Much has been written, photographed and shared about the passenger who was forcibly removed from an overbooked United Airlines flight. There are many lessons from that ugly incident, among them the importance of businesses telling their customers the truth.
Airlines have overbooked for years, and many of us, myself included, have stood at airport gates in giddy anticipation of receiving a travel voucher. Now we know that you can be removed from a flight at the discretion of the carrier. It’s written thus on the contract of carriage printed in tiny characters on paper tickets that most of us no longer receive. It’s almost if the company doesn’t want you to read or understand what they want you to agree to.
Overbooking is not the result of an airline being so popular because of their great food or customer service that more people want to fly with them than they have seats available. It’s because they make more money when every seat is occupied. So they deliberately accept payment for more seats than are available on each flight. They do this because they want to make a profit in an industry that has for many years not been profitable. Why haven’t they made more money than they spend?
An airplane-sharing economy?
A big reason has been the price of jet fuel, though that has not been a factor for the last year and more as the price of oil is now less than half of what it was a couple of years ago. A bigger reason is that airlines are a capital intensive industry. Airplanes can cost hundreds of millions of dollars each—very different than, say, the car-sharing business where there are few if any capital costs that aren’t paid by self-employed drivers. We are not likely to ever see pilots who own their 777’s, nor would we want to.
So what we have is a very expensive, high overhead business model that collides with the traveling public’s desire to enjoy low airfares. If there was no deliberate overbooking as part of the business model, airlines would have to charge more for those tickets, blankets and bags.
The airlines have not been upfront about this aspect of the “bargain” they’ve struck with passengers. Instead, they’ve whittled away at the incentives offered to passengers with a seat to give theirs up to someone whom they collected the fare from, knowing they didn’t—and might not—have a seat for them. The airlines knew, or believed, they held all the cards and could continue to put downward pressure on the cost to them of the voucher. What they didn’t see coming is that the incredible shrinking voucher ceased to be an incentive, as it was on the ill-fated United flight. In an effort (a laudable one as it turned out) to put things right, United upped and widely published its new maximum voucher value to an eye-watering $10,000. The thrill has just returned to the overbooking sweepstakes.
Interestingly, I’ve never been surveyed by United or any other airline on the overbooking processes and procedures. Yet I’ve answered questions on airplane boarding, flight attendant demeanor, baggage, and onboard snacking. How could it be that such a potential flashpoint for customer dissatisfaction turned out to be a massive Achilles heel that prompted a full-page mea culpa in national newspapers, letters to passengers from United’s CEO; and don’t forget threatened boycotts from current and prospective passengers in China, calls to reregulate the industry, sinking stock value (since recovered) and many other embarrassing repercussions?
You might argue that even if the airlines were completely candid about overbooking, the result would have been the same because of rigid rules, poor training, lax customer service standards due in part to a decade of employee benefit cuts and mergers, an absence of individual employee discretion at the point of potential conflict, etc.
This is a persuasive argument. But if candor and transparency had been overarching company values, both with the flying public and among its employees, chances are excellent that United would have anticipated what eventually happened, gamed the different scenarios, set policies accordingly and avoided this expensive fiasco.
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Conover + Gould Strategy Group