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United Airlines’ reputation takes a beating but share price is up

Stop press! Story update Wednesday 12 April 2017

Since this column went live, there have been further developments. This saga still has a long way to go. Now Wednesday morning, the fallout from United Airlines is into its third day, having broken on Monday afternoon in the US, early evening in the UK.

It will quickly become a PR case study of how not to manage a crisis. It illustrates some of the issues around sincere and timely apologies and legalistic non-apology apologies, which we’ve touched on before in a UK context, and will do so again.

What is remarkable is not that United’s share price ended yesterday $255 million down, losing 1.1% of its value. Perhaps more remarkable is that a few hours earlier the price had been down 4% or $1.4 billion.

In other words, during a near-total media and social media meltdown, when the company appeared almost wilfully to be doing the wrong thing, the stock bounced and rallied for much of the day.

It is extraordinary how out of kilter public sentiment and the investment community appear to be.

Many of United’s other critical audiences will be less forgiving.

Crucial questions as United starts to rehabilitate its reputation will be:

  • How committed the senior management really is to fixing the problem, given that it took three goes and more to apologise.
  • How United demonstrates that it has now, genuinely, taken responsibility.
  • How it makes peace with the 69-year old victim, David Dao, and other passengers on the flight.
  • What practical steps it takes to show that this sort of thing will not happen again, which must go beyond blaming the individuals in question.

The key to understanding the different reactions of the media and market reactions may be to look somewhere in the middle. Whilst the investment community may be underreacting, so it is also possible that media and PR pundits have overreacted.

I don’t think anyone has actually said that the head of United’s CEO, Oscar Munoz, should be put on a silver platter. But some of the calls for acts of contrition, such as endless free flights for all, are almost as unrealistic.

If the communications industry wants to be taken seriously at these times, so that it can help prevent such poor corporate reactions, then it should be more measured, and rational, in the way it reacts.

We’ve all been horrified by the sight of United Airline’s passenger, beaten and bloodied, being dragged from his seat. But for the grace of God, that could have been any one of us.

The immediate and worldwide reaction is almost the perfect social-media storm. The eye-witness testimony, “Oh my God, this is wrong”. The live video. All filmed live. All viral. All in time for print news and breakfast TV deadlines to magnify the horror.

In the face of this worldwide outrage, if our dearly-held beliefs on the influence of mass-consumer reactions are right, then United should be reeling with the implications and fallout. The business must be suffering.

United’s share price rising
The FT reports, “shares in United rose 0.9 per cent on the day… investors appeared unfazed”. United’s share price has gone up, at least to start with.

For sure, United’s crisis-management team must be in overdrive. The business is (rightly) drawing criticism for its legalistic, insincere and forced apology, “I apologise for having to re-accommodate these customers”. Really?

Commentators are drawing their pens to explain the obvious, on what it should have done differently. How the incident shouldn’t have happened. How over-booking should be handled. How respectful businesses should have reacted. All that is valid.

What is perhaps more surprising is that consumer outrage and reputation appear to be operating independently of investor sentiment.

It may be that the media storm simply does not matter to United’s senior management.

The FT goes on to quote airline analyst Chris Higgins at Morningstar. “I think investors are overlooking the news around the passenger being removed because the headlines from these incidents are usually short-lived and have little bearing on an airline’s operational or financial performance going forward.”

There you have it.

Are we going back to the future?
Has the investment community started to expect business performance not to live up to rising social and media expectations? Has it started to build reputational damage into the price? If so, what does that mean for reputation management?

In the pre-internet era it was common to treat different critical audiences, such as customers and investors, entirely separately. They would not hear what was said to the other.

Now they hear it, but ,perhaps up to a point, do not believe it matters. We will see how the story, and share price, unfold.

Written by Guy Corbet, independent communications consultant

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