Wow! So you’re probably sick and tired of the United Airline’s ordeal. A passenger, Dr. David Dao, got dragged off an overbooked United flight at O’Hare International Airport in Chicago last week to make room for other United flight attendants. It seems pretty crazy to think that United would allow anyone to drag anyone else off a flight, just because they needed space for their own employees.
Most airlines would have just kept “upping the ante”, and allowed the market to determine the price for the ticket for reimbursement to give to a passenger who would have relinquished his/her seat. I’m sure if United had asked if someone would give up their seat “voluntarily” for $1500 they would have had a few takers. Instead, they stopped the bidding at $800 AFTER they allowed everyone to already board the plane. How stupid was that?! Now, United Airlines has a mega lawsuit on their hands AND it looks like they will need to change their slogan too.
H/T PJ Media:
For those of you who’ve been in a cave recently (and one without internet access), United Airlines recently encountered a situation where they had too few people who were willing to give up their seats to a flight crew who needed to fly on the plane.
When you have a shortage of anything, you have several choices:
- You can let the price rise until someone with the scarce resource is willing to provide it.
- You can conduct a lottery.
- You can force someone to give up the resource.
United cycled through all three: they initially made the mistake of only trying a half-hearted attempt at the first option, then progressed to the second, and finally resorted to the third (i.e. they “re-accommodated” an unwilling passenger). But if they’d really given the first option a fair chance, they could have avoided what’s now become a $3 billion loss in market capitalization.
They initially offered money to seatholders and then raised the price when there weren’t enough takers (#1). But they stopped at $800. Unfortunately, only two ticketholders took the bait at this price. In economic terms, “the market didn’t clear.” Had they gone just a bit higher ($1,000? $1,500), they’d have found takers. And if they’d let “the market” decide, they’d have bought the seats from the seatholders who valued them least, so they’d have had a transaction with happy customers. Instead, they picked randomly (#2), and eventually removed a passenger by force (#3).
In addition, they fell afoul of what’s known as the “endowment effect.” This means that individuals place a higher value on something (like an airline seat) once they own it than they did before. In other words, once they’ve been seated, the airline seat becomes more valuable than it was before they were seated. So United further shot themselves in the foot by negotiating with passengers after they’d boarded rather than before.
In the future, instead of being on the wrong side of the Internet (“United Fight Club” and other assorted memes, anyone?) they should use it to their advantage. They can take their existing mobile app and modify it so that their passengers can participate in what’s called a “Dutch Auction.” In this setup, the sellers (the passengers) privately post the price at which they’d be willing to surrender their seat. So when they’re overbooked, United simply looks at the schedule of prices, and choose sequentially from the lowest prices on up until they’ve acquired the seats they need. And like all free market transactions, it’s a win-win — they get the lowest possible price, and only make transactions with parties who think it’s in their best interest.
What a BRILLIANT idea! Allow the customers to set the price and allow the market (supply/demand) to determine the price. What a concept. Maybe if United and their employees had used ANY common sense, they would not have been attacked with some of these memes on social media. Here’s just 10 I plucked off the internet:
- United with the new ‘Fight Club’ section:
2. Or….this one depicting the hit show #TheWalkingDead.
3. Or how about this one,….
4. Or better yet….how many former United passengers are doing this?
5. OK, just a few more…..
6. Speaking of competitors….I especially liked the Southwest marketing…
7. Maybe United should have these guys handle their seating issues.
8. Or maybe United should have announced their new marketing plan….
9. Or how about this one?
10. Finally…. Even Kim Jong Un gets it!
Ok, yes, those were some funny memes off the internet posted after United’s STUPID incident with flight #3411 flight to Louisville from Chicago. But the incident itself is very serious.
A few police officers involved in the incident have been put on leave. Lawyers have been hired and rest assured someone is going to “pay” for the incident involving Dr. David Dao being forcibly removed from the United flight because he would not relinquish his seat on an overbooked flight to other United flight attendants.
United Airlines CEO Oscar Munoz has apologized for this “truly horrific” incident and has promised to “fix what’s broken so this never happens again.” He also said he takes full responsibility and he “promised to do better”.
Of course, there’s already some finger pointing directed at the Chicago PD as well.
Who knows what will happen in the end, but one thing is for sure, you can bet United’s stock took a hit. No one likes to see ANYONE dragged off an airline. Let’s hope the next time United has an overbooked flight, they let the market decide on the price of the ticket for reimbursement to the passenger who “voluntarily” gives up his/her seat.
Personally, I will continue to use Southwest Airlines, wherever I fly – “Lowfares. Nothing To Hide.” I have never found United Airlines to be “The Friendly Skies”.
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