(Image courtesy of Bloomberg)

Perception is Reality: A Look at the United Airlines P.R. Mess

 

Barry Armstrong

Founder and President, Armstrong Advisory Group

 

Over the past few weeks, United Airlines has provided every business major in America with a crash course in how not to handle public relations.  Although every other person with a pulse has weighed in with their own commentary about United’s decision to forcibly remove a passenger from one of its flights, there are important lessons to learn from the airline’s never-ending nightmare from a business perspective.

 

Communicator of the Year?

 

First, United Airlines CEO Oscar Munoz should give back the U.S. Communicator of the Year award that the magazine PRWeek gave to him in February.  In his first apology for the incident, Munoz said that the airline was sorry it had to “re-accommodate” customers on the flight.  That’s right: the act of violently removing a paying passenger from his seat on a plane is also known as “re-accommodating.”  Munoz later doubled down in a letter he wrote to the airline’s employees, blaming the passenger for being “disruptive and belligerent” and emphasizing that the employees addressed the situation according to the company’s procedures.

 

Too Late for “Sorry”

 

However, the next day, Munoz changed his tune: after apparently sleeping on it, he concluded that the incident was “truly horrific” and issued promises that the company “will do better.”  Despite his attempts to apologize, the damage had taken its toll: at one point on Tuesday, shares of the company were down as low as 4.3%, and the company lost nearly $1 billion in market cap value.  Although the company’s stock has since pared much of those losses, it was fascinating to witness how a public relations nightmare can deal a tremendous blow to a giant in the aviation industry.  It is a self-evident truth: public relations is a critical component of any business, and mishaps can inflict serious harm.

 

A Billion-Dollar Difference

 

We know what United’s CEO did wrong, but what can other business leaders do right with this lesson in mind?  For starters, reacting swiftly to public relations disasters is crucial.  Immediately after the story hit the newswires, all Munoz had to do was issue a sincere and thoughtful apology for the incident.  Regardless of whether the passenger was wrong or the flight crew was right (or vice-versa), everyone can agree that the airline was capable of handling the situation with a lot more tact.  Perception is reality in the business world, so aside from handling a situation properly at the outset, the best thing a company can do is immediately shift into crisis mode, apologize sincerely and quickly, and communicate a specific plan to correct any mistakes.  It could make a billion-dollar difference, and I hope the business majors are paying attention.

 

Barry Armstrong has over 30 years of experience in the financial industry.  He founded the Armstrong Advisory Group in 2004 and has been sharing his financial knowledge with New Englanders on a daily basis during his Boston-based radio broadcast for nearly 20 years.  Learn more about Barry and the Armstrong Advisory Group at www.armstrongadvisory.com.  Securities offered through Securities America, Inc.  Member FINRA/SIPC and Advisory Services offered through Securities America Advisors.  Barry Armstrong, Representative.  Representatives of Securities America do not offer tax advice.  Always seek the assistance of a tax professional familiar with the laws in your state.  Armstrong Advisory Group and Securities America are unaffiliated.  April 2017