The cost of dragging a passenger off an overbooked flight added up fast Tuesday for United Continental Holdings as the stock's dive wiped out an estimated $255 million of the airline's market value.
The shares of United, which is engulfed in a public relations firestorm following Sunday's on-flight confrontation with a passenger who was pulled off a flight with too few seats in Chicago, experienced a major loss in altitude Tuesday. At the closing bell, United (UAL) shares were down 81 cents, or 1.1%, to $70.71 per share, but well off their lows for the day.
At its trading low Tuesday shares were down $3.16, or 4.4%, which at the time had briefly erased nearly $1 billion ($994.2 million) in market capitalization, according to USA TODAY research.
The confrontation between the passenger and United flight crew members was caught on video, went viral on social media and was seen by hundreds of millions of people around the world. United CEO Oscar Munoz issued an apology Monday but prompted more negative backlash after he sent a letter to airline employees crediting the crew involved in the incident with following established procedures. The CEO followed up with a second apology later Tuesday in a statement, where he acknowledged the “outrage, anger (and) disappointment” over the incident and expressed his "deepest apologies for what happened.”
Market watchers say the advent of social media and the quick dissemination of news and images around the globe can pose problems for companies and cause their stocks to fluctuate wildly, at least in the short term, when employees are perceived or alleged to have behaved badly.
"Before social media like Twitter and Facebook, before the advent of fast communication, maybe they can get away with (something like this)," says Gary Kaltbaum, president of Kaltbaum Capital Management. "But it is a whole new ballgame. You spend a lifetime and a ton of advertising money trying to gain a great reputation with a moniker like "Fly the friendly skies," but it takes one incident to completely (undo it). It's tough to recover quickly with everyone seeing it, and makes people think twice about who they will fly with. United's stock (today) reflects the negative potential."
Monday, United's shares were able to shrug off the controversy, closing nearly 1% higher at 71.52.