American Airlines Has a New Cost Saving Approach to Bump Vouchers When They Oversell Flights

Back in the spring American Airlines started soliciting volunteers in advance to be bumped off of oversold flights, asking what the lowest amount each would take in travel vouchers in exchange for traveling on another flight.

  • This wasn’t a real commitment, needed volunteers would be called up to the gate and offered a specific flight to be rebooked on – which they could accept or keep their original plans.

  • And the amount American would pay would be the lowest amount needed to meet their need for volunteers (so the lowest bidders might wind up getting more than they asked for).

Just last week American’s CEO Doug Parker was talking up a new change the airline would be making to reduce the overbooking compensation they pay out, essentially following Delta and United which have been years ahead of American with advance bidding.

The new system is here, and via JonNYC they’re calling it “Pay What You Bid.” American will no longer announce dollar amounts soliciting volunteers, And customers will no longer all receive the same amounts when they volunteer, the airline will pay each person the lowest amount that person bid. So different passengers will get different amounts for volunteering.

Gate agents will see bids sorted lowest to highest and they’ll issue vouchers in dynamic amounts matching what each passenger said they’d take. This seems like it’s going to be more cumbersome at the gate, and may even run counter to the airline’s operational goal of D0 – since it’ll take more time for gate agents to have individual conversations (where amounts are only referenced discretely and in confidence).

If gate agents still have to solicit for volunteers at the gate, they’re not supposed to announce amounts – since the airline still wants to pay the lowest amount to those who have already volunteered. Another challenge is without reference to amounts, passengers may think the voucher ‘for an American Airlines (or American Eagle) flight’ may just be a single roundtrip rather than an amount divisible across multiple trips.

It’s amazing in a way that the Supreme Court weighed in on airline overbooking in the 1970s, and yet we’re still talking about it today. For years carriers have tried to reduce their costs, such as by offering a single roundtrip rather than higher amounts of cash and by only offering up to the amount the Department of Transportation would require for an involuntary denied boarding – Until United’s David Davo incident.

Now airlines are going to new great lengths to avoid involuntarily denying boarding to passengers. That really drove up costs of overbooking, We’ve seen stories about Delta giving a passenger $4000 in travel vouchers for agreeing to take a later flight and United giving out $10,000.

One of the best things about denied boarding compensation is that it isn’t taxable as income, although there may be a moral conundrum over whether the compensation should go to your employer instead of you if you take a bump while on business travel.

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 InsideFlyer.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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Comments

  1. United didn’t give that girl 10k. Those are just the T&Cs on the back of the voucher, value is on the front.

    The electronic interaction on overbooking is good, but the problem is they won’t clear you until everyone boards to confirm the over sale or weight/balance condition. So if you have a rollaboard you’re screwed if people miss the flight and you have to board last because you waited for the voucher. Need to clear before boarding starts.

  2. @ Gary — I take bumps on DL when possible. I always enter a high bid when asked, and these are completely ignored by the gate agent. They have stuck to the old method at the gate AFAIK. First come, first served, and everyone gets the highest amount.

  3. @ Gene, my experience is the same. I doubt AA will be able to pull this off especially when volunteers are able to talk to each other and see what they bid. The DL system still only allows you to put max $800 when in fact the lowest offers I have seen lately are $1000.

  4. I’ve never seen these prebids come into play on UA or DL when offered

    It ends up being a last minute deal at the gate, face to face

    Just walked away from $1,000 x 2 this week plus first class for a companion for an overnight that was ready to be handed before boarding on a flight that ultimately went out with one standby

  5. “Gate agents will see bids sorted lowest to highest and they’ll issue vouchers in dynamic amounts matching what each passenger said they’d take. This seems like it’s going to be more cumbersome at the gate…”

    If you’re flying, they have all your information. They could easily populate the voucher along with your re-booked reservation in their website, so you could download it just like you download a boarding pass. Accept the offer and you’re done. Next.

    The disadvantage is that AA would be making it impossible to LOSE the voucher, and way to easy to FIND the voucher the next time you’re travelling, and hence people might actually USE the voucher.

  6. It doesn’t make sense to me how they ask you to bid an amount before you know how you would be rebooked. I may be willing to take $200 if you are just adding a connection and delaying me by an hour, whereas I would need a lot more than that for an overnight delay.

    I normally just bid the lowest amount, knowing that I can always turn down their offer if I don’t like the rebooking. But it seems like this would really slow down departure if more than a few people start doing this.

  7. I pre-bid on Delta about 5 years ago and the system worked as expected — I received a voucher in the amount of my bid. As I recall, they called me up to discuss it before generally asking for volunteers. I think it was $195 or $245 or something likely to beat out a round number, and my delay was going to be only about an hour.

  8. I agree it will take longer. I see all sorts of logistical issues here, since in every case the ability to rebook you will vary depending on time and destination, so that there could be endless complications. As Sco says, what I’m willing to take depends on what the alternate arrangements will be. I can’t know that when I place the bid, so each time it is going to take time to have that conversation.

    When they are at the gate and offer a fixed price, while saying “You will be on the 2:30 p.m. flight”, then those who find it acceptable can simply go up and get the change done.

    Parker is always trying to out think himself to make something appear to generate more income (or reduce costs) without enough attention to the unintended consequences.

  9. United has a similar system in place, you can choose award miles or dollars (voucher). Trouble is you still have to go to the gate. Would be better if you could just stay home.

  10. AA are Friggin game playing crooks
    I try not to hate them but sadly I do
    At least I rarely ever fly them thankfully

  11. Yesterday my AA flight was oversold. They asked for two volunteers to take a $475 voucher to take the next flight, the next morning. No bidding and they got the volunteers they wanted.

  12. Last week: AA oversold SJC – LAX. They were offering $800 per passenger, as announced over the speakers.

  13. I think on principle I’m going to start bidding the lowest amount just so I can jack them around by sauntering up to counter to let them know I’ve changed my mind and want a (much) higher amount.

  14. Wow. Good for American, likely bad for customers.

    Still a little unclear on how this works. Presumably pax will be able to bid online, on the app, at check in, and at the gate.

    As others noted, will pax be able to choose their new itin at the point of bidding? For example, the current UA systems allows you to bid x for itin1 and y for itin2, which (in theory) allows DoD to rebook without obtaining consent. If it’s just bidding, then I agree this creates slightly more of a headache for the GA. But it already takes forever to rebook and issue vouchers. And will you be able to change your bid or conspire w/pax at the gate? Some pax on UA deliberately have forced the bid up to the max by holding out.

  15. David, sorry but there is no evidence of it being true. She shared a picture of the T&C printed on her voucher, same as any other voucher, got called out for it on Twitter for it several times and never responded.
    UA confirmed “a” voucher but would not confirm the amount.

    Innocent mistake or publicity stunt who knows (I’ve done the former), but the story isn’t true (in multiple regards) but sounds good for her and UA so you won’t see any claims otherwise.

    It’s been over a year, surely the splurge would have been broadcasted ( I haven’t bothered to look, no need).

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