140 million dollars, 1.4 tons of cash. That is what Dr. David Gao received after being violently dragged off an overbooked United Airlines flight. With such a settlement, it seems that the company shows their sincere apology to the physically and mentally tortured passenger. However, if we look into this entire incident from an economics perspective, it is not hard to recognize that all the company did was to ensure it’s own benefit, and all the settlement and so-called “apology” is nothing but a way to maintain their revenue.
Back to the evening of April 9. When the crew decided to remove four passengers to make room for United Airlines staff, it clearly benefits the company. Since it is only an eight hundred dollars voucher for each passenger, it is a tiny fraction comparing to the revenue that these four staff could generate. So from the business point of view, it is unquestionably a good deal. However, they forgot one most important factor in the equation: customer satisfaction. Imagine a passenger who has already boarded the plane, stored his luggage in the upper …show more content…
This reflected on the stock market, where the price of United Airlines stock dropped for a dramatic five percent. And the passenger, with his lawyer, was preparing to file lawsuits against the airline. It is until this point that the PR department of United Airlines realized the severity of this incident, and had no choice but show some real settlement. The CEO of United Airlines apologized for the incident and “took full responsibility for what happened”, and came with the words, was an eight-figure settlement. Also, United Airlines announced its new policies, including decreasing overbooking rate, and offering $10,000 to passengers who voluntarily give up seats when the flights are overbooked. These improvements helped the firm to regain reputation. However, that is just a drop in the bucket comparing to its 36.6 billion dollars revenue from
Back to the evening of April 9. When the crew decided to remove four passengers to make room for United Airlines staff, it clearly benefits the company. Since it is only an eight hundred dollars voucher for each passenger, it is a tiny fraction comparing to the revenue that these four staff could generate. So from the business point of view, it is unquestionably a good deal. However, they forgot one most important factor in the equation: customer satisfaction. Imagine a passenger who has already boarded the plane, stored his luggage in the upper …show more content…
This reflected on the stock market, where the price of United Airlines stock dropped for a dramatic five percent. And the passenger, with his lawyer, was preparing to file lawsuits against the airline. It is until this point that the PR department of United Airlines realized the severity of this incident, and had no choice but show some real settlement. The CEO of United Airlines apologized for the incident and “took full responsibility for what happened”, and came with the words, was an eight-figure settlement. Also, United Airlines announced its new policies, including decreasing overbooking rate, and offering $10,000 to passengers who voluntarily give up seats when the flights are overbooked. These improvements helped the firm to regain reputation. However, that is just a drop in the bucket comparing to its 36.6 billion dollars revenue from