Price controls and the United controversy

The Washington Examiner editorial board explores the role of federal price controls in the recent United Airlines scandal.

… United had a full flight and needed two seats for employees, probably lest a plane full of people in Kentucky be delayed for lack of a flight crew. But no passengers wanted to exchange their seat for an $800 travel voucher. So the crew chose two passengers for removal from the plane at random, presuming that they would be happy enough with the compensation that airlines are required to offer in such situations.

One of those selected, David Dao, did not agree, and suffered injuries as he was hauled off the aircraft. He was not a willing participant in the sale of his seat. As a doctor who apparently had patients to see in Kentucky the following morning, the flight was worth more than the modest financial compensation for being kicked off of it.

So why didn’t the airline simply increase its offer until it found a passenger willing to make the transaction? The answer is that federal regulations set an artificial cap on what an airline has to pay if it kicks you off their plane. So long as it can get you to your destination within two hours of your scheduled arrival, an airline doesn’t have to pay you any more than twice the ticket price, or $675, whichever is less. And if it cannot get you there within that time frame, it must pay you four times the ticket price, capped at $1,350.

The price cap encourages airlines to hold their ground on compensation, and to turn to the government to use force instead. Which is exactly what happened.

If not for federal price controls, the crew and passengers would have had proper incentives to settle this matter in a civilized manner without bloodshed. The airline could have raised its offer in free travel or cash, or asked passengers to make their lowest offer on paper or by text message, then paid out to the most competitive bidder.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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