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United Airlines: Four Seats Worth $1.5 Billion? | Time.com

time

Many things are baffling about the decision by United Airlines employees to have a passenger dragged bleeding from one of their airplanes as other patrons taped the debacle on their smartphones.

But with company CEO Oscar Munoz declaring that he “emphatically” backs the employees despite a plunge in the company’s stock price, it’s amazing that the boss seems not to understand his own business model.

These are good times in the airline business. Low fuel prices have contributed to an unusually profitable stretch. So has industry consolidation, including the 2010 merger of United with Continental Airlines to create the world’s largest carrier. Dominance of regional hubs leaves the surviving airlines to operate as near monopolies.

So United gave up on dynamic pricing and resorted to monopoly thuggery. And that was a foolish thing to do. Instead, they should have continued their exploration of the real value of those four seats. I bet they would have found the price pretty quickly after they crossed the magic $1,000 threshold. But whatever the price of the seats would have amounted to, I am absolutely certain they would have cost far less than $1.5 billion.

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United Airlines: Four Seats Worth $1.5 Billion? | Time.com.