The best article on the United incident I've found

It is an interesting perspective and I found the opening paragraph to be rather unexpected. Having been there on a few occasions, I must say the comparison does not seem at all apt.
Turning to the substance, it was obviously a horrific episode and one can only hope the unfortunate passenger will make a full and speedy recovery.
Given the universal coverage of the matter, it seems very unlikely the full facts will ever emerge since both the airline and the airport will almost certainly wish to settle this matter quietly. So unless the passenger elects to pursue the matter in court as a matter of principle there probably will never be a full accounting of the circumstances.
Clearly, there is blame on both sides. A ticket does not guarantee passage on a particular flight. The airline had the right to demand the passenger vacate the seat. It does seem the airline may have failed to follow the proper procedures in terms of the type of notice provided.
It is also true that airport security had the right to remove the passenger by force, if necessary. Whether the actual force used was justifiable in the circumstances would be for a court to decide. In any normal human terms, it certainly seems to be totally excessive.
All in all, it is a very sad situation.

"The root cause of why domestic air travel is so bad is that this is what you get when you allow monopolies to form."

I am not sure there are issues other than the economics of running an airline that prevent potential competitors from setting up shop. Over the years since deregulation in the late 1970s many airlines have started up and only a few of them have managed to stay in business. It is a very difficult cyclical industry and the major carriers have all gone through restructuring in order to stay in business.

Certainly, there have been benefits to consumers in the past 4 decades. It is not clear to me what more government policy could do at present.

The following comment from Justice Breyer is interesting:

In 2011, Supreme Court Justice Stephen Breyer (who worked with Senator Kennedy on airline deregulation in the 1970s) wrote:

What does the industry's history tell us? Was this effort worthwhile? Certainly it shows that every major reform brings about new, sometimes unforeseen, problems. No one foresaw the industry's spectacular growth, with the number of air passengers increasing from 207.5 million in 1974 to 721.1 million last year. As a result, no one foresaw the extent to which new bottlenecks would develop: a flight-choked Northeast corridor, overcrowded airports, delays, and terrorist risks consequently making air travel increasingly difficult. Nor did anyone foresee the extent to which change might unfairly harm workers in the industry. Still, fares have come down. Airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010. In 1974 the cheapest round-trip New York-Los Angeles flight (in inflation-adjusted dollars) that regulators would allow: $1,442. Today one can fly that same route for $268. That is why the number of travelers has gone way up. So we sit in crowded planes, munch potato chips, flare up when the loudspeaker announces yet another flight delay. But how many now will vote to go back to the "good old days" of paying high, regulated prices for better service? Even among business travelers, who wants to pay "full fare for the briefcase?

ETA: Just saw that a Nobel Prize winner and his wife were bumped 2 years ago after actually taking their seat on board.

It’s not the first time this happened. In the past, more high-profile passengers have faced the same indignity. Nobel Prize–winning economist Robert Shiller knows this only too well. Two years ago, he was bumped off a United Airlines(UAL)flight from Denver to Aspen, Colo., after he and his wife, Virginia, had already taken their seats on the airplane. Shiller, who teaches at Yale University was a victim of overbooking, economist Nouriel Roubini tweeted after the incident. (A United spokesperson did not respond to request for comment.)

http://finance.yahoo.com/news/heard-one-nobel-prize-winning-003409438.html

Foreign owners are not allowed to provide domestic air services in the US. The Asian and Middle Eastern airlines, perhaps airlines from other countries as well, would have no problem commencing services in the US and doing things differently to take a slice of the record profits here.

"North American carriers: The strongest financial performance is being delivered by airlines in North America. Net post-tax profits will be the highest at $18.1 billion next year, although down slightly from the $20.3 billion expected in 2016. The net margin for the region’s carriers is also expected to be the strongest at 8.5% with an average profit of $19.58/passenger. In 2017 capacity offered by the region’s carriers is expected to grow by 2.6%, slightly outpacing expected demand growth of 2.5%. Recent consolidation continues to underpin the region’s strong profitability, even as the region faces upwards cost pressures which include the price of fuel."

I agree with you that foreign competition is restricted. Since the old IATA days 3-5th Freedom issues have been a sore subject in every country and that mentality has not really changed.

That being said, the Ryanair-type model is really a function of the unique features of the EU which essentially allows it to have a major cost advantage over other airlines.

However, even in a completely unregulated market ( which certainly will never happen in air travel), the kind of issue in this thread could still happen since it was not a competition-related issue but something else entirely. People do not always behave rationally, either on board an airplane or elsewhere.

As to the record profits that is simply inherent in the nature of cyclical industries. That a look at the chart of SPY vs UAL for the length of time data are available. SPY is the clear winner.

It is not that one incident is a direct result of the market's characteristics, it is that the policies and attitudes that those market characteristics allowed meant that there had been no repercussions. It took an incident of excessive force by the police to outrage enough people to shift the demand curve for United's flights and for all airlines to change their policies to not suffer from the fallout. But the economics of the industry overall will not change much.

However, if there were another 5 airlines to choose from, especially the higher quality ones from Asia and the Middle East, then things could be very different. Virgin America managed to come in from nowhere, shot to the top of the quality and satisfaction charts and was worth enough to be sold for $2.6 billion. Imagine 5 Virgin America type airlines were allowed to operate in America and compete with the domestics.

As to the cyclical nature of the business, the number one external factor affecting airline profitability is fuel cost. Structurally though, when domestic airlines were growing and profitable, just as with the auto industry, it allowed unions to become more powerful. While there are nice levels of profitability, everybody is happy, but when profitability takes a hit because of rising fuel costs or an economic downturn, the union contracts become a drag. At this point, in a truly competitive market, the fittest survive or consolidate the weakest. If foreign carriers had been allowed in at these points, indeed had been there throughout, then there was more chance of the weakest players being allowed to go bankrupt and more chance that all players be subject to moral hazard.

He certainly nailed that one.:slight_smile:

Personally, I prefer the solution from 50 years ago as it gets the job done with less mess.

Lawyers for David Dao, the Kentucky man who was violently removed from a flight for refusing to give up his seat earlier this month, said Thursday that they have reached a confidential settlement with United Airlines.

Source: Washington Post.