Damage to airline unlikely to last, say analysts

United Airlines' 2010 tie-up with Continental allowed the company to claim more than 50 per cent of passenger traffic in Houston and Newark, and to serve one in three fliers from Washington Dulles International Airport and in San Francisco.
United Airlines' 2010 tie-up with Continental allowed the company to claim more than 50 per cent of passenger traffic in Houston and Newark, and to serve one in three fliers from Washington Dulles International Airport and in San Francisco.PHOTO: BLOOMBERG

WASHINGTON • The video of a bloodied passenger being forcibly pulled from a United Airlines flight sent the company's stock tumbling on Tuesday and prompted calls for the chief executive to step down.

But will the damage last? History suggests it may well not.

As deeply troubling as the video is, analysts say, the emotional fury such incidents generate usually is fleeting, lasting a few days or weeks at most. The reality, they say, is that consumers have long put price, convenience and personal taste ahead of outrage.

And partly because of a rash of recent mergers that left the country with just four major airlines, many customers may not even have much choice. United's 2010 tie-up with Continental allowed the company to claim more than 50 per cent of passenger traffic in Houston and Newark, and to serve one in three fliers from Washington Dulles International Airport and in San Francisco.

"This will be just a short kind of hit," said marketing professor Lakshman Krishnamurthi of Northwestern University's Kellogg School of Management.

"Volkswagen had the diesel problem, and their sales are fine. Toyota had a problem years ago, and nothing really happened to their sales."

Another example: PepsiCo - which operates in a virtual duopoly in the beverage industry - appeared to stumble when it ran a 21/2-minute ad featuring celebrity model Kendall Jenner wading through a crowd of protesters and handing a police officer a can of Pepsi.

Pepsi pulled the ad within 24 hours after activists called the commercial "trash" for appropriating a protest movement over the police killings of black Americans.

But six days after the ad ran, PepsiCo stock was virtually unchanged.

"Pepsi reacted swiftly, they expressed remorse, and they enabled people to move on," said Professor Maurice Schweitzer of the University of Pennsylvania's Wharton School.

Volkswagen and Toyota have also survived crises in recent years. The Environmental Protection Agency in 2015 found Volkswagen had used a special device to mask diesel emissions in some of its cars. And Toyota suffered a public relations disaster starting in 2009 over its deadly "sticky accelerator pedal".

But Volkswagen and Toyota went on to sell 10.3 million and 10.2 million cars, respectively, last year - blockbuster sales for each, according to company data.

"People forget. They end up seeing a deal online, and they will pull the lever," said Mr Eric Schiffer, chairman of Reputation Management Consultants.

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on April 13, 2017, with the headline 'Damage to airline unlikely to last, say analysts'. Print Edition | Subscribe