Behind United Airlines Fateful

Decision to Call Police

Airlines rules-based culture in spotlight after man was dragged off
flight by law enforcement
Like most other airlines, United follows strict rules on every aspect of handling its passengers. Shown,
the United Airlines terminal at O'Hare International Airport in Chicago, last week. PHOTO: PATRICK
GORSKI/ZUMA PRESS

By
Susan Carey
Updated April 16, 2017 8:56 p.m. ET
1210 COMMENTS

The recipe for the disastrous decision by United Airlines employees to call for police to
remove a passenger from a fully booked flight was years in the making.

Like most other airlines, United Continental Holdings Inc. UAL +2.41% follows strict rules
on every aspect of handling its passengers, from how to care for unaccompanied minors to
whether someone gets a whole can of Coke.
While procedures change to keep up with evolving safety and security protocols, streamlining
the underlying bureaucracy can be a lower priority for an operations-focused carrier such as
United, experts said.

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Deviating from the rules is frowned upon; employees can face termination for a foul-up,
according to people familiar with the matter.

At United, this has helped create a rules-based culture where its 85,000 employees are
reluctant to make choices not in the book, according to former airline executives, current
employees and people close to United.

Airlines crave consistency, experts said, and United isnt unique in its strict focus on rules.
For carrierswhich face government scrutiny on everything from pilot training to repairs
the tomes of rule books can help ensure safety protocols are followed.

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The company follows manuals, said a longtime United pilot at the nations third-largest
carrier by traffic, where he said the rule-based culture was reinforced by the merger with
Continental Airlines seven years ago.

The incident at United last week, in which Chicago Department of Aviation police dragged a
screaming passenger, David Dao, down the aisle and off a United Express regional flight,
started as a mere scheduling issue. United declined to comment on the incident, pending its
investigation.
People close to the company said it could have been avoided. At least some decisions that led
to the crisis were fueled by employees following rules, which are endemic to big, long-lived
airlines and amount to giant manuals.

As United prepares to report first-quarter earnings on Monday, it isnt clear how much the
reputational hit will cost the company. Investors so far havent punished Uniteds stock
shares ended last week 2% lowerbut it isnt clear yet what impact the fracas will have on
the carriers bookings or new employee training costs.
MERRILL SHERMAN

Fliers have vowed on social media to boycott the airline, which transported 143 million
passengers last year and was seeing big improvement operationally after a few sluggish years.
Many customers on social media and in the press have called on Chief Executive Oscar
Munoz to resign.
The incident has also turned into an indictment of the overall treatment airlines provide their
increasingly dissatisfied customers. The U.S. industry, which has consolidated into a virtual
oligopoly where the four largest carriers control more than 80% of domestic seats, has taken
away perks like free checked luggage, crammed more seats into economy-class cabins and
made frequent-flier programs less rewarding, all to improve the bottom line.
United has lagged behind its rivals for years in financial and operating performance. The
messy merger in 2010 with Continental Airlines further hurt its focus on customer service
because the new company was busy aligning its information technology systems, working to
win federal safety regulators approval for new procedures and manuals to cover the
combined entity and producing new labor contracts to cover its mostly unionized workforce.

Last Sunday evening, Republic Airways Holdings Inc., the regional airline operating the
flight for United, asked an hour before departure for four of its crew members to take the
place of passengers, according to a person familiar with the matter. The crew was needed the
next day at the flights destination in Louisville, Ky., the person said. They had been delayed
by a mechanical problem earlier. United agreed, according to two people with knowledge of
the matter.

But the two pilots and two flight attendants didnt arrive at the gate until a few minutes
before departure, according to Uniteds pilots union. All the passengers were already seated.
United CEO Oscar Munoz. The firm reports earnings Monday. PHOTO: RICHARD
DREW/ASSOCIATED PRESS

Uniteds gate agents went on board to offer compensation to customers who would agree to
fly later, a negotiation that normally takes place at the gate. There are rules for this process,
known as denied boarding. No one took their top offer, $800 plus a hotel voucher.

Instead of offering more, agents used a computer program, as dictated by the rules, to pick
fliers of the least value to the airline based on factors like ticket price paid and frequent-flier
status, according to people familiar with the matter.
Three obliged, but Dr. Dao, who was flying with his wife on a trip from California, refused.
So the agents, following the rules, called for law enforcement.

In hindsight, the gate agent should have said, Folks, were not leaving until someone gets
off. If someone doesnt take the $800, were going to cancel the flight, said the United pilot,
who wasnt involved in the incident.

But canceling the flight would have been a drastic step, according to the rule books. Seventy
passengers would be stranded and require compensation and new flight arrangements the next
day. The extra crew wouldnt have made it to Louisville, causing the flight the next morning
to be canceled as well. People close to United said the rules-based calculus is to
inconvenience the fewest number of fliers.

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Employees followed the policy, said a person familiar with Uniteds executive suite. But
questions remain about why the agents didnt raise the compensation level last Sunday, which
is part of Uniteds review expected by the end of the month. United declined to comment on
the compensation decision. Last week, it said it will refund the fares of all the passengers on
that plane, Flight 3411.
It also isnt clear when United executives, who sit in the 11th floor of the Willis Tower in
downtown Chicago, learned of the incident.

By Monday morning, after videos taken by passengers on the plane had spread rapidly on
social media, United was on the defensive. Botched attempts by Mr. Munoz, the CEO, to
explain the events appeared to make things worse.

Part of what happened is there were too many cooks in the kitchen, one knowledgeable
person said of the companys initial responses.
Mr. Munoz first tweeted apologies at midday Monday for having to re-accommodate those
customers.

On Tuesday, in a change of tone, Mr. Munoz called it a horrific event.

On Wednesday morning, in an interview with ABC, he called the event a system failure and
said United hasnt provided its front-line managers and supervisors with the proper tools,
policies, procedures that allow them to use their common sense.

Thats on me, he said. I have to fix that.

Decades-old union conventions that enshrine seniority over performance are part of the
problem, one former executive said, because employees are rewarded for their tenure rather
than their talent.

Another former airline executive said he believes Mr. Munoz, didnt realize how rule-based
the employees are. The huge rule books need to be burned because crazy shit happens, the
executive said.

United said no employees have been put on leave or terminated in connection with the
incident, and it isnt aware of any dismissals at Republic Airways, which has declined all
comment. The three law-enforcement officials employed by the Chicago Department of
Aviation have been put on leave pending an investigation.

Mr. Munoz, who is facing his biggest challenge as the head of United, has pledged to review
the companys policies for moving flight crews, incentivizing volunteers to yield their seats
on sold-out planes and relations with airport authorities and law enforcement. Mr. Munoz
also said United will change its former policy of asking law enforcement officers to remove
passengers from its flightsunless it is a matter of safety and security.

Robert Milton, nonexecutive chairman of United and a former CEO of Air Canada, said in an
interview that Mr. Munoz has the complete backing of the 15-member board, something he
reiterated Friday in a memo to employees.

But Mr. Milton added that Dr. Daos mistreatment and Uniteds flat-footed reaction must
become a defining moment in the history of United Airlines pivoting to customer service
and customer delivery.