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What happened on United flight 3411?What service expectations do customers have of airlines such as United and How did these expectations develop over time?

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In early April 2017, United Airlines (United), one of the largest airlines in the world, found itself yet again in the middle
UNITED AIRLINES On April 6, 1926, a crowd of 2,500 spectators cheered on as inaugural flight CAM No. 5 took off from Pasco, W
seats.21 To avoid having to fly with empty seats, most airlines oversold and overbooked flights (that is, they sold more tick
However, instead of choosing considerably larger aircraft to accommodate the increase in demand, many had replaced these with
his first statement, Munoz called the incident truly horrific in a third statement. He accepted responsibility for the inci
Page 6 9B18A015 and claimed that it had shamed the airline industry as a whole. He suggested that the way United conducted
age EXHIBIT 1: CUSTOMER SATISFACTION INDEX FOR AIRLINES IN THE UNITED STATES 72 67 69 67 71 64 67 66 63 64 64 66 53 64 Baseli
In early April 2017, United Airlines (United), one of the largest airlines in the world, found itself yet again in the middle of a service disaster this time for forcibly dragging a passenger off an overbooked flight. The incident was to become a wake-up call for United, forcing it to ask itself what to do to prevent such instances and what steps to take to rebuild its tarnished brand image. Because the incident occurred within a month of United barring two teenage girls from boarding the flight for wearing leggings, the ensuing social media uproar resulted in Oscar Munoz, United's chief executive officer, issuing an apology.2 United was soaring after an outstanding performance the previous year,3 with a first-quarter net income of US$S96 million and revenue of $8.4 billion, which was an increase of 2.7 per cent year over year. However, the two incidents left Munoz grappling with service-recovery issues On the day of the fateful event, United realized it had overbooked its seats and needed four passengers to leave flight 3411. United was willing to offer as much as $800 as compensation. Finding no takers, however the airline chose four passengers to disembark and forcibly dragged out the one person who refused. Within 24 hours of the incident, footage recorded by co-passengers went viral on social media and resulted in more than one million mentions on Twitter. What had started out a case of travesty of justice and major service failure for travellers became an image crisis for United. Within two days of the incident, United suffered a $250 million dip in its market value. The company attempted an image makeover to improve its airline customer satisfaction index (see Exhibi 1) and offered value-added services. After years of ranking low on customer satisfaction ratings, United was suddenly scrambling to contain a public relations (PR) disaster. week after the incident, at the release of the first-quarter report, Munoz took full responsibility. He admitted that despite the report's optimistic numbers, United had to view these setbacks as lessons and work towards improving the company's customer service performance from start to finish.9 As a major airline, United needed to learn from these incidents and find answers to some key questions: What expectations do customers have from airlines such as United in terms of customer service? How do these expectations develop over time? How important are customer satisfaction, customer relationships, and customer experience to an airline like United? How can United conduct a root cause analysis for service failure and identify gaps in its delivery of good quality service?
UNITED AIRLINES On April 6, 1926, a crowd of 2,500 spectators cheered on as inaugural flight CAM No. 5 took off from Pasco, Washington, marking the birth of Varney Airlines. Over the years, the fledgling airline merged with many others to become United Airlines. Headquartered in Chicago, United operated across a wide domestic and intemational network that reached as far as the Asia-Pacific region. Measurements of revenue and passenger-miles flown suggested that United was the world's third-largest carrier. In 1997, United became a founding member of the Star Alliance group of airlines. In 2017, the airline and its regional affiliates flew more than 1,200 aircraft through seven hubs located in the United States and two others at Guam and Tokyo Narita.1 In the first quarter of 2017, United reported a revenue amount of $8.4 billion, for a 2.7 per cent year-over-year increase. Its consolidated passenger revenue per available seat mile remained flat during that period, but the consolidated yield increased by 0.4 per cent compared to the previous year. However, the consolidated unit cost per available seat mile increased 5.1 per cent over the same period of 2016, following a rise in fuel expenses and negative effects from labour negotiations. In the same period, United met various operational key performance indicators, some of which included 25 zero- cancellation days for its mainline operation and a consolidated completion factor of 97.5 per cent, which was 0.6 points higher than in the first quarter of 2016 and implied a reduction of 2,500 flight cancellations. In the aftermath of the disastrous incident on flight 3411, United worked to optimize its network potential and improve its schedules and products, while predict demand and maximize profitability on each flight.1 The company aimed to increase perceived value among its customers. United planned to have in place several value-driven initiatives by 2018 to increase its incremental value of S3. billion. Some of these initiatives included commercial enhancements (througlh improved customer segmentation and a better MileagePlus program), cost structure improvements (by raising the quality of its aircraft and installing slim-line seats), and strong operational performance. This last initiative was intended to decrease costs related to delays and