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Buffett says United made 'terrible mistake' with passenger clash

Monday, May 8, 2017 - 20:59

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Warren Buffett, the top investor in United Continental Holdings Inc, faulted the airline for a confrontation last month with a passenger who was ripped out of his seat and dragged off a plane after refusing to give up his spot for a crew member.

[NEW YORK] Warren Buffett, the top investor in United Continental Holdings Inc, faulted the airline for a confrontation last month with a passenger who was ripped out of his seat and dragged off a plane after refusing to give up his spot for a crew member.

"Obviously, it was a terrible mistake," Mr Buffett said Monday in a televised interview on CNBC.

United sparked global condemnation - and industry changes - after video posted on social media showed the passenger, David Dao, on his back with a bloodied mouth. United's early efforts to contain the scandal backfired when Chief Executive Officer Oscar Munoz said the airline had to "re-accommodate" the man and, later, that Dao had been "disruptive" and "belligerent." The CEO then struck a more contrite tone.

"He's apologized many times," Mr Buffett said. "But your first reaction is going to get a lot of attention." Mr Buffett said he's never met Munoz. The billionaire was asked about the impact of scrutiny from lawmakers, including a Congressional hearing where Munoz acknowledged a breach of public trust.

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"It's bad," Mr Buffett said. "It wouldn't change the investment strategy. It's bad. How bad it is, I don't know."

Mr Buffett oversees more than 360,000 employees as chief executive officer of Berkshire Hathaway Inc., and he said the natural tendency of management is often to support staff. He cited instances of inexperienced workers at Berkshire's See's Candies stores having tense interactions with customers who know more about the products.

The Dao confrontation escalated to violence. He suffered a broken nose and other injuries, his lawyer said, and he reached a settlement with United for an undisclosed amount. The company's board canceled Mr Munoz's expected 2018 elevation to chairman and tied executive compensation more closely to customer service.

The carrier also increased payouts to passengers who offer to give up their seats to as much as US$10,000 from US$1,350. Delta Air Lines Inc had recently made a similar change. United also said it would reduce flight overbooking - a practice that's been profitable for carriers because it ensures that planes fly at maximum capacity even if some passengers cancel at the last minute. Southwest Airlines Co said it would stop the practice entirely.

Berkshire is also among the largest investors in Delta, Southwest and American Airlines Group Inc. He said that fliers' preference for low fares has pressured companies to cut costs, which can hurt the customer experience.

"I would hate to run an airline," the billionaire told CNBC. "It's a job I don't want, running an airline."

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