The incident of United Airlines violently dragging a customer off of one of its flights was not “unfortunate” or “unavoidable” or whatever else whitewash they want to throw on it to put the backlash behind them. It is a planned-for, deliberate practice which can be backed down from at every stage in the process. United regularly gambles that some people won’t show up for its flights, so it sells multiple extra tickets on them, wringing hundreds of extra dollars out of each one. What’s abundantly apparent now, though, is that United is completely unwilling to lose when its bets go south.
(As an up-front side note, United sold assigned-seat tickets on the flight in question and they never assign the same seat to two people, so they very well knew who the people who should have been kicked from the flight were — those without assigned seats — but those people also happened to be United employees, and the fact that they considered their duties immutable over everyone else’s without even knowing what anyone else’s duties were speaks volumes. You can bet your bottom dollar those employees weren’t even options in the “randomization” that selected people to get kicked off.)
The obvious answer to the situation United found themselves in when they tried to gamble on the market and lost would be to find the market price to buy seats back so that they could then give them to their own employees. In practice they could have proceeded in one of two ways: either continually raised their offer price until they had enough takers, up until they hit the price at which they were willing to have their own employees miss the flight and then have them miss it instead; or, starting at the price at which they were willing to have their own employees miss the flight, they could have held a reverse auction, until no passenger was willing to miss the flight for less money than the lowest bids on offer, where if they failed to find enough takers they’d have their employees miss the flight instead.
The response to proposal of this sort by many in the media has been to say “Oh, poor United, they never could have done this, the big mean federal government sets the maximum amount that can be offered at $1350!” Aside from the fact United never got close to offering this (they never offered more than $800), the simple fact is that this is false. And I’ll get to the law in a bit, but I think I’ve traced down where this misinformation started, and it’s not misinterpretation of the law.
You see, even when they lose their bets, airlines want to use every trick possible to wriggle their way around to saving money, and it seems in this situation they’ve landed on lying about the law to passengers on order to have an immovable leverage point in negotiating for volunteers to leave overfull flights. Take this nationally-reported case of a family making $11,000 off of Delta repeatedly overbooking their flights:
At first, Bloom says she ignored the offer, but once an announcement for $900 per seat was made, her husband approached the agent to say that he, his wife, and their 4-year old daughter would be willing to give up their seats for $1,500 a piece. The agent made a counteroffer of $1,350, which is the maximum amount an airline is able to compensate a passenger under U.S. law.
Well, if the airline can’t pay a cent more than $1350 according to federal law, then that kills any negotiating power the customers have. And it would, if it were true, but it’s not, what’s actually going on is that airlines have made it policy to instruct their employees to lie to save what could potentially be thousands of dollars whenever their bets do go south.
As can be seen even in that report, though, journalists have widely bought into this lie, and have adopted the stance that the moderate amount of money airlines choose to give customers is a big boon. But this simply isn’t the law:
(a) In the event of an oversold flight, every carrier shall request volunteers for denied boarding before using any other boarding priority. A “volunteer” is a person who responds to the carrier's request for volunteers and who willingly accepts the carriers' offer of compensation, in any amount, in exchange for relinquishing the confirmed reserved space.
The operative part here being “the carriers' offer of compensation, in any amount”. Not “any amount up to $1350”, “any amount”. Carriers still maintain the right to give customers any compensation they see fit for any inconvenience or unexpected amount of cooperation, as has always been the case; it would be completely nonsensical for the law to say otherwise, or for anyone to expect the law to say otherwise.
Then the mystery becomes how did the airline industry so successfully hoodwink journalists nationwide into believing their lies? Well, that comes from willfully misrepresenting a completely different part of the law, regarding involuntarily removing passengers from flights:
(a) Subject to the exceptions provided in § 250.6, a carrier to whom this part applies as described in § 250.2 shall pay compensation in interstate air transportation to passengers who are denied boarding involuntarily from an oversold flight as follows:
...
(2) Compensation shall be 200% of the fare to the passenger's destination or first stopover, with a maximum of $675, if the carrier offers alternate transportation that, at the time the arrangement is made, is planned to arrive at the airport of the passenger's first stopover, or if none, the airport of the passenger's final destination more than one hour but less than two hours after the planned arrival time of the passenger's original flight; and
(3) Compensation shall be 400% of the fare to the passenger's destination or first stopover, with a maximum of $1,350, if the carrier does not offer alternate transportation that, at the time the arrangement is made, is planned to arrive at the airport of the passenger's first stopover, or if none, the airport of the passenger's final destination less than two hours after the planned arrival time of the passenger's original flight.
That may seem a bit ambiguously worded, but there’s two things to keep in mind when parsing the legal meaning of this text. The first is that the “maximum”s are maximums only on what the law is mandating the airlines “shall” pay, i.e. they are maximums that replace the 200% or 400% when those get higher than regulators are comfortable mandating on more expensive flights (this serves as a sort of safeguard/subsidy to operators running longer flights). The second is that things are only made illegal by the law if they are explicitly stated as such, and nowhere here is it explicitly stated that compensating more is illegal. Indeed, a later section of the same law makes offering larger compensation explicit, allowing for the cash payment to not be made if the customer who is involuntarily being removed agrees to receive in-kind compensation instead, where that compensation must be of greater or equal value to that involuntarily denied:
(c) Carriers may offer free or reduced rate air transportation in lieu of the cash or check due under paragraphs (a) and (b) of this section, if -
(1) The value of the transportation benefit offered, excluding any fees or other mandatory charges applicable for using the free or reduced rate air transportation, is equal to or greater than the cash/check payment otherwise required;
The only reason this needs to be included in the law at all is because the cash payment could not be gotten around otherwise. It is not included as a limit on how airlines can offer extra compensation to their customers.
(As a final side note, the reasons for including maximums on the required minimum compensations aren’t purely about letting airlines get away with not paying for bad bets, as these laws also apply when legitimate problems arise that require carriers to deny someone their seat, such as seats becoming unusable due to safety equipment malfunctioning, etc. Whether the law should distinguish between these sorts of cases, though, is another discussion.)
With all of that trudged through, what we arrive at is the following: $1350 is the MINIMUM airlines can legally get away with paying passengers to involuntarily get off of flights that the airline’s gambles went south on (as long as the tickets for those flights went for $337.50 or more). It is by no means a maximum of any sort, except to the degree that the maximum amount airlines are willing to pay before resorting to violence against their own customers is whatever is the absolute minimum they are required to by law.