United Airlines: Profitable but plagued by public relations disasters

Key Points
  • The death of passenger's dog in an overhead bin caps 11 rough months for United that began with passenger being dragged off a jet.
  • The airline is in the midst of an aggressive expansion plan.
Why United is in the pet transporting business
Why United is in the pet transporting business

United Airlines is embroiled yet in another public-relations fiasco when a passenger's dog died after it was stowed in an overhead bin.

The dog's owner said a flight attendant insisted the bag, which contained the black French bulldog, be stowed in an overhead bin. An airline spokeswoman said the flight attendant didn't hear or understand the woman that the dog, named Kokito, was in the bag, calling the puppy's death "a tragic accident."

Now, the airline is once again playing defense against a backlash on social media, where consumers called to #boycottunited.

The puppy's on-board death is the latest in a string of fiascoes that began last April when passenger David Dao was violently dragged off a regional jet serving a United route to make room for commuting crew. The video of the bloodied passenger circulated worldwide.

Animal issues

The death of the French bulldog struck a nerve with the public. Some wrote that animals don't belong in airplane cabins and others called United heartless for allowing the incident to happen. People for the Ethical Treatment of Animals weighed in, saying "it is up to each of us to keep our companion animals safe" and that "no trip is that important" as to endanger an animal.

The Department of Transportation said its investigating the incident and is in touch with the U.S. Department of Agriculture, which enforces the Animal Welfare Act.

United transports more animals than any other U.S. carrier. Last year, it transported 138,178 animals. Eighteen of them died and 13 were injured, an animal incident rate of 2.24 per 10,000 animals, higher than other carriers. Twenty-four animals transported by U.S. carriers died in total. Those figures do not include animals carried in the cabin and several of the deaths were due to pre-existing conditions, a United spokesman said.

The airline's passenger pet problems didn't end with the death of the French bulldog on Monday. A United customer on Wednesday said the airline flew her 10-year-old German shepherd to Japan instead of Kansas City, Missouri.

A new kind of challenge

The social media disaster is a relatively new kind of scar for United as it is for competing airlines that have confronted the viral posts of in-cabin conflicts.

It comes at a time when airlines have posted a steady stream of profits, a shift from years of boom-and-bust cycles that resulted in a decade of megamergers among them. The industry even won over Warren Buffett, who shunned airline investments for years after a bet on US Airways soured. Berkshire Hathaway is now among the top shareholders in each of the four major U.S. airlines.

The large mergers (United combined with Continental Airlines in 2010) and a plunge in fuel prices in mid-2014 has helped fuel record profits. U.S. passenger airlines are enjoying their longest streak of profitability in at least four decades, according to data from Airlines for America, an industry group. United Continental Holdings, the airline's parent, just posted its fifth-consecutive year of profits.

But profitability clearly doesn't prevent such disasters as Kokito's death. And the sheer size that airlines have grown to doesn't help them avoid such nightmares, said Samuel Engel, who heads the aviation group at consulting firm ICF.

"First, you have a workforce that is dispersed across the globe and often unsupervised. Second, you need to balance giving employees rules to follow while allowing them enough personal discretion to be human beings with their customers," he said. "It's like a game of telephone: The larger the company, the harder it is to project consistent culture and behavioral norms throughout the organization."

The airline has spent nearly a year trying to stop customer service problems from spiraling out of control like the Dao incident. This year, it launched a training program that aims to teach some 30,000 employees about safety, efficiency and caring. Called core4, the program includes role-playing exercises in which employees work out customer service problems and then discuss their approaches.

Some employees are skeptical and said the company's emphasis on making sure planes arrive on time reigns supreme.

"When there's an issue, management isn't interested in the 'why' of what happened," said a flight attendant who spoke on the condition of anonymity because she was not authorized to talk to media. "You get charged with the infraction and points are added to you file ... period. It's a sad reality now, maybe there's hope that it'll change."

Demands on all sides 

These passenger incidents are a challenge for CEO Oscar Munoz, who took the reins after his predecessor Jeff Smisek resigned in September 2015 amid a federal corruption probe. Munoz, who had been tasked with improving the airline's image, had a heart attack and a transplant shortly after taking the role. He returned the following year.

Just over a year later, a string of public relations disasters occurred, starting with Dao's dragging last April.

Munoz apologized repeatedly after botching an initial mea culpa and was forced to explain overbooking and other airline policies before several, angry lawmakers. United launched more robust customer-service training, which aimed to give front-line employees more power to make decisions on their own, before it followed up with a new course this year.

But other passenger incidents arose, many of them amplified on social media. Weeks after the Dao confrontation, a traveler's giant rabbit named Simon died after a United flight from London to Chicago. In August, a Texas family's spaniel died after a lengthy tarmac delay on a trip from Houston to San Francisco.

Labor and Wall Street

These incidents aren't United's only challenges.

The airline has had to play defense with Wall Street too, where investors have grown impatient with the company's performance compared with its large peers — American Airlines and Delta Air Lines.

Delta's shares are up about 19 percent over the last 12 months, and American's have gained about 31 percent. United's are about 3 percent higher over the past year.

Investors sent United tumbling stock due to its handling of low-cost competitors last fall and later, balked at an aggressive expansion plan, some fearing an impending fare war. The airline's shares fell around 2.6 percent on Wednesday after the dog incident to close at $70.74. Prices were flat Thursday.

The airline also is facing tensions with its own workers. United pilots bristled at the latest expansion plan, fearing the company could outsource additional service to regional airlines, whose pilots and crew are paid less than they are. That came just as pilots and the company are in the early stages of contract negotiations.

Earlier this month, United's president, Scott Kirby, said he would shelve a controversial bonus plan after employees expressed outrage. The airline wanted to get rid of bonus program that rewarded employees for meeting certain targets in favor of a lottery system, with bigger prizes but fewer recipients.

Reduced passenger choice

United has a long way to go to improve customer sentiment. United came in behind Alaska Airlines, American and Delta in the J.D. Power airline satisfaction survey published last May.

But will a boycott materialize? Because of years of consolidation, many passengers won't have a choice since the airline has such a large presence in its hubs in Chicago, Newark, New Jersey, and Houston, just as other big carriers dominate in their hubs. Passengers often prioritize low price above all else. And commercial airplanes have been flying fuller than ever as demand continues to grow.

The puppy's death won't ruin United's business, said Eric Schiffer, chairman of Reputation Management Consultants. It will simply create ill will toward it.

"People will fly them but with resentment," he said.

Correction: This story has been revised to reflect the rate 2.24 per 10,000 animals is United's animal incident rate, not the death rate.