American Airlines’ New Policy To Reduce Bump Compensation

Filed Under: American

American Airlines is changing the procedure with which they bump passengers. We’re talking specifically about those who agree to be bumped (in exchange for travel vouchers), which is called voluntary deny boarding.

This is one of those ideas that probably sounded great at the C-suite level, without considering the challenges that gate agents already face.

How American Airlines Currently Bumps Passengers

Up until this policy change, if an American Airlines flight was oversold, they’d typically ask in the app during check-in whether you were willing to volunteer, and how big of a voucher you’d need in order to give up your seat.

This was non-binding, and in many ways nonsensical, because they wouldn’t tell you what flight you’d be rebooked on. Presumably you’d be willing to accept a different amount if you’d be delayed one hour or one day. It’s like asking someone how much they’d pay for a house, without showing them the house…

The key was that if you selected any amount then you’d show up on the airport volunteer list. So it didn’t really matter what you bid, because again, it was non-binding.

Then at the gate they’d typically solicit volunteers in an oversell situation. With the previous system, they’d announce over the PA the amount of compensation they were offering.

If they needed to increase the compensation to get more volunteers, then everyone who got bumped would get that same compensation.

In other words, let’s say a flight was oversold by five people. If they offered a $400 voucher but only had one taker, then they might have offered a $500 voucher. If they then had enough takers then everyone would have gotten the $500, including the first person who agreed to $400.

American Airlines’ New “Pay What You Bid” Bumping System

On Tuesday American Airlines sent out a memo to ground agents explaining the new system with which they’ll bump people, called “Pay What You Bid.”

Here’s how American Airlines describes the “what” of this change:

Effective immediately solicitation for volunteers will not include a voucher amount. Instead, agents will pay volunteers the amount they bid on the Volunteer list.

And here’s how they explain the “why” of this change:

Previously we agreed to pay each customer the highest amount bid for their flight. Moving forward well now pay customers the amount they bid, which will reduce overall denied boarding compensation.

So, how will this actually work?

  • In an oversell situation, during check-in customers will have the opportunity to bid on one of four voucher amounts they would receive as denied boarding compensation, meaning passengers may receive different compensation amounts for a single flight
  • If they still need more volunteers, gate agents are told to make an announcement soliciting volunteers without stating the voucher amount
  • Gate agents are encouraged to have individual conversations with customers who respond to the announcement
  • All customers will be paid the amount discussed individually
  • Gate agents are encouraged to raise the compensation amount for gate-solicited volunteers, rather than those who had already bid on potentially being bumped

Why This New System Is Poorly Thought Out

As I said above, this policy change seems like something that’s a great concept to reduce costs at the C-suite level, but which will be awful for gate agents.

As such I don’t think the concept of paying people different amounts is unreasonable, just as people pay different amounts for the same flight. The problem is how challenging gate agents’ jobs are to begin with.

What do I see as the problems with this new policy?

  • Currently American’s system of “bidding” on how much you’d be willing to bump for is silly, since it doesn’t tell you how long your delay will be; you’re speculatively agreeing to a voucher amount without knowing how much you’ll be delayed
  • With this new system, say you agreed to $200 in the app, but then they tell you that the next flight is in 10 hours; will this become a negotiation with the gate agent at that point, since management suggests people should accept their original offer?
  • It will be much harder for gate agents to solicit volunteers without naming a voucher amount
  • Gate agents are already way overworked and have such stress on them to get flights out on-time, so where are they supposed to find the time to have these “individual conversations”
  • Since denied boarding compensation is often only issued after the plane leaves, chances are that everyone who gets bumped will be “huddled up” at the podium, and it puts the gate agent in a potentially awkward situation to issue different compensation to different passengers

What do you make of American Airlines’ new “Pay What You Bid” system?

Comments
  1. I think it’s a good idea because they will end up having more than enough volunteers at the gate so flights won’t actually end up overselling. I’ve flown non rev standby on flights before where they already cued volunteers and in the end still got a seat.