cancellations, reduce the number of passengers that needed to be re-accommodated on other airlines, and improve schedule utility. its revenue-management system to accurately United strove to embed sustainability into its operations and worked towards reducing its overall carborn footprint. Over the previous two decades, United had improved its aircraft fuel efficiency by 33 per cent and had begun using advanced sustainable altemative fuels. Thanks to the company's efforts in this area, United was rewarded for its environmental initiatives in 2013 and declared Eco-Aviation Airline of the Year by Air Transport World. In 2014, the company also received the Sustainability Outstanding Achievement award by the Global Business Travel Association Foundation and the Gold Award for Sustainability Excellence by ICARUS. Despites its successes, however, United was the source of many controversies, inviting disappointment from the public and the wrath of its customers. Glaring incidents included the 2008 mishandling and damaging of singer/songwriter Dave Carroll's guitar, a 2015 request from a United flight attendant to a breastfeeding mother to cover up:19 and multiple incidents in 2017, including United's negligence in the death of a passenger's dog, its refusal to allow two teenagers to fly because of their attire, and the flight 3411 incident that saw a passenger forcibly dragged off a plane. This last event became one of the biggest customer service disasters in the airline's history 20 OVERSELLING AND OVERBOOKING OF AIR TICKETS In a price-sensitive industry such as air travel, flying with empty seats was a major revenue problem for any airline company. The rate of last-minute cancellations and missed flights by passengers (no-shows) was estimated at around 7-8 per cent. These incidents left airlines with little or no time to resell the vacant
seats.21 To avoid having to fly with empty seats, most airlines oversold and overbooked flights (that is, they sold more tickets than there were seats). The risk of this strategy, however, was that fewer-than-anticipated cancellations and no-shows would cause the airlines to grapple with a surplus of passengers for a full flight. Airlines invested in special software that analyzed historical data, routes, time of day, seasons, ticket prices, and passengers with refundable tickets to calculate the most likely number of customers who would shovw up for their flight. In the event that these calculations were inaccurate and a surplus of passengers resulted, airlines first turned to volunteer passengers to leave the overbooked flight. If that did not resolve the issue, the airlines followed a routine criteria to involuntarily bump passengers to another fight, but exempted business-class travellers, frequent fliers, and online check-ins. In the United States, the Department of Transportation (DOT) governed the overselling and overbooking of air tickets. DOT's regulatory framework allowed an airline to overbook its flights provided it had volunteer passengers willing to be re-booked on a later flight with compensation. If too few or no volunteer passengers were available in an overbooked flight, the airline was allowed to randomly select passengers to involuntarily deny boarding and compensate them as specified by DOT regulations.2Ailne were required by the DOT to establish priority rules for which passengers would be denied boarding. For example, unaccompanied minors and passengers with disabilities were exempted from being involuntarily denied boarding. Airlines also considered factors such as frequent-flier status and the full-fare ticket passengers in their selection. THE UNITED EXPRESS FLIGHT 3411 "FIASCO" AND PUBLIC UPROAR On April 9, 2017, United had a last-dash emergency that needed the airline to fly four of its staff members to a connecting destination. This meant that four passengers on United Express flight 3411 needed to be bumped to another flight to free up four seats. After boarding was completed, the crew of the Chicago Louisville flight announced that they wanted four passengers to leave the flight voluntarily and offered S400 in vouchers for future travel on United, a hotel stay, and a seat on a plane leaving more than 21 hours later. When none of the passengers volunteered to leave the flight, the crew raised the offer to S800. Despite the higher compensation, no passenger seemed willing to deplane. The airline then announced thata computer algorithm would randomly select four passengers to leave the flight, exempting frequent fliers and higher fare-paying passengers. One of the four passengers randomly selected, 69-year-old David Dao, refused to deplane because he was a doctor and needed to attend several patient appointments the next day When Dao continued to refuse to leave the plane, a Chicago Department of Aviation officer from the O'Hare Intemational Airport forcibly dragged him out of the aircraft, leaving him bloodied and bruised. 26 According to DOT, airlines were within the law to involuntarily move (or bump) passengers to another flight in case of overbooking. DOT also allowed the individual companies to determine their own fair boarding priority lists. United admitted to, and apologized for, overbooking flight 3411, which led to a passenger selected to be bumped refusing to leave and being forcibly removed. The Chicago Department of Aviation later announced that the officer involved in the incident was suspended due to his disregard of standard operating procedures2 27 Airlines deliberately overbooked flights and oversold tickets, anticipating no-shows, which was within DOT regulations. British Airways acknowledged that in a single year, it had overbooked approximately 500,000 seats and was forced to ask about 5 per cent of its customers (24,000) to leave the flights. Despite the inconvenience caused by bumping passengers, the practice was rampant because of the benefits overbooking created for airlines. Most airlines minimized the need to bump passengers by using passenger historical data and algorithms. Also, most companies had replaced their 50-seat aircraft to increase seats.
