How Delta masters the game of overbooking flights (free markets not force)

[Timshel]

When Delta overbooks a flight, they let their passengers decide how much getting bumped is worth. I discovered this last week when I checked in online for my flight from Minneapolis to Philadelphia. What was the minimum I was willing to accept in travel vouchers to take a later flight — $500, $300, $200, less? After doing some rough mental calculations, I bid $300. High enough to cover most of a ticket to Mexico and low enough to be competitive without feeling exploited.


No deal. I boarded my flight on time and arrived in Philadelphia five minutes ahead of schedule.


Delta started this practice back in 2011, and it works like this: When passengers on overbooked flights check in online or at the check-in kiosk, they’re asked what the dollar value of the travel voucher they would accept as compensation for volunteering their seats. They give you a hint, too — “Delta accepts lower bids first.” By the time you reach the gate, the gate attendants already have a list of passengers to call up to confirm they’ll fly standby. If your bid is low enough, you’ll be on that list.


By having customers compete against one another to give up their seats, Delta ensures it can just about always lock in the lowest possible payout. How low can you go? The ground is the limit.

See more at http://www.pbs.org/newshour/making-sense/how-delta-masters-the-game-of-overbooking-flights/

 

[Timshel]

United took the statist route and called in big government to bail them out. Delta uses the free market to settle this peacefully, efficiently and in a way that should leave everyone satisfied.

The solution to this is simple. Less government. When United calls and says we have a passenger that refuses to be denied the service he paid for (what a dick, right?), you tell them, "Figure it out yourself."

They should demand that United raise their offer or find another way to move their crew. It is not the government's obligation or interest to fix their problems or help them cheat customers by beating those who complain.

 

[Althea]

Many people are happy to take credits in exchange for being bumped. The United case wasn't about overbooking. The flight wasn't overbooked. You don't get removed from your seat after boarding if you are getting 'bumped'.

 

[Timshel]

Many people are happy to take credits in exchange for being bumped. The United case wasn't about overbooking. The flight wasn't overbooked. You don't get removed from your seat after boarding if you are getting 'bumped'.

It is ultimately overbooking. There were more ticket holders than available seats.

Moving crew is something they do regularly and for some good reasons they give them priority, The problem is how do you resolve the issue of too many tickets/not enough seats.

United called for a big government bailout. The right solution would have been to offer more money until someone agreed to be bumped.

Maybe the government should just charge $10000 for the service of passenger removal. I am pretty sure someone would have taken less than $10000 to give up their seat.

 

[canceled.2021.1]

United's biggest mistake was allowing the plane to board in an overbooked status. Of course they have government regulations to thanks

 

[Timshel]

United's biggest mistake was allowing the plane to board in an overbooked status. Of course they have government regulations to thanks

Well that would have likely raised the price they would have had to pay to fix their mistake.

United's biggest problem is they resorted to violence by calling in big government thugs to bail them out. Petulant children will do that.

 

[tsuke]

united went the cheap route. They stopped offering at 800$ and instead offered to forcibly remove the person. They made a judgement call that the bad pr would be worth less than 800$.

 

[cawacko]

Excellent column from The Grumpy Economist on the United situation and personalized tickets to price discriminate. I hadn't thought of it from this perspective.



Commentators seem to have noticed a lot of the economics of the United fiasco: Yes, don't stop auctions at $800. (WSJ review and outlook.) Yes, if you need employees at Louisville so badly, call up American and buy a first class ticket. Book a private jet. Or, heck, you're an airline. Bring up another plane. Don't drag people off planes to save a measly $500.

The one economic point that I haven't seen: the whole issue also comes down to airlines' use of personalized tickets to price discriminate. (And most of the TSA's job is to enforce that price discrimination by making sure you are the name on the ticket.) If you could resell tickets, the problem would go away. Then the airline must sell only as many tickets as there are seats on the plane, as concerts do. If people aren't going to show, they put their tickets on ebay -- or another quick peer to peer ticket trade platform -- and someone else buys them. Including the airline, if it wants to send employees around. Standby disappears -- want to get on the plane? Bid for a ticket. We still get efficiently full planes -- fuller, even -- nobody ever gets bumped, and the auction for the last seat is going on constantly.

Yes, one of the hardest lessons in economics is that price discrimination can be efficient. Business class cross subsidizes leisure and pays for fixed costs. But the airlines could speculate in their own tickets as well, so its' not clear in a data mining race that scalpers would reap the price discrimination profits better than the airlines themselves.

Holman Jenkins adds, in a brilliant column,

While we’re at it, what’s wrong with Chicago airport security? Did not a single officer say, “I’m having no part of this. If United can’t deal with its
overbooking mistakes in a civilized, non-cheapskate way, how is it my job to manhandle innocent customers?” This also smacks of our national malaise
—police who need an armored personnel carrier before they’ll roll up and serve a warrant, who wait outside Columbine High until they’re sure the
shooting has stopped.

And do not the other passengers rebel at seeing such treatment? Well, maybe not the first time, but I suspect the next time they try to drag a customer off an overbooked plane, there will be a riot.


http://johnhcochrane.blogspot.com/2017/04/united.html?spref=tw&m=1

 

[canceled.2021.1]

Well that would have likely raised the price they would have had to pay to fix their mistake.

United's biggest problem is they resorted to violence by calling in big government thugs to bail them out. Petulant children will do that.

Big Gobblement runs the airlines.

