Tuesday, April 11, 2017
Time to Fire CEO
Shares of United Airlines (UAL) were down as much as 4% in early trading on Tuesday after video surfaced Monday of a passenger being forcibly removed from an overbooked flight over the weekend.
The video went viral on social media on Monday, though shares of the airline actually rose during the trading day, giving the brief appearance the company had dodged a major financial hit from the controversy.
On Tuesday, as the controversy surrounding the video failed to die down, shares dropped as much as 4.3%, or $3.10 per share, taking upwards of $950 million in market cap value away from the company based on 314 million shares outstanding.
And while stocks broadly were down on Tuesday, United’s losses far outpaced that of the broader market. After the market close on Monday, United also raised its forecast for first-quarter flight capacity and kept its passenger unit revenue guidance unchanged.
United had offered a $1000 voucher to anyone willing to give up their seat on the overbooked flight, according to a letter sent by Munoz to United employees on Monday obtained by the Associated Press.
But as Bloomberg’s Joe Weisenthal quipped on Tuesday, given the drop in United’s market cap it seems the actual offer price for that voucher could’ve been in the hundreds of millions of dollars and the company would still be making out fine.
In a statement following the video on Monday, United CEO Oscar Munoz said, “This is an upsetting event to all of us here at United. I apologize for having to re-accommodate these customers.”
Munoz’s use of “re-accomodate” for how the airline dealt with the passenger was widely panned.
In Munoz’s letter to United employees, he appeared to shift blame onto the passenger, whose face was bloodied after he was dragged off the aircraft, saying the passenger was being “disruptive and belligerent.”
BuzzFeed News reported overnight that millions of people in China, the world’s fastest-growing air travel market, called for a boycott of the airline. The man dragged off the United flight was Asian-American.