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Wednesday, September 13, 2017

Strategic CSR - United (follow-up)

As a follow-up to the Newsletter I sent last semester about United's treatment of its passengers (Strategic CSR – United), the article in the first url below reinforces the idea that all the airline is doing is providing the level of service for which we are willing to pay:
"On Tuesday, the carrier released its first financial statement that included the period after security officers forcibly removed a 69-year-old passenger, Dr. David Dao, from a plane. The incident left him bloodied and disheveled and left United facing widespread calls for a boycott. Nearly three months later, it appears that all the public anger has not hurt the company's bottom line."
In case you needed reminding, the online version of the article has the video of the forced removal embedded in the story. Not only did the video (and subsequent #boycottUnited campaign) fail to hurt the airline, however, it thrived in its aftermath:
"United reported a profit of $818 million in the most recent quarter, ending in June, up 39 percent compared with last year. Sales rose, too, as more customers booked flights with the carrier, amid rising demand for air service over all. In a separate report this month, United said that it had more than 71 million passengers during the first half of the year, up 4.2 percent compared with last year."
While I understand that there are complex issues involving the failure of anti-trust law to provide a competitive industry for domestic U.S. flights and that the price of airline fuel drives profits to some degree, the stunning results (39% growth, year-over-year) suggest we are also gluttons for punishment:
"The results point to an underlying principle about the airline business: Passengers, by and large, look for the most convenient and cheapest fares, not which airlines claim to offer the best service."
Or, as a longer discussion about seat space in the article in the second url below puts it:
"Faced with a choice between discomfort and higher fares, most travelers choose discomfort."

Given such results, what is the United CEO to takeaway from the experience? Should he risk his airline by providing a higher quality product and charging accordingly, or should he give passengers what they say they do not want, but what seems to be the only thing for which they are willing to pay?
Take care
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United Airlines Profit Rises Despite Boycott Threats Over Passenger Treatment
By Micah Maidenberg
July 18, 2017
The New York Times
By Justin Bachman
August 17, 2017
Bloomberg Businessweek