sds1493

I'm wondering why airlines don't give an incentive for passengers who know they won't make a flight to inform the airline that they won't be flying.

Surely it would make sense for an airline to offer an incentive to people who know they won't be flying to actually cancel so that the airline will have a better idea of how many no-shows there will be. Surely if the airline had a better idea of how many people won't be flying, there would be less uncertainty involved in overselling so that when passengers cancel, the airline will be able to sell more tickets (perhaps at a lower price more likely to sell - adjusting for the decreased uncertainty), and in cases where no one cancels, the airline will know to oversell fewer tickets (or to sell at a higher price reflective of the increased likelihood of having to compensate).

Any ideas why airlines don't do this?

Am I missing something about overselling or something else?

ft101

Some airlines do. It must suit their business model and not others if you've noticed ones that don't.

Artpen100

Good question. UA allows you to cancel, and then rebook within a year to any location with only the change fee. On a paid business class ticket, definitely worth it. Austrian, on the other hand, requires rebooking prior to the original trip to the same location and in the same class. That is, in effect, often an incentive to check in and then not show to hope for an IRROPs. They get their money, but probably lose the opportunity to re-sell the seat and collect it twice.

lhrsfo

Offering an incentive to cancel is effectively the same thing as softening the refund / change policy. That will change the breakage rate and therefore the economics of the operation. Nearly all airlines I fly are fully non-changeable, non-refundable and I get that. UA has always been remarkably generous, with Same Day Changes permitted and, against a fee, the ability to capture residual value in a ticket. However, I see that they are moving away from such generosity and towards the more common model.

Looked at by itself, the OP's suggestion makes perfect sense but, looked at in the context of the buying decision, it's a much more debatable idea.

belfordrocks

Last year I had a booking on a US domestic route, where I needed to cancel, but the change fee outweighed the value of the ticket. Of course, there was no incentive for me to cancel, so I just left the ticket. Day of travel, weather comes along, IRROPs happens and I get a full refund. I'm sure this story isn't uncommon either.

pinniped

This is most of my typical domestic U.S. tickets. There's no reason to cancel - you just wait, watch the flight, and grab a refund if there's IRROPs. Flight operates normally, no biggie...figure maybe a standby got my seat.

Southwest is, of course, the exception.

sds1493

Do you mean to say that UA allows one to change even without informing the airline prior to the original flight date?

sds1493

Is offering an incentive to cancel really equatable to softening the refund/change policy?

They are technically equatable if you actually do change your ticket or have a refundable ticket.

The incentive scheme would speak to people who wouldn't have let the airline know prior to the original flight date as A) it's cheaper to make a new booking; B) they don't have a refund policy.

Any idea how many people fall into this second category?

croberts134

In order for an airline to want to do this the cost savings from lowered DBs (which I don't think would be that great) would have to exceed the compensation paid to passengers who "pre announce" their no show. The ability to resell the seat is already baked into the overbooking rate so I don't think it should enter into the equation.

I really don't think the economics work.

sds1493

According to this there were 365,000 DBs (342k/23k voluntary/involuntary) in the US in 2017 so it sounds like there is plenty of room for improvement. Granted a lot of the DBs are due to irrops but the overselling model also accounts for the x number of passengers who simply decided not to travel yet didn't inform the airline.

Rather than paying 'pre-announcers' compensation, give a small-yet-significant incentive ($20?) cash to their bank account for informing the airline. More information = less uncertainty of what x is = better pricing/overselling models.

Perhaps only offering the cash incentive to pax on already-full flights.

How does this sound?

croberts134

DBs won't drop to 0 so, being generous, assumed they can cut this number by 50% so 182,500 DBs. Assume an average cost per DB of $500 (again...being generous) and you get a total DB cost of $91.25m per year.

In 2017, US carriers carried a total of 965m passengers. Assume 90% of them are on non-refundable tickets, which gives you 868.5m passengers that might qualify for this. Assume ticket breakage of 1%, which gives you 8.685m passengers who will take you up on your offer of $20 to let them know in advance. This would cost airlines $173.7m per year.

Now, sure, not everyone who is going to no show is going to tell the airline in advance for $20 so the cost of that program will go down, but so will the savings number from reduced DBs so I still don't see how the economics work.

zebranz

What would happen if your no show was the last segment - trigger a higher pricing? Nice thought of encouraging a win-win but IMO unworkable.

RustyC

I know it's probably not a ULCC crowd here, but those are definitely cases where just walking away from a paid or award ticket is the only practical option. This can happen quite a bit with Spirit and their reduced-mile awards for credit cardholders. With those you have to book proactictively...a real plum like ATL-DEN at 5K miles RT + taxes/junk will go quickly, but maybe something comes up and you can't go. It's easier to eat the miles than pay the change fees.

With Frontier