Justin L
16th January 2011, 09:42 AM
This article in the Wall Street Journal (http://online.wsj.com/article/SB10001424052748703583404576080312319441634.html) reports an interesting approach by Delta regarding handling overbooked flights.
Delta Makes Fliers Bid to Get Bumped
JANUARY 14, 2011
By MIKE ESTERL
ATLANTA—The age-old ritual of the passenger bump is getting a high-tech makeover at Delta Air Lines Inc.
The overhaul could dial down the drama for consumers at departure gates around the U.S. at a time when airplanes are flying fuller than ever. In addition, it could save Delta money as regulators consider increasing the amount that airlines must pay passengers who get bumped involuntarily from overbooked flights.
For decades airlines have overbooked flights to avoid taking off with empty seats when passengers with reservations don't show up at the airport for a flight. From 8% to 10% of passengers with reservations for a particular flight typically don't show up, according to Peter Belobaba, the director of MIT's Global Airline Industry Program.
When too many people show up, airline-gate agents embark on last-minute negotiations with passengers who might be willing to take a later flight in return for a financial incentive.
Delta's new system, which has been up and running since last month, replaces that often-chaotic system with a silent auction that asks passengers to name their price electronically before they arrive at the departure gate if it looks as though there may not be enough seats on a flight.
Passengers who check in with Delta online before leaving for the airport or at kiosks before going through security can type in the dollar amount they would accept from the airline to be bumped from their flight. Delta can then accept the lowest bids, eliminating a lot of the uncertainty early.
Delta, the second-largest U.S. airline by traffic, is flying solo thus far. But many already see the future—both the good and the bad.
"I think it will definitely eliminate a lot of the confusions and questions at the gate,'' said Charlie Leocha, head of the Consumer Travel Alliance, a nonprofit consumer-rights group.
The new system could also give Delta a negotiating edge with the consumer because it can pick the lowest bids and passengers won't know how low others are willing to go.
By contrast, rival airlines continue to broadcast their offers—typically vouchers for future travel ranging from $200 to $400—to passengers at the departure gate. They keep ratcheting up their offers until enough passengers accept, often just minutes before a flight is scheduled to depart.
The new Delta system "pits the consumer against the consumer, rather than the airline petitioning the passengers,'' said Mr. Leocha.
It's also being implemented as the Transportation Department is considering a proposal that would require airlines to pay customers as much as $1,300 if they are bumped involuntarily to a later flight, up from $800. Under U.S. rules, airlines don't have to pay anything to passengers when they cancel entire flights for weather or other reasons. That is not scheduled to change.
The number of passengers on U.S. airlines who agreed to be bumped from flights in the first nine months of 2010 rose to 541,694 from 510,878 in the like 2009 period, according to the Transportation Department.
The number of passengers who were involuntarily bumped from overbooked flights rose to 53,287 from 52,219 over the same period.
Airlines are expected to face even more negotiations over overbooked flights in 2011. Passenger load factors on U.S. airplanes are already at a record, and they are expected to rise again this year as demand continues to grow. At the same time, airlines plan to keep domestic capacity roughly flat.
Atlanta-based Delta says the new bidding system allowing passengers to be voluntarily bumped is a "win-win'' for consumers as well as the airline because it boosts efficiency and removes a lot of the chaos at the gate. Delta wouldn't say how many fliers have used the new system.
"Saving three or four minutes at the gate has a big operational impact,'' said Paul Skrbec, a Delta spokesman. He acknowledged that the price Delta has to pay fliers to agree to be bumped" probably would be cheaper'' under the silent auction.
Delta Makes Fliers Bid to Get Bumped
JANUARY 14, 2011
By MIKE ESTERL
ATLANTA—The age-old ritual of the passenger bump is getting a high-tech makeover at Delta Air Lines Inc.
The overhaul could dial down the drama for consumers at departure gates around the U.S. at a time when airplanes are flying fuller than ever. In addition, it could save Delta money as regulators consider increasing the amount that airlines must pay passengers who get bumped involuntarily from overbooked flights.
For decades airlines have overbooked flights to avoid taking off with empty seats when passengers with reservations don't show up at the airport for a flight. From 8% to 10% of passengers with reservations for a particular flight typically don't show up, according to Peter Belobaba, the director of MIT's Global Airline Industry Program.
When too many people show up, airline-gate agents embark on last-minute negotiations with passengers who might be willing to take a later flight in return for a financial incentive.
Delta's new system, which has been up and running since last month, replaces that often-chaotic system with a silent auction that asks passengers to name their price electronically before they arrive at the departure gate if it looks as though there may not be enough seats on a flight.
Passengers who check in with Delta online before leaving for the airport or at kiosks before going through security can type in the dollar amount they would accept from the airline to be bumped from their flight. Delta can then accept the lowest bids, eliminating a lot of the uncertainty early.
Delta, the second-largest U.S. airline by traffic, is flying solo thus far. But many already see the future—both the good and the bad.
"I think it will definitely eliminate a lot of the confusions and questions at the gate,'' said Charlie Leocha, head of the Consumer Travel Alliance, a nonprofit consumer-rights group.
The new system could also give Delta a negotiating edge with the consumer because it can pick the lowest bids and passengers won't know how low others are willing to go.
By contrast, rival airlines continue to broadcast their offers—typically vouchers for future travel ranging from $200 to $400—to passengers at the departure gate. They keep ratcheting up their offers until enough passengers accept, often just minutes before a flight is scheduled to depart.
The new Delta system "pits the consumer against the consumer, rather than the airline petitioning the passengers,'' said Mr. Leocha.
It's also being implemented as the Transportation Department is considering a proposal that would require airlines to pay customers as much as $1,300 if they are bumped involuntarily to a later flight, up from $800. Under U.S. rules, airlines don't have to pay anything to passengers when they cancel entire flights for weather or other reasons. That is not scheduled to change.
The number of passengers on U.S. airlines who agreed to be bumped from flights in the first nine months of 2010 rose to 541,694 from 510,878 in the like 2009 period, according to the Transportation Department.
The number of passengers who were involuntarily bumped from overbooked flights rose to 53,287 from 52,219 over the same period.
Airlines are expected to face even more negotiations over overbooked flights in 2011. Passenger load factors on U.S. airplanes are already at a record, and they are expected to rise again this year as demand continues to grow. At the same time, airlines plan to keep domestic capacity roughly flat.
Atlanta-based Delta says the new bidding system allowing passengers to be voluntarily bumped is a "win-win'' for consumers as well as the airline because it boosts efficiency and removes a lot of the chaos at the gate. Delta wouldn't say how many fliers have used the new system.
"Saving three or four minutes at the gate has a big operational impact,'' said Paul Skrbec, a Delta spokesman. He acknowledged that the price Delta has to pay fliers to agree to be bumped" probably would be cheaper'' under the silent auction.