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How regulators can discourage a repeat of United’s overbooking fiasco

United Airlines is getting a lot of negative press after videos showed security guards forcibly removing a paying customer from a flight scheduled to fly from Chicago to Louisville.

The flight was overbooked, and United needed to find seats for four of its crew members so they could staff later flights taking off from Louisville. The airline offered passengers up to $800 to leave, but when no one volunteered, United selected four passengers at random and ordered them off the flight.

The video shows one of the four, who said he was a doctor and needed to see patients the next morning. He refused to leave the flight, so security guards dragged him down the aisle.

It was a shocking scene that highlights one of the more controversial aspects of American air travel.

Airlines routinely overbook their flights, and in theory that should be good for everyone. Seats on airline flights are a scarce commodity, and most flights have a few no-shows. So if airlines never overbooked, there would be a few empty seats on almost every flight.

Instead, airlines typically sell a few more tickets than they have seats. Sometimes, there are enough no-shows that everyone gets a seat. Otherwise, the airline offers passengers financial incentives to voluntarily give up their seat. Most of the time, there are at least a few people on any given flight that are willing to delay their flight for a few hours or a day in exchange for compensation.

The problem, of course, comes if there are no no-shows and no one willing to be bumped to a later flight. That’s what happened over the weekend, and it led to an ugly scene.

Some people have looked at this situation and blamed United for overbooking flights. But I think that’s the wrong response. If airlines stopped overbooking flights, there would be empty seats on most flights and ticket prices would be correspondingly higher.

Rather, the problem was that United was too stingy in offering passengers compensation to voluntarily leave the airplane. Federal regulations give airlines a relatively easy out in situations like this: They can bump a passenger involuntarily if they pay four times the ticket price (up to $1,350).

According to news reports, United only went up to $800 per passenger — which wasn’t enough to convince anyone else on the flight to reorganize their plans. United could have kept raising its offer, and eventually it would have found someone willing to take a later flight.

Instead, United invoked the rules allowing them to bump passengers involuntarily. That might have saved the airline some money in the short term, but it also earned them a lot of bad publicity. United could and probably should have offered more, even if they wound up paying more than the federally mandated payment for involuntarily bumping, to avoid creating a PR nightmare.

For their part, federal regulators could discourage airlines from behaving like this in the future by boosting the compensation required to customers who get bumped involuntarily. That would have given United a stronger incentive to find a volunteer rather than dragging passengers off the plane kicking and screaming.

Update: United responds.

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