United Airlines Incident Provides Management Case Studies for Business Schools

Published with Permission by:
Lint, James R., “United Airlines Incident Provides Management Case Studies for Business Schools”, Online Career Tips, 14 Apr. 2017, Web, http://onlinecareertips.com/2017/04/united-airlines-management-case-studies/

By James Lint
Faculty Member, School of Business, American Military University
Senior Editor for
 In Cyber Defense and Contributor, In Homeland Security

Last Sunday, security officials dragged paying passenger Dr. David Dao off United Express Flight 3411 from Chicago to Louisville, Kentucky. As a result of his rough treatment, Dr. Dao was hospitalized. The incident, which passengers filmed on their smartphones, escalated into a public relations scandal for United Airlines.

By Tuesday, United’s stock fell 1.1%. This plunge wiped out $255 million of the airline’s market capitalization.

The market decline amounted to a major pay cut for United’s Chief Executive Officer, Oscar Munoz, based on his stock options and other future payments.

[Related: It’s Time to Improve Passenger Protection Laws for Overbooked Airlines]

United’s Handling of Situation Likely Caused Its Stock Decline

United’s handling of this incident is partially to blame for the stock decline. Munoz failed to promptly acknowledge the injuries Dao suffered and the stress to Dao and his wife caused by this incident.

Munoz also did not offer a sincere apology as a result of this incident at first. Instead, Munoz insisted that the security officers had followed proper United procedures. A few days later, Munoz finally issued a public apology.

In the meantime, Dr. Dao has hired two lawyers to proceed with lawsuits against United.

Solutions to the Practice of ‘Bumping’ on Aircraft

One solution for a company like United would be to offer better incentives. Perhaps the airline could increase the incentive to get off the plane from $1,000 to $2,000. MarketWatch reports “United’s revenues come to about $36 billion a year, or roughly $100 million a day.” Surely, United can afford to sweeten the pot when asking a passenger to take the next flight.

Another suggestion would be not to use law enforcement to remove passengers like Dr. Dao. What charges could officers have pressed? Trespassing would seem like one possibility. But airlines spend a lot of marketing money to fill seats. Telling a passenger that he is going to be removed because he is trespassing seems counterproductive to the goal of filling seats.

Management Lessons to Be Learned from United Airlines’ PR Disaster

While companies never publicly admit to mistakes for fear of lawsuits, Munoz’s initial statement violated a key element of leadership: Leaders take responsibility and fix the problem. Munoz’s numerous contradictory press statements is a case study of what management should not do in a crisis situation or how to make a complete mess of a public relations program. Public relations studies of United’s handling of the affair will go on for years.

Dao’s Treatment Could Also Impact United’s Future Markets in Asia

Dao’s claim that he was targeted for removal because he is Asian could adversely affect United’s business in Asia especially. Many future passengers have probably seen the video of this incident on social media, which could harm any plans United might have for expansion in Asia.

All in all, this was not a proud moment for the United States or for United Airlines.

United Airlines Has Provided an Excellent Management Case Study

As an instructor in the School of Business, I find this incident to be an excellent teaching event for students to discuss and learn from United’s mistakes. As sad as this case is, there are a plethora of lessons to be learned from Dr. Dao’s case, such as how good managers should act and how to properly manage a public relations crisis. These learning experiences are applicable for college freshmen as well as corporate chief executive officers.

About the Author

James R. Lint recently retired as the (GG-15) civilian director for intelligence and security, G2, U.S. Army Communications Electronics Command. He is an adjunct professor at AMU. James has been involved in cyberespionage events from just after the turn of the century in Korea supporting 1st Signal Brigade to the DHS Office of Intelligence and Analysis as the first government cyber intelligence analyst. He has 38 years of experience in military intelligence with the U.S. Marine Corps, U.S. Army, government contracting and civil service.

Additionally, James started the Lint Center for National Security Studies, a nonprofit charity that recently awarded its 45th scholarship for national security students and professionals. James was also elected as the 2015 national vice president for the Military Intelligence Corps Association. He has also served in the Department of Energy’s S&S Security Office after his active military career in the Marine Corps for seven years and 14 years in the Army. His military assignments include South Korea, Germany and Cuba, in addition to numerous CONUS locations. James has authored a book published in 2013, “Leadership and Management Lessons Learned,” a book published in 2016 “8 Eyes on Korea, A Travel Perspective of Seoul, Korea,” and a new book in 2017, Secrets to Getting a Federal Government Job.”