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.
The new thingy is indeed called “pay what you bid” pic.twitter.com/p7O60ZKYrC
— JonNYC (@xJonNYC) November 11, 2019
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.
This is how badly United didn’t want to give me cash: pic.twitter.com/sI7vmbeB2Q
— Allison Preiss (@allisonmpreiss) March 22, 2018
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.