I think it is cute that people still think free markets exist

 

[Timshel]

While we’re at it, what’s wrong with Chicago airport security? Did not a single officer say, “I’m having no part of this. If United can’t deal with its
overbooking mistakes in a civilized, non-cheapskate way, how is it my job to manhandle innocent customers?” This also smacks of our national malaise
—police who need an armored personnel carrier before they’ll roll up and serve a warrant, who wait outside Columbine High until they’re sure the
shooting has stopped.

And do not the other passengers rebel at seeing such treatment? Well, maybe not the first time, but I suspect the next time they try to drag a customer off an overbooked plane, there will be a riot.


http://johnhcochrane.blogspot.com/2017/04/united.html?spref=tw&m=1

Hell, yeah. FWIW, there was a comment on reddit claiming to be from one of the passengers who said some offered to take $1600 and the flight waiter/waitress laughed in response. If I had been the cop I would have told United to either accept that offer, make a counter, get bent or if they still insist maybe I'd be willing bust up one of the crew and throw them off, I guess.

 

[Micawber]

.

I think it is cute that people still think free markets exist

Then why the flag, eagle and overblown patriotism? You obviously don't believe in it. Isn't leaving your only option? Oh, there is another. Blog all day, pose as a real American, complain about the absence of a fictional past and wallow in misery. Good on ya!

 

[Timshel]

Big Gobblement runs the airlines.

I think it is cute that people still think free markets exist

So that is your excuse for supporting more government/socialism for the rich?

The free market could have solved this easily. But since it might hurt United you are ok with big government stepping in to save them from their mistake.

 

[canceled.2021.1]

So that is your excuse for supporting more government/socialism for the rich?

The free market could have solved this easily. But since it might hurt United you are ok with big government stepping in to save them from their mistake.

Feel free to live in your delusions. Those who know me know I am not a big gobblement supporter

 

[Timshel]

Those who know me know I am not a big gobblement supporter

It's cute that you think so. Your solution to this is big government. The better solution is free markets.

 

[canceled.2021.1]

It's cute that you think so. Your solution to this is big government. The better solution is free markets.

In a true free market there would be no FAA

Not sure how much more clear I can make it. United handled this wrong. This guy contributed to his dilemma by being an ass.

 

[Text Drivers are Killers]

Many people are happy to take credits in exchange for being bumped. The United case wasn't about overbooking. The flight wasn't overbooked. You don't get removed from your seat after boarding if you are getting 'bumped'.

So what was it about.? Did they think the good doctor was a threat??

Something else fishy about this is that the media cartels say the doc is 69 but he looks much younger.

 

[Text Drivers are Killers]

Delta is handling this problem the smart way though i think it would be better if they gave you a check instead of vouchers.

 

[Mott the Hoople]

It is ultimately overbooking. There were more ticket holders than available seats.

Moving crew is something they do regularly and for some good reasons they give them priority, The problem is how do you resolve the issue of too many tickets/not enough seats.

United called for a big government bailout. The right solution would have been to offer more money until someone agreed to be bumped.

Maybe the government should just charge $10000 for the service of passenger removal. I am pretty sure someone would have taken less than $10000 to give up their seat.

Not to be an apologist for United but the local cops are hardly big government and they were probably clueless that the cops would beat his ass.

 

[Mott the Hoople]

united went the cheap route. They stopped offering at 800$ and instead offered to forcibly remove the person. They made a judgement call that the bad pr would be worth less than 800$.

i wouldn't take the travel vouchers. I volunteered once to give up my seat for a travel voucher to fly anywhere in the continental US. It came with so many restrictions I couldn't use it. I'll never do that again.

 

[Mott the Hoople]

Excellent column from The Grumpy Economist on the United situation and personalized tickets to price discriminate. I hadn't thought of it from this perspective.



Commentators seem to have noticed a lot of the economics of the United fiasco: Yes, don't stop auctions at $800. (WSJ review and outlook.) Yes, if you need employees at Louisville so badly, call up American and buy a first class ticket. Book a private jet. Or, heck, you're an airline. Bring up another plane. Don't drag people off planes to save a measly $500.

The one economic point that I haven't seen: the whole issue also comes down to airlines' use of personalized tickets to price discriminate. (And most of the TSA's job is to enforce that price discrimination by making sure you are the name on the ticket.) If you could resell tickets, the problem would go away. Then the airline must sell only as many tickets as there are seats on the plane, as concerts do. If people aren't going to show, they put their tickets on ebay -- or another quick peer to peer ticket trade platform -- and someone else buys them. Including the airline, if it wants to send employees around. Standby disappears -- want to get on the plane? Bid for a ticket. We still get efficiently full planes -- fuller, even -- nobody ever gets bumped, and the auction for the last seat is going on constantly.

Yes, one of the hardest lessons in economics is that price discrimination can be efficient. Business class cross subsidizes leisure and pays for fixed costs. But the airlines could speculate in their own tickets as well, so its' not clear in a data mining race that scalpers would reap the price discrimination profits better than the airlines themselves.

Holman Jenkins adds, in a brilliant column,

While we’re at it, what’s wrong with Chicago airport security? Did not a single officer say, “I’m having no part of this. If United can’t deal with its
overbooking mistakes in a civilized, non-cheapskate way, how is it my job to manhandle innocent customers?” This also smacks of our national malaise
—police who need an armored personnel carrier before they’ll roll up and serve a warrant, who wait outside Columbine High until they’re sure the
shooting has stopped.

And do not the other passengers rebel at seeing such treatment? Well, maybe not the first time, but I suspect the next time they try to drag a customer off an overbooked plane, there will be a riot.


http://johnhcochrane.blogspot.com/2017/04/united.html?spref=tw&m=1

Talk about a poor business decision. Uniteds heavy handed tactics have cost far more money then just about anything else they could have done.