Posted on 04/18/2017 11:54:41 AM PDT by SeekAndFind
That the forceful ejection of a United Airlines passenger the Sunday before last proved so newsworthy indicated something that’s largely been ignored by the airline’s myriad critics and “advisers.” What happened was news precisely because it’s so rare.
But for a commentariat prone to turning anecdote into statistic, United’s resort to force when it came to properly removing David Dao (more on this in a bit) from one of its airplanes was naturally (to the chattering class, at least) a sign of a tone-deaf airline; one clueless about customer service thanks to a culture within the airline that doesn’t prioritize it. United’s actions were apparently also a sign that its executives don’t understand the auction process that economists – who’ve almost to a man and woman never run a business – can apparently design in their sleep. Oh please.
Back to reality, we all know why airlines frequently sell more seats than are physically available. They do so because they have a good sense based on years of statistical analysis of roughly how many no-shows there will be for each flight. The major airlines are plainly good at divining the no-show count as evidenced by travel journalist Gary Leff’s stats in USA Today revealing that, “Out of over 600 million passengers boarding major U.S. airlines in 2015, half a million didn’t have seats. Most of those voluntarily gave up their seats.” Leff adds that the latter explains why a mere 46,000 passengers were actually involuntarily denied boarding in 2015, a rate of 0.09%, according to Leff’s calculations. Again, Dao’s ejection was news precisely because what happened almost never does.
Despite this, economists have as mentioned used United’s alleged error to showcase their presumed worth. You see, economists claim to solve problems. Crunching numbers in their cubicles free of the pressures that concern those who actually run businesses, they come up with “solutions” for those businesses.
Case in point is Robert Samuelson, resident economist at the Washington Post. Though he acknowledges that there are lots of public policy problems that “cannot be easily solved,” he contends that “Fixing airline overbooking is not one of them.” Samuelson’s solution is for airlines to consult another economist who has largely spent his adult years contemplating the many great problems businesses face from Harvard’s leafy campus. According to Samuelson, Greg Mankiw has a plan for the airlines. Here it is:
“Make the airlines pay when they overbook. When they do, ‘they should fully bear the consequences. They should be required (by government regulation) to keep raising the offered compensation until they get volunteers to give up their seats," writes Mankiw. "If $800 does not work, then try $1,600 or $8,000.’"
Samuelson adds that the professor in Mankiw is "sure volunteers will appear as the price rises." Samuelson agrees with the professor, but would “tweak” his proposed imposition of force on businesses “by requiring that all the bumped passengers receive the highest payment.”
Of course the problem for Samuelson and Mankiw, along with countless other economists awoken by United’s alleged error, is that airlines have long been doing what they propose. We know this because airlines regularly oversell flights, only for them to offer rising rates of compensation to reserved passengers assuming they don’t have enough seats. Sorry economists, airlines have long employed the auction process that has oddly given your profession its day in the sun.
As for the proposed regulations offered up by economists mostly untouched by the real world, they’re passing strange simply because economists generally pay lip service to the truism that there’s no such thing as a “free good.” But in demanding federal compensation rules as Samuelson, Mankiw et al are, they act as though the compensation will be paid by 'someone else.' Back to reality, assuming the federal imposition of highly generous compensation for bumped passengers, this will reveal itself either through reduced seat availability for consumers, much higher prices for the consumers in search of low-priced fares, or both. Well-heeled economists presumably don’t consider this truth simply because their air travel is likely not of the supersaver variety.
Regarding Dao, it’s well known at this point that the flight he’d booked a ticket for wasn’t oversold as much as United wanted to transport four crew members to Kentucky in order to staff a flight the next day. So that the airline could serve many more passengers, it bumped Dao, along with three other willing customers. And while PR mavens can fight among themselves about the brand implications of United’s actions vis-à-vis Dao, it’s worth pointing out that the airline did the right thing in removing the obnoxious passenger from the plane.
Lest we forget, a purchase of an airline ticket, particularly a supersaver ticket, is not a guaranteed reservation in the traditional, contract sense. A supersaver ticket is low-priced precisely because such a fare might be bumped – albeit rarely – based on a lack of seats. In Dao’s case he didn’t have a reservation as much as he’d booked the strong possibility of flying when he wanted to. United was correct in removing him much as any business would be correct in removing from its premises any individual engaged in the act of taking. The seat was United’s to allocate, not something owned by Dao.
About this, readers can rest assured that United’s most frequent passengers, as in the ones that generate the most revenue for the airline, are the least likely to be bumped. For members of the commentariat to defend Dao’s right to a seat is for those same members to reject the property rights of businesses. Federal regulations imposed on businesses regularly ignore property rights, and because they do costs for their customers rise to reflect government disdain for property.
The economist in Samuelson concludes that “Making airlines pay more for overbooking would, almost certainly, make them more careful in their scheduling, while also more adequately compensating inconvenienced passengers.” It’s a nice thought from the offices of the Washington Post, but if it’s so simple as Samuelson suggests, why the need for governmental force? Samuelson never considered the latter, and realistically didn’t consider business and economic realities much at all in penning his piece in which he explained to the airlines how they should operate, sans irony.
But for-profit businesses don’t need the help of economists largely unfamiliar with business or profits. As evidenced by how airlines regularly and seamlessly handle the good, pro-consumer strategy of overbooking, they’re already well aware of how to handle passenger overflow. The problem isn’t the airlines, but an economics commentariat ever eager to turn what’s singular into a statistic.
