Saturday, April 15, 2017

United Airlines made the right decision. Just not the smart one

How DARE United Airlines drag that poor man, a DOCTOR, with PATIENTS! Did you see the video? You HAVE to watch the video. OMG, I just can’t stop SMH. You know this is JUST what is wrong with AMERICA. We have lost our RIGHTS!

Hasn’t it been fun? The OUTRAGE! This is some good-shit, collective-consciousness, crack cocaine we are smoking on this media frenzy.

Beyond the specifics of what happened on United Flight 3411 is another story: what happens when businesses become so laser focused on the bottom line that they forget their customers? Add to that the difficulty in assessing the risk of very rare but exceedingly costly events.

Imagine we are at United’s corporate office where they look at and review policies. Someone or some team was responsible for developing the policies and procedures for handling “bumping” a passenger from a flight from overbooking, moving pilots around the country, and so on. And somewhere is the case where no one is willing to voluntarily be bumped, regardless of the incentives, so they choose randomly. The end.

So when a randomly selected passenger says, “no, I’m still not leaving regardless of your incentives,” we invoke a different set of policies and procedures. We now have a “belligerent” or “non-cooperative passenger” with guidance ending with calling in local law enforcement to forcibly remove the passenger.

Could this have been anticipated? Maybe, maybe not. But it is now! United is taking the heat but every other airline has some variation of that approach.

But consider this: United was acting rationally. They overbook to ensure all seats are full. It’s cheaper to bump passengers than run a flight with empty seats. It’s cheaper to bump passengers to accommodate pilots “dead heading” to another airport. It allows the airline to run with fewer pilots rather than having unused pilot capacity sprinkled around the country. From a pure profit, bottom-line assessment, to return the most to it’s share holders, United is acting just as it should.

But are there costs to this approach? Imagine the conversation of one United’s policies and procedures teams in the corporate office: “You know, what if something bad happens when we bump someone? They are not in a ‘happy place’ and willingly go along with it? What then?”

Risk analysis of this type is tricky? What is the probability that will occur? And then, what is the cost if it does occur? Could someone have estimated the PR costs, then lost revenues from boycotts? The media spin campaign and special consultants to fix it? The lawsuits? Hard to say.

If you want to see something interesting, check out United’s Annual Report (SEC 10-K) filing then look at Southwest’s. It’s interesting to note the cold, data reporting, tables, and such of United’s while Southwest’s opens with a three-and-a-half page letter from the CEO that ends with this:

"… our Purpose is to connect People to what’s important in their lives with friendly, reliable, low-cost air travel. We take great care of our Employees, so they can take great care of our Customers. If we do both well—keep our service levels high and our fares low—we can take great care of our Shareholders. 
… 
And, ... we aspire to more—to become the world’s most loved, most flown, and most profitable airline."

That’s good stuff. It says a lot. Shareholder value? Yes, yes, of course. But people? Oh Yes! Very important. And this is how Southwest manages it’s risks. By ensuring their cultural goal includes becoming the most loved airline. When the boots on the ground -- the gate attendants, flight attendants, and pilots -- are operating from that cultural orientation, rather than solely the numbers, different outcomes become possible.

It’s a culture thing.

And we can see how United is starting to handle this. With a new policy. 

I wonder if they want to be loved too?

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