Please No "Passenger’s Bill of Rights"

Thom Lambert —  19 February 2007

Soledad O’Brien said a (sort of) bad word on American Morning this morning. I was watching when she said it. I didn’t notice the word, but it’s plain as day in the transcript below (omissions noted by ellipses):

O’BRIEN: Our top story this hour, the problems of JetBlue. … JetBlue is still reeling from last week’s snow and ice storms that left passengers trapped on planes for hours.

CNN’s Allan Chernoff is live for us this morning at New York’s JFK airport. …


Of the flights that are scheduled to depart and arrive from JFK airport here in New York this morning, four are delayed so far. JetBlue is going to have to do much better than that if it hopes to revive its battered reputation.


CHERNOFF (voice over): JetBlue’s reputation as one of the nation’s most efficient, most comfortable small airlines has come plummeting back to earth five days after a winter storm left its passengers stranded and trapped on runways for up to eight hours. The company says they still needed to cancel almost a quarter of flights on Presidents Day weekend. …

UNIDENTIFIED MALE: Last night our flight was canceled last minute going to D.C. We were put on a 2:00 a.m. flight here to JFK. We arrived, our baggage was missing. We’re told it was put on another flight. We had to go home, come back, pick it up. It’s been a brutal two days, definitely, with JetBlue.

CHERNOFF: The problems with JetBlue all started on Valentine’s Day, when northeast ice storms left planes and hundreds of passengers literally frozen on runways for hours, which then triggered what the company said was a domino effect, causing them to cancel hundreds of flights since Wednesday. …

GEORGE MATRONI, STRANDED JETBLUE PASSENGER: If the CEO of JetBlue is watching, I would like to say, either your resignation should be tendered, or you should implement a new dynamic within JetBlue.


CHERNOFF: Well, the chief executive has apologized, and tomorrow he plans to announce a passenger bill of rights which will include the right to actually get paid if you are stranded on an airplane — Soledad.

O’BRIEN: Allan Chernoff for us this morning. He’s at Kennedy airport.

Thank you, Allan.

About 20 high school students from the Boston area are pretty angry about some airline problems themselves. They’re now home, but they’re supposed to be in Spain for a class trip.

The students and their teachers say Delta Airlines gave away their seats. Delta says the group showed up late, the seats were already claimed by others. So as compensation, the kids got $200 vouchers for future travel on Delta.

Oh, yes, they’re pissed.

ROBERTS: They’re what?

O’BRIEN: Angry is what I was trying to say. Well, you know what? They always give you this voucher. And you could not be more furious with the airline at the moment that they hand — I don’t want to ever fly you again. Don’t hand me a voucher.

I can say that. That’s not a bad word.

Anyway, Congress, of course, is now looking — like you have never said that word in your life.

ROBERTS: I have, but not on television.


ROBERTS: I say it all the time. Not with the cameras looking at me.

O’BRIEN: My children know not to say that, not to repeat mommy.

The proposed law actually starting moving through the House and the Senate over the weekend. Among some of the recommendations, it would give you the right to get off a plane that’s been delayed on the ground for more than three hours. The bill would also force airlines to tell you about a delayed or canceled flight before you buy a replacement ticket.

I didn’t notice Soledad’s gaffe because I was thinking, “Man, this is TERRIBLE publicity for Jet Blue and Delta.” Then Soledad said the bad word and I might have noticed, but she then said something even more provocative: Congress feels the need to regulate here?!

Alas, it’s true. When I got to school and logged on to my computer, the first headline I saw on was: A traveler’s ‘Bill of Rights’?. That article, which explains Sen. Barbara Boxer’s plan to introduce legislation that would regulate how airlines must handle tarmac delays, was located right next to the headline: Singing the Jet Blues: CEO ‘humiliated and mortified’ as delays, problems continue.

Does Congress really think it can do a better job than market competition at policing the airlines’ bad behavior? I don’t. Any “Passenger’s Bill of Rights” will consist of a set of mandatory contract terms that will have the effect of increasing the cost (and thus the price) of air travel.

As American Morning noted, the humbled Jet Blue is planning on adopting its own bill of rights. Should we believe Congress will do a better job at determining which “rights” are cost-effective — that is, which rights customers will value at least as much as the cost of guaranteeing them? Surely not.

Thom Lambert


I am a law professor at the University of Missouri Law School. I teach antitrust law, business organizations, and contracts. My scholarship focuses on regulatory theory, with a particular emphasis on antitrust.

12 responses to Please No "Passenger’s Bill of Rights"

    market failure, right here 26 February 2007 at 2:30 pm

    Back to the passengers’ bill of rights, ss there anything wrong with the 3-hr tarmack maximum waiting period? Isn’t this a good solution to a prisoners’ dilemma, where each plane refuses to return to the gate, because it doesn’t want to lose its place in line? If they’re all forced to go back to their gates, then everyone will collectively be better off, right?


