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United shares slide as PR nightmare catches up with investors

  • Shares of United Continental slipped Tuesday.
  • The airline's stock had climbed nearly 1 percent Monday, not reacting much initially to the internet's response to an ugly video of a passenger being dragged off an overbooked flight.

Shares of United Continental fell by 2 percent Tuesday as outrage over Dr. David Dao of Kentucky being dragged off an overbooked flight finally caught up to the stock. The shares were among the worst performers in the S&P 500.

The airline's stock, however, climbed nearly 1 percent Monday, not reacting much initially to the internet's response.

Videos of the incident went viral on social media and prompted CEO Oscar Munoz to apologize for having to "re-accommodate" customers after a two-hour delay. The confrontation happened on a United Express flight operated by Republic Airways.

Munoz issued a second apology Tuesday afternoon in which he said the company "will fix this." "It's never too late to do the right thing. I have committed to our customers and our employees that we are going to fix what's broken so this never happens again," he said. The company's stock traded off the lows of the day amid the second Munoz apology.

Overnight, though, even more graphic videos showing Dao being dragged off the flight, covered in blood, triggered further outrage on social media on China.

Although the doctor's identification as ethnic Chinese has not be confirmed, the top trending topic on Tuesday on microblog Weibo, China's take on Twitter, was #UnitedAirlinesforcespassengeroffplane.

"This went to the next level when the CEO and the [United] executives began to respond," said Andy Swan of LikeFolio, which monitors social media for financial applications. "They threw gasoline on a fire."

Instead of viewing what transpired on a United plane Sunday evening as a "one-off" incident, now United's shareholders are questioning the competence of management in handling crisis scenarios, Swan said, hence why the stock is starting to drop.

"This is an enormous deal for shareholders," he said.

The apology note issued by CEO Munoz on Monday and then his letter to employees that evening almost "restarted the crisis," Swan added, saying he watched mentions of United skyrocket on social media for a second and a third time.

Munoz doubled down in the letter to employees, saying those involved "followed established procedures." He called the passenger "disruptive and belligerent." In one of the videos, the passenger said he was a doctor and had to return home to treat patients on Monday.

"When management stepped out — and [they did it] in most offensive way possible — you started to see negative mentions surge," he said. "[United] invited some really negative stuff on themselves."

—CNBC's Huileng Tan contributed to this report.

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