Wed, May 10, 2017 - Page 10 News List

Buffett faults United CEO after passenger dragged off aircraft


United Airlines chief executive officer Oscar Munoz, left, speaks on Tuesday as United Continental president Scott Kirby, second left, listens during a US House of Representatives Transportation and Infrastructure Committee hearing in Washington.

Photo: Bloomberg

Warren Buffett on Monday said that United Airlines bungled the case of the passenger dragged off a plane last month and he criticized the chief executive officer’s handling of the incident.

Airplanes “may become like cattle cars,” but that is because a significant number of passengers put up with crowding in exchange for cheaper fares, Buffett said.

Buffett’s Berkshire Hathaway Inc is United’s largest shareholder and has large stakes in other big US airlines.

After the market closed on Monday, United reported that passenger traffic last month rose 7.4 percent, compared with the same period last year.

That beat Delta’s 1.6 percent gain, but fell short of Southwest’s 8.4 percent increase.

Most of those tickets were bought before the April 9 incident on a United Express aircraft in Chicago.

United has not discussed whether the fallout has affected bookings since then.

According to FactSet, Berkshire Hathaway owns more than 9 percent of United Continental Holdings Inc, a stake worth nearly US$2.2 billion at Monday’s closing share price of US$74.98. Berkshire is also the top shareholder at Delta, No. 2 at Southwest and No. 3 at American.

The bloody removal of a 69-year-old passenger from a plane was obviously “a terrible mistake,” Buffett said on CNBC.

He criticized United Airlines chief executive officer Oscar Munoz, who first gave a vague response, then defended his employees and blamed the passenger before giving a contrite apology.

“I kind of wonder whether Oscar had actually seen that [video] when he made the response,” Buffett said. “If so, it was a bigger mistake by far.”

Buffett said a chief executive officer’s natural tendency is to first defend his employees, but that should not have been the case if Munoz had seen the video.

United declined to say when Munoz first saw the video.

The chief executive officer’s has said his early response was insensitive.

United issued a statement saying it appreciated Buffett’s perspective and has announced policy changes to improve customer service.

“It’s bad” when airline executives get hauled before US Congress, as Munoz and others were last week, Buffett said, but added that the strategy behind his airline investments remains unchanged.

The financier said air travel has become “unbelievably safe” and that full aircraft are making the airlines profitable — even if that causes “a fair amount of discomfort.”

“They may become like cattle cars, but ... a significant percentage would rather be treated that way and fly for X than have far more legroom, two abreast, all kinds of things, and travel for X plus 25 percent,” he said.

High average occupancy has kept prices from rising, Buffett said. He was also skeptical about Congress imposing new regulations on the airlines, saying that would push fares higher.

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