    Religious worship implies a matter of faith. While I do think that markets are pretty cool, I would characterize my “general tenor” more as skepticism, or lack of faith, in government.

    Unlike market participants, government relies heavily on raw coercion in “serving” its people. Essential as it is to our freedom and security, I just think that government should be held to a higher standard when discussing policy options. In my experience, and that of my ancestors, government failures are orders of magnitude more costly than market failures.

    market failure, right here 21 February 2007 at 11:33 am

    Thom — Apologies. I should have clarified that my post was directed more towards Hodak and the general tenor of the religous worship of markets on this blog than your specific post. I only mean to indicate that government can and should serve a normative role in steering markets towards equilibria that are both efficient and just in a more pluralistic, egalitarian, and inclusive sense.

    As for the “free content” wonder moment, I think it’s interesting that Socrates was providing “free content” in Athens well before anyone had any conception of captlist market economics. Perhaps intellectual fame, rather than market dynamics, is a more powerful motivator for those public domain university web materials.


    a stream of cynical ignorance …

    is exactly what America needs. Whether its IRAQ, NAFTA, ENRON, GLOBALIZATION, DE-REGULATION or JET BLUE the right wing always have the Hodak’s of the world to publish the Big Lie.

    Any one who doubts me ought to read the Illinois papers, today. Market de-regulation has made billions for AMEREN and others, doubled electricity prices, and will be closing thousands of small businesses.

    Jet Blue’s management’s losses were “paper losses.” disinformation, a trick mastered by anyone who sat through 1/2 of A Good Shepherd.

    such paper losses wholly fail to explain why management permitted such a dumb sequence of events and why no one is going to be fired, not even the idiots who would not retrieve passengers from off the tarmac for more than 10 hours.

    remember, how do you tell when management is lying? Their lips are moving.

    airlines are a dumb business, one in which the business model makes it impossible to make money. there are several finance studies of the industry that show it has consumed all invested capital with losses and will to such into the future.

    When you have an industry with a broken business model, the only way to make money is through finance, viz Icahn and TWA. The fellow running Jet Blue is not an idiot. He knows these lessons and I assure the readers that he gets us every day with the same attitude toward Jet Blue that Icahn had about TWA


    Mkt Failure–

    I’m not sure how you infer from my post that I believe all government intervention into markets is unjustified. Perhaps it’s your comment, not my post, that constitutes a “knee-jerk … impulse.”

    I certainly accept government intervention into markets when there is a legitimate market failure that the government can cost-effectively remedy. For reasons M. Hodak details (and which are ALL OVER the news the last couple of days), I believe the market’s working pretty darn well at punishing airlines that screw up on service matters. That was the point of the post. (I realize it was a little subtle. I threw the bad-word thing in there to try to get readers’ attention. Sneaky, huh?)

    W/r/t the environment, there are sometimes legitimate market failures (e.g., externalities) that merit some government intervention (though, I would argue, not necessarily the sort of intervention we’ve traditionally pursued). My post in no way suggested that all environmental regulation is bad.

    W/r/t the various “isms” you cite (sexism, racism, anti-semitism), your argument seems inapposite at best. A “passenger’s bill of rights” isn’t aimed at alleviating some form of discrimination, is it? And can we really credit the government with “eliminating racism, anti-semitism, and gender bias” as you say? Last I checked, there was still a lot of that stuff going on. In fact, I’m aware of only one employer that has an express policy of refusing to hire openly gay people: the United States military. (That’s the government.)


    It’s hard to know where in a stream of cynical ignorance to dip in one’s hat and drop some intellectual iodine, so I’ll just choose this:

    “M. Hodak can offer no set of facts that explain why management did something so dumb, other than that management was going to profit by its actions.”

    I’ll offer these facts. The president of JetBlue owns over 10 million shares. So, when the stock price drops five percent, as it has in the last couple of days, he is out about $7 million. That’s quite a loss for someone making $200K per year. He is entitled to a profit-based bonus, but he probably won’t get one this year because of this fiasco. Last year, the sharp rise in oil played havoc with their profit, and top management got nothing. The president’s compensation, by the way, is the same as the rest of his senior managers, except that he gets no stock or options–he figures he has enough.

    So, I would appreciate it if John, so quick to judge this management on the basis of assumptions plainly contrary to these facts, is willing to alter at least the portion of his post dependent on these facts.

    market failure, right here 20 February 2007 at 2:04 pm

    The market sure has done a wonderful job of protecting the environment, hasn’t it? The market sure did a great job of eliminating racism, anti-semitism, and gender bias, didn’t it?

