It’s Time for U.S. Airline Passenger Rights Legislation

It’s Time for U.S. Airline Passenger Rights Legislation

August 23, 2009

By Tim Cummins

I was never a great fan of government legislation as a way to drive corporate performance. In the same spirit, I prefer contracts without massive penalty and liability clauses. I like to believe that organizations are driven by a desire to do the right thing and to maintain a positive market image and good relationships with customers. But I must admit that the U.S. airline industry has managed to change my mind. Continental Express Flight 2816 en route from Houston to Minneapolis, but stranded needlessly overnight in close-by Rochester on August 8th is only the most recent example of a structural industry disregard for customers.

Recently, my young son was due to leave New York but was delayed some 6 hours. During that time, the airline kept him and his fellow passengers, from an over-booked flight, captive in a non air-ventilated room. They refused to give information; they denied requests for any sort of refreshment, even water; and of course they used ‘security’ as a heavy-handed deterrent to any sort of passenger complaint.

When it comes to customer commitment, the majority of U.S. airlines appear to have none. All of us can recount stories like my son’s. Mine was with Continental Airlines when I suffered a 26-hour delay, avoidable were it not for gross incompetence. My wife’s was on US Airways, when she finally gave up after an excessive delay and drove to another airport 7 hours away.

I acknowledge the airline industry is a complex one. However, the incompetence and hostility that major U.S. carriers rain down on their customers is more in line with Soviet-era behavior. It simply should not be accepted in a country that sees itself as the face of capitalism, the home of the consumer.

As the leader of a worldwide association that advocates high ethical standards and promotes the obligation of corporations to meet their commitments, I have long cautioned and called for increased debate on proposed government legislation and mandatory rules, versus preferably allowing voluntary industry ethical codes to work. I have highlighted the negative impact that regulation frequently has on the market, introducing distortions and complexity (e.g., export / import regulation). However, it appears there may be times when an industry must be held accountable – and, unlike the financial services sector, before it is too late.

While European airlines are far from perfect, it does seem to me that the airline passenger-rights rules that the EU introduced, enforcing compensation for inconvenienced passengers, has had a significant and positive impact. Introduced against the sky-will-fall protests of the industry, it appears to have brought a new level of discipline and attention to passengers’ needs. It seems – unfortunately – to confirm the point that organizations respond only if there are direct and meaningful consequences for their actions, or inaction.

Economists don’t generally agree on much. However, most would likely agree that some markets work well, some not so well and some not at all. After years of U.S. Congressional pressure and unfavorable press accounts of horrific passenger treatment, airlines still have not been willing or able to solve the extended tarmac delay or other troubling customer service problems. The August stranding in Rochester, MN represents just the most recent “Exhibit A” in what a swelling majority of airline industry professionals themselves considers a failed market.

The airline industry is protected; competition is limited. And that has allowed major U.S. carriers to sink to a point of the lowest common denominator. So, they either need an strong injection of competition (e.g., open the market to foreign ownership) to fix the market failure, or they need some form of compulsion such as legislation that sets forth national standards, bright-line rules and obligatory compensation to wronged customers.

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About IACCM
Mr. Cummins is Chief Executive Officer of the International Association For Contract & Commercial Management (IACCM). With members from more than 100 countries and over 2,000 international corporations, IACCM is leading the way in responding to the demands of global networked markets. Membership is drawn from many industries and is made up of contract and commercial managers, negotiators, attorneys and supply chain professionals.

BTC EDITOR’S NOTE
On Tuesday, September 22, 2009 consumer and travel industry organizations will conduct a Stakeholder Hearing in Washington, DC regarding airline passenger rights legislation. The purpose of the hearing is to examine passenger safety-related problems such as extended ground delays. Experts representing all sides in this debate have been invited to participate. For additional information and to register, please visit http://stakeholderhearing.eventbrite.com.