United Airlines could have avoided PR nightmare by following economics 101

United Airlines could have avoided PR nightmare by following economics 101 [According to reports, airlines routinely overbook their flights leading inconvenience to passengers]

On April 9, a passenger was forcibly removed from a United Airlinesflight from Chicago O’Hare to Louisville after the carrier was unable to find volunteers to accommodate four of its employees on standby.

Dramatic videos of the incident have gone viral on YouTube and social networks, and I reckon the resulting cost of this PR disaster will likely make United’s CEO wish he had sent in a private jet to ferry those employees to Louisville (which the airline could easily have afforded, given its net income of US$2.3 billion in 2016).

ALSO READ:United shares fall after worldwide backlash over dragged passenger Many articles have reported that airlines routinely overbook their flights, and sometimes passengers have to accept (voluntarily or not) the inconvenience of getting to their destination later than planned.

As an airline economist, I do not recall, however, such a situation ever escalating to the level it did on that United flight. The incident raises many questions, including why airlines overbook and what the carrier could have done differently.

Airline economics 101: Why they overbook Overbooking is indeed something that the airlines routinely do, and it represents a rational behavior for a carrier that sells some of its tickets as fully refundable contracts (mostly to business customers who pay the highest rates).

While the last few years have generally been good for airline profitability, the brutal truth is that profit margins have been rather low historically. Airlines rank below most other industries in terms of return on invested capital, according to the International Air Transport Association.readmore