United Airlines: The Complexities of Corporate Policy

Cameron Scullen – It is a necessity for corporations to have company policies. These policies keep the employees in line, allowing the company to properly achieve economic efficiencies while ensuring its cooperation with applicable law. However, sometimes the adherence to company policies can lead to an ethical confrontation.

On Sunday, April 9, 2017, Dr. David Dao refused to leave an overbooked United Flight, United Express Flight 3411 (Departing Chicago O’Hara Airport for Louisville, KY). The result was Chicago Airport Security personnel forcibly removing Dr. Dao from the airplane, resulting in Dr. Dao sustaining various injuries.

On Tuesday, April 11th, United Airlines Chief Operation Officer, Mr. Oscar Muñoz, apologized for the forceful removal of Dr. Dao from the plane. Although some may indicate that Mr. Muñoz’s apology to be an admission of a particular legal violation, many will argue that it was not such.

United Continental Holding (“United”) is a holding company registered with the U.S. Securities and Exchange Commission and trades on the NYSE. The holding company has many subsidiaries, including United Airlines. United has a company policy that allows the airline employees to remove passengers from an overbooked flight when no one volunteers to leave the plane. Although airlines will offer incentives to encourage individuals to freely remove themselves from the plane, such as the $1,000 voucher offered by United in this case, the airline may find it necessary to remove passengers to make room for employees. Here, United had four employees that were needed in Louisville, KY and had to board Flight 3411 in order to meet company demands. If these employees did not board Flight 3411, further flight delays could have ensued in Louisville, KY.

Despite United’s company policy, much debate has arisen as to the morality and ethics of forcibly removing passengers from an overbooked plane. The Transportation Department has initiated a review of United’s policy on overbooking, while Chicago’s aviation department suspended an officer involved in the incident. But a very complex issue resulting from this incident is the impact of United’s overall business. On April 7th, prior to the incident, United’s stock price closed at 70.88. However, by April 13th, the price had fallen roughly 2.53% to 69.07.

Furthermore, United is the largest U.S. Carrier operating in China, having “a code-sharing relationship with Air China Ltd., one of the country’s biggest airlines.” Mr. Muñoz has plans to gain a strong foothold in the Chinese market by offering affordable flights into the United States. The latter would give United a competitive advantage against other domestic and international airlines, as well as giving United a stronghold in a secondary consumer market. However, the recent incident has been broadcast over Chinese social media. The Chinese consumers may view this incident negatively and result in United’s popularity, as well as its future potential in China, to falter.

It is critical that every major corporation implement and adhere to company policies. These policies can instill ethical efficiencies that will help generate revenue that can result in profits. But it should not go unnoticed that the compliance with company policies can, in certain circumstances, have substantial impact on a corporation’s public relations and potentially harm both the corporation’s market price and long-term business strategy.

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