What would Warren Buffett tell United Airlines to do?

Billionaire investor Warren Buffett‘s Berkshire Hathaway Inc. is reportedly the largest single shareholder of United Airlines parent’s United Continental Holdings (UAL) with a stake of 28.95 million shares, or 9.2% of the shares outstanding (according to latest SEC filings).

So far Buffett has not spoken about this United self-inflicted mess (United Express Flight 3411 incident wiki page) yet but we may learn something from history. You see, Buffett biography The Snowball‘s author Alice Schroeder reported Buffett (an American Express investor) wrote the following during the 1963 Salad Oil Scandal (or “Soybean Scandal”) [with emphasis added],

It is our feeling that three or four years from now, this problem may well have added to the stature of the company [American Express] in establishing standards for financial integrity and responsibility which are far beyond those of the normal commercial enterprise.

Schroeder continues in The Snowball [with emphasis added],

Buffett wrote that two paths lay before the company, and that an American Express that took responsibility and paid the $60 million [note: remember, this is 1963!] to the banks would be worth very substantially more than American Express disclaiming responsibility for its subsidiary’s acts.” He described the $60 million payment as inconsequential in the long run, like a dividend check that got “lost in the mail”.

Using history as guidance, what would Warren Buffett tell United Airlines to do?

My guess is Buffett would advice United CEO Oscar Muñoz (or whoever replaces him) to take responsibility and pay a reasonable amount to settle the pending lawsuit as a United that take responsibility “would be worth very substantially more than United disclaiming responsibility“.

And in an imaginary world that Muñoz (or whoever replaces him) doing the RIGHT THING, “this problem may well have added to the stature of the company [United] in establishing standards for integrity and responsibility which are far beyond those of the normal commercial airlines.” Yes, things need to be done RIGHT now, and United need to lead in “establishing standards for integrity and responsibility which are far beyond those of the normal commercial airlines.

We will see what will happen in time. With Berkshire’s $2 billion (April 13 closing price of $68.07 multiply by 28.95 million shares) investment holding in United, I won’t be surprised reporters will want to ask what Buffett thinks about this mess next time he is interviewed on CNBC or other news media. We will see if I’m right or wrong.

Have a watch of Dr. Dao’s lawyers (more info at Thomas Demetrio’s law firm) and his daughter Crystal Dao Pepper’s hour long press conference today (CNN report) (CBC FB full video, CBC News report).

April 13, 2017 Update:

Sen. Franken (April 11, 2017), “Sen. Franken Presses United Airlines to Explain Forcible Removal of Passenger on Weekend Flight” [emphasis added]

– A federal cap exists on the amount of money a commercial airline may compensate a passenger for being involuntarily denied boarding or rescheduled for a flight. Why was the full amount of $1,350 not offered to passengers aboard Flight 3411 before the passengers were involuntarily denied boarding and forcibly removed? Does the $1,350 cap serve any benefit to consumers?

– Was the Louisville-bound flight oversold prior to including the four United Airlines personnel reported to have been granted seats to enable them to reposition from Chicago to Louisville? If so, were there alternative flight or ground transportation options for these four crew members that could have ensured they arrived in Louisville with sufficient time to board their next flight? Did United Airlines have the ability to assign other crew members to that flight departing from Louisville?

Does United Airlines limit the number of airline tickets that may be oversold on each flight?

Aviation Week, “Podcast: United in Crisis” – ATW and Aviation Daily editors discuss multiple mishaps and backlash after video of passenger’s violent removal goes viral.

LA Times Op-Ed. “Let Richard Branson kill United Airlines

LA Times, “At United Airlines and Wells Fargo, toxic corporate culture starts with the CEO

In two statements Monday, including an internal letter to employees, Munoz chose to see the incident entirely from the workers’ point of view. He depicted the airline staff as having treated Dao “politely” and “apologetically” and Dao as “disruptive and belligerent.” He said the airline agents “were left with no choice but to call Chicago Aviation Security Officers to assist in removing the customer from the flight.”

He added, “While I deeply regret this situation arose, I also emphatically stand behind all of you …. Treating our customers and each other with respect and dignity is at the core of who we are.”

In a third statement issued Tuesday, Munoz finally made the right noises. “I deeply apologize to the customer forcibly removed and to all the customers aboard, he said. “No one should ever be mistreated this way.”

He pledged to “work to make it right” via a “thorough review” of passenger bumping policies as well as United’s relationship with local law enforcement agencies, with a public report due by April 30.

