U.S. Markets open in 8 mins

Airlines are giving crews leeway to hand out money when necessary

Ethan Wolff-Mann
Senior Writer
United CEO Oscar Munoz testified in front of Congress on Tuesday. Source: AP

Lawmakers on Tuesday castigated airline executives in a hearing looking into what went wrong in the now famous April 9 incident when a United Airlines passenger was violently dragged off an overbooked flight.

United (UAL) CEO Oscar Munoz and executives from prominent US airlines testified before the House Committee on Transportation and Infrastructure in what its Chair, Bill Shuster (R-Penn.), described as “a tough hearing.” The tone was one of bipartisan anger. Even for the most laissez-faire members of Congress, a common refrain emerged in the committee, best illustrated by Rep. Brian Babin (R-Tex.): “I don’t like regulation—I’m a conservative Republican. But…”

Rep. Duncan Hunter (R-Calif.) took an even harsher tone, beginning his questions with an attempt at a joke-question: “Why do you hate the American people?”

The message was clear: Either improve customer service or face government meddling.

In the weeks since the incident occurred – and which took on a life of its own through social media – United, as well as other airlines, have announced policy changes aimed at avoiding similar public relations nightmares.

Munoz also apologized a few more times during the lawmakers’ venting. “It was a mistake of epic proportion,” he said. “It’s horrible calculus. Do you make the flight bad for 150 or make it bad for two or three.”

Munoz promised to avoid situations that cause “impossible” situations and told the committee the airline had changed its compensation strategy to entice passengers to voluntarily give up their seats, authorizing a fat carrot of up to $10,000 in compensation.

Alaska Airlines’ (ALK) Senior Vice President Joseph Sprague noted a similar, but more open-ended policy. He said the airline will give passengers money and miles “on the spot” via an “empowerment toolkit” app in the crew’s mobile devices. Senior vice president of American Airlines’ (AAL), Kerry Philipovitch, said it did not have an upper limit of what they would pay volunteers on overbooked flights.

For passengers, this pivot by airlines to pay what is necessary to buy back a reservation from a customer is both a boon and the most efficient method, as a Stanford economist told Yahoo Finance in April.

Employees’ ability to settle issues by whipping out the company checkbook to placate a bumped passenger with cash or miles is often dependent on passengers knowing their rights and what the airline is obligated to do to hold up its end of the bargain, or the “contract of carriage.”

Throughout the committee hearing, members of Congress referred to these contracts of carriage and their immense length: United’s contract is around 37,000 words long, which is 11,000 words longer than Truman Capote’s “Breakfast at Tiffany’s.” While the contract stipulates what a passenger is entitled to in case of a long delay, missed connection, or lost bags, airlines may not volunteer to hold up their end of the deal. In many cases, a passenger must be proactive and knowledgeable of their rights.

The committee stressed that these contracts are far too long and that it would be unreasonable to expect a passenger to read in full before buying a ticket. The airline executives agreed and committed to shortening it to something more readable, though they remained unenthusiastic at some members’ suggestion to get it down to one page—something that exists in the European Union.

The spark of the United incident may not ignite a move to implement new laws and regulations for air travel. However, it may provide an increased interest and a venue for other airline reforms, thought long overdue by some. Rep. Steve Cohen (D-Tenn.) took the hearing as an opportunity to discuss airline seat size, something he has attempted to regulate with the SEAT act, a bill that would require airlines to have enough legroom to make rapid evacuation possible in an emergency and fight potentially deadly deep vein thrombosis (DVT).

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, tech, and personal finance. Follow him on Twitter @ewolffmann. Got a tip? Send it to tips@yahoo-inc.com.

Read more:

Banks take just 90 seconds to approve a credit card. Here’s what they look for.

Uber’s new tipping dilemma: low prices or smooth experience

Zuckerberg at Facebook conference: if you take one thing away—this is it

The cost of unifying North and South Korea

The trick to getting credit card fees waived? Just ask

Chase’s Sapphire Reserve is very worth it, even with its slashed bonus