Was the United incident a market failure?


David Dao, the United passenger

As almost everyone knows by now, a doctor was violently physically removed from a United Express plane a couple weeks ago because he needed to be in Kentucky the next day for his patients. United mistakenly overbooked the plane and at the last minute, four employees approached, saying they needed to board to crew a plane from Louisville the next day. Airline representatives offered passengers a rebooked flight, hotel, and $400, but nobody took it up. Then, they offered $800 and still no one took it up. Usually, airlines will go higher, but for some reason, they chose instead to have a computer randomly kick four people off who had already boarded and settled into their seats. The first two were a couple who willingly left, then our latter day hero was selected and absolutely refused, saying he had appointments the next day. Instead of being reasonable and asking for proof or taking him at his word, they insisted he leave, and soon called security, who literally beat him bloody and dragged him off the plane, likely causing a concussion and other massive damage. Passengers started recording and screaming about the unfairness, setting up United for the absolute worst public relations disaster for a company in years, only to be exacerbated by an arrogant CEO. The settlement is expected to be in the hundreds of millions, and deservedly so.

ancap-meme-generatorThe incident immediately became the butt of thousands of jokes from Southwest saying they beat competitors not passengers to the lowly ancapball. Leftists quickly began to screech for more regulations and a passenger bill of rights, never mind the rarity of this incident. Contractually speaking, United probably violated its carriage agreement. Unless you are a security disruption, once you are boarded, you cant be unboarded. That would be ridiculous and evil as we have seen. What this teaches us, and I saw when I worked retail, is that its often cheaper to just buy off a customer than to deal with a PR nightmare or a lawsuit. It probably would have been cheaper for United to book the crew new tickets on another plane (however it may have been the last one on that route for the day), or even hire a luxury bus with champagne service to ferry the crew home, than it was to pay four passengers $800 each plus hotel and other expenses.

Many airlines seem to have a knack for nearsight and forget or become cynical about their being in constant spotlight. If they didnt want to get that bus, everyone has a price. Of the 100 something people on the plane, surely someone would have been willing to go for $1200 or more. I know $400 would be enough for me unless I had to be somewhere, but perhaps I ought to milk it as far as it goes. Almost everyone has a price.

The liberals and socialists say this shows a failure of the free market. Corporations see us as cattle to be milked (one might say those getting a concrete service or good are getting the better deal than those getting mere pieces of paper). If anything, this is a case of why government is evil. United is an awful airline. I like to say I hated them before it was cool. I regretfully flew them from Newark to England last summer, when I wanted Delta (hubbed at the further away JFK). The merger with Continental has been noted by frequent flyers as an unmitigated disaster. United took its well-regarded partners routes, planes, and logo, and attached its own horrid service and management.

In a free market with insurance-based regulation instead of force-based regulation, United would have either been wiped out by competition ages ago or radically reformed. All the taxes, expenses, regulations and other tangles new airlines have to deal with just to get off the ground are horrendous. An existing airline has massive advantages. I should know, Ive been looking into starting an airline. It takes a year or more of approvals before you can even buy planes. And it used to be worse, until Senator Ted Kennedy and President Jimmy Carter, of all people, oversaw the deregulation of the industry. Its one thing to have safety checks and security standards, but there is no reason an airline cant just buy planes and essentially get going.

The security officers, one of whom is now suspended, appear to have been privately hired and it is being questioned whether they even had the authority to remove someone from a plane. In a sense, who cares, private security should have that authority. Many are making a fuss about this being private security, especially harping leftists, but this is a rarity. Meanwhile, the TSA and police grope and beat us on a daily basis. No one cries about that. Unlike a police officer, the security officer will be investigated and may even end up in prison.

Yes, these things should not happen, but they do and you cannot regulate them out of existence. The key is to take measures to reduce the likelihood at as little cost to the customer as possible. Opening up the market to more competition will ensure good companies succeed and bad ones fail. There is a reason Southwest, JetBlue, and Alaska were able to become so successful. Deregulation and thwarting regulation enabled them to get going and provide a better service. When I was a kid, we flew Continental and later United on family trips to Orlando. Back in January, we finally returned and we took JetBlue. It was cheaper and now my mom and sister know how much better it is. They were impressed. Competition and markets work, and it vexes us libertarians every day that more people dont see this!

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