United is the weakest among the major four U.S. carriers in many financial metrics. That's an issue, and it eventually could cost Oscar Munoz his job, though most of the problems pre-date him. But these one-off customer service issues are not CEO Oscar Munoz's fault, and it's unlikely he'll be asked to leave because of them.
United Airlines has managed a feat to which no company aspires — outraging the world twice in less than a year. The death of a puppy in an overhead bin this week raises anew the question of whether the carrier’s CEO can hang onto his job.
United has sustained a series of embarrassments on Chief Executive Officer Oscar Munoz’s watch, from the tragic loss of a French bulldog on Monday to the surreal death of a giant rabbit in United’s care at the Chicago airport. Munoz survived one of the worst corporate scandals in recent history almost a year ago, when a video captured airport officers forcibly dragging a United passenger down an airplane aisle.
Airline insiders say this latest blunder is unlikely to cost Munoz his job, given his successes with stabilizing the airline’s workforce and improving on-time performance. Yet Munoz already lost his elevation to chairman of United Continental Holdings Inc. over his handling of the dragging incident. And escalating social media attention to each gaffe extends their life in the public’s mind.
“The problem is United has long had a culture that some might describe as not customer-oriented and others might describe as anti-customer,” said Bruce Hicks, a former head of communications for Continental Airlines.
‘Got a Problem’
Board members should be thinking about how to change United’s culture and who should be the leader to do it, said Ben Baldanza, the former chief executive of Spirit Airlines, a company with its own history of poor customer service. While he doesn’t see Munoz or President Scott Kirby losing their jobs, he said “any one of these instances are terrible on their own, but you link them all together and you realize you’ve got a problem.”
United spokeswoman Megan McCarthy declined to comment on speculation about Munoz’s future.
Chicago-based United finds itself in a bad-news cycle that is difficult to break out of, said Hicks, who fended off negative press in the 1980s over Continental’s difficult merger with the defunct People Express Airlines. After the video surfaced of officers bloodying passenger David Dao last April, Munoz compounded the damage by criticizing the abused customer’s behavior.
He then quickly reversed course, pledging sweeping changes to United’s customer service practices. Recently, the airline rolled out a training program for thousands of employees called Core4 that will encourage them to offer more compassionate service.
The puppy’s death on a flight from Houston to New York’s LaGuardia Airport Monday reinforced United’s reputation for corporate insensitivity. Widespread posts on social media say a flight attendant had the animal’s crate placed in the overhead bin over the owner’s protests. Although United quickly apologized and took responsibility for the dog’s death, the carrier erred in telling the public that the flight attendant didn’t know there was a dog in the crate, Hicks said.
Aside from the customer-service glitches, the company got more bad press last week when it replaced an employee-bonus program based on performance with a lottery that awarded larger prizes to fewer people. It dropped the idea after employees pushed back.
Munoz has guided United on an ambitious effort to improve the profitability of its hubs by increasing connecting flights. However, some investors fear the effort is boosting its seating capacity too much, with the extra supply dragging down fares and hurting profits in the short run.
United dropped 2.6 percent Wednesday to $70.74, the biggest decline in a month, leaving the stock up 23 percent since Munoz became CEO in September 2015. That put it behind the 28 percent gain for a Standard & Poor’s index of the five biggest U.S. airlines and the 40 percent advance for the S&P 500 index.
Ultimately, Munoz probably will survive this latest scandal, given the goodwill he’s been building within the company, observers say. Munoz has improved morale among United’s almost 90,000 employees and boosted its position in monthly on-time performance rankings of U.S. airlines to middle of the pack or better from near the bottom.
An airline that historically has had a difficult relationship with labor now has all of its major union groups under contracts. After the passenger-dragging scandal, several union leaders supported Munoz amid speculation about his future.
“It’s ludicrous to think Oscar’s job would be in jeopardy,” said Sara Nelson, international president of United’s flight attendant union, the Association of Flight Attendants. “United Airlines was nearly destroyed by those previously in charge. Oscar has been working steadily to fix it. Everyone at the airline knows that.”
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Photo credit: United CEO Oscar Munoz testifies at a congressional hearing. Munoz has had an at-times rocky tenure at United. Bloomberg