Giving up your seat for a voucher? Only on one condition!

by Tom Johansmeyer on

It’s always pretty tempting. You’re sitting in the gate area and hear the voice on the loudspeaker, offering travel vouchers and other perks if you’ll give up your seat because your flight is oversold. You know the drill … “if your travel plans are flexible.” Well, while en route to the Gadling meet-up in Chicago, I got this opportunity and decided to roll the dice. Along the way, I learned a bit that you may find useful when the gate agent is trying to seduce you into seat sacrifice.

Don’t give up your seat on one airline to accept a seat on another.

Right away, I felt uncomfortable. It’s natural to hesitate when you’re giving up a sure thing. Next, the gate agents were hunting for flights … never a good sign. I was on Delta, and the next Delta flight was fully booked … even though the original announcement promised volunteers a flight on the next Delta flight. The whole arrangement left me doubtful, but the thought of $800 worth of free travel (I was with my wife) pushed me forward. Gadling top dog Grant Martin was egging me on via e-mail, along with several other members of the team.

So, I pulled the trigger.

The Delta gate agent was able to get us booked on an American Airlines flight to Chicago leaving two hours later. So, we picked up our carry-ons and trudged across the Cincinnati airport to Terminal 2, where we’d check in and catch our new flight.

A shock awaited us at the American Airlines counter: our flight had been canceled. Fortunately, the airline was able to get us on a flight that was leaving earlier … though it had been delayed five hours (i.e., it was supposed to leave at 1 PM but was pushed to 6 PM, while our canceled flight was supposed to push back at 8 PM). Unlike everyone else on that flight, we got lucky. But, I wondered, what if we hadn’t been put on the earlier American flight? How screwed would we have been?

I called Delta’s media relations department while waiting for my flight on American and heard back rather quickly. The rep wasn’t able to point to a specific policy and rushed through an explanation that wasn’t terribly encouraging. The moral of the story seemed to be that Delta would welcome you back … because that’s the airline with which you started.

A media relations rep without some form of corporate-speak to quote chapter and verse is unnerving. These are the people responsible for making the airline look good less bad. If PR can’t give you a straight (if biased) answer, what are the chances of that gate agent being able to deliver?

“It’s easier when it’s a Delta-to-Delta” change, the rep explained. So, that tipped me off. If you can’t get a flight on the same airline, don’t chance it. I was told that there is more the airline can do for you if you’re on one of its flights. That’s true. They can bargain with first class upgrades, exit row seats and other perks. But, if they send you to another airline, you lose all that leverage.

Now, if you are moved to another airline and they cancel on you, you can always go back to the one with which you started, but keep in mind that the options available to them are more limited. If they’ve spent the day accommodating bumped passengers from oversold flights, there may not be as many slots available. You’ve lost time, which means you’ve lost flights.

And, since you’ve already given up your flight, there’s little you can do. You’re at the airline‘s mercy.

With my episode last Friday, I’m still a bit confused about the gate agent’s choice of flights. To have a plane canceled in the 15 minutes it took to walk from one terminal to another felt a bit fishy. I have no evidence of a decision from convenience, but I am certainly suspicious.

Of course, I did learn something, albeit the hard way: do not give up your seat if you can’t be booked on the same airline. You’re guaranteeing a world of headache.

Misery works: airlines making money on baggage fees

by Tom Johansmeyer on

The one thing nobody says about the “nickel and dime” strategy is that it can work. For the airline industry, charging passengers for extra bags translated to more than $1 billion in lifeblood to a struggling business last year, according to the Department of Transportation. As much as you may hate to shell out that extra cash, last year, it went to businesses that desperately needed it.

Before the financial decay spread to every corner of the business community last year, airlines typically allowed two pieces of checked luggage per person and charged for anything else that followed. Then, United Airlines started demanding that passengers throw down $25 for a second bag, with US Airways following to the tune of $15.

It adds. Up. United brought in an extra $133 million. Delta picked up an extra $177 million. American Airlines wins with $278 million last year from baggage fees. Even Southwest Airlines pulled in an extra $25 million. Rick Seaney, CEO of Farecompare.com, believes that baggage fees could be worth up to $3.5 billion in 2009.

American Airlines to offer one way mileage bookings

by Grant Martin on

Frequent flyer programs are infamous for adding restrictions to possible bookings. Everyone knows that the cheapest reward tier is almost never available when looking for tickets, that numerous fees and surcharges still apply after you redeem your “free” ticket and that miles just aren’t as useful as they once were.

That’s why it’s so befuddling to see one of American Airlines‘ new mileage booking benefits. The nation’s second largest carrier just announced that frequent flyers can now use miles to book one way tickets. No, this doesn’t mean “cash and miles” where you have to pay for 1/2 of your round trip ticket. Now you can simply use 12.5k miles to book a one way ticket and be done with your itinerary.

Why hasn’t this been done before? Airlines are notoriously stingy with miles, and any excuse that they can use to make you spend more miles and incur more fees is usually welcomed. Giving the passenger the flexibility to use miles or cash per leg is, well, unprecedented. And an excellent move by American Airlines, I must add. Hopefully more frequent flyers find their way to AA’s ranks because of this benefit — I know I’ll be taking advantage of it.

March airline plunge softens in April

by Tom Johansmeyer on

Passenger traffic is still falling. That’s not going to change for a while. But, the decline slowed in April, signaling that the prolonged sharp dips may be behind us. Some optimists even believe that the worst is over – though I maintain a healthy skepticism.

