How United Airlines could have avoided brutal takedown of passenger
A recent video of the dragging of a passenger on board a United Airlines (UA) flight has received more than a hundred million views from across the world.
The incident has spawned a cottage industry of sorts of social media memes, and damaged the airline's brand and stock value, not to mention the reputation of its CEO — in just few days.
Could simple economics or plain soft skills have helped it smooth out the kerfuffle?
| Avoidable disaster. Photo: Reuters |
If the airlines has to move four of its crew members to operate another one of its aircraft, it would cost the airline about US $2,00,000 in gross revenue (assuming a minimum of three take-offs and landings; an average eight-hour flying shift; each ticket priced at US $353, as was the case in this instance. Though average ticket prices are US $160).
As per FAA guidelines, passengers can be compensated upto US $1,350 at most (or four times the average ticket price). So, for US $5,000, it should have been able to buy out four seats from its four regular booked passengers and ferry its crew of four on its own aircraft — at minimal opportunity cost. It could also have booked them on an alternate flight or charter a small flight for US $10,000!
All economic choices. But neither is it as efficient as using their own capacity nor a long-term solution.
So what is a good way to solve this?
A reverse Dutch auction,where the airline ups the cash payout they are willing to pay to offload a passenger, till the passenger bites. But they are probably restricted by the airline regulator FAA in doing so. And it is potentially open to misuse as people try to game the system by maximising their compensation.
Generally, the use of price to equilibrate demand and supply is a good tool. But where surge in demand is uncertain, and capacity fixed. The short term price that balances supply-demand is often harsh. Uber surge pricing at its peak is a case in point.
Also, another problem with using cash to buy people out of their legitimate seats is that it encourages upfront queuing and that involves negative externalities for passengers as a whole.
These are, therefore, some anomalies with unintended consequences.
What next?
In India, 15,000 passengers were offloaded (mainly on account of overbooking) in 2016 — they make up about 0.015 per cent of all passengers who travelled last year (99 million), well below the global average. However, it seems they were all handled well.
How did they manage?
By persuasion, grace and courtesy one would imagine, because pure, direct cash compensation is not an option here! And probably by not having to shell out too much for providing alternate arrangements to smooth matters over.
A good system by all accounts — below the radar at all times.
But what is the basis for this? Rules from the USA!
Prior to the Airline De-regulation Act in 1978, US airlines were regulated by the Civil Aeronautics Board (CAB). Airline services were considered a "public convenience and necessity”, much like a utility, and the CAB worked to ensure the accomplishment of a simple goal: to keep prices reasonable and customer service good.
Something the American airline industry must revisit now.