PR disaster or Investment Opportunity?

It is no surprise that airlines overbook flights, as it was the recent case of a passenger being scorted/dragged off a plane due to the plane not having space for him.

According to news source the passenger along with 3 others were asked to step off the plane as they needed to make room for crew members that needed to board a flight in Louisville.

The 3 other passengers stepped off with no incident and were given compensation for the trouble and their patience.

Now this is a Public Relations Nightmare for United as this is not the image they want to portray. The CEO has since apologized but stands by their decision as they needed to get their crew members to Louisville.

The curios thing about this incident is that stock for United Airlines jumped due to investors going with the sense that an overbooked flight was a good sign that United is growing.

Current stock price is $71.52 +0.64%(0.90%)

Now what do you think about the incident and the stocks going up?

This is not an insider tip or any type of suggestion for you to invest in the stock market,
I am not an expert and assume no responsibility on the individual’s investments

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This is not a duplicate as this touches on the result of the passenger being kicked off(stock price went up)

A small PR blip isn’t going to phase a seasoned investor. Couple of lower than average fares and people will be back flying UA. Negative articles are published daily about Air Canada and they’re doing very well for themselves.

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I agree, but I see myself investing in some aviation related stuff, avionics, parts etc. But you’re right this is just a blip for a company too big to fail at this point.

I’m not particularly liking aerospace valuations at this time, Trump has artificially inflated the current valuations IMO. I can’t see cost-plus contracts being his style. Moving to fixed-cost can put a strain on margins. The overall volume of orders may increase, but earnings may not go as high as what many investors are currently expecting. We might even see some margin decline as the USGOV move towards more responsible procurement practices.

The wildcard is congress, they like cost-plus because it creates more jobs, they might force the administration to continue to use cost-plus contracts. We will see what happens with this.

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Hey @Danman thanks a lot for this perspective. I didnt consider a couple of you things you mentioned. I mean, the announcement he made about Boeing and a new Air Force One, plus the meeting with CEOs from airlines a couple weeks back. Thanks!

this is intresting, I would have thought that the share prices might have taken a tumble after that incident.

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Love that disclaimer 😂😂

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That’s because the boycott of the airline may have reduced the amount of passengers traveling which would then decrease the revenue and profitability of the company but with stocks it can vary, investors seem to not care

The reasoning behind this was that some investor were expecting a fall in United shares because of bad PR (economics 101) however that PR nightmare actually never really made it’s ways to the stocks resulting in those investments helping United far more than helping the investors. Look at today’s results. United Holdings has lost almost 5% today. Why? Because the investors realized that they bought their investment too soon before the PR fallout could begin. Now those investors are selling high to get investments back to buy at United’s low once the PR fallout hits.

United Continental Holdings 5 day stock chart

image

You can see where the investor bought too early. That dip in morning trade on Monday gave investors the false signal of a share drop. However the drop never happened because while the PR was still hot the investors (mostly new ones it would appear) did not realize that you wait at least a day for PR fallout to hit. Just a bunch of noobies who dont know how to invest in a company after a PR fallout.

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The thing is(according to my friend)it’s not even a united airlines plane it’s actually a United express it’s a different company and the law enforcement actually dragged him out not the United Express employees.

This could explain a lot of your questions about overbooking. I knew that this happened, but no you know the real reasons behind it, and it wasn’t a mistake by United. This was made in a direct response to this situation.

As for me, I will not stop flying United because of this. I will be flying them six times in the span of 26 days in June. I wouldn’t be afraid to fly United, just because “this may happen to me”, because, I know, it won’t. Shining the light on this event makes it less likely to happen again with United, because, they want to avoid this mishap again. Similar to how one of the safest days to fly is on 9/11, due to the fear it may happen again, and increased security in that day.

@USA007 Yes, United Continental stock is falling, but in the March it dipped well lower than what it is now, and, also, it is still worth way more than that of American or Delta, nearly $25 more a share. It will hurt, but in the ever booming airline industry, no long term harm will be done, and they will recover.

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Another thing worth noting. Much of the fallout from the video is coming from China as Chinese investors are boycotting United (China is one of United’s major markets). Lose of business in China is a huge blow to United. By the time Chinese investors started hearing about the video investments were done for the day. Once the market opened in the US you could see what the pull out of Chinese investors did to United’s stock value.

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Can’t never be too careful.

Very well put! Thanks so much for putting it so eloquent. It gave me yet another perspective on this.

Economics 101? I took economics and bad PR was never mentioned, nor were stock prices.

Huh? Alternative facts much?

Not really, it’s just short-term investor panic. Some fund managers might be cashing in on short term gains.

Not really, Boeing stock plunged instantly after Trump’s Air Force 1 remarks. This is probably just a small group of large investors getting cold feet, stuff like this happens.

Funny, every airline struggles with yields in China. They’ll be fine. The conservative press in China is blowing the whole thing up into a racism thing. (Source: am Chinese) If some vengeful investors are trying to drive down the stock price, good for them, I’ll take advantage of their red mist. It’s not going to impact long-term earnings since UA’s main high-yield base into China comes from the US anyway.

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According to ABC World News United loss about $700 million dollars in stock today. I wouldn’t be investing in them right now.

UA only lost $255 million in market cap. That’s quite normal for valuations to whipsaw, Apple lost $7 billion in market cap today.

Apparently it was that much around the morning hours and today’s final figures is what you mentioned. As for Apple and their cap space of $742 billion, I could careless about them.

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That dip in the morning eh? United will bounce back, I hope. Do you think this will be a long lasting effect or will it be a temporary bump.