    Oh wait, it was the government that did those things. Not to say that the governmet is always the solution, and I share your unease that more regulation is what’s needed to remedy this problem, but I think a knee-jerk deregulatory impulse is just as misguided.

    Eric Posner’s work on norms shows that a market can hum along quite nicely, yet act in a racist, sexist, anti-semitic manner.


    whenever I read M. Hodak’s posts I am struck with two constants.

    First, like our President, he seems totally unable to learn from history—“Those who fail to learn the lessons of history are doomed to repeat them.”—George Santayana

    the bad history, the canard offered is that Jet Blue “lost hundred million dollars shaved off their equity value because of the bad publicity.”

    By now, Mr. Hodak must be the only person in America who doesn’t understand that such considerations make absolutely no difference to any American business man or woman. If it did, the management of Jet Blue would never have permitted the events to take place.

    Actions speak louder than words and it is plain from Jet Blues actions that management planned and intended that its passengers be treated as they were. The wire services and newspapers are full of reports that Jet Blue has failed and refuse in proper investment, personnel, and reservation systems to avoid what happened and that it decided to “fly” when other carriers had grounded their planes. Why were such conscious decisions made by the best and brightest?

    M. Hodak can offer no set of facts that explain why management did something so dumb, other than that management was going to profit by its actions.

    To understand how management could have profited, one only need to recall that stocks can be shorted, directly or indirectly, thorough re-sets on options and other techniques (management could even have an LBO in the works). One never knows.

    This last observation points out Hodak’s failed analysis of regulation. If we had no regulation, say of stock shorting, then the management of a company would have a huge incentive to create an event like this to drive down the stock price.

    This is just old corporate history. What we are talking about is arrogance and greed, plain and simple. There may have been 38 airlines offering some flights in or out of the airport, but the truth is that there is no real competition on terms, conditions, etc., for the passengers—they are just an inconvenience.

    The proof in all of this. Jet Blue has already announced that no employee will be fired because of what happened, even though direct cash losses will be above $30 million



    I see. So we need someone, either the states or the federal gov’t, to keep the airlines from victimizing their customers. Otherwise, the airline de facto monopoly, like the 38 of them at JetBlue’s home airport, would each have their way with passengers without any consequences. Is that it? Except, of course, for the hundred million dollars shaved off their equity value because of the bad publicity. And the threat of bankruptcy. Because, otherwise, it’s not as if the CEO really cares, or would fall over himself to publicly apologize and try to make things right. It’s not like when a public official does something wrong and quickly promises to make amends.

    On the other hand, giving states the ability to use their police powers against the airlines…well then that would make everything better. We can trust that prosecutors will follow every headline to avenge bad behavior. But what if there is something that makes the papers, and the prosecutors find themeselves without a stick because the sneaky airline didn’t actually break any existing law against fraud or theft or something? Well TOBAL! (I think it should be pronounced “two ball,” as in a call for more muscular government. Maybe it should be amended to “The oughta be a law, Senator!” I’m still a novice at the acronym thing.) Because if the government can’t “do something” about every problem, why the people would be helpless.

    The poor children.


    the reason why we need federal regulation is that, when Congress “de-regulated” the airlines it pre-empted state law, at the request of the airlines.

    as a consequence, no consumer in America has the right to bargain over any term or condition of an airline contract because the states are prohibited from exercising their police powers to assure a competitive market.

    consumers must simply take what is offered by a de facto monopoly, which is why airlines can imprison people for hours.

    all contract promises, if kept, increase the cost to the promisor, so that increased cost argument is a red herring. Following that logic, courts would never enforce a promise.


    TOBAL! — Very nice.


    Alas, that’s what Boxer nation looks like. Anything that grabs headlines demands regulation. (I would have said anything that grabs negative headlines, but that would be redundant.)

    The root cause of Boxer nation is that democratic outrage I will christen TOBAL! (There oughta be a law!). Can I trademark TOBAL? I think it has more marketing and visceral appeal than ISTMWETCOI? (I’m sure the market will eventually take care of it).

    The root cause of TOBAL!, I believe, is the lack of economic education of our young. The relative benefits of market-driven allocation of society’s resources…well that seems so wrong to so many people on so many levels. “Why can’t we just…”

    The notion that “we” in a non-market context means that state power must necessarily substitute for voluntary relationships, or that such substitution necessarily creates both private and social welfare costs is second-order madness, crazy talk, or gibberish to 80 percent of the people (which means at least 51 percent of our fellow voters–more on the coastal urban centers, less in the log-cabin wilderness).

    It seems to me that if we don’t challenge TOBAL! at its source, we are condemned to live in Boxer nation.