United Airlines handled its customer dragging incident with all the finesse of a bull in a china shop, but that’s not going to change consumers’ flying habits. That’s a sentiment echoed by several investors, including Omega Advisors’ Leon Cooperman.
As a matter of fact, Cooperman told CNBC Tuesday that he had seen an opportunity when some investors, spooked by the media frenzy surrounding Dr. David Dao’s forced removal from a United Airlines flight, sold off shares of the airline in early April. At the time, shares dipped as much as 6.3% as angry consumers around the world pledged to cut ties with the company.
When asked by CNBC’s Scott Wapner if he wavered at all in his support for United after the incident, Cooperman answered: “We bought some in decline.”
As Cooperman sees it, investors who sold off United shares following the incident made an elementary investing mistake by overreacting to headlines and failing to grasp the fundamentals of the company.
“This stuff passes,” he said of the dragging incident to CNBC. “We’re talking about a billions of dollars earned company… It sounds very cold and callous, but if a a drug company winds up with a bad drug and they kill somebody, everybody wants to know what is the earnings per share impact.”
Well, Cooperman notes, the impact was minimal, largely thanks to the fact that the airline industry has effectively become an oligopoly thanks to a series of mergers and acquisitions over the past decade. That created pricing controls in the industry, while giving consumers few alternatives in flight choice.
“At the end of the day, if United has the right plane going to the right place at the right time, I’m flying United,” he said. “I’m not going to go out of my way to go to a different airport at a different time.”
So far, Cooperman has gotten it right. Shares of United have completely erased their losses from the incident, and even surged to an all-time high earlier this month. Shares closed down by 2.5% Tuesday.