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United (UAL) to Refund 3411 Flight Passengers for Fiasco
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The horrific incident on flight 3411 at Chicago’s O’Hare International Airport continues to haunt United Airlines, the wholly owned subsidiary of United Continental Holdings (UAL - Free Report) . In a bid to make up for the misbehavior, the carrier has offered to refund all the 70 passengers on board the infamous flight.
A Painful Recap
On Apr 9, a passenger (David Dao, a 69 year old doctor of Asian origin) on the overbooked flight 3411 was forcefully removed after he refused to voluntarily give up his seat and get off the plane. Given that the flight was overbooked and United Airlines needed to make room for four of its crew members, the carrier initially asked for volunteers from among the paid passengers to get off the plane. Reportedly, the carrier offered $400 per passenger as compensation and subsequently doubled the amount.
However, the move failed to elicit any response from the passengers as no one was willing to evacuate his/her seat. Subsequently, four passengers were randomly selected and asked to get off the jet. Three of these passengers got off, but the Kentucky-based physician refused to oblige, citing his need to urgently reach destination due to professional requirements. However, his pleas went unanswered as aviation department police officers grabbed the man and dragged him down the aisle of the Kentucky-bound flight. Currently, he is being treated at a Chicago hospital.
The incident, which was captured by fellow passengers on mobile and uploaded on social media, earned the carrier grave criticism from across the globe. The carrier was also alleged of racial discrimination. In fact, Dao was heard screaming that his Chinese origin was responsible for the inhumane treatment meted out to him.
Statements of Varying Emotions from the CEO
United Continental’s CEO Oscar Munoz has issued multiple statements ever since the passenger fiasco became public. In fact, his initial reaction in a letter to his employees on Apr 10, was anything but apologetic. He reportedly said that the incident was “unfortunately compounded” and even referred to Dao as “disruptive and belligerent.” Surprisingly, the carrier’s shares gained on Apr 10.
The incident, however, began to affect United Continental on Apr 11, as the world began to take greater notice of this barbaric incident. On Apr 11, the company’s stock price fell 1.13% and as its market value dropped sharply. Moreover, the outrage in China as the video went viral is extremely unfavorable for United Continental as China is one of its key markets.
Following the stock’s disappointing performance and the outrage, Munoz appeared to be more apologetic for the incident in his third response. The CEO called for an in-depth review of the company’s policies, particularly regarding overbooked flights. Results of the review are expected to be available by Apr 30.
Subsequently, the CEO said in an interview that there will be no repetition of the incident in any United Continental flight, going forward. He also said that police officials will no longer be summoned to evacuate paid passengers. He even changed his stance about Dao when he admitted that was not at fault, virtually retracting his comment that the doctor was “disruptive and belligerent”.
Why the Decision to Refund Passengers?
In a bid to pacify the masses and prevent the stock from sliding further, the carrier announced that all passengers on the concerned flight would be provide a full refund. Passengers have the option to avail the compensation in cash/ travel credits or miles.
United Continental is leaving no stone unturned to put an end to this sordid episode and shift the focus to its first-quarter earnings report, scheduled for Apr 17. However, only time will tell how successful the carrier is in its efforts. We note that United Continental will be the second major carrier to release quarterly results this earnings cycle. Delta Air Lines (DAL - Free Report) had kicked off the Q1 earnings season for airlines on Apr 12.
Price Performance
The United Continental stock has struggled of late, underperforming the Zacks categorized Transportation-Airline industry in the last three months. The stock lost 5.9% while the industry registered an increase of 3.3% over the period.
The passenger debacle issue is a huge negative for the stock.
Zacks Rank & a Key Pick
United Continental currently carries a Zacks Rank #3 (Hold). Better-ranked airline stockis GOL Linhas Aereas Inteligentes SA and Deutsche Lufthansa (DLAKY - Free Report) .GOL Linhas sports a Zacks Rank #1 (Strong Buy), while Lufthansa carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Gol Linhas gained over 100% on a year-to-date basis.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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United (UAL) to Refund 3411 Flight Passengers for Fiasco
The horrific incident on flight 3411 at Chicago’s O’Hare International Airport continues to haunt United Airlines, the wholly owned subsidiary of United Continental Holdings (UAL - Free Report) . In a bid to make up for the misbehavior, the carrier has offered to refund all the 70 passengers on board the infamous flight.
