Ethics Case

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Purdue University *

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111

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Business

Date

Feb 20, 2024

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pdf

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3

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Background United Airlines' strategy reflects the US airline industry as a whole. They apply a mass-market business model with little differentiation in customer segments. This is a common trend in the industry because customers have virtually no switching costs. Competitors in the industry rarely target specific segments and focus on the large pool of customers wanting to fly. Overall, this industry is an oligopoly dominated by United Airlines, Delta Air Lines, American Airlines, and Southwest Airlines. This leaves United Airlines in the midst of extreme competition in the market with little room for error. A common practice within the industry to ensure that no seats are left unoccupied is overbooking. This is a legal practice that focuses on the goal of maximizing profits, often at the expense of customer satisfaction. Considering United Airlines's mission statement, "Connecting people. Uniting the world", this may seem like a company that focuses on helping as many people travel as possible. This ideal would align with the strong competition and the common overbooking practice used by the industry. CEO of United Airlines - Oscar Munoz Oscar Munoz, the CEO of United Airlines, is a well-respected businessman who held high-level positions at multiple companies before rising the ranks within United Airlines. Before he was appointed as CEO, Munoz spent years on the board for United's parent company United Continental Holdings. Due to these experiences, Munoz had an advanced understanding of what leads to success in the highly competitive airline industry. Stepping into the role in the latter half of 2015, Munoz was seen as the perfect candidate to lead United Airlines through the pressure it was currently facing due to slipping profits and strong shareholder demands. Munoz and United Airlines began to get back on track after a rough start to 2015 and saw the stock rising to previous highs in early 2017. Known for his strong morals, Munoz began his tenure going on a "listening tour" to speak with disgruntled employees all over the US to find ways to improve processes and employee satisfaction. Most of the success was due to United Airlines' focus on margins and increasing profit through new advertising campaigns and tactics like overbooking. In March 2017, Munoz was even recognized as PR-Weeks 2017 Communicator of the Year. The role of a CEO includes overlooking overall operations, directing the agenda, communicating with the board, and delivering statements to the media. Munoz built his brand to become the perfect spokesperson for United Airlines. The Incident On April 9, 2017, Munoz was faced with a disaster like none other previously encountered by the airline. United flight 3411 began boarding on schedule like any routine flight, packed to capacity with paying passengers. This is normal; however, the situation started when United needed to create room for four deadheading crew members on flight 3411 to cover a flight in Louisville the following day. Deadheading is a standard practice for airlines to transport crew members to cover flights. However, flight 3411 was already packed full of passengers. United offered the onboard passenger's flight vouchers to reschedule their flights to create room. But when no one volunteered, the airline staff was forced to resort to other methods. They decided to select passengers at random to deplane and reschedule their flights.
Two couples were chosen at random to create space for the crew. The first couple selected was unhappy about the decision but grudgingly left the plane. The second couple, David Dao and his wife refused to surrender their seats. When the united crew failed to get Dao to leave, they called on the Chicago department of aviation security officers to handle the situation. Dao was requested to deplane and reschedule his flight to make room, but after continuing to refuse, the security officers resorted to physical measures to get him off the plane. One of the officers reached over two seats to grab Dao and pull him out of the seat and into the aisle. In this process, Dao's face struck an armrest knocking him unconscious. Dao suffered from injuries including a broken nose, the loss of 2 front teeth, sinus injuries, and a concussion. The officer then dragged Dao, with a bloodied face and limp body, through the aisle and off the plane. Dao was taken to the hospital for non-life-threatening injuries, and shortly after, the united crew filled the vacated seats, and flight 3411 took off. Aftermath In less than 24 hours, the video of Dr. David Doa was widely shared and picked up by mainstream media agencies. In one of the videos, you could hear the passenger claim he was chosen because of his race, which wasn't the case. This incident affected the United States stream and reached Chinese sites, eventually leading to 480 million people watching this situation. After this incident, many United States, Chinese, and Vietnamese citizens started protesting United Airlines by posting pictures/videos of loyalty and credit cards being cut apart. In return to social media backlash, the U.S. federal government decided to launch an investigation into the accident by using the hashtag #ChineseLives Matters. Oscar was having a hard time dealing with this sudden situation. Soon after the social media posts circulated worldwide, the stock market took a big hit for the company. As Oscar tried his best to address this situation on social media, he noticed he had another concern to solve. One might say Oscar wasn't aware of this situation and found out at the same time everyone else did. The stock had decreased by 1.1%, which questioned the company's future financial performance. Especially since surveys indicated that 77% of fliers would never choose United Airlines even if that meant it would cost more. Because of this situation, many United Airlines competitors have taken this situation to their advantage. Many competitors decreased their bumped cases to showcase their advantage over Delta. On top of that, many airlines started listening to the customers and adapting rules and changes based on feedback. Delta did its best to follow these principles too but was still criticized for the incident.
Discussion Questions 1.) What is the main ethical issue Munoz is facing in this scenario? 2.) Who are the relevant stakeholders, and which ones should Munoz prioritize? 3.) What are the protocols for removal of a customer/ can force be used? 4.) Should Muzos be liable to apologize for an issue not directly related to his decisions? 5.) How does Munoz’s decision affect his public image and the company's reputation? Further Reading Bever, Lindsey. “Doctor Who Was Dragged, Screaming, from United Airlines Flight Finally Breaks Silence.” The Washington Post, WP Company, 9 Apr. 2019, https://www.washingtonpost.com/transportation/2019/04/09/doctor-who-was-drag ged-screaming-united-airlines-flight-finally-breaks-silence/. Domonoske, Camila. “After Unsatisfying Answers, United Offers 'Deepest Apology' for Violent Confrontation.” NPR, NPR, 11 Apr. 2017, https://www.npr.org/sections/thetwo-way/2017/04/11/523451560/after-unsatisfyin g-answers-united-offers-deepest-apology-for-violent-video#:~:text=I%20share%2 0all%20of%20those,ever%20be%20mistreated%20this%20way. Victor, Daniel, and Matt Stevens. “United Airlines Passenger Is Dragged from an Overbooked Flight.” The New York Times, The New York Times, 10 Apr. 2017, https://www.nytimes.com/2017/04/10/business/united-flight-passenger-dragged.h tml. Wise, Alana. “United Airlines Faces Mounting Pressure over Hospitalized Passenger.” Reuters, Thomson Reuters, 11 Apr. 2017, https://www.reuters.com/article/us-ual-passenger-shares-idUSKBN17D1L7. Zeeburg, Delia van. “Overbooking of Airlines: A Quick Guide for Your Business Travel Processes.” TravelPerk, 15 June 2022, https://www.travelperk.com/blog/overbooking-airlines-quick-guide-business-travel -processes/.
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