Morality of Capitalism & United Airlines

Recently, at Chicago O’Hare International Airport, United Airlines created a major uproar. The airline asked four passengers to get off the flight for airline personal to obtain seats. The problem emerged when the fourth passenger was literally pulled out of his seat and removed from the plane. A physician from Kentucky, Dr. David Dao, was incompetent when asked to get off the plane resulting in Chicago Aviation Security Officers to be called to the scene. The officers dragged the man down the aisle where he became incredibly bloody. Now Dr. Dao is currently seeking medical treatment and care due to the brutality of being ejected from his flight.

Screen Shot 2017-04-11 at 10.43.56 PM

The question arises where is the morality of capitalism in today’s society? Corporate America constantly puts forward economic profits before thinking about human dignity. Due to the fact United Airlines overbooked suggests they are profit maximizers, as unbooked seats equals a loss in revenue. Therefore, should individuals expect to be bumped from different flights every time he/she travels? Absolutely not. Capitalism is a fair exchange between goods and services. Each time an individual travels he/she should expect to get on their intended flight – everyone has places to go and people to see. Degrading an individual by bloody dragging them off the plane diminishes one’s human dignity. In today’s society, if corporate laws have come to allow this behavior, there needs to be stricter regulation. There is no justification for these actions on behalf of the Chicago Aviation Security Officers. United Airlines needs to realize there is more than money – human beings are more important.

Attempting to sellout flights aims to reduce the price of tickets, helping consumers, because big corporations have the objective to maximize profits for shareholders, which increases the volume of tickets sold, generating greater revenue. Recently, falling oil prices should have resulted in lower airline tickets. However, consumers have not seen any benefits from lower oil prices as ticket prices have risen.

The airline industry needs laws to sustain profitability. Over the years, airlines have cancelled low-volume flights, reduced service quality, merged with other airlines, and raised the price of airfare. Free market competition enables more Americans the option to fly, providing cheaper airfare as the airline can establish their own prices. When doing so, it is ALWAYS important to act morally in every circumstance.

Sources:

http://www.americamagazine.org/politics-society/2017/04/11/united-airlines-debacle-isnt-about-customer-service-its-about-morality

https://www.usatoday.com/story/news/nation/2017/04/11/united-ceo-employees-followed-procedures-flier-belligerent/100317166/

http://www.huffingtonpost.com/entry/united-airlines-debacle-monopoly_us_58ed0821e4b0ca64d919ae1d?

Advertisements

3 thoughts on “Morality of Capitalism & United Airlines

  1. kathrynmckenzie18

    Really enjoyed reading your post Victoria! I think the United Airline incident is definitely indicative of a larger debate that needs to ensue. I wonder what laws, as you mentioned, could be beneficial to such a complex issue.

    Reply
  2. Victor Matheson

    Here are my thoughts as an economist as well as some background. First, the airline doesn’t have to honor your ticket, but by law the passenger is entitled to compensation if involuntarily bumped. United’s passenger contract related to bumps is fairly strictly regulated by the Code of Federal Regulations.

    The law is $0 compensation if you are bumped but made less than 1 hour late. 2x your fare (up to a max of $675) if you are made 1-2 hours late. And 4x your fare (up to a max of $1,350) if you are made 2 or more hours late. And this compensation is cash not vouchers.

    So, when involuntarily bumping someone, they look for how delayed they will make the person and how much the person paid. If I have someone on a $99 ticket that I can get in a scheduled 110 minutes late, that’s the one I want to bump.

    So, it is easy enough to just tweak the compensation requirements to make the multiples and the maximums higher and let the Coase Theorem take over. Eventually someone will take the money if you make the price high enough. To paraphrase Winston Churchill, “We have established we are all prostitutes. We are just haggling about the price.” It also may be in United’s best interests to pay more than the maximum legal amount to avoid bad publicity. And if they are giving vouchers they should be willing to pay a ton more.

    The real problem here is more of the behavioral economics issue. By letting the guy board the plane and then taking him off, you are bringing in loss aversion. There would have been a much smaller scene and less pain on the part of the passenger if they had simply never let him board in the first place. As Kahnemann and Tversky would note, once he was in that seat, he became psychologically attached to it making it all the more valuable to him making it far more expensive for United to pry him out of it. That’s probably the biggest economic lesson here.

    Reply
  3. petercampito15

    I really enjoyed your article! I was recently reading about this indecent and was shocked to find that the reason they forced the four passengers out was so they can make room for their own employees. What is your opinion on this and was this an economically motivated decision?

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s