You may have encountered airlines offering compensation and seeking volunteers to switch flights while traveling by plane. This amount could reach hundreds or even thousands of dollars, which is like receiving a small windfall for the individuals involved. Why do airlines do this? Is this kind of “good deal” common?
According to the aviation news website “Simple Flying,” airlines spend money to ask passengers to switch flights mainly because they allow overbooking, which means they sell more tickets than there are actual seats available.
This risk management and revenue loss reduction strategy is based on the assumption that some passengers may not show up for their flight. However, when all passengers show up, there is a shortage of seats. In such cases, airlines usually offer compensation, ask passengers with reservations to give up their seats, and arrange alternative flights to their destination.
This practice benefits both passengers who voluntarily give up their seats and the airlines. These passengers can earn some extra money, while airlines can avoid strong protests from other passengers or even having to cancel flights.
In the aviation industry, overbooking is a common practice because many passengers do not board as scheduled. Data from the Federal Aviation Administration (FAA) shows that 5% to 15% of passengers are unable to board as scheduled due to flight delays or changes in plans, among other reasons.
Airlines are allowed to oversell tickets according to regulations. For example, a flight with 100 seats may sell 105 tickets. Airlines monitor the proportion of passengers who do not show up to adjust their overselling ratio. However, if a passenger is left without a seat due to this practice, the airline must provide compensation and alternative flight arrangements for the affected passenger.
In the United States, airlines do not publicly disclose guidelines on how much compensation passengers will receive. However, historically, Delta Air Lines has been the most generous, offering vouchers of up to $10,000 per passenger, while United Airlines and American Airlines have compensated individual passengers up to $5,000.
It is important to note that voluntary versus involuntary seat giving up are different. The former, as mentioned above, allows passengers who voluntarily give up their seats to receive generous compensation, while the latter refers to bumping, where passengers are forced to give up their seats due to the flight being full, among other reasons, with the compensation amount predetermined by the Department of Transportation.
According to the Department of Transportation regulations, airlines are obligated to provide alternative flights and compensate passengers delayed one to two hours with cash equivalent to 200% of the ticket price (up to $1,075), and passengers delayed over two hours with cash equivalent to 400% of the ticket price (up to $2,150). These costs must be paid within 24 hours of the passenger being denied boarding.
If a passenger is denied boarding by the airline for reasons other than overbooking, the situation may be more opaque. If bumping occurs due to factors such as aircraft changes, weight or balance issues, seat downgrades, or fewer than 30 seats available, passengers usually do not qualify for compensation.
For passengers, the compensation offered by airlines may seem like an easy way to earn money, but the situation is not always straightforward. Firstly, the compensation is not always in cash. Some airlines (such as Delta Air Lines) allow passengers to exchange it for Amazon gift cards, but most airlines only provide vouchers that can be redeemed on future flights with that company.
Another scenario that may occur is passengers voluntarily giving up their seats but not being able to do so. For example, after the final count, there may be enough seats available, or other passengers may not board at the last moment. Additionally, if you accept the airline’s arrangement, the next flight may be significantly delayed and may require an overnight stay. The airline also does not guarantee you will get a seat in the same class on the next flight.
According to Department of Transportation statistics, on United Airlines flights, only 1 in 30,000 passengers is involuntarily removed from the plane. This means that in the vast majority of cases of overbooking, no issues arise. Nevertheless, it is important for passengers to understand their rights, especially when compensation is provided in the form of vouchers.
In conclusion, as reservation systems become more advanced, airlines will be able to predict more accurately which passengers will actually show up at the boarding gate and how many passengers there will be. This will minimize the occurrence of such events. However, as long as flights are overbooked, these situations will arise and affect the airlines’ revenue. Therefore, it is crucial to fully understand your rights to make the most of these situations.