Crony Capitalism and Super Elite Status for Politicians

Via FrequentFlying, Delta has been giving out elite status to favored politicians: the Governor of Georgia gets comped Diamond status and the Lieutenant Governor, state House Speaker and state Senate President all get Platinum Medallion status.

Programs routinely comp status to special friends, whether program partners or influentials that they wish to ingratiate themselves with. There’s less of this with Members of Congress where ethics rules tend to be stricter and scrutiny greater (though the 2007 “Honest Leadership and Open Government Act of 2007” carves out specific exceptions to allow Senators to play golf for free). Still, while explicit gifts are rare treatment for politicians is still better than for others — members of Congress created their own legislative deal to score free close-in parking at National Airport and when US Airways was struggling financially early in the last decade and announced significant layoffs, Ted Kennedy intervened to “protect” two jobs at DCA — the special services reps who took care of important politicians such as himself.

It’s one thing when an airline or hotel chain offers status to important customers to sway business, or to leadership of firms they’re doing business with. It’s another thing entirely when they’re offering these perks to politicians and bureaucrats. Mind you, I don’t blame the travel provider one bit. It’s how business is done, especially in highly regulated industries. Politicians hold a great deal of sway over a company’s profitability. It’s called crony capitalism. Delta was noted to have provided the Georgia governor with top tier elite status after he signed a $30 million tax break. By any measure that makes the governor important to Delta. There’s no suggestion of quid pro quo here, but Delta is reliant on the good will of political favors, and they treat their politicians well when they can.

It’s entirely to be expected as long as politicians influence fortunes of private companies, and crusading against special perks for politicians misses the point. Still it does rather anger me if I’m trumped out of an upgrade by a politician doling out dollars they’ve taken out of income (or if I’m trumped out of that same upgrade by an air marshall…)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. “…and crusading against special perks for politicians misses the point.”

    I’m sorry, but this is a pretty stupid statement. I can see the subtle argument that you’re pushing, and it is not good. Can you please forget your own pseudo-libertarian biases for a second?

  2. what a sickening post–typical U.S. hypocrisy….and they are always criticizing OTHER countries politicians about corruption……..and here they are LEGALIZING their own corruption. I will use my ballot as a coaster for my soda in 2012. Sheesh……..

  3. Giving a bribe is little worse than making a smart business decision. Taking a bribe is corrupt. However, in the scale of the corruption practised by our politicians, this is small beer (aka a pork thimble as opposed to barrel).

  4. It is wrong plain and simple.

    Nothing to do with anyone being liberal or conservative. It is a bribe, a buy-favor, and should not be happening.

  5. While — for the most part — I agree, keep in mind that in some cases, politicians and bureaucrats get different treatment by airlines for reasons other than “bribery.” I have traveled with people who are accompanied by an armed escort or two, and the security people do not want to stand around the crowded gate area. It is much safer to put the principal, the guards, and the guns inside one of the airline club waiting rooms. They will also want to board the plane first, and always notify the pilot of guns on board. Abuses abound, yes; but not all of this is abuse.

  6. The business and political angle is interesting, but you don’t mention the part of the 2nd article that specifically discusses something more germane to this blog:

    “Delta valued the gold medallions at just under $1,600 and gave them to …

    Receiving platinum medallions valued at just under $2400 were … and former house majority leader Jerry Keen, who got his medallion after deciding not to run last year.

    It was a campaign contribution to someone without a campaign. [Clark] Howard said Delta’s values for the medallions are too low.

    “Well, if you ask very frequent flyers, they would tell you that being platinum medallion probably has a value to them of somewhere in the range of $10,000 to $15,000 per year,” said Howard. ”

    It’s unusual to see a value assigned by an airline for their elite status. These values make buyback programs like AA’s (neighborhood of $500) seem like a bargain.

    And it would seem to have tax implications for any of us that might get status as a gift or contest prize (though these politicians won’t pay tax, as these were campaign contributions).

    Gary, what do you think the value of status is?

  7. If they’re campaign contributions, they are not for personal use. They should be attached to a different frequent-flyer number and the miles earned will become the property of the office, not its holder.

  8. @Swag the relevant factor is that the campaign contribution laws at issue are Georgia state laws, one can’t reasonably believe that these are campaign contributions (gifts for use by the campaign) when politcians are using the status for both personal and official business, independent of campaign activity. But I have to assume without evidence to the contrary that the arrangements conform to Georgia state law. I further simply assume that the valuations are done in such a way to tailor to the needs of the gift. I don’t think of these as useful estimates otherwise.

  9. If you consider the politician to be the principal (like a CEO) of an entity that does business with the airline, often paying Y/B fares, then this is no different than giving Global Services or Platinum based on revenue… It just looks bad.

  10. Who would the airline favor, an employee of a multi-billion dollar company that decides on which airline to contract their gigantic contract with or a politician whose term may only last one term?

    Remember the story where a Best Buy Executive who is a Premier Executive was downgraded from F to Y, because of his clothes… Someone who said he works for a consulting firm estimated the Best Buy contract to be worth around $60 million dollars for UA annually. That does not include personal travels made by employees, if Best Buy switched their contract over to Delta I am sure many employees would frequent Delta more for personal travel as well.

    I wouldn’t be surprised if any of the PM politicians who are still in Y would trump DMs on the upgrade waitlist on day of departure [Happened on AS with Patty Murray as reported by a FTer]. Now, the question is, what if that DM was a corporate executive who realized he got skipped by a politician with lower status?

    I would say at least 80% of the time they [politicians] fly in paid F anyway just like corporate CEOs and VPs who have comped statuses from airlines.

  11. As long as the information and influence is disclosed, then this is a manifestation of democracy at its finest; having the freedom to vote with the dollar. Nothing wrong with it. Problems arise when special interests are hidden from view, not when they are overt.

  12. I don’t know about Georgia, but when I worked with the State of California [CSU system], the state does have a contract with UA and WN, but employees can fly on whomever they want, just that they won’t have the flexibility of an unrestricted airfare. The state uses a reimbursement system, so employees can just book whatever they want as long as the price is reasonable then the State will send a reimbursement check after filling out the necessary paperwork. The only “strict” rule is that the marketing carrier has to be an US based carrier and the contracts do not mean much to us when shopping. If I want to fly AA, I will fly AA as long as the AA airfare is not ridiculous.

    With many corporate contracts, employees are bound to fly on those airlines except in certain circumstances and many bookings with large corporations have to utilize an in-house travel department or a third party travel agency, not directly with the airline which further regulates how the bookings are made. So, a corporate contract naturally will see more corporate employees traveling on the contracted airline compared to a state contract. Just my limited ignorant observation…

  13. Are private businesses the same as public servants?
    I only say that because of the corruption value.
    Private businesses are using their own money, whilst public officials are using OUR money.
    There is a difference in how we transact, or at least think about how to transact with each of them.
    Also, about the guns…what happens when you fire a gun in a pressurized cabin at 35000 feet? Just curious.
    I would want the bodyguards to carry tasers instead, especially since the rest of the passengers most certainly wouldn’t be carrying guns.

  14. The governor of Georgia doesn’t have much choice…traveling from Atlanta, Delta is pretty much your airline. Thank God they are a first rate airline!

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