United reaches a settlement with Ky. doctor dragged from his plane seat

Kentucky physician David Dao, who was dragged off a United Airlines flight in Chicago on April 9 after refusing to give up his seat to a crew member, has reached a financial settlement for an undisclosed amount with the airline, his lawyers announced Thursday.

A condition of the settlement includes a provision that the amount remain confidential. Dao's lawyer, Thomas Demetrio, praised United CEO Oscar Munoz, who "said he was going to do the right thing, and he has."

"United has taken full responsibility for what happened on Flight 3411, without attempting to blame others, including the City of Chicago," Demetrio said. "For this acceptance of corporate accountability, United is to be applauded."

Cellphone video of the altercation sparked international furor. Dao, 69, lost two teeth and suffered a broken nose and a concussion.

The settlement was announced the same day United released a 10-point improvement plan that includes increasing compensation to up to $10,000 for a passenger asked to give up a seat due to overbooking. Dao was offered $800.

In its plan, United pledged to reduce the amount of overbooking, particularly flights on smaller aircraft and the last flights of the day. United said it will launch an "in the moment" app for employees to quickly resolve customer issues, by compensating travelers immediately.

The airline will create an automated check-in system for soliciting volunteers earlier to give up seats in exchange for compensation.

United will eliminate the red tape on permanently lost bags with a new "no questions asked" reimbursement of $1,500 to any passenger whose bag is misplaced. No customer seated on a plane will be required to give up a seat involuntarily unless safety or security is at risk, the airline said.

United said Flight 3411, scheduled to depart at 5:40 p.m. April 9, was overbooked by one seat, according to the airline's latest statement, released Thursday. After no one volunteered to get off, the airline bumped a passenger who had not received a seat assignment. The remaining passengers boarded.

But a 2:55 p.m. flight to Louisville, Ky., had a maintenance issue and was delayed. Four crew members who had been booked on that earlier flight needed to get to Louisville to operate another flight.

United agents began to seek four volunteers willing to give up their seats, offering $800 travel credits plus the cost of meals and hotel for the evening. No one accepted. An agent then followed the airline's involuntary-denial-of-boarding process, based on criteria including fare paid, whether the passenger had a seat assignment before boarding, and time of check in.

Two customers, a couple, left and received compensation. Dao and his wife were approached, and Dao refused. United told him they would call authorities. Chicago aviation department officers were summoned, but were unsuccessful in persuading Dao to leave.

A United supervisor left the plane and tried to call a manager. Dao was physically removed from his seat. The moment was caught on smartphone cameras by other passengers, showing Dao yelling as he was dragged down the aisle.

"Our review shows that many things went wrong that day," Munoz said. "This is a turning point for all of us at United, and it signals a culture shift toward becoming a better, more customer focused airline."

Also on Thursday, customer service and employee pay overshadowed American Airlines' solid first-quarter earnings, which beat expectations. Shares fell more than 7 percent at one point on the news that American, which has a major hub in Philadelphia, offered mid-contract pay increases of 8 percent for pilots and 5 percent for flight attendants to bring them to the highest rates of rivals United and Delta. The expense adds $930 million over three years.

"We are troubled by AAL's wealth transfer of nearly $1 billion to its labor groups," analyst Jamie Baker, of JP Morgan Chase, wrote in a client note.

On a conference call, CEO Doug Parker said American was investing in its product and its team: "When we merged we were creating the largest airline in the world, and we set out to build the best. We made a commitment that we would have pay rates at, or near, the top of our competitors' pay rates. It's the right way to lead any service organization. We recognize pay alone won't build trust, but we also know it's an important step. This investment in our people will make a difference in our service."

American shares closed down 5.22 percent, or $2.42, to $43.98. United shares closed down 0.90 percent, or 64 cents, to $70.64.