The catastrophe that wasn’t

BY Carsten Knox

Too big to fail? When massive PR failures extend to an entire industry, nobody loses for long.

Last spring, United Airlines customers filmed a passenger forcibly, and famously, removed from a packed flight, one of four randomly chosen to accommodate crew members who needed the seats.

Cue a high-profile public relations nightmare. The reaction was ferocious, the impact felt both in the court of public opinion and on the financial markets—within 48 hours, United’s stock had fallen by 6.3%, roughly the value of 14 Airbus A319s.

But the anger expressed in reaction to the incident wasn’t just directed at United; it was quickly directed at all airlines. There were immediate dips in the stock value for other American carriers, such as Southwest and Delta, suggesting a spillover effect. No one has good things to say about commercial air travel these days. Outside the US, the story seemed to fuel local fires:

“Companies like this need to go out of business,” wrote a commenter on a CBC report of the story. “Air Canada is in the same league.”

“Flying domestically in the [US] is just awful on every level, and becoming more so in Europe. This awfulness is now creeping into long-haul, intercontinental flights as well,” wrote a commenter on the UK news outlet the Daily Telegraph’s take on the story.

Another commenter on the Telegraph’s site wrote: “Air travel is impossible … drop off and car parking etc., check-in, boarding and tiny seats, with no leg room or comfortable facilities like there were in the old days.”

This recent example of a brand—and industry—besmirched by massive public blowback isn’t the only one.

Earlier this year, CBC broke the story that TD Bank Group employees were being pressured to meet high sales revenue goals to the point of breaking the law.

How much damage is all this likely to do in the long run? Probably not much.

Just as we grumble every year when a big bank posts record profits, we are appalled when its employees admit to adopting illegal practices to increase sales.

But when we hear reports that employees at other banks have done the same things, we roll our eyes and shrug our shoulders. They can launch the damage control— CEOs apologize, companies settle lawsuits and agree to independent investigations—but they don’t really need or want our forgiveness. We keep coming back. We won’t change until we’re offered a better product or one that’s less expensive.

Air travel, much like banking, has become a grudge industry. While no one believes the airlines will ever change, we’re not going to stop flying. Same with the banks, oil companies, cable companies and cellphone providers. We’ve grown cynical about them, expecting the worst behaviour from the top providers. We hold our noses and keep going.

This is true even in the cataclysmic example of Volkswagen. In 2015, the German carmaker admitted to installing software on 11 million cars worldwide to cheat emissions tests. The financial implications for Volkswagen are staggering, and are still playing out, but in January 2017 the company announced it sold more cars than any other manufacturer, passing Toyota as the world’s biggest car company. Even in Sweden, the Volkswagen Golf was the most popular car in 2016, the first time in more than half a century that the homegrown Volvo brand hadn’t been the Swedish consumer’s favourite set of wheels.

If there’s a lesson to be learned from all of this, it’s that, while public disapproval of an industry will only last so long, there’s an opportunity for competitors in the broader space to leverage the error and offer a differentiated alternative while emotions are still running high—but you’ll have to be nimble. Amtrak and Via Rail could have easily cashed in on United’s mistake with a summer travel promotion promising no overbookings. Credit unions could have capitalized on the bank scandal by highlighting their more customer-oriented approach. And car companies could have used Volkswagen’s emissions-cheating misstep to promote emissions-free electric cars.

At least one competitor did respond in a timely fashion to the United passenger-removal controversy. Weeks before, United’s CEO Oscar Munoz criticized airlines from the Gulf states as not being real airlines but rather “branding vehicles for their countries,” so bad blood had already spilled.

Triggered by the United controversy, Emirates, a Dubai-based airline, released a commercial responding to Munoz’s negative comments by listing its recent accolades—TripAdvisor named it the best airline in the world—before concluding with a shot at the famous United slogan: “Fly the friendly skies … this time for real.”