Worse than a Crime (Updated)

Perhaps the most viral story online at the moment concerns the passenger violently removed from a United flight just because the airline had overbooked. The story in fact is quite astonishing and brings to mind Boulay de la Meurthe’s famous line: “C’est pire qu’un crime, c’est un faute.” (It’s worse than a crime, it’s a blunder.)

The blunder on the part of United’s management was huge, as United now looks like the nastiest company in the world, and it’s stock price has taken a significant hit.

The airline reportedly offered passengers as much as $800 to voluntarily give up seats on the overbooked flight, but nobody accepted that offer. That’s when United decided to resort to police state tactics. Of course, the thing to do would have been to ratchet up the $800 offer. At some point, passengers would have been willing to accept. As Ted DiBiase, the Million Dollar Man, said, “Every man has his price.” Even if United had to offer $1600 to four passengers, that extra $3200 is a pittance compared to the legal and public relations costs United is now facing.

There are always two ways to get compliance from people. You can offer them value, or you can threaten them with force. The carrot or the stick. The carrot is always preferable, and is in fact the civilized way to proceed. And that, frankly, is the difference between the free market and communism. One relies on voluntarism, the other, force.

For United, this is apparently not the first time they’ve threatened their own customers. Here’s a story about United threatening to slap a guy in handcuffs unless he gave up his first-class seat. That allegedly happened just last week.

Civilized men do not settle disputes with force. United in these cases is guilty of behavior so uncivilized that the company should be shunned by all decent people. If United were forced out of business over this incident, the outcome would be justified.

In the past, I’ve defended corporate executives from criticism that they are overpaid, saying that, if you want top talent, you’ve got to pay. There must be a lot of very highly paid talent at a company as large as United Airlines, yet somehow amidst all that purported business acumen, the company adopted a policy that anyone with common sense would have known to be disastrous.

One final point. I could be wrong, but I can’t imagine an incident like this occurring 30 years ago. At that time, I believe cooler heads would have prevailed. Something bad has happened to our society. Levels of civility and trust have waned. In this case, not just the airline, but also the passenger behaved very poorly. The passenger did not conduct himself with dignity. Everybody on both sides comes off looking very bad.

Update. Turns out that many media reports about this incident were riddled with errors. First, the reason the airline needed the passenger removed was not over booking. Instead, the airline wanted to fly some of its own employees who were running late to staff a flight.

Also, many media outlets claimed that the airline’s actions, while deplorable, were perfectly legal. But the excellent nakedcapitalism.com notices that a lawyer posting on Reddit argues persuasively that United’s actions were in fact unlawful. The law states that United cannot give precedence to its own employees over customers with confirmed reserved seats.

[T]he law is unambiguously clear that airlines have to give preference to everyone with reserved confirmed seats when choosing to involuntarily deny boarding. They have to always choose the solution that will affect the least amount of reserved confirmed seats. This rule is straightforward, and United makes very clear in their own contract of carriage that employees of their own or of other carriers may be denied boarding without compensation because they do not have reserved confirmed seats. On its face, it’s clear that what they did was illegal– they gave preference to their employees over people who had reserved confirmed seats, in violation of 14 CFR 250.2a.

The victim is going to get a very nice settlement. And given that United broke the law, I should think a hefty fine from the FAA would be in order, although I’m not holding my breath, since the regulators basically work for the airlines.

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4 thoughts on “Worse than a Crime (Updated)

  1. Do you think United can recover from this? I remember all the public scrutiny around BP about 8 years ago, but they seemed to recover okay. Or is this situation different?

    • The only risk for BP was the cost of the government settlement (which took several years to determine or the recovery would’ve occurred much more quickly). BP exited the retail gasoline space prior to the spill so the customer impact was minimal.

      For United, the settlement will be small (<$10M?) and the impact on future customers will determine its fate. The lack of competition among airlines will almost certainly allow them to overcome this. Hard to justify a higher-priced or less convenient airfare strictly on moral grounds.

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