A New Cranky Talk is Live – A Conversation with Wallace Beall on Airline Pricing and Overbooked Flights

America West, Overbooking, Podcast

Listen on Apple, Spotify, direct, or wherever you get your podcasts.

And we’re back. See, I told you we weren’t ending Cranky Talk entirely. We just decided to take it off a set schedule, so we could just do it when we had something worth talking about. And this week, I decided to take a trip down memory lane.

My guest is Wallace Beall who was a director over yield management when I started at America West back in the day. Wallace stayed through the US Airways and American acquistions, finally retiring a few years back. So why is Wallace on the pod this week? Well, the post about Delta increasing overbooking got us talking about the old days, and it sent us down a rabbit hole. So, we decided to record the conversation for all of you. The industry has changed a whole lot in the last 25 years. I hope you enjoy the discussion.

Email Dave here to tell him just how much you’ve missed him.

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9 comments on “A New Cranky Talk is Live – A Conversation with Wallace Beall on Airline Pricing and Overbooked Flights

  1. I despise – truly – the whole concept of “overselling”. Don’t get me wrong – I understand why the airlines do it, but I think it is a morally and ethically problematic business practice.

    Here’s my question (and I am honestly asking this out of complete ignorance): what percentage of people actually don’t show up for their flight who have paid for a completely refundable ticket? Put another way, how many people actually pay for a refundable ticket, make a reservation, and cancel within a day or less of a flight, get their fare back, and cause the airline to have an unsold seat and no revenue? Is it really that many people? Seriously?

    I ask because it seems to me that the *VAST* majority of people pay for a nonrefundable fare, and if they don’t show up they end up eating their airfare/gifting it to the airline. Is that not the case if you miss a flight because either you are late or just don’t show up? If that is the case (again, I am asking honestly here), then why would the airline need to oversell a flight in any event? They have the nonrefundable fare money already. Why oversell?

    Or, are the airlines just counting on a certain percentage of people not showing up for whatever reason (late, whatever), taking that person’s fare, and then hoping to sell the seat again, so that they essentially can sell it twice? If so, that seems very dishonest to me!

    I feel the days of the executive having their assistant book them on multiple flights back to LaGuardia from O’Hare so that they can leave the meeting whenever they wish are long gone. And so why do airlines even need to “oversell” a flight?

    If I paid a nonrefundable airfare for my seat, and I show up at the gate with time to board, and am told that I am being “bumped” because some statistical model says I fell within the standard deviation of no-shows, I feel that I have the right to not only my “nonrefundable” airfare back, but perhaps the full-fare refundable fare as well. PLUS hotels, meals and anything else that the disruption will incur in terms of costs. If being bumped makes me miss a business meeting, wedding, funeral or cruise, then the airline should be legally liable for treble costs and additional documented damages. Just a thought.

    1. Nowadays cancelling a ticket usually just results in a fligh credit, not a gift to the airline. And there are other reasons not to make a flight: misconnections and same-day-standby among others.

      Excellent screen name!

      1. grichard – Thanks! First type I flew on as a wee little tyke ;)

        And understood; but if you cancel a nonrefundable: (1) the airline still keeps your money, as the “credit” (a) only lasts a certain amount of time and is (b) for a fixed amount, so if the fare goes up (including “change fees”) you still pay more, and if you don’t rebook a flight in a fixed time then the money is indeed theirs to keep.

        But if you buy a refundable ticket? Don’t you get your money back (in the original form of payment – i.e., cash, miles, et cetera)? Again – and I am asking out of ignorance – are so many people doing this that it warrants/justifies setting up a system that bumps paying passengers off of a flight? Even if only rarely?

        As to the other potential reasons – I understand that there are myriad reasons to miss a flight, but I feel they shouldn’t ever result (however “indirectly”) in a booked and paying passenger getting bumped. Period. Sorry, I just don’t see it as fair.

        If the airlines lose money on letting a seat go empty because so-and-so missed a connection for whatever reason, then perhaps it will also coerce the airlines into improving connections and operations.

