More Fliers Forced To Give Up Seats:

Overbookings Surge as Airlines Trim Schedules; Passenger Compensation Unchanged Since 1978.

By Scott McCartney, Wall Street Journal

            Airline flights are getting bumpier—before they even leave the gate. The number of people involuntarily bumped off flights bounced up more than 40% to 185,368 in the second quarter, compared with the same period in 2005, according to government data. It was the highest number in any second quarter since 2000, a particularly bad year for getting bumped, when business was booming and fares were high. Also, the number of passengers enticed to voluntarily give up seats on overbooked flights rose more than 10% in the second quarter of last year.

            Under financial pressure from high oil prices, airlines have trimmed flight schedules this year and jammed more people onto remaining trips. That’s led to more-crowded flights—some of them overcrowded.

            Regional airlines Comair, Mesa , SkyWest, and Atlantic Southeast overbooked the most in the second quarter, according to the Department of Transportation. Among big carriers, Northwest Airlines had the highest rate of people with tickets who were denied boarding, voluntarily and involuntarily combined. Lowest: Jetblue Airways.

            The increase raises several questions about the long-held airline practice of selling more tickets for a flight than there are seats on the plane. For one: The DOT requires that airlines compensate passengers for bumping them off flights, but the maximum amount of $400 was set in 1978 and hasn’t changed.

            Had the maximum amount been adjusted for inflation, it would be more than $1,200 today. And some argue that since the last tickets sold are usually the most expensive, airlines have too much incentive to sell $1,000 tickets when no seats are available if the penalty is only $400 to bump a cheap-fare passenger.

            “I don’t like the practice, but if it’s going to be there, we have to have stricter penalties,” says Al Anolik, a San Francisco attorney who specializes in travel law.

            The DOT, which sets the cap, says it “has not made any decisions about whether to pursue revisions to the bumping-compensation rules.”

            Even the practice of overbooking itself raises questions, since many other businesses aren’t allowed to sell the same product to two different customers, or bait them with one deal then switch them to something else. Why are the airlines different?

            The answer dates back nearly 40 years to 1967, when the Civil Aeronautics Board, which regulated the airlines industry at the time, decided to allow airlines to overbook to cover no-shows. The board figured that extra revenue allowed airlines to offer lower fares, and that overbooking benefited customers who otherwise couldn’t buy a ticket, only to have the flight leave with empty seats.

            The rules got tested in court 30 years ago when Allegheny Airlines, now US Airways, bumped consumer crusader Ralph Nader from a flight and Mr. Nader sued. The U.S. Supreme Court ruled in 1976 that the federal government could allow airline bumping, but airlines had to offer compensation to volunteers first, essentially setting up an auction system. That’s why you hear gate agents asking for volunteers to give up seats in exchange for free tickets or travel vouchers.

            “It was a spectacular success,” says Mr. Nader, who hasn’t been bumped off a flight since.

            Aviation attorney Mark Pestronk, who often represents travel agencies and travel companies, says the current system is flawed because airlines essentially defraud bumped customers out of their tickets. A fairer system, he says, might be to allow transfers between passengers—like theater tickets. If you can’t go, you can swap with someone, sell the tickets or give them to a friend. Of course such a system might have security hurdles since officials run passenger names through screening computers. Airlines say they have to overbook because some tickets are refundable and some customers don’t show up. Curbing overbooking would likely weaken revenue, possibly push ticket prices higher and make it harder for business travelers to find seats for last minute trips. Some travelers even like getting bumped in order to score vouchers for free or discounted future trips when they volunteer to give up seats.

            Airlines use reams of historical data and sophisticated modeling to predict, flight by flight, how many no-shows there likely will be. And their predictions are usually quite accurate. All told, in the second quarter, about 13 passengers among every 10,000 were denied a seat on a flight, and 91% gave up their seats voluntarily.

           It’s also worth noting that taking vouchers to voluntarily give up seats has declined in popularity over the past five years. Vouchers typically come with lots of strings attached that make them hard to use. Some, for example, can’t be used with the least expensive fares or are restricted from holiday travel periods, and some airlines make you go to the airport to buy tickets with vouchers.

            If you are on an oversold flight, don’t have a confirmed seat and must get on the plane, Mr. Anolik suggests offering compensation on your own to people who do have seats. He gave a traveler $200 once, saving himself four hours of delay waiting for the next flight. Since he bills $395 an hour, he figured it was a bargain.

            With more tickets being nonrefundable or carrying $100 penalties for changes, some travelers question whether airlines should be allowed to overbook as much as they do. Perhaps airlines should only be allowed to bump passengers with refundable ticket. If the ticket—essentially a contract for service—can’t be broken by the customer, why should the vendor be allowed to break it? Consumers on restricted fares can’t change their minds without penalty, but airlines can, complains John Reece, a frequent traveler from Truckee , Calif. “It seems to me the airlines have no excuse to overbook at all,” he says.

            Thatcher Stone and his teenage daughter got bumped by Continental Airlines in Newark , N.J. , as they were trying to get to a Christmas skiing vacation in Colorado . The gate agent didn’t ask for volunteers to give up seats, and Continental didn’t unload his baggage—it went to Colorado , preventing the Stones from finding someplace else to ski. The airline couldn’t get him to Colorado for six days, rendering his vacation useless. Continental says when someone is bumped, the carrier tries to offer alternative flights, refund the ticket, help make other arrangements, or off some form of denied boarding compensation. “But that is not always acceptable to the customer,” a spokesman says. “We are always sorry when a customer is denied boarding involuntarily.”

            Mr. Stone, a New York lawyer who lectures on aviation law at the University of Virginia , refused the airline’s $400-per-person offer since he was out $1,800 in nonrefundable payments to his Telluride resort. Instead, he sued Continental in small claims court for breach of contract. He was awarded $3,110.

            “The only reason I sued is because they weren’t acting like mensches,” Mr. Stone says.

Number of voluntary and involuntary denied boardings per 10,000 passengers, second quarter 2006.                            

Source: U.S. Department of Transportation