Note the metric being used: passenger traffic. There’s a lot of mileage between asses in seats and money in the bank. On a positive note, increased passenger traffic means that more people are spending money on travel. Of course, deep discounts are responsible in large part for the increasing traffic. The value of these passengers in dollar terms, therefore, is quite low.

United Airlines reported a traffic drop of 10.5 percent in April 2009 relative to the same month in 2008. Delta and American sustained smaller declines. Southwest, meanwhile, showed a 4.1 percent increase.

And, fares fell.

The average one-way domestic fare paid in the first quarter of 2008 was $213 – compared to $246 for full-year 2008.

For now, however, the airlines believe it’s better to sell seats at any price, especially if they have to put a plane in the air anyway.

Making sense of the airline industry

by Tom Johansmeyer on

The situation is currently grim for airlines, having gone from “bad in January to ugly by March,” according to USA Today, mirroring the U.S. economy as a whole. But, some feel that the worst is behind us. At the same time, a decline in business traveler traffic may suggest that we have a long way to go.

That’s why I love USA Today … two perspectives for the price of one!

Let’s make one thing perfectly clear: airline executives are unanimous in refusing to state that a recovery has begun. Keep in mind that CEOs have to be incredibly careful whenever they speak. Something that’s interpreted as a prediction could be disastrous later. A prediction becomes a goal to be met, and failure to do so can have harsh implications on the stock price.

In case you don’t know, that means real people lose real money.

That being said, Delta, American and Continental executives allowed themselves some modest hope, suggesting that “at least traffic levels aren’t collapsing the way they did last year.”

For now, there’s little to celebrate aside from the hope that we’ve hit bottom. Continental’s revenue per available seat mile (RASM) fell 4.8 percent in January, 11.5 percent in February and 20 percent in March. April is likely to be down 13 percent to 15 percent.

RASM basically tells you how much revenue an airline pulls in for every seat flown. Let’s make it easy: assume that a plane has two seats and flies 100 miles. One passenger pays $200 and the other pays $100. The first passenger pays $2 per mile, and the other pays $1 per mile. It averages out to revenue of $1.50 per available seat mile.

Now, assume that we have a third seat … and it’s empty. So, we’re working with $2, $1 and $0. That’s RASM of $1 (as opposed to the $1.50 above).

Figuring this out for an entire airline for a full month is obviously much more complicated, but you can probably see the value in doing so. It’s a way to figure out just how productive every seat on every plane is – even the empties.

Delta’s perspective is that things aren’t getting worse right now, even if they aren’t good, and American believes that it’s too early to tell.

The decline in business travel is seen as a big part of the problem. Business travelers tend to spend a lot of time in planes, and they don’t always get the lead time to buy tickets (or prepare their families for long absences) that they’d like. As a result, they often pay more for tickets than vacationers, who have the luxury of planning ahead.

To keep expenses down, many companies are trying to cut their spending on travel, opting for other collaboration alternatives. While face-to-face meetings are nice, they tend to be a lot more expensive than webinars and conference calls. When you have to squeeze the budget, travel is an easy place to cut spending a bit.

I saw this firsthand during the last economic downturn (following the collapse of the “dotcom economy” and the terror attacks of September 11, 2001). I was a management consultant and flew every week. While my clients were willing to foot the bill for weekly travel, I found myself under a lot more pressure to find cheaper flights, stay at hotels that were less expensive (and less convenient) and take a taxi to the airport instead of driving and putting my car in the lot for a week.

Though business travel can be cut, it won’t go away completely. There will always be a need. While many cite conventions as a source of business travel, you’re more likely to run into weekly grind travelers at airports in this economic environment. Catch the first flight out of a major airport on a Monday morning, and you’ll see business and business casual attire, laptops clutched and weary looks. These people make the same run every week, returning home on a late flight Thursday or Friday. When you have a lot of people dropping $500 a week on flights – each doing it 40 times a year or more each – the airlines benefit. When they slow down, the airlines feel pain.

To compensate, as you’ve seen here on Gadling, airlines are coming up with more fees – and they’re not all as crazy as the Ryanair pay-to-pee proposal. Baggage charges seem to be most common, with Delta hitting up passengers for $50 to check a second bag on international flights (starting July 1, 2009). The airline hopes this will generate another $100 million this year.

Delta’s not innovating, here; it’s just the most recent.

The need is salient, given recently released first quarter financial results. JetBlue and AirTran stood out by turning profits ($12 million and $28 million, respectively), largely because the cost of jet fuel dropped. Take that out of the equation, and AirTran’s 31 percent revenue decline would have had a greater impact.

Meanwhile, US Airways posted a $103 million loss. Alaska Air Group lost $19.2 million for the quarter. Delta, American and United showed substantial losses, as well.

Leisure travel isn’t the primary driver, as fare deals have kept this section of the market fairly active, if less profitable. It’s the business travelers who are straining airline financial performance. It will take a turn in the economy to solve this problem. Any measures available to the airlines are more likely to slow the bleeding than repair the situation as a whole.

When will that happen?

Like the airline CEOs, I’m not crazy about making predictions, as my success is shaped more by luck than clairvoyance. But, I’ll take a small step out on a limb. Businesses will green light travel increases when they see an upside to doing so. When sales teams encounter big opportunities, they will be able to make the case to fly. This means that a client has to be ready to write a big check. Also, startup activity will result in the use of venture capital funding to hop on planes with the hope of pitching new ideas to clients interested in growing their businesses or realizing a cost savings.

You won’t notice it at first; these trends take a while to gain steam. Success builds upon success, with each win leading to several new opportunities and a willingness to fund travel for them.

Am I willing to throw a date or timeframe out there?

No way!

We’ll all have to wait and see.