  2. This is no different than DL’s system and it’s really not that hard for a gate agent to sort the VOL list from low to high. Very rarely will they need to solicit additional volunteers beyond those who put their name on the list.

  3. If they told you what the reroute would be before you bid, then it would be a lot less likely to sting and this seems to be american playing the follow delta (but worse) game again.

  4. American needs to stop being a Delta follower. At the end of the day, if they have all the same policies but Deltas in-flight product is better…. people are just going to go to DL. Do things that set you apart from DL. It shows a complete lack of ingenuity if you just try to copy another airline all the time (but doesn’t invest in the product) The new 321 Oasis Jas 20 first class seats but still only 4 flight attendants. When they said first class customer service wpuld improve tremendously if they could have to FAs up there American just said “well the other airlines just have 1 up there” – so? I thought your whole motto was going for great. Be different. Invest. Think outside the box. Stop being a follower and then wonder why your customer satisfaction is so low.

  5. From the popular Spirit Airlines gameshow.

    Now showing on all AA gates.

    The price is right!
    With your host Doug Parker.

  6. Moral of the story- – don’t bid in the ap. Have the “individual” conversation with the gate agent and offer no less than $1,000.

  7. The AA gate agents can make their lives easier by simply telling everyone the maximum amount AA is willing to compensate them for voluntary denied boarding. By doing so, no individual conversations would be needed and everyone who volunteered would be happy.

  8. Seems like there’s no incentive to list as a volunteer in the app unless you’re a pensioner or something and would do it for almost any amount of money.

    I used to always be an automatic “yes” regardless of the rerouting options, because I knew it would be at least $300.

  9. I guess I know what I’m doing when AA asks for volunteers. gonna go right up to the gate and snipe potential volunteers. We’ll be able to drive a harder bargain for everyone if we team up.

  10. $1100 was the offering yesterday, or so I was told. I would be upset if I received $200 and the other person receive $1100. Most people don’t understand the process and haven’t a clue what happened until after the first flight leaves and the gate agent is explaining in great details why they are not on the flight and why they need to wait 8 hours for the next flight.

  11. If I’m aware of an oversold situation and I have flexibility, I inquire about the rebooking options first. if they work for me, I tell the gate agent that I can help them out in exchange for whatever $ amount it takes to clear the last passenger and then I take a seat and get out of their hair. If AA wants to play this game, then I will no longer volunteer. (Well, this is an empty empty threat. I no longer choose to fly on AA so its not likely they will see me again soon.)

  12. It doesn’t matter what others get as long as you are happy with yours. This is what you call ‘minimizing consumer surplus’

  13. @Richard: “$1100 was the offering yesterday, or so I was told. I would be upset if I received $200 and the other person receive $1100.”

    Unless things have changed recently, it has always been my understanding with AA that if someone volunteers for a lower amount and then the offer increases because they need more volunteers, everyone gets the higher amount.

  14. Just in time for the holidays, the time of year where the flights are oversold and “the next flight is December 26” isn’t an answer anyone is willing to tolerate.

  15. The old us airways was best. If used give volunteer a r voucher good anywhere domestically and put them on next available flt. Advising them in advance when next available flt is

  16. @James – Incorrect. Delta will pay all volunteers the same amount. If some volunteers at a lower amount and the gate agent has to increase the amount to get enough volunteers, all volunteers whose seats are used will receive the higher amount

  17. This is ridiculous. Simply stupid. This will only make AA customers more mad.
    We know this game, we understand what is voluntary vs involuntary denied boarding.
    Please explain to the regular Joe that he only gets $150 for a flight 10 hours later versus Mike next to him will get $1000 and a flight in 2 hours.

  18. For those that say this is what DL has been doing — I’m confused. Earlier this year when my flight departing from LGA was oversold, the gate agent was publicly announcing the compensation amount, so I don’t see that as the same rules AA just made. Did DL just change the policy before AA did or what?

