Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Airline Overbooking Is Flying High

Page 1 of 2

It’s probably one of the least likeable things about airlines. The idea of overbooking allows airlines to sell more seats than there are on the plane in the hope that not everyone shows up and the airline can make money on the tickets for which passengers never showed. But it doesn’t always work out so great for passengers, especially those who are bumped. While only a fraction of a percent of passengers are actually bumped from their flight, the practice of airline overbooking and the subsequent passenger bumping it can lead to has ruffled feathers among consumer advocates and regulators alike.

Delta Air Lines, Inc. (NYSE:DAL)Not much compensation

A long standing policy used by Air Canada was to give bumped passengers a choice of either $100 cash or a $200 travel voucher. For most passengers, this is little compensation for what often amounts to a major inconvenience in their travel plans. Fortunately for bumped passengers, consumer advocates convinced the Canadian Transportation Agency to force Air Canada to revise its bumping policy. The Ottawa Citizen now reports that the new policy calls for passengers to receive between $100 and $800 cash, depending on the length of their delay. The policy also allows for higher compensation amounts given in travel vouchers.

Despite a dislike of Air Canada by many passengers, a characteristic of many airlines and the industry in general, Air Canada did succeed in being crowned the Best International North American Airline by Skytrax for the fourth year in a row. Even with the occasional bumped passengers or flyers who had their luggage lost, Air Canada appears to be doing a satisfactory job in customer service as a whole. This should be beneficial to Air Canada as it tries to maintain its market share in competition with an expanding WestJet and add capacity to its international network.

Buy some tablets

Businessweek reported a rather interesting sort of airline fine a couple weeks ago. After violating passenger bumping rules, Delta Air Lines, Inc. (NYSE:DAL) was assessed with a fine of $750,000, but there’s a catch to the terms of the fine: Delta Air Lines, Inc. (NYSE:DAL) can use $425,000 of the fine to purchase tablet computers to find volunteers to be bumped when an overbooking occurs. Exactly what difference nearly half a million dollars of tablets will make depends on how Delta Air Lines, Inc. (NYSE:DAL) implements the proposed program. As a Delta Air Lines, Inc. (NYSE:DAL) shareholder myself, I congratulate the airline’s negotiators on keeping more than half the fine to reinvest in its own business, however the incident does raise questions as to how future passengers’ rights violations will be handled by federal regulators.

Other airlines too

Airline overbooking, and subsequent bumping of passengers, is a common industry practice regulatory agencies have come to accept. Even the airline that tries to build itself on a customer service image, Southwest Airlines Co. (NYSE:LUV), has been guilty of passenger bumping and was fined $200,000 for bumping violations in 2010 according to CBS News. While it has avoided most baggage fees in an effort to appear more consumer-friendly, even Southwest Airlines Co. (NYSE:LUV) sees the benefits from overbooking aircraft and the additional revenue obtained from selling more seats than it flies. Southwest Airlines Co. (NYSE:LUV) has made some sacrifices in ancillary revenues on the baggage side but it refuses to give up all aspects of the airline industry. Despite this continued overbooking, Southwest Airlines Co. (NYSE:LUV) could maintain its consumer-friendly image simply by not implementing baggage fees which attract ire from a large base of passengers.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!