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
Let me ask you one question: how would you feel if this happened to you? You’ve bought the item (in this case, a flight), paid for it, have it in your possession - and then the seller comes along and says sorry, it’s not yours, it belongs to a “better” owner that the seller has belatedly chosen so you have to give it back. I’m just surprised no one has fought back before.
blah blah lotsa useless words because this ceased being about any kind of right vs wrong the instant the first video was uploaded to YouTube. Perception becomes reality, as UAL is going to find out when they sign the check.
Just because you can doesn’t mean you should...................
Don’t forget that federal regulation limit how much compensation the airlines can offer someone to bump them from a flight....
Not to mention all the other federal regs that increase the cost of airlines that contribute tot he airline culture of constantly trying to overbook flights....
Dao’s lawsuit against United will, as demonstrated in debate in previous threads, devolve to the details of the carriage contract on the ticket.
Once United called the TSA and Chicago Transit Police, the matter was out of their hands. It is the Chicago cops who put the beating on Dao.
I still don’t understand though why United doesn’t give its local managers a bit more flexibility to offer higher rewards, to entice that last passenger to get off the plane....
Speaking of reality, this flight was not overbooked. It was full, but the airline sold only as many seats on the flight as were available.
Everything else in this article that flows from the premise that this flight was overbooked is pure bloviation.
The problem is that United pulled paying customers off the flight due to a crew scheduling problem.
That's why they've changed crew scheduling so that a dead-heading crew needs to be at the gate at least 60 minutes prior to the departure time so that they can bump paying passengers before they're seated on the airplane.
Dao violated no part of United's Contract of Carriage. United violated their own Contract of Carriage by physically removing Dao from his seat and because of this they will pay through the nose.
As well they should.
The author and the airline industry seem to confuse airline tickets with lottery tickets.
It is the manner of the removal that is the problem.
They should have gotten actual police officers to remove Dao, not security guards with no experience and no arrest powers.
UAL probably thought that the officers who responded were police officers. Unfortunately, they weren’t.
Right. Say it again: "It wasn't oversold." That is a tremendously important point.
So that the airline could serve many more passengers, it bumped Dao, along with three other willing customers.
Really reaching here. United has a responsibility to serve many passengers in many cities. That is a corporate matter. They were pretty clearly failing at doing that, since they didn't have personnel in the right places and didn't have a good way to get their personnel to where they were needed. Beating your paying customers unconscious so that you can provide good customer support must be something they teach at Harvard Business School. In the real world, it's a "no-no".
I fly a few dozen times annually and have never seen a single passenger removed. This hype by the old media is a single passenger incident out of millions that fly annually. It is not representative of how passengers are treated. However, it is representative of how the old media is ready to attack and vilify any large private business.
The author of the article is incompetent and wrong.
BWAHAHAHAHAHAHAHAHA the writer of this needs to look and see the 10s of MILLIONS of lost revenues, and Brand Value that United has lost over this... This writer is an IDIOT.
United could have been 100% within its legal rights to do what it did, but if you think they were right to do to.. you sir, well you sir are an idiot.
https://www.youtube.com/watch?v=LQCU36pkH7c
“Perception becomes reality”
Correct.
And Emotions become Logic. Way too many people saw that video and their emotions went into overdrive and they themselves wanted to sue United for a bazillion bucks.
But yet when we leave perceptions and emotions off the table and apply reality and logic - United wins.
I blame the pilot.. .
zoooom
I would obey the law and leave the plane.
I respect private property.
One, I am in complete agreement with the writer. Two, I would have been furious, but would not have escalated the situation where folks had to force me to leave. Three, when you book a “risky” ticket, you run the risks. Airlines have different prices for different tickets and not all tickets are the same. Nothing new here. One fliers ignorance and bad manners is zero concern of mine. If he was holding up the flight by acting like a jackass, I would have helped carry him off the plane.
I normally take a company’s side as I am a capitalist, not crony, but true Milton Friedman capitalism.
However, even if Dao had his license suspended and even if he scammed this, it is BS.
Factually innacurate.
the airlines have been limited as to how much they can offer. 400% of your one-way fare, $1350 maximum.
Otherwise, yes, the proper solution is to require them to keep raising the offer until there are takers.
Sleazy (if legal) stratagems should be costly tp the perpetrators, even if said perps have the ability to get away with such.
UAL is going to argue that they were required by law to move that flight crew. And thus they were required to take people off the plane. United will say they had nothing to do with the security guards who showed up, and no choice.
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