However, instead of choosing considerably larger aircraft to accommodate the increase in demand, many had replaced these with regional planes with only 70-100 seats. This meant that seat constraints persisted with the overbooking practice, which helped boost fares but kept a short supply of seats 30 In the uproar that followed, Dao claimed that his Asian ethnicity made him a target. Online comments and video by other passengers on the flight went viral on social media, generating attention across the glolb The Chinese social media website Weibo alone attracted more than 100 million views. Among several Twitter topics that surfaced, the highest trending topic (or hashtag) was #NewUnitedAirlinesMottos, with social media users sharing slogans that were critical of airlines, including "not enough seating, prepare for a beating."nteret users specifically targeted United through memes (images with funny captions) and dark humour. Many passengers boycotted United, especially those in China-an important market to United, which claimed to fly the largest number of nonstop U.S.-China flights. However, a journalist who authored a book on the Chinese aviation industry wrote on Twitter that despite suffering immense reputation damage in its "most important intemational market," the company remained largely unresponsive two days after the incident. The lack of response by United was despite reliable sources confirming that the video of Dao being dragged had gone viral in United's key market The situation escalated to reach the White House website We the People, which received more than 100,000 petitions against United in one day. The U.S. president, Donald Trump, also condemned the incident and suggested that airlines could have further raised the compensation rate before resorting to the use of force UNITED'S PUBLIC RELATIONS EXERCISE Ineffective PR handling allowed the crisis from the incident to develop and increase.3" A crisis-detection and social-listening platfom analysis firm that monitored conversations surrounding the United incident found little mention of the incident or United for several hours after the first Twitter comment appeared between 7:00 p.m. and 8:00 p.m. on April 9. According to the firm, the evening timing of the first tweet might have been the reason for a delayed reaction. In fact, by 5:00 a.m. the next day, there were numerous online posts about the incident, and by noon that day a quarter of a million online comments had surfaced most of them vehemently negative. United's first official response, at 5:07 a.m. on April 10, 2017, was non-committal and asked for more details before making a statement. By 9:27 a.m., Munoz released a statement referring to the incident as "an upsetting event" and apologizing for the re-accommodation of passengers. He assured the public that a detailed review of the incident and a personal meeting with the affected passenger would follow.3 Twitter users found the choice of the term re-accommodate" in the apology by Munoz unacceptable. Soon, numerous memes based on United's definition of the term "re-accommodate" appeared. Customers considered the response too insensitive and expressed their displeasure using social media. Later that day, Munoz issued a statement to his employees in which he referred to the passenger as "disruptive and belligerent. He acknowledged that employees had followed protocol in their handling of the situation. However, PR experts Rupert Younger and Ed Zitron found United's strategy disappointing and ineffective. Younger felt that United should have been more prompt in its response to limit the negative reaction to the viral video. Zitron believed that United aggravated the issue by being reluctant to offer a complete apology for fear of lawsuits and by attempting to downplay the incident instead of being sensitive to customers and showing a willingness to rectify the problem. United could have seized the opportunity to project an image of a caring airline, rather than a callous and dismissive company. Almost 27 hours after
his first statement, Munoz called the incident "truly horrific" in a third statement. He accepted responsibility for the incident and vowed to make amends. He also promised to "do better." In 1965, United had launched the slogan, "Fly the friendly skies." The head of the agency that ran the campaign at the time explained that the slogan was intended to communicate warmth and concem to its customers, as well as efficiency.4 That message contrasted starkly with the aftermath of the flight 3411 incident, which discouraged many potential customers from ever flying the friendly skies with United. The airline's Twitter hashtag #UnitedJourney, which encouraged passengers to post their memorable pictures online, began attracting negative and unsavoury twitter posts.6 However, United was accused of censoring and removing tweets by passengers about the incident. Most likely, Twitter's automatic tools hid or deleted tweets that violated its abuse rules if they contained violent language, swearing, or abusive language, whiclh United was attracting by this time. According to one crisis management expert, United had created its own crisis. The airline first entered a difficult situation and then mishandled the outcome. Seeing the backlash that United faced due strategies and established new mechanisms to avoid similar situations in the future. 