I agree the "bidding for upgrades" system may cause some perception issues.

FWIW, AC is just copying what 30+ airlines have been doing. Plusgrade was created two years ago and based on my understanding it has been quite successful in generating ancillary revenue for the airlines.

It will be interesting to see whether this will be in addition to or will replace LMUs and how this will impact the ability to use e-upgrades.

Have not seen anything on it posted in this related thread, but considering that many of their competitors already have such a program in place, it will happen sooner-or-later.

Have not noticed anything mentioned in-here either, considering "bidding" was not "liked", per se.

It may be like the other programs where depending on fare-paid/tier-status, one will be e-vited by e-mail...

The Points Guy's article was from February 2015. I noticed that there was a thread on AC from June 2015, which I posted upthread. Some interesting discussion, particularly since is took place well over a year before OP started this thread with an example email received from a friend.

LH has been using Plusgrade since at least Nov 2014 (based on what I've seen on their forum). I'm sure others can speculate why AC is 2 years behind some other airlines in this bidding program.

Haven't had the chance to skim the whole thread, but a couple observations:

1) Why is it a "low value" item? Last time I checked, most people consider $100 to not be "low value", and I suspect many would value J vs Y to be worth at least $100, say for a TCON. By most people, I mean, look to the rows behind you, not at all the cheapeners we sit around.

2) Gaming the price assumes collusion is possible. With 200+ participants, many of whom do not have information or communication of each others' intentions, collusion is impossible. It will only take 5 college kids on spring break to out bid your price gaming. FT readers, I hazard to guess, do NOT represent even 10% of any given flight.

Delta has implemented upfront bidding for VDB at checkin, and I believe it is a brilliant way to efficiently distribute scarce resources to those who desire it the most. Rather than run an "auction" at a time critical moment (just before boarding), do it ahead of time.

AC at the moment runs a one-sided auction with LMUs, and I think probably fails to sell a lot of residual J inventory because of poor price setting. By opening up bidding, AC allows the purchaser to communicate binding signals for pricing. One last thing, however, is that of the group of successful bidders, they should all only pay the lowest successful bid price, but whatever.

Currency has been the "point system" agreed upon for settlement of debts, at least in Canada and US, giving rise to the term "Legal Tender." eUp credits, Aeropoints, blah... Cash is king.

It takes time to design and print the bidding slips to hand out at check-in time to write your bid down. Also takes time to hire the staff to pull the bids from the box, collate and sort them, decide the cutoff threshold, and issue the seat upgrades. Also, mustn't forget complementary pens... wouldn't want to lose an awesome bid because traveler lacked a writing utensil. But would need to institute a clawback policy if pax is not seen using pen to write on bid slip...

Tight band is to make you think the high bid is not so bad compared to the low bid and will make you think you can lock it down by bidding high.

More people would do that then just buy the upgrade for the high price stated.

Because if you make people compete over something then they want it more.

Although a logical argument, I will have to disagree.

A similar counter logic could be made by suggesting that creating a wider band would make the company lose out on much bigger fish that could easily compensate for 2-3 low ball offers (think low P versus J).

Additionally, from a game theory stand point, seeing a wider band and higher potential bids could enduce bidders to bid to the highest of their capabilities by fear of potential higher bidders.



There is no point in truncating the high side of the demand curve. Remember that since the bidding process will enable discriminatory pricing, you now have access to the full potential of producer surplus, and you will gain no benefits from capping your maximum bid.

Assuming a 77W, with maybe 10/40 J seats free, you have a potential of 360 bidders for 10 seats (potentially less if bidding is taken out of something like R space). If less than 20% of passengers are interested in bidding for J, you are still creating a game with over 60 pax competing for 10 seats, and information asymmetry will therefore bias the bids upwards by fear of losing out just because you wanted to cheap out on an extra $100.



So in a case like this (and with limited information on ACs consumer pool), any tight upper limit would kill potential profits, and any tight band on the high side will make them lose out on potential bids that could top up the cabin.



Therefore, I can see AC instating some kind of reserve price (in order to try and preserve the cabin integrity), and a top bid price (difference in price between K and J). Considering our limited information set, we could reasonably suggest that forcing any kind of tight band could lead to a potential loss in producer surplus in the long run.

How about a live system allowing for revised bids? In fact, why just do this for upgrades? Why not for all seats?

Because if you get to revise your bids, you are giving away information and losing the advantage from asymmetry.

Better chance to get max value if it's a one shot deal because you are more likely to bid as much as you're willing to pay for it on the first shot (again, this is assuming information asymmetry).

It will also give better drmand data to AC since it won't be skewed by bid fighting.

One time at OLCI I was offered a ~$500 LMU. I declined. Didn't need it.

By the time I go to the gate, I was tired and in a bad mood, and wanted to buy it. But the flight had closed, there were still empty seats, but I had no way of getting the upgrade ("shut up and take my money" comes to mind).

The plane left with empty seats in J, and AC lost $500.

So.. is the email accurate or not?

OK but wait , that is very different.

There's always the opportunity to buy up to J before gate control. But can't it still be done?

I seem to recall someone on YYZNRT boarding at like T-15 (maybe less) and a gate agent bringing a receipt printed on the same paper as the PIL saying "hears your receipt for your upgrade, enjoy your flight". SD also asked how they enjoyed that last minute upgrade.

Do you get an in flight receipt if you LMU? Or did the guy do some kind of supre last minute upgrade?

Or I guess maybe he was wait listed and had to pay a copay.



But to answer your implied question, we don't know if the cabin would have been empty under a bidding system.

Maybe they will sell a seat at $450 instead of cashing in on your $500 last minute, but I doubt that basing a pricing strategy of what ifs and rare occasions the best of strategies though.

Well, revise upwards only... almost like open outcry... But agreed, this would not be the best option for the seller in this case because of the lack of consensus of the value of upgrade. A dutch auction would be hard to implement asynchronously, so I guess sealed bid it is.

Then how about this: Collect sealed bids at checkin time.

At flight close time, have the app SELL the upgrades at a price higher than lowest winning bid, LMU style... you know, pop up some promo on everyone's phone offering a live action "outcry" essentially. I guess then nobody would submit sealed bids then.... Well, nobody on this thread would. =P

Edit: Never mind; the cost of implementing the technology would far outweigh the incremental revenue.

My point was more that you suggested not allowing modifying bids.

My initial bid was $0 (or if I'd actually been given an option, probably around $200).

My later bid became $500, because circumstances had changed enough from when I initially checked in that the amount I was willing to pay had increased significantly.

That's a good idea actually. But I wonder if that would be too much of a logistical nightmare at the gate. Hmmm...

If I was AC, I would do this:

1. Clear all Altitude Upgrades

2. Process Bids for 50-75% of seats T-2 or 3 days (would depend on data about last minute J purchases and stuff).

3. Clear bids

4. Offer LMU T-24h adjusted for an internal reserve price and expected demand.


AC gets to fill J while still having an opportunity to extract more value with better priced LMU.