U.S. lawmakers eye airline legislation, citing 'terrible' experiences

(Adds comment from United CEO Munoz to reporters)

By David Shepardson and Alana Wise

WASHINGTON, May 2 (Reuters) - U.S. lawmakers threatened United Airlines and other U.S. carriers on Tuesday with legislation aimed at improving customer service after a passenger was hauled down the aisle of an overbooked flight last month.

The House of Representatives transportation committee held a hearing for top airline executives to testify, and to determine how Congress might respond to policies that can adversely affect passengers. In April, David Dao, 69, was dragged from a United flight at Chicago's O'Hare International Airport after he refused to give up his seat to help make room for crew members.

At the hearing, United Chief Executive Oscar Munoz repeatedly apologized for the removal of Dao, with whom the airline reached a settlement last week for an undisclosed sum.

"In that moment for our customers and our company we failed, and so as CEO, at the end of the day, that is on me," Munoz said. "This has to be a turning point."

Munoz was joined at the hearing by United President Scott Kirby and executives from American Airlines, Southwest Airlines and Alaska Airlines.

American Airlines experienced its own public relations fiasco last month when a passenger video went viral, showing a woman on a plane in tears holding a child in her arms and another at her side after an encounter with a flight attendant over a baby stroller.

"Clearly what happened was wrong," said Kerry Philipovitch, the airline's senior vice president of customer experience, at the hearing.

Many lawmakers fly weekly to and from Washington, D.C., and they took the opportunity to recount the frustrations customers routinely face, including complicated booking systems, confusing fees, long waits and unexplained flight delays.

"We all know it's a terrible experience," said Representative Michael Capuano, a Democrat from Massachusetts, throwing his arms in the air in frustration. "Some charge fees for baggage, some charge fees for oxygen, who knows?"

The White House has not weighed in on whether new rules are needed to respond to airline customer service issues, and it was unclear how quickly Congress might move, if at all.

"If airlines don't get their act together, we are going to act; it is going to be one size fits all," said Bill Shuster, chairman of the House of Representatives' transportation committee. "Seize this opportunity because if you don't, we're going to come, and you're not going to like it."

After the hearing, Munoz said the message that change was needed was loud and clear.

"I think the sense in the room was one of an admonition to get your collective stuff together," Munoz told reporters at the Capitol as he attempted to leave by a side door. The alternative is to face additional legislation, "which I think is fair," he added.

United has changed its policies by reducing overbooked flights and offering passengers who give up their seats up to $10,000.

Airlines have said they routinely overbook flights because a small percentage of passengers do not show up.

United has promised to no longer call on law enforcement officers to remove ticketed passengers from their seats except in situations involving security or safety.

At the hearing, Munoz defended the policy of overbooking, saying it helps the airline better serve passengers. But American Airlines said it would not end the practice.

Alaska Airlines told the committee it was considering changing its overbooking policy.

Southwest said last week it would upgrade its reservation system and change its cancellation policy to end overbooking altogether.

"We are not going to go broke, I promise you that," said Bob Jordan, executive vice president at Southwest, at the hearing. Jordan said the airline expected the change to reduce the incidence of customers being denied boarding by about 80 percent.

Delta Air Lines declined to testify. In a statement, the airline said it was working with individual members of Congress on customer service issues.

SEAT Act

In March, a group of prominent Democrats including Senate Minority Leader Chuck Schumer reintroduced a bill called the SEAT Act to force airlines to expand seat size and legroom. They hope to attach it to legislation that has to be approved by Sept. 30.

Airlines have opposed previous efforts to mandate seat size and space, warning it would result in higher fares.

Democratic Representative Elizabeth Esty of Connecticut told the major airlines that their customer service issues suggested there was not enough competition.

"If the market were functioning well, this never could have happened," Esty said.

The Transportation Department on Tuesday issued a report that the U.S. airline industry made $13.5 billion in net profits in 2016.

Republican Duncan Hunter, who takes the only direct San Diego-Washington flight weekly when Congress is in session, said it was a "joke" to suggest there was competition.

"Why do you hate the American people?" he asked, semi-seriously. "I was going to ask how much do you hate the American people but I'm not going to ask that."

Representative Brian Babin, a conservative Republican from Texas, said he did not generally support government regulations but flying is now a "very onerous task" and "something has got to be done in terms of customer service with some of you airlines." (Additional reporting by Steve Holland and Amanda Becker in Washington; Writing by Roberta Rampton and Amanda Becker; Editing by Jonathan Oatis and Richard Chang)