        And if people want the flexibility of “same day standby” then they can pay extra for that (and I believe many already do). The otherwise empty seat they take should (in my humble opinion) have simply been an unsold seat, and not some ethereal seat from the standard-deviation-off-of-the-mean-seat-bank-in-the-pricing-model. And the now-empty seat on a latter flight still makes some money if the standby fees are calculated correctly. But the practice won’t and shouldn’t bump someone.

        My bottom line is that a paying passenger who is at the gate on time should simply NEVER get bumped. I think it is a rotten practice and stinks.

    2. Eastern – I don’t know no-show numbers since those would be proprietary, but as Wallace and I discussed, the issue is really about having a large standard deviation. Things like flight firming really help to lower that and create much more consistency. Combine that with sky-high offers when there is an oversell and it’s exceedingly rare for someone to get involuntarily bumped anymore. But it’s also not just about no-shows. It’s also about people who cancel within a day of travel or even more. It’s hard to re-sell that seat with late cancels like that, so overbooking takes that into account as well.

    3. Ya know, I get the impulse, but if airlines didn’t sell those seats they’d have to charge more. Or at least attempt to do so, to stay out of bankruptcy. (Especially in the late 90s and early 2000s that the podcast covers..)

      But looking at today, I give kudos to Delta that the manage to overbook with such a low IDB rate. Sure they have a hearty VDB rate, but as a passenger if I’m in the position to take that, sure I’ll be happy to get paid to take a later flight.

      United seems to do alright, and AA really should up their game.

      So in my book, overbooking, especially with a low IDB rate is a win-win-win. The VDB’d passengers win with extra money they didn’t expect, the other passengers win with comparably lower fares, and the airline wins with more revenue.

  2. I know some airlines already use their apps and email communications to try to push pax to later flights if the passenger’s flight is overbooked (e.g., if the 10a flight on the route is overbooked but the 12p is not, sometimes the airline will email pax the day before and ask them to voluntarily bump themselves to the later flight, or prompt the pax to submit a bid to do so), but do airlines do it in reverse?

    In other words, if the 10a flight is overbooked but the 830a flight on the same route has plenty of seats left, would an airline send out a communication offering to allow pax to switch to the earlier flight? I’m not a road warrior, so maybe this happens for elites or happens on certain airlines, but I haven’t seen evidence of a formal process for this sort of thing. Perhaps the airlines have studied the concept and discarded it (not sure how common/profitable standbys and same day changes are). Given that IRROPS and delays tend to cascade as the day goes on, however, it seems like it would make sense for the airlines to try to fill the earlier flights when possible, if just to give themselves a little more flexibility later in the day, and to avoid the cost/headache of bumping pax on later flights.

    1. Kilroy – They usually don’t do that because in general they want to confirm they’ll need you to be bumped before letting you change to another flight.
      That being said, it wouldn’t surprise me at all if they did this in some situations. But if you’re elite, you can switch to an earlier flight without charge anyway, usually.

      1. Thanks for the explanation, Brett.

        I do my best to avoid spending hours and hours at the airport, but if am I through security 60+ minutes before my flight I’ll sometimes do as you did on your recent departure out of ATL and see if there is an earlier flight that I can try to get on instead.

        The last time I tried that I was politely told that switching to the earlier flight wasn’t allowed due to my fare class (basic economy fare, no loyalty status, totally understandable). It was worth a try, however, and I still consider the cost of the bottle of soda ($4 at a newsstand) that I slipped to the gate agent when I made the request to be a worthwhile “investment” ;-) . (The gate agent did actually appear to check the system and try to help, and the soda hopefully made her day a little better; giving her the soda made me smile for the rest of the trip.)

  3. Brought back memories. I was consulting extensively for HP (PRM, network, marketing, etc.) in the early 90’s, so it was interesting to learn from you and Wallace how things evolved post-bankruptcy. One memory was hearing executive management trying to justify why they should keep a single 747 to fly a single route that lost a lot of money.

    The timing of fare filings and competitive gamesmanship among airlines also resonated.

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