How North Korean and Russian Politics help you understand United Airlines
Ahh United. Some pharmacy is making a fortune selling antacids to your PR department.
They just barely got over LeggingsGate and now there’s United Fight Club.
But unfortunately for the passenger turned gladiator and the rest of us, aside from some superficial PR this is pretty unlikely to change much for United.
Why? Because United isn’t being deliberately evil and twirling their mustachios and cackling, they’re just responding rationally to the economic factors that dictate their business.
A while ago I joked that getting status on United Airlines was like being a member of North Korea’s ruling family — sure you’re at the top of the pyramid, but it’s a pretty crappy pyramid.
As it turns out, though, looking at the power dynamics in autocracies like Russia and North Korea is pretty instructive to understand how business works for a big airline.
Dictatorships and autocracies look like one-man shops on the outside, but they’re not. Every villain needs henchmen who will obey them and carry out their orders. The rulers in an autocracy don’t answer to their people, but they need people on their side like oligarchs, generals, spies, and so on.
Ruling such countries means creating a codependency between the rulers and the elites: the rulers depend on the elites to stay in control, and the elites depend on the rulers to stay rich and powerful.
The rest of the people… well they have no power and no money, so who cares if they’re happy? They just need to be kept pacified.
How does this relate to United? Simple. As most people have known for a long while, airlines make most of their money off of business travelers. As much as 70% of their profit on some flights come from business travelers.
And these travelers, like the oligarchs of Russia or the ruling cliques of North Korea, are lavished with perks and rewards for their loyalty.
Business class travelers never have to worry about getting involuntarily pushed off the plane.
When inconvenienced, they’re generously compensated. Flight delayed? Earphones didn’t work? Flight attendant was rude? A quick call gets you frequent flyer miles and a profuse apology.
Good luck to the rest of you trying that.
And of course you can’t even quantify the most enjoyable of all the perks, an opportunity to feel superior to your fellow man!
Just as in North Korea the ruling clique got “luxuries” like iPods, candy bars, and Segways as rewards, as a frequent flyer with status you get expedited security checks! Priority boarding! Get your luggage first! Change your flight whenever you want!
Sure as far as perks go, it’s not much, but man you should see what the other people get…
The thing is, rewards like this don’t just give the elites warm fuzzies, it also gives them a vested interest in fighting for the regime and the status quo.
After all, their elevated status only exists when the regime is in power.
The most elevated United Global Services traveler instantly becomes a plebe again if they book on another airline.
That’s why it’s pretty unlikely they’ll change their bookings if they’re already loyal to the United ancien regime: they’d have to start all over with someone else.
And that’s why you see Wall Street analysts saying things like “Overall, we think demand for United Airlines flights are unlikely to be affected by this poor customer service incident.”
And as long as United and other airlines make most of their profits from business travel, there’s much more incentive to make the front of the plane happy than the back of the plane.
Historically, autocracies crumble because of either massive external pressure, like invasions, or because part of the ruling class defects. The American Revolution was lead by wealthy landowners, and it’s why China was so terrified when college students, the next generation of the elite, started protesting at Tiananmen Square.
Given the consolidation in the airline industry, I don’t really see anything happening to United from the outside anytime soon.
As for the elites… well so far the only people I see really outraged are the people whose money United doesn’t much care about anyway.
