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DOT Doubles Compensation for Bumping, Some People Won’t be Happy

I know this happened last week, but I haven’t had the chance to write about it until now. The DOT announced that it was going to increase the compensation for passengers who are involuntarily denied boarding. Is this a big deal? Well it could be. It certainly won’t make Robert Stack and the other volunteer bumpees happy, because they’ll probably have fewer chances.

First of all, let me explain exactly what’s happening here. In the fourth quarter of last year, out of 138 million passengers, there were about 125,000 that were denied boarding (pdf – page 33). Of those, nearly 114,000 were voluntarily denied boarding. In other words, the flight was oversold, the airline offered compensation in exchange for someone taking a later flight, and it was a done deal. People who take advantage of that won’t see more money in their pocket.

It’s the slightly more than 11,000 people who were involuntarily denied boarding who will get more. Those people wanted to be on that flight, but the airline couldn’t get enough volunteers. So, they had to deny boarding to someone who wanted to be on that flight. In the past, these people received the remaining value of their ticket to their next stopover with a cap of $200 if they arrived at their destination within 2 hours (4 hours internationally) of their original arrival time. If it’s later than that, passengers were entitled to double the value of what remains on their ticket to the next stopover with a cap of $400. Those caps will now become $400 and $800. Also, the number of seats on planes covered by this rule was reduced from 60 to 30. I had no idea it was 60 before. I’ve seen plenty of 50-seaters go out while still paying the usual compensation, so I’m not sure if this will make much of a difference practically.

So will this matter? If you love volunteering, it probably will reduce your chances. Airlines consider the expected cost of a denied boarding in their overbooking decisions. Now that the cost has gone up, the willingness to overbook will go down. So, those who love getting bumped won’t be happy. On the other hand, the .008% of people who have had the terrible frustration of being bumped involuntarily will be happy-ish to receive more money. I say happy-ish because they won’t actually get to their destination any faster.

Ultimately, this is just a way to discourage the airlines from overbooking. It may work, but it will end up reducing revenues for the airlines. You can expect to see more fare increases to help cover the costs.

Edited @ 1149a on Apr 23: Changed compensation to note that the dollar amounts are caps, but the compensation is based on the value of the ticket.

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