I HATE Illinois lawyers!
I mean Nazis...No wait... Lawyers are worse!
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
Sure he would. DAMAGE CONTROL. People lie in press conferences all the time. What Dao did was a belligerent act, it was the most basic of all belligerent acts: failure to comply. And nothing you or Munoz says will change that simple fact as well documented in the dictionary.
And once the laughter dies down, Dao's attorney will ask if they were not expected to physically remove Dao, why were they called? Maybe United thought they'd employ the department approved 'pretty please, with sugar on top'?
We'll never know though because UAL has admitted they were completely in the wrong.
“Fed regs give airlines no flexibilty on a deal.
They have a federal regulation on the max payout. 800 dollars?”
There are no federal maximums on the payout for overbooking. There are guidelines as to the minimum a bumped passenger is entitled to. In any case, this was not an overbooking situation.
Right or wrong I hope their stock tanks and long shot of long shots UAL goes bankrupt and its assets get sold to other companies. UAL lost my luggage three times and flat out stole my bag one of those times. Wife confirmed they had the bag and knew where it was. UAL sent me a letter explaining that their legal department said UAL had no liability so I would not get my bag back or compensation. Flying in the cheap seats on UAL after one or two long flights is an exercise in Masochism.
I am all for him seeing as I am unable to stick it to UAL myself.
Cannot even begin to agree with you. When the CEO goes public to say a passenger had every right to be in the seat the airline sold him, that’s game, set and match.
While I agree the government should not be involved, as soon as passengers realize they can hold out for more credit/money, they will hold out for more.
Doesn’t matter if you agree with me. Press conferences are NOT admissible in court because they are 100% meaningless in the legal arena. Functionally they are hearsay, the person is not under oath and can say whatever they want. If it actually gets to court NEITHER of his press conferences will be presented because they have no legal meaning. Long established legal fact, stuff said away from the court and not during an investigative interview is just stuff, it has no meaning.
The case has almost no possibility of going to trial. Odds are enormous that United will settle.
In the meantime, the CEO of United is publicly exonrating Dao. You don’t like what he said, but that changes nothing. The argument that Munoz has no idea what he’s talking about would just be lame. He was briefed by United lawyers before appearing on GMA.
I HATE Illinois lawyers!
I mean Nazis...No wait... Lawyers are worse!
A society's first line of defense is not the law but customs, traditions and moral values. These behavioral norms, mostly transmitted by example, word-of-mouth and religious teachings, represent a body of wisdom distilled over the ages through experience and trial and error. They include important thou-shalt-nots such as shalt not murder, shalt not steal, shalt not lie and cheat, but they also include all those courtesies one might call ladylike and gentlemanly conduct.Policemen and laws can never replace these restraints on personal conduct. At best, the police and criminal justice system are the last desperate line of defense for a civilized society. This failure to fully transmit value norms to subsequent generations represents another failing of the greatest generation.
- Walter E. Williams, Nov. 21, 2007
Nope. They still lose. They can’t plan well. They made assumptions. They forcibly removed a paying customer because of their lack of foresight.
Emotions don’t play a part in any of those statements. However, since we are not robots, I saw the pictures and concluded, Thank God for Southwest, my preferred carrier.
The weird thing is that the above is apparently true.
46,000 people almost don’t exist?
Far more likely than winning the lottery.
If FaceBook and YouTube are admissible, then so are statements made at a press conference.
This was not overbooking -- the airline checked him in, put his ass on a seat and then discovered "Oh, we need to shove off 4 paying passengers to replace with OUR EMPLOYEES" and offered them vouchers, not real money to get off.
That is bad, but letting a person sit down makes it worse.
You and I would be inclined to agree if we're still in the terminal -- we won't like it, but we'd be more likely to agree than if we were actually sitting on the seat.
The airline offered vouchers for another flight on UNited — if you got bumped off, would you want that? If they offered cold, hard cash, more people would have jumped.
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