Why you'll never get $10,000 to give up your United Airlines seat

By Bloomberg News, May 2 2017
Why you'll never get $10,000 to give up your United Airlines seat

The world was horrified to watch a bloodied United passenger dragged off a jet in Chicago earlier this month.

While the assault by O’Hare security personnel had zero to do with an oversold flight, linkage to that longstanding policy of putting profit over the occasional ticket-holder was swift. It’s been under attack ever since.

On Thursday, United and the victimized passenger, Dr. David Dao, settled their dispute out of court. But the repercussions have been much wider, triggering modified overbooking policies and even elimination of the practice altogether at some carriers.

Now the bid by airlines to mollify an outraged flying public has culminated with promised, eye-popping payments for your seat when a flight is oversold – up to $10,000 at United Continental Holdings Inc. and Delta Air Lines Inc.

But if you’re suddenly hatching a scheme to snare 10 large by purchasing a ticket on a peak Monday morning or Friday night flight, you may want to hold off.

There is no “$10,000 jackpot” at the airport waiting to be hit. Not really.

Overbooking has become a fundamental component of how carriers manage revenue.

It’s a rational way to fill every seat in the face of inevitable, everyday issues that cause passengers to miss or skip their flights.

Historically, when it happens, volunteers are sought with the promise of a free hotel stay and travel vouchers.

If no one pipes up, unlucky passengers are selected from among cattle class in back (the wealthy and business travelers up front rarely get bumped.)

Those selected get the same hotel room, and maybe some money and other goodies, as the volunteers.

But about that new, big payout: Neither Delta nor United is likely to dole out $10,000 to solve an oversold flight. For one thing, they won’t need to.

Two people on the United Express flight to Louisville where Dao received his injuries got less than $1,000 for giving up their seats. A third offered to do so for $1,000.

Thus, some amount greatly under $10,000 appears to be a suitable market price for an airline to free up whatever few odd seats it might need.

American Airlines, meanwhile, doesn’t disclose a maximum compensation but sets the amount “properly in order to obtain the correct number of volunteers,” spokesman Ross Feinstein said.

Secondly, in this casino, the house holds all the cards.

The airlines decide which flights will be oversold and by how many seats, based on past data. They can curb, expand, or stop the practice as they see fit.

United, for one, plans to reduce overbooking; currently only 4 percent of its flights have more ticketed customers ready to board than available seats, the airline said Thursday.

Besides, it’s a safe bet that the United incident has caused a thorough review of overselling protocols at every carrier that does it. None wants to create customer hostility at the gate, given all the smartphone video cameras, and none wants to write sizable future-travel vouchers.

And no one wants the public relations disaster United brought on itself in Chicago, its hometown. Just ask Chief Executive Officer Oscar Munoz.

Sizable compensation almost always comes into play when a carrier is facing an “involuntary denied boarding” scenario. That means the volunteer supply has been exhausted and the gate agent is about to force people off a flight.

Scrutinize the government data on these two groups - volunteers vs the involuntary – and the former group dwarfs the latter.

Last year, this was about 434,400 and 40,600 people, respectively. At Delta, the world’s second-largest airline, only 1,238 of its 129.3 million passengers were bumped involuntarily last year.

These data mean that most bumped passengers took an airline’s initial offers, not a more lucrative one that likely came when the airline was confronted by an indignant passenger whose seat was nicked against her will at the last minute.

These payments are typically in future travel vouchers, not cash, but it depends.

On Thursday, Southwest Airlines announced it would stop overselling as part of its transition to a new reservation system. The Dallas-based carrier said the new information technology, from Amadeus IT Group SA, will make its seating forecast “dramatically” more accurate, largely obviating the need for overbooking.

Even with the shift, some denied boardings will still occur—at Southwest and elsewhere—for reasons as varied as swaps from larger to smaller aircraft to, as in the case of United and Dr. Dao, the need to accommodate flight crews.

“As time has gone by we have been fortunate to have fewer and fewer no-shows, so the gross amount of the problem is far less today than it was 20 years ago,” Southwest CEO Gary Kelly said on a quarterly conference call. He conceded that the United incident had moved the issue onto his spring agenda.

Overbooking is an airline tool to boost revenue, but it’s not a necessity; its costs will be very closed managed. That magical maximum payout? It’s more P.R. than promise—you have a better shot at picking up $10,000 in Vegas.

This whole point about compensation and the amount of money distracts from the real underlying issues that is not being resolved. That is, the lack of empathy and trust by both parties.

The passenger experience from the point of purchasing a ticket right up to travel is beset by adversarial games between passenger and airlines involving pricing, seat allocation and luggage allowance.

Add to this, the non-human interaction of self-service check in kiosk and the theatrics of security, which the airline has outsourced to the federal government and feels so accountability over.

This is the recipe for non-empathetic and distrustful passengers.

United Airlines - Mileage Plus

17 Feb 2016

Total posts 45

I checked into a SYD - SFO - ORD J class flight in Sydney last year and got both boarding passes. I arrived at SFO , rechecked my luggage and headed to the lounge and then cued up at the gate to board as normal. When my boarding pass was scanned I was directed to the desk and informed I had been bumped. All I got was a US$400 United voucher and an economy seat on the next flight. I think I'll be pushing a little harder next time. I wonder what humiliation one would have to suffer to be in the running for a $10k voucher..

31 Mar 2014

Total posts 382

I would have refused to accept that and stood your ground. Start to make a scene and watch the staff squirm when people start videoing. 

Virgin Australia - Velocity Rewards

30 Oct 2015

Total posts 60

I was on a flight LAS-JFK in first class last September with Delta. I was seated and settled when the gate crew came on board looking for a volunteer to disembark and catch the next flight. Initial offer $400.

I heard someone one or two rows back mention that if they had the time they would negotiate the price. So I decided to try - $1500, $40 meal voucher to cover the two hours since LAS has no lounge. 

Deal done - so I gladly disembarked knowing my domestic flights for my upcoming holiday were paid for. 

Turns out that one of Delta's top tier members had a tanty at the gate at flying economy and refused to board unless they gave him a seat in first class. The gate crew were more than appreciative to me. 

United Airlines - Mileage Plus

13 Mar 2015

Total posts 79

DL paid recently around $11,000 in compensation to a family of three for declining their seats. Not all was money or DL certificates, there were also AMEX Pre-paid cards, vouchers and other gift cards, in addition that their negotiated hotels and paid of the cancellation fees for hotel, upgrades fligths and confirmed seats for their new flight arrangements.  

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