WaPo, “United passenger: Dragging incident more horrifying than when he fled Vietnam” [emphasis added]

“Meanwhile, one of the 70 passengers onboard the flight offered more details about the incident.

John Fuller of Fairfax, Va., described a chaotic — and bloody — scene as aviation security officers tried to remove Dao from the plane.

Fuller said he and the other passengers — a military family with a young child, members of a high school lacrosse team and business travelers — were seated and buckled when a United employee came aboard and said that four people would have to leave the plane.

“She was very terse,” Fuller said. “She said ‘Four people need to get off this plane or we’re not going anywhere.’ ”

United orders review of policies following dragging incident

When no one budged, Fuller said the woman left and returned with a list. She marched down the aisle. First she told a young couple they would have to leave and then a woman. Then she approached Dao, who was sitting in an aisle seat. Dao refused. Fuller said Dao’s wife was not picked to leave.

Security was called and three officers boarded the plane. Millions of people worldwide have seen the video of what followed.

“One person yanked him out of his seat and then I saw them starting to drag Dao,” Fuller said. A woman ran to the front of the plane shouting, “What are you doing to my husband?”

“She kept shouting,” Fuller said. “The police kept telling her she needed to come out or they were going to arrest her. She finally stepped outside.”

But it wasn’t over, Fuller said. Dao returned. But now he was bleeding.

“There was blood spurting out of his mouth,” Fuller said. “He had an agitated … look. “He went by me and kept saying ‘I have to get home. I have to get home.’ ”

Fuller watched Dao stumble back to his seat.

The security officers returned, but refused to restrain Dao because he was injured and bleeding, Fuller said.

Two paramedics boarded the plane.

“I saw a paramedic escorting Mr. Dao from behind,” Fuller said. “He’d stuffed [paper] towels in [Dao’s] mouth.”

NBC News, “Thomas Demetrio: Who Is the Lawyer Taking on United Airlines?

“Are we going to continue to just be treated like cattle? Bullied? Rude treatment?” Demetrio asked at a press conference for Dao’s case on Thursday.

“We all have had enough … angst for flying as it is. Don’t treat the people who helped make you be the corporate entity you are like Dr. Dao was treated,” he said, adding that the City of Chicago may also be liable in the incident.

While no lawsuit has been officially filed yet, Dao’s lawyers on Wednesday filed an emergency “bill of discovery” against the carrier in Illinois State Court in order to preserve evidence in the case, including all surveillance videos and cockpit voice recordings.

“People have asked me, ‘Well, why don’t you just file the lawsuit?'” said Demetrio. “When we file our lawsuit, it’s going to be because every word, every preposition, is in that lawsuit for a reason,” he said. […]

“He’s the everyman’s lawyer,” said retired Cook County Circuit Judge Thomas Hogan in an interview for SuperLawyers magazine in 2009. “He has an ability to connect. He doesn’t condescend to a jury. They understand that he’s an advocate and that he has fulfilled the promise he made to them at the opening statement,” he said.

Richard Branson, founder of Virgin Group including Virgin Airlines, posted this good article, “What is your business built on?

“Take the airline industry. We have created three beloved airlines, Virgin Atlantic, Virgin Australia and Virgin America, which have all been fuelled by a belief that passengers deserve better. Passengers deserve choice, they deserve courtesy, and they deserve care. They deserve innovation, they deserve respect, and they deserve an amazing experience. They do not deserve to be treated like numbers on a balance sheet, and cattle in a cabin.

We pride ourselves on heartfelt service. Allowing your team the freedom to be themselves is key to achieving that. By putting to many processes and procedures in place, staff can be hindered when they need to make judgement calls, based upon their experience, their humanity and the company culture. Across our hotels, our trains, our health clubs, our banks – all across the Virgin Group – we give our teams the latitude to make decisions based on common sense, not outdated rule books. It simply comes down to giving your staff the right tools to do their job, then trusting them to do the right thing.”

Ellen on United Airlines’ Latest Headlines

PBS, “How Delta masters the game of overbooking flights” (April 11, 2017, original story published on Dec 29, 2015)

April 27, 2017 update: CBC News, “United Airlines reaches settlement (amount undisclosed) with passenger dragged from plane – David Dao was forcibly removed from a flight in Chicago on April 9” Note: As expected, United settled and it settled quickly.

May 8th, 2017 update: CBC News, “United Airlines made ‘terrible mistake’ over dragged passenger, says Warren Buffett

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