Economist | Police drag a man from a United Airlines plane

Within the past couple weeks, the media had a frenzy regarding one of the nations’ air carrier United Airlines decision on customer removal. The airline experienced an overbooking situation which is not uncommon within the airline industry and solicit volunteers to give up their seats for a monetary amount. The airline industry continues to be a very lucrative market especially since the cost of fuel is low. Additionally, emerging markets and globalization has led to an increase demand for air travel.  While the airlines often make profitable gains from overbooking, the situation can be a big inconvenience for passengers who are solicited. Working for an airline has provided the necessary knowledge as it relates to overbooking. Many people view this has a bad thing but for the airlines it makes the most sense from an economic stance. When customers often book flights, they may choose their seats, but in actuality on some airlines, that seat is not guaranteed. Instead, a passenger may pay for their ticketed journey between two or more location points.

If the airline finds itself in a sticky situation, there are certain algorithms that decides which passenger should be removed. This includes, the time of check-in, the last passenger to board the plane etc. If a passenger does not show up, that seat on the plane goes out empty, the option to fly with empty seats is the worst possible scenario for airlines as it can reduce their profit margin. From a financial stance, the lost revenue can be compensated by overselling the flight where a next passenger can take that seat.  A plane flying at less than full capacity is a waste of money for an airline’s operations, especially if the seating is a premium or business class. Given this information, many people ask the question whether if overbooking is indeed the best economical move to prevent an airline from losing money. Quite often the question is yes, a passenger paying $1500 for a ticket and being compensated with a voucher for a future flight is not costing the airline much.

Firstly, the future voucher is often a credit for a free travel, and may sometimes be accompanied with blackout dates. The airline industry has peak seasons and in low seasons, planes will fly empty. The next question that maybe asked is what about food and lodging? Most airlines receive discount for local hotels and accommodating a customer for $150.00 a night is not as bad compared to losing $1500. The situation on United was indeed mishandled and after facing strong media backlash, the question for United is whether or not their stocks will be affected given a few passengers expressed interest to boycott the airline. Most importantly, the other question that must be asked is why the situation was not handled better? The answer to both of these is yes! United’s stock dropped about 4% according to CNN money which ultimately results in $1 billion of the market value being lost (CnnMoney, 2017).  Secondly, the situation could have been handled in a better manner. 

While United employees were not “dragging” the man off the plane, the situation occurred on United property and ultimately the public eye can easily relate this to their employee. Better training must be implemented for airport enforcement officials removing passengers of the plane. It hurts the brand and image of the airline, affects the wellness of passenger and overall sends a negative message.  This ultimately can affect the travel demands and profit for the airline.  The bad reputation gained cannot be easily offset and can even lead to more financial burden such as lawsuits. Airlines should perhaps increase either the monetary or voucher amount for passengers that agree to give up their seats or eliminate overbooking altogether. Customers are more prone to volunteer their seats when they are enticed by a high monetary value. Adding other incentives can also limit the frustration at hand. While some of these perks may not always work, it is the airline’s due diligence to ensure the situation is handled within a professional manner.