Thursday, October 12, 2006

Things that go bump at the airport

More Fliers Forced To Give Up Seats (need a WSJ ticket to read in full):
The number of people involuntarily bumped off flights bounced up more than 40% to 16,323 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 over last year.

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.

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 airlines different?

The answer dates back nearly 40 years to 1967, when the Civil Aeronautics Board, which regulated the airline 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 consumers who otherwise couldn't buy a ticket, only to have the flight leave with empty seats.

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 passenger with refundable tickets. 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.

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.

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.

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.

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.

Grumbling grows among airline passengers
Government report shows nearly 10,000 lost bags a day, increase in arrival delays.

U.S. airlines saw more than a 26 percent jump in reports of mishandled baggage during the year by the top 20 reporting airlines to 9,735, coupled with 17.2 percent more complaints about airline service, according to figures from the Department of Transportation.

The statistics also show more passengers bumped involuntarily due to overbooking and those that did get on their flights saw increases in flight delays, diversions and cancellations.

But a good record on baggage doesn't necessarily translate to good financial results. Independence Air saw its lost-bag report rate improve dramatically to 3.54 from 10.68 in 2004, when it was formerly operating as a feeder airline. It was good enough to be third best, behind Hawaiian and AirTran Airways (Research). But Independence filed for bankruptcy in November and halted operations in early January.

Part of the problem may have been because planes were fuller than ever before in 2005. The Air Transport Association, the industry trade group, reported that its members filled a record 78.5 percent of seats in 2005, while handling 553.8 million passengers.

With so many flights at capacity, it's not surprising DOT stats showed more than a 6.4 percent increase in passengers who were involuntarily bumped from flights due to overbooking, to 47,774.


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