the necessary policy changes to make sure this never happens again.”
Previously, much of the public sentiment found Munoz’s statements following the incident lacking, as the CEO referred to the forceful ejection that put the paying passenger in the hospital as “re-accommodation.” On Twitter, many called for the CEO’s own “re-accommodation” and created “re-accommodation” and other overbooking memes.
Since then, Munoz and United have changed their tone significantly, promising to review its system of overselling, find ways to incentivize volunteers, and to discontinue the use of law enforcement to force customers off planes. Munoz said review will be shared with the public at the end of April.
Investors don’t like United’s recent strategy, but it’s good for their recent scandal
While the call began with a nod to the recent controversy, the subject shifted sharply in the question and answer section of the presentation, as analysts questioned United’s strategy of increasing its flights to small and mid-size cities—its market share, in the eyes of analysts.
United’s President Scott Kirby countered to probing on this decision by saying that it wasn’t an attempt to get market share, but the additional capacity was a return to United’s “natural share.”
“[This is about] restoring natural market share to a position it was in the past,” said Kirby, “not trying to invade someone’s hub.”
There is a link between last Sunday’s dragging incident to the increased capacity and flights to smaller cities. United’s increasing of these flights may not be great for margin, but it’s good for flyers who want more flights, and passengers who get bumped. If another flight is coming, the stakes are lowered if another is coming in a few hours instead of the next day.