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Airlines – It’s Time For Legislation

August 8, 2008

I was never a great fan of legislation as a way to drive corporate performance. In the same spirit, I prefer contracts wihout 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. But I must admit that the US airline industry has managed to change my mind.

My nine year old son may – or may not – be somewhere over the Atlantic right now on a Delta flight that was due to leave New York some 6 hours ago. During that time, the airline kept an over-sold flight captive in an airless room. They refused to give information; they refused to provide any sort of refreshment (even water); and of course they use ‘security’as a weapon to prevent any sort of complaint.

When it comes to customer commitment, the majority of US airlines have none. All of us can recount stories like this (my most recent was with Continental just 2 weeks ago, when I suffered a 26 hour delay through avoidable incompetence; my wife’s was a week ago on US Airways, when she gave up and drove to another airport, 7 hours away).

I acknowledge it is a complex industry. But the incompetence and hostility that major US carriers show to their customers is more in line with Soviet-era behavior. It simply should not be accepted in the country that sees itself as the face of capitalism, the home of the consumer.

In previous blogs, (see, ‘Are Rules Destroying Value?‘) I called for increased debate on legislation and rules versus voluntary and ethical codes and i highlighted the negative impact that regulation can have on the market, introducing distortions and complexity (for example, export / import regulation). But it appears there may be times when indutry must be held accountable. While European airlines are far from perfect, it does seem to me that the ‘bill of rights’ that the EU introduced, enforcing compensation for passengers, has had a significant and positive impact. Introduced against the protests of the industry, it appears to have brought a new level of discipline and concern. It seems – unfortunately – to confirm the point that organizations respond only if there are direct and meaningful consequences for their actions (or inaction).

It would be nice to believe that companies want to do well just because they care. But the truth is that, over time,  they need some pressure to strive for excellence. The airline industry is protected; the competition is limited. And that has allowed the major US carriers to sink to a point of the lowest common denominator. So either they need an injection of competition (open the market to foreign ownership) or they need some form of compulsion – such as obligatory compensation to their customers.

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