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Too big to boycott: United likely to ‘make a safe landing’ from PR disaster

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The video of a bloodied Asian passenger being forcibly pulled from a United Airlines flight sent the company’s stock tumbling on Tuesday, prompted calls for the chief executive to step down and sparked a viral campaign in China to boycott the company.

But will the damage last? History suggests it may well not.

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United Airlines shares nosedive

Following the forceful removal of a passenger from a United plane, shares in the company have fallen and the CEO has called the incident ‘truly horrific’.

As deeply troubling as the video is, analysts said, the emotional fury such incidents generate is usually fleeting, lasting a few days or weeks at most. The reality, they say, is that consumers have long put price, convenience and their personal tastes ahead of outrage.

And partly because of a rash of recent mergers that left the country with just four major airlines, many customers may not even have much of a choice.

United’s 2010 tie-up with Continental allowed the company to claim more than 50 per cent of passenger traffic in Houston and Newark, and serve one in three flyers from Washington Dulles International Airport and in San Francisco.

On Tuesday, two days after the 69-year-old passenger’s removal from a flight out of Chicago to Louisville, United chief executive Oscar Munoz appeared to do just that. Abandoning any defense of the company’s actions, Munoz said: “I deeply apologise to the customer forcibly removed and to all the customers aboard. No one should ever be mistreated this way. We are going to fix what’s broken so this never happens again.”

Within minutes of Munoz’s apology, the company’s shares began a resurrection from its public-relations nightmare. United Continental Holdings finished the day at $US70.71, down 1.1 per cent but far from the 4.4 per cent plunge earlier in the day.

‘Short kind of hit’

“This will be just a short kind of hit,” said Lakshman Krishnamurthi, a marketing professor at Northwestern University’s Kellogg School of Management. “Volkswagen had the diesel problem, and their sales are fine. Toyota had a problem years ago, and nothing really happened to their sales.”

"I continue to be disturbed by what happened on this flight," United chief executive Oscar Munoz wrote in a statement. ... “I continue to be disturbed by what happened on this flight,” United chief executive Oscar Munoz wrote in a statement. “I deeply apologise to the customer forcibly removed and to all the customers aboard.” Photo: Richard Drew

United is just the latest corporation mired in a public-relations mess. But many of these cases have resolved relatively quickly, with little or no lasting damage to the company’s financial performance.

PepsiCo — which operates in a virtual duopoly in the beverage industry — appeared to stumble when it ran a 2 1/2-minute ad featuring celebrity model Kendall Jenner wading through a crowd of protesters and handing a police officer a can of Pepsi.

Pepsi pulled the ad within 24 hours, after activists called the effort to sell soda “trash” for appropriating a protest movement over the police killings of black Americans.

But six days after the commercial ran, PepsiCo stock was virtually unchanged.

Swift response: Pepsi last week pulled its advertisement featuring Kendall Jenner and an ambiguous protest storyline within 24 hours. Photo: Youtube.

Swift response: Pepsi last week pulled its advertisement featuring Kendall Jenner and an ambiguous protest storyline within 24 hours. Photo: YouTube

“Pepsi reacted swiftly, they expressed remorse, and they enabled people to move on,” said Maurice Schweitzer, professor at the University of Pennsylvania’s Wharton School. “This is something United can easily recover from as well, but it takes an expression of remorse.”

Volkswagen and Toyota also have survived crises in recent years. The Environmental Protection Agency in 2015 found Volkswagen had used a special device to mask diesel emissions in some of its cars. And Toyota suffered a public-relations disaster starting in 2009 over its deadly “sticky accelerator pedal.”

Volkswagen and Toyota sold 10.3 million and 10.2 million cars in 2016, respectively — blockbuster sales for each, according to company data.

History ‘not the friend of the consumer’

“History is not the friend of the consumer,” said Eric Schiffer, chairman of Reputation Management Consultants. “CEOs bank on three things: advertising to re-brand, the collective short-term memories of consumers and convenience — because their brand has a near monopoly.

“They figure time heals. And unfortunately it does. People forget. They end up seeing a deal online, and they’ll pull the lever.”

It matters little that “people are barking mad” right now if consumers do not channel their anger three or six months from now in their purchasing decisions, Schiffer said.

The only way to send a message to corporations, he said, is via a long-term boycott strong enough to send a devastating blow to their quarterly earnings.

“It has to be a strong slap in the face,” Schiffer said.

United’s previous PR crashes

United has been caught in — and recovered from — multiple public-relations backfires.

In 2008 the airline forced a musician to put his guitar in the baggage, refusing to allow the $US3500 custom Taylor instrument in the passenger cabin. The musician looked on helplessly from his coach seat as his guitar was tossed around outside. United refused to pay for the damaged instrument, and the guitarist wrote a song titled “United Breaks Guitars,” which went viral on YouTube.

Last month, United barred two girls wearing leggings from boarding a flight because they violated the company’s dress code for employee friends and family members who fly for free.

And then there is the latest passenger scandal.

“This is going to collapse the three things they have done badly – the guitar, the leggings, and now all of a sudden you have a trifecta,” said Andrew Gilman, a crisis-management expert.

“The United line is, ‘We know you have a choice when you choose to fly,’ ” Gilman said. “Well, you really don’t have a choice. But if you had a choice today, you are going to pick the other guy.”

The short-lived nature of consumer movements is partly why experts in crisis management often advise executives to placate the public in the short-term.

Southwest, American, United Continental Holdings and Delta now constitute the Big Four in the US, accounting for 85 per cent of the industry, said Seth Kaplan, an industry analyst and managing partner of Airline Weekly.

The Justice Department recently stopped United’s plans to expand further in Newark, saying in its complaint that “the enhancement of United’s dominant position would subject air-travel passengers at Newark — who already pay some of the highest fares in the nation — to higher fares and fewer choices.”

‘Airline of last resort’

Kaplan said United will feel some effects of the video.0

“Flights are still going to be pretty full on United,” he said, “but if they are full of people who are paying a little less because they had to be enticed to fly United, then that’s not good for the airline.”

He said a good corporate reputation is a ticket to profits over the long haul. “You don’t want to be the airline of last resort.”

But ultimately these brands may not pay a big price for their actions.

Some marketing experts say these controversies can even be good for companies. Thus the old advertising adage: All press is good press.

While Pepsi quickly pulled its controversial ad last week, the social-media outrage and wall-to-wall news coverage already resulted in billions of dollars’ worth of publicity, said Schiffer, the reputation consultant.

That advertising mishap echoed another call to boycott the soft drink giant nearly 30 years ago, when Catholics objected to an ad starring Madonna and her 1989 “Like a Prayer” single because the official music video showed her kissing a black saint.

“The ad upset a lot of people, but there was no net effect,” Schiffer said. “Perhaps the Kendall Jenner ad was in the same template as 30 years ago. The free publicity that Madonna and Pepsi got back then was huge. In the short term, Pepsi certainly alienated people. But in the long term, it’s irrelevant. And sadly, I think United will make a safe landing with all this.”

Consumers have short memories, and Krishnamurthi said those with few options have even shorter memories.

“Who is going to boycott?” he said. “The frequent flyer is not going to.

“I am a 23 million mile frequent flyer on United, and I’m not going to change my habits because of this.”

The Washington Post

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