47 to poor crisis management, other corporate leaders revised their own PR UNITED AIRLINES UNDER FIRE Customer satisfaction had been American Customer Satisfaction Index compared to most of its competitors (see Exhibit 1). The flight 3411 incident would only serve to lower United's image further. To help matters, United announced that the company would provide full compensation to all passengers on that flight.9 In addition to Munoz's apology, a United spokesperson explained that the flight had not been overbooked, as was previously reported, but rather four passengers needed to be bumped to accommodate United's staff members. However, the airline's reputation had already suffered a major blow. Some experts referred to the company's handling of the crisis as brand suicide," as the company's stock dropped an estimated S255 million in market value within 48 hours of the incident. At one point, United's stock briefly plummeted by 4 per cent, or about $1 billion of the company's total market value, before regaining and closing at a 1.5 per cent loss. More importantly, the company experienced a steep drop in its reputation.2 Warren Buffett, one of the largest investors in United's parent company, agreed that the carrier had made a "terrible mistake" in managing the situation. an ongoing concern for United. The airline had ranked very low in the 53 A survey of 1,900 people conducted three days after the incident revealed damaging figures regarding consumer preference for the airline. An overwhelming 79 per cent of prospective customers who were aware of the incident said they would choose to fly with one of United's competitors instead, and 44 per cent said they would choose another airline despite additional cost and travel. However, although most experts agreed that United had suffered a blow to its reputation, United was expected to recover its immediate losses througlh effective advertising.5s Some analysts felt that the incident's impact on the company's bottom line over the long run would be minimal because passengers tended to choose airlines based on cost, convenience, rewand programs, and association with their employer. wever, although Munoz was originally expected to be promoted to the position of chair, the parent company cancelled the promotion and announced that executive compensations would in the future be linked directly to customer satisfaction. THE COMPETITORS' REACTIONS United's competitors were quick to react to the flight 341 incident. Emirates Airlines took the opportunity to release a promotional video claiming to be the "best airline in the world" with an excellent customer service record, supported by a long list of awards.Emirates president Tim Clarke called the incident a "disgrace"
Page 6 9B18A015 and claimed that it had "shamed the airline industry as a whole." He suggested that the way United conducted its business was reflective of the company's poor performance from the top down.59 The Royal Jordanian airline took a more whimsical approach by tweeting a poster with a no-smoking sign accompanied by the caption "We would like to remind you that drags on our flights are strictly prohibited by passengers and crew. We are here to keep you #united. Dragging is strictly prohibited." United's major American competitors -American Airlines and Delta-chose to remain silent on the issue. However, less direct competitors of United did react. JetBlue Airways thanked its supporters for positive reviews and Southwest Airlines temporarily revised its logo to read, "We beat the competition. Not you.0 THE WAY FORWARD Clearly, United's reputation suffered greatly after the flight 3411 incident, both in the United States and in key international markets such as China. The company's disastrous public reaction following the incident and its poor crisis management left the airline reeling from social media attacks, customer dissatisfaction, passenger anger, and a drop in its stock value. United was left with the daunting task of rebuilding its image and making a major service recovery. Management had already been struggling with very low rankings in customer satisfaction. In the aftermath of this incident, the airline realized it would need to rebuild its brand and greatly improve its customer satisfaction ratings United was forced to take a hard look at its tarnished image and begin taking steps to rebuild its brand perception among travellers and throughout the industry. United's mistakes prompted other major airlines to find new ways to meet or exceed customer expectations, increase customer satisfaction, and value customer relationships. Like other airlines, United realized that it needed to continually perform root cause analysis for any service failures. Effective execution and management of customer experience strategies was necessary for the delivery of optimum service. Company-wide collaboration would be needed to raise service standards and efficiencies-not only within the organization, but across the entire aviation industry
age EXHIBIT 1: CUSTOMER SATISFACTION INDEX FOR AIRLINES IN THE UNITED STATES 72 67 69 67 71 64 67 66 63 64 64 66 53 64 Baseline NM 78NM 70 77 71 1995 NM76 NM 71 72 67 1996 NM76 NM 71 67 70 1997NM 76 NM 62 69 68 1998NM 74 NM 67 65 65 1999NM 72 NM 64 68 62 2000NM 70 NM 2001NM 70 NM 62 615 68 65 61 63 66 62 62 62 62 60 56 67 2002 NM 74 NM 63 66 64 63 65 68 64 68 64 67 57 64 70 61 67 61 69 57 62 57 68 61 71 #164 2003NM75 NM 67 67 6 2004NM73 NM 66 67 64 62 2005NM74 NM 64 65 61 2006 NM74NM 62 64 63 2007 NM76 NM 60 59 56 2008NM 79 NM 62 60 56 2009NM 81 NM 60 64 56 2010NM 79 NM 63 62 60 2011 NM 81 NM 63 56 61 2012 81 77 NM 64 65 62 62 61 54 59 62 61 65 2013 83 81 NM 65 68 6264 201479 78 NM 66 71 60 20158178 75 66 71 60 2016 808077 72 71 68 2017 8280 78 76 76 70 Note: NM not measured; # company merger Source: Adapted from "Benchmarks by Industry," American Customer Satisfaction Index, accessed May 29, 2017 www.theacsi.org/index.php?optionscom-content&view=article&id=1 47&catid=&Itemid-2 1 2&isAirlines.