Bank Overdraft Charges, Airline Delays: Putting Profits Over People

Includes: AAL, BAC
by: Bob McTeer

If they had enough bathrooms and cool air circulating, three hours delay in an airplane on the tarmac wouldn’t be so bad. But they don’t, and it’s bad. Real bad. Somebody should do something.

Somebody should also do something about those big bad banks charging overdraft fees at the checkout counter without first asking permission.

And those big bad insurance companies shouldn’t be putting profits ahead of people, as the President accused them of during his latest rant against business. They should increase their payouts and lower their rates.

Well, our government is on the case. The Department of Transportation is set to impose fines up to $27,500 per passenger for tarmac delays over three hours. Let’s see now: $27,500 times 300 passengers is approximately $8,250,000 per delayed flight. Did I get that right? My frequent flyer carrier, American Airlines (AMR), suggested that it would save a ton of money by cancelling the flight instead. Spoil sports! They should be willing to sacrifice some of the enormous profits we all know airlines are making.

Bank of America (NYSE:BAC) said it would end the practice of honoring overdrafts on debit cards at the checkout counter for a fee. No money, no honey. It seems that getting permission from the over-draught (if it’s not a word, it should be) customer, as a new Fed regulation would apparently require, is not feasible. In this case, the outcome of eliminating a priced “service” because the regulation is difficult or impossible to implement is being taken as a victory by consumer advocates. Maybe the unintended consequence was intended in this case.

Now, I’ve been stranded on sitting airplanes way too long, but probably not three hours. And, like everyone else on the planet, I’ve had insurance companies deny claims I thought they should have honored. It would be better if they didn’t deny claims and if they never uttered the words, “preexisting condition.” Make them pay.

You see, banks, airlines, and insurance companies all have printing presses in their back rooms. Their ability to pay is limited only by their willingness to pay. Why they don’t all just do right and put people ahead of profits, I don’t know. Why do they have to be so churlish?

The impulse to legislate or regulate desirable outcomes by forcing Paul to pay Peter assumes that Paul has unlimited resources. So, Paul should put people first, not profits. Paul’s unlimited budget should be put in the service of mankind. Paul should provide free lunches.

Economics may be defined in many ways. The definition I usually think of has to do with unlimited wants and limited means. It deals with scarcity. Unfortunately, economics exists because there are no free lunches. That is obviously not true in politics. In politics, we can all benefit at the expense of others.

The serial over drafters have caught a break, assuming they don’t mind having to abandon their lattes at the cash register due to insufficient funds. Overdraft fees were a source of revenue to banks that will be replaced on different products and different customers. At some point my “free” checking account won’t be free any more.

At some point the increase in flight cancellations to avoid potential $8,250,000 fines will add to the real burden on the flying public, especially those whose airlines have hub and spoke systems. Cancellations spread and multiply throughout the system. Cancellations are costly to the airlines too, and those costs will have to be made up by higher prices or reduced services. Customers will not only pay more for tickets, but will incur extra costs by having to schedule earlier flights to guarantee arrival times. Or, airlines can just eat the cost. We all know how profitable they are.

Disclosure: No positions