A Painful Recap
On Apr 9, a passenger (David Dao, a 69 year old doctor of Asian origin) on the overbooked flight 3411 was forcefully removed after he refused to voluntarily give up his seat and get off the plane. Given that the flight was overbooked and United Airlines needed to make room for four of its crew members, the carrier initially asked for volunteers from among the paid passengers to get off the plane. Reportedly, the carrier offered $400 per passenger as compensation and subsequently doubled the amount.
However, the move failed to elicit any response from the passengers as no one was willing to evacuate his/her seat. Subsequently, four passengers were randomly selected and asked to get off the jet. Three of these passengers got off, but the Kentucky-based physician refused to oblige, citing his need to urgently reach destination due to professional requirements. However, his pleas went unanswered as aviation department police officers grabbed the man and dragged him down the aisle of the Kentucky-bound flight. Currently, he is being treated at a Chicago hospital.
The incident, which was captured by fellow passengers on mobile and uploaded on social media, earned the carrier grave criticism from across the globe. The carrier was also alleged of racial discrimination. In fact, Dao was heard screaming that his Chinese origin was responsible for the inhumane treatment meted out to him.
Statements of Varying Emotions from the CEO
United Continental’s CEO Oscar Munoz has issued multiple statements ever since the passenger fiasco became public. In fact, his initial reaction in a letter to his employees on Apr 10, was anything but apologetic. He reportedly said that the incident was “unfortunately compounded” and even referred to Dao as “disruptive and belligerent.” Surprisingly, the carrier’s shares gained on Apr 10.
The incident, however, began to affect United Continental on Apr 11, as the world began to take greater notice of this barbaric incident. On Apr 11, the company’s stock price fell 1.13% and as its market value dropped sharply. Moreover, the outrage in China as the video went viral is extremely unfavorable for United Continental as China is one of its key markets.
Following the stock’s disappointing performance and the outrage, Munoz appeared to be more apologetic for the incident in his third response. The CEO called for an in-depth review of the company’s policies, particularly regarding overbooked flights. Results of the review are expected to be available by Apr 30.
Subsequently, the CEO said in an interview that there will be no repetition of the incident in any United Continental flight, going forward. He also said that police officials will no longer be summoned to evacuate paid passengers. He even changed his stance about Dao when he admitted that was not at fault, virtually retracting his comment that the doctor was “disruptive and belligerent”.
Why the Decision to Refund Passengers?
In a bid to pacify the masses and prevent the stock from sliding further, the carrier announced that all passengers on the concerned flight would be provide a full refund. Passengers have the option to avail the compensation in cash/ travel credits or miles.
United Continental is leaving no stone unturned to put an end to this sordid episode and shift the focus to its first-quarter earnings report, scheduled for Apr 17. However, only time will tell how successful the carrier is in its efforts. We note that United Continental will be the second major carrier to release quarterly results this earnings cycle. Delta Air Lines (DAL - Free Report) had kicked off the Q1 earnings season for airlines on Apr 12.
Price Performance
The United Continental stock has struggled of late, underperforming the Zacks categorized Transportation-Airline industry in the last three months. The stock lost 5.9% while the industry registered an increase of 3.3% over the period.
The passenger debacle issue is a huge negative for the stock.
Zacks Rank & a Key Pick
United Continental currently carries a Zacks Rank #3 (Hold). Better-ranked airline stock is GOL Linhas Aereas Inteligentes SA and Deutsche Lufthansa (DLAKY - Free Report) .GOL Linhas sports a Zacks Rank #1 (Strong Buy), while Lufthansa carries a Zacks Rank # 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Gol Linhas gained over 100% on a year-to-date basis.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 "Strong Sells." Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>