-- John Tamny is editor of RealClearMarkets, a Senior Fellow in Economics at Reason Foundation, and a senior economic adviser to Toreador Research and Trading
You hit the nail on the head and I could not agree more. All the Freepers here arguing UAL was right miss the point that it could happen to any of us tomorrow during the truly miserable and degrading experience we call commercial air travel....a greyhound bus with wings.
But the CEO of United says Dao was in no way at fault. On what charge would you arrest an innocent citizen? (Even if you think there is something to charge Dao with, Munoz doesn’t. In a case like this, his opinion takes precedence.)
Being in the industry I’ve read that and it goes back to when people were booking seats on different flights but not actually paying for them until they arrive at the check-in desk so airlines were flying with empty non-revenue seats.
Was thinking about him when I wrote that - and guess what happened to him?
You might be interested in a couple of legal opinions on the matter:
United Airlines Cites Wrong Rule For Illegally De-Boarding Passenger
This article deals with the concept of Dao 'tresspassing' on the airplane.
See: United Airlines' Own Contract Denied it any Right to Remove Passenger
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Just another misdirecting nonsense post!
(Fake news)
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This post is all smoke and mirrors.
None of it relates to the known facts of the case, nor to UAL’s own policies and contracts.
Wasted bandwidth.
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Once he was identified by United that he was no longer going to fly on the aircraft, he was trespassing. Once he was trespassing and refusing to leave, he was interfering with the operation of the aircraft. The lawful order was to vacate the aircraft.
1) yes the flight was oversold. It became oversold when more passengers need seats than are available.
2) his being allowed to board is irrelevant
Zerohedge had an article saying banks are far worse than airlines. If United/Republic hadn't been so stingy, none of this would have happened. It is a big deal to get bumped at O'hare if you have to stay overnight. Nobody volunteered to take the $800 voucher.
Is the CEO of United a judge, or a LEO. Then he has no legal authority ... he has an opinion.
HAHAHA if you think that, you are naive... This man will get lots of cash out of this airline... Yes the Captain is the law on a plane and can do whatever they want, but if you think that just because you CAN do something means you should... you are a fool.
United is paying through the nose for this... and will be for quite some time.. and yes this guy will get paid a lot more than the $800 voucher he didn’t take voluntarily. United will suffer 10s if not 100s of Millions in lost revenues and brand damage from this incident... and this guy will get a payout directly as well.
United, fly the gestapo skies.
I have no basis to question your assertion. But that consent decree reads (corrrectly - matching business practice) as though the airline actually sells, takes the money, for more seats than the aircraft has, on speculation that some people will be no shows for that flight. The speculation is well founded, as the rate of overbooking is much greater than the rate of combined voluntary and involuntary denial of boarding.
I often fly on a flight other than the one I initially scheduled and paid for. Sometimes later, sometimes earlier. I like the convenience of flexibility, but the airlines are moving toward a system that binds the customer to the booked flight.
1) yes the flight was oversold. It became oversold when more passengers need seats than are available.
2) his being allowed to board is irrelevant
Dan has already shown you the proof that all these claims are wrong.
Sorry to learn of your United stock losses.
Its a stupid question. “Bumping” has gone on for over 30 years and has been declared legal. Anyone who flies knows this. You don’t have to “like” it but to deny reality is just plain stupid.
By the way, I quit flying in 2002 due to the BS at the airport. I didn’t cry and refuse to follow legal orders.
Finally someone on FR posting sensiblely about this.
Munoz has very good lawyers. By the time he declared Dao innocent, Munoz had been thoroughly briefed.
If it goes to court he’ll lose because the airline has the right to kick anybody off their plane. Now United might not want it to go to court, so they might bribe him to make it all go away.
United handled it poorly, there’s no question about that. But as they say: more than one thing can be true. It’s not either or, both parties can be pathetic douches. And the fact of the matter is Dao acted like a 3 year old who just had his baba taken away, he’s just as big an idiot as anybody at United.
Airlines can and do offer more if necessary.
The $1350 is not a maximum limit. It is a minumun threshold. If this threshold value is met or exceeded and still not enough passengers accept, airlines can start involuntary bumping without legal repercussion.
Stop reading and believing fakenews. There are plenty of knowledgeable sources (aviation law attorneys, for example) that have provided useful analysis of this issue.
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>> “The fact of the matter is airlines have a nearly absolute right to kick people off their planes, this was a battle he could not win.” <<
Complete nonsense!
They must obey the laws, and remain in compliance with their “carrier contract,” which prohibits them from removing a passenger after admitted to the aircraft except is certain rare circumstances related to the specific passenger.
They were outside their own submitted carrier contract, and all commercial and admiralty law. (admiralty law takes over when the plane is demonstrably under way)
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United’s rule 21 - Refusal of Transport
“Passengers who fail to comply with or interfere with the duties of the members of the flight crew, federal regulations, or security directives;” [Rule 21, section H Safety, subsection 2]
The duty of the crew was to accommodate the four airline workers to their next destination. That duty is established by United with regards to accommodating union rules and federal regulations for crews being on flights and their rest times and compliance with FAA directives.
Further, federal regulations prohibit two people from occupying the same seat for safety reasons. Thus the doctor was one of four who were identified for involuntary bumping.
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