Southwest to Stop Overbooking as United Uproar Echoes

  • ‘That’s one of the pain points,’ CEO Kelly tells analysts
  • United pushes maximum payout for giving up seat to $10,000

Will United Airlines’ Customer Problems Impact Investors?

Southwest Airlines Co. said it would stop overbooking flights, after the forcible removal of a United Airlines passenger from a packed plane sparked worldwide outrage.

Overbooking is tentatively set to end May 8, Southwest said Thursday. That would be about a month after a 69-year-old United customer was dragged from a jet by airport police for refusing to surrender his seat -- an incident that left the carrier’s image in tatters when videos of the episode circulated on social media.

Southwest’s move underscored the urgency among carriers to avoid a similar debacle. Delta Air Lines Inc. increased payouts to almost $10,000 for passengers who voluntarily give up their places on oversold flights. United Continental Holdings Inc. itself followed suit Thursday -- both carriers’ payouts previously were capped at $1,350 -- and announced other policy changes to win back passenger trust.

“It’s not a topic that is brand new to us,” Southwest Chief Executive Officer Gary Kelly said on a conference call to discuss earnings. “That’s one of the pain points we’d like to eliminate.” He said the airline has been reviewing overbooking policies for a couple of years and indicated that the United incident added urgency.

“It puts the question under a bright light. Why not do it now?” Kelly said.

In addition to increasing its payout, United plans to overbook fewer flights and refrain from calling in law enforcement unless safety and security are at risk, according to a company statement Thursday. The airline and lawyers for the passenger who was removed its flight, David Dao, said they had resolved their dispute. Terms weren’t disclosed.

Violating Values

“Every customer deserves to be treated with the highest levels of service and the deepest sense of dignity and respect,” CEO Oscar Munoz said in the statement.

Rigid policies for handling cases where passengers must be denied boarding “got in the way of our values,” he said. The airline is still dealing with brand damage and other fallout from the April 9 incident. United faced another round of negative headlines Wednesday when a giant rabbit died as it awaited a connecting flight after arriving in Chicago from London.

United’s board last week canceled Munoz’s expected 2018 elevation to chairman and tied compensation more closely to customer service.

Thomas Demetrio, one of Dao’s lawyers, said United’s latest changes are common sense.

“Both Dr. Dao and I applaud United for promptly addressing the many issues that have plagued passenger satisfaction in the arena of airline customer service,” Demetrio said in a statement Thursday. He had said that Dao suffered a concussion, broken nose and two lost teeth in the incident.

Training Employees

United said it also would refrain from demanding that seated customers surrender their spots involuntarily, unless safety or security is at risk. The company is planning a new automated system to solicit volunteers willing to give up their places on overbooked flights. Other measures are designed to give employees more training and power to deal with difficult situations.

By June, United expects to have a team in place to help gate agents find ways to use nearby airports, other airlines and ground transportation to get passengers and crews to their destinations.

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