  19. Frank – For the exact same reason regular Joe paid $500 for the ticket and Mike paid $1000…

    Granted most people are morons, but there’s only so much people should have to do to accommodate that.

  20. @ Callum

    Nope. Its not based on how much you paid, its based how much you ‘bid’. In my example Joe could have paid more for the ticket or just used miles. It just doesn’t make sense at all.

  21. They missed step one, which is being able to make confirmed changes through the app along with a confirmed compensation.

    “Fly through ORD instead of DFW, arrive 30 minutes later. Here’s $100.” Maybe even allow for faster routing and no compensation – even call it a “complimentary same-day routing upgrade”. Win-win for everyone.

  22. Last weekend the max I was offered from Los Angeles to Mexico City was $500. On the way back the max was $250. It seems to me that the amount of compensation is directly related to the value of local currency. $250 was certainly not enough for me to take a flight the next day but it was a lot of money to the Mexican national who took the offer. I liked the old system where you could get a lot more than $500.

  23. Does Delta specify the alternative flight when they ask if you’d like to bid? Seems like Ben’s complaint – and it’s a legitimate one – is that you’re being asked to bid for an unknown alternative. If enough people use the app, the system could work without any input from gate agents at all if people have all the info they need within the app.

    AA also seems to be missing a fundamental issue: they have information (the number of oversold seats, the number of people willing to bid) that the customer does not. By keeping all of that information secret, the airline can take advantage of the customer’s lack of knowledge about the market s/he is participating in. But if they make announcements to solicit volunteers, and people get a sense (by watching the podium) of how many people are bidding for a known number of vouchers, it will influence how much they bid.

    So, for example, if I know that there are 30 oversold seats and almost no takers for vouchers, I might demand $1000 or more because there is little competition for the service I am providing the airline. But if I have no idea how many oversold seats there are and how many people are bidding, I might be perfectly happy to accept $200.

  24. And American thinks up one more way to create confusion, stress and unhappy customers.
    How very cutting edge.
    (Sometimes when I am flying I just don’t want a never-ending series of decisions and complications to add to the supremely uncomfortable seat and crowded-elevator experience.)

  25. I volunteered my paid first seat for $800, stood by the gate and was thinking about using that airline for something fun. I was the only volunteer, when I went to get my voucher they said get on the plane, there is not enough time to process someone else to upgrade, move them, and get the standby on.

    I was upset because i lost the $800 and a free hotel in the area, and standby guy was upset because he was stuck in Dallas.

    Old or new process, if it’s going to impact D0 then involuntary bumps will be happening.

  26. Wouldn’t it be easier and cheaper just to stop over selling flights? I’ve been a gate agent for three major airlines and can say that oversales are extremely time-consuming and disruptive at the gates.

  27. IANAL but I thought they had to give the same amount to everyone? e.g. I once volunteered for $700 on DL but got $900 because they had to go up to dislodge the second person needed.

  28. I have not seen the highest-amount-to-all-volunteers noted in the article actually practiced by AA. We volunteered for a bump last year, at the next-to-last offer made by the gate agent. We did NOT get the higher, last amount offered. Just the one announced before we volunteered.

  29. As an agent for American this policy is ridiculous and makes it so much harder for the gate agent. When a passenger bid a low amount and I told them the next flight was tomorrow they asked if they could raise the amount they bid to which the answer, per the over sales department, was no. We ended up having to involuntarily deny boarding to 5 passengers due to lack of volunteers and write checks for several thousand dollars. American wants to oversell these flights and doesn’t want to pay for it. It’s no wonder they have the highest rate of involuntary denied hoardings of any airline.

  30. I didn’t understand this policy and volunteered (thought there would be an accept button in a new screen on the app). Our itinerary is not flexibe
    Is this binding? Can I call AA and get off the volunteer list?

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