United Continental Holdings, the holding company for United Airlines, is suffering a serious social media backlash in light of footage showing a passenger been forcibly dragged from one of the company’s planes on Sunday. The situation has been covered in great detail after the company confirmed it requested volunteers to catch a later plane due to overbooking. Apparently when one particular passenger was chosen at random to leave the plane he refused and law enforcement officers forcibly ejected him resulting in a bloodied nose.
Down 6% in early trading
As we speak United Airlines shares are down nearly 3% although this is something of a recovery from the pre-market fall of 6%. This equates to a fall of around 3% for the week so far reducing the company’s market capitalisation by $600 million. However, many investors believe that this is only the start of the downtrend caused by social media footage which does not cast the company in a good light whatsoever.
What has upset many people is a lack of compassion from the company and a refusal to apologise for the forcible ejection which occurred in front of young children. Indeed the company’s chief executive officer Oscar Munoz has added further fuel to the fire by suggesting the customer had been “disruptive and belligerent” when social media footage would appear to suggest otherwise. The fact that the customer in question turned out to be a doctor will likely mean that the unsavoury episode with carry on for some time to come.
Investor sentiment
Whether this unfortunate incident will have a material impact on the company’s long-term prospects remains to be seen. In the short term there is no doubt that investor sentiment has turned against the company and there could be some form of boycott in the short to medium term. Historically similar episodes have tended to burn out fairly quickly but the constant attention given to the footage via social media continues to fan the flames of concern. If we were to see any significant fall in passenger numbers this would require some serious PR work from the company.
It is puzzling as to why the chief executive officer of the company has apparently attempted to smear the customer when the company is under such pressure. If United Airlines had simply raised its hands and admitted it was at fault then in all likelihood the episode would be over. However, whether or not the company was at fault in any way the footage does not cast the staff and the company as a whole in a very good light.
Dangers of social media
Social media can both be extremely positive and extremely negative for a company’s long-term reputation. Modern day businesses are very keen to use social media as a way to bolster their reputation but as we have seen with United Airlines this can also work the other way. All we need now is for the authorities to get involved or some kind of legal case to drag on and this could have a serious detrimental impact upon the company’s long-term reputation.
In all fairness it is unlikely that United Airlines is the only airline to have used such strong-arm tactics in the past but unfortunately for shareholders the company is carrying the can for this industrywide strategy.