Soon You’ll Re-Sell Airline Tickets On StubHub-Style Website

Many airlines oversell flights, knowing that some passengers won’t show up. If all they sell is the number of seats they have on a plane, then some seats will go empty. They are missing out on revenue, and overall over time that means higher fares for everyone and lower profits.

Over the years airlines have gotten better at predicting no show rates, outside of the pandemic, and so involuntary denied boardings (“bumps” where more passengers show up than seats and airlines can’t find enough volunteers to take another flight) have fallen. The model changed somewhat during the pandemic, with changes in consumer behavior. And the elimination of change fees from most fares have further complicated matters.

When more passengers do show up than an airline has seats they will try to convince some people to take a later flight, by offering them flight credits or cash. Usually they will offer less than they are required to pay when they involuntarily bump someone (which can be up to $1,550 cash). Delta will still frequently offer more than this to avoid involuntary bumps.

This gets expensive. So airlines have taken to reaching out to passengers in advance to move them to other flights, and have tried to get them to volunteer in advance through the app at specific lower compensation amounts, trying to avoid bidding situations at the gate.

But the airline is usually the one managing this process – oversell a flight, run a marketplace to figure out at the airport who isn’t going to get on board but only once everyone has shown up.

Mexico’s VivaAerobus is working on a new StubHub-style model, as Brian Sumers explains in his Airline Observer newsletter ($$).

Soon, he said, Viva will introduce a new approach: It is launching a marketplace, with a third-party vendor, allowing passengers who book in advance to trade their tickets to last-minute high-fare passengers. Zuazua likened it to Stubhub, a resale marketplace for event and game tickets. Viva will still overbook, but Zuazua envisions turning to this this platform when Viva wants to sell more tickets at the last minute.

Rather than raise the cap and assume it can buy off 10 more customers, Viva will not open a seat on a sold-out flight until a customer paying a lower fare on the same flight accepts an offer to switch to a less-busy departure.

“What if you can get five more seats by brokering a buyer-seller interaction before they get to the airport?” Zuazua said. “Look at this like a Stubhub or a Ticketmaster model. A high-demand flight is not different from a sporting event or a concert that is sold out. You can broker between a buyer and a seller who is willing to fly on another day or at another hour.”

Airlines usually make tickets non-transferable (the person buying the ticket has to fly it) because they don’t want people undermining their price discrimination rules like advance purchase, Saturday night stays, etc. Last minute travelers might be asked to pay more than someone booking months in advance. That doesn’t work if passengers can buy months in advance and then resell their tickets at the last minute for a profit, but still less money than the airline is asking.

Instead third party vendor FairLyne helps airlines set up their own marketplaces where customers can sell their tickets and receive a voucher when a buyer for their tickets is found.

Airlines can earn revenue from ticket sales on already sold out flights, where they ordinarily wouldn’t generate any incremental funds. Effectively it lets airlines keep selling last-minute tickets even after flights are sold out. The airline gets their last minute price, while potentially returning half of the original discounted ticket cost to the passenger in the form of travel credit that they’ll use – likely with additional cash – to fly the airline again in the future.

This won’t work as well for airlines without change fees. That customer would just roll over the full credit for their ticket towards future travel. Instead it works best where tickets are completely non-refundable and non-changeable.

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. Today, customer gets bumped to next flight + hefty airline credit. Even with that it takes a bit of work to get volunteers

    With this model, customer just gets the airline voucher, but now they are a last minute buyer for the next flight. Net effect is they use up their voucher just to be late getting to their destination

  2. I sure hope it doesn’t get to be a StubHub or Ticketmaster model because those are some of the companies I hate the most. They are built on getting the most revenue out of a ticket and don’t care if there are empty seats because of it. They provide little value to a band while shutting out some of their fans. In a concert, you can get there late after negotiating a lower price ticket and still see the headliner. On an airplane, that won’t work. In fact, I refuse to go to StubHub or Ticketmaster shows. Ticketmaster even monopolizes the biggest venues as a part of it’s parent company, Live Nation. If those two become the model expect a lot of just because we can charges.

  3. And see them sell a ticket for $200 and when you get to the end you see another $200 in fees. I hate that model. I have several times decided not to attend an event because I just don’t like those companies. The current model is better for the consumer.

  4. Sounds like a horrible idea.

    I can see speculators buying seats early, for low price, then hoping to flip the seats to last-minute travelers.

    Or worse, buy seats and flip them to distressed travelers. “Hey, there’s a hurricane coming, we have the last 5 seats left.”

  5. @Ex-UA Plat says, this is gonna work out very badly for customers and very well for focused resellers.

    Resellers will buy tickets in bulk for popular routes, destinations and key dates around holidays on/around the day of issue (or the day Southwest/Frontier etc issues their tickets which decreases average route price).

    Which will increase prices for the average Joe who wants to travel, say, NYC – MIA for the winter holidays/New Year. Or anywhere into Vegas around the final four. And so on.

  6. Thinking about this further, it’s ripe for exploitation by insiders.

    Find what flights are about to sell out, buy tickets on speculation.

    Find out what flights traditionally sell out, buy on speculation.

    Look at historic high load factor dates, buy on speculation.

    All it takes is one or two insiders with access to the trove of data the airline has and somebody could make lots of money.

  7. Hopefully nothing to do with Joe Bidens comments about transferable airline tickets Biggest profits for scalpers on flights to events that haven’t been finalized yet. F1, Super Bowl etc

  8. FYI airline tickets are the only item that defies the laws of economics meaning it is highly inefficient. The price should be going down closer to take-off. This type of marketplace is the future. It reminds me of RyanAir starting to unbundle services. What seemed like a silly at the time, resulted in all major carriers adopting the same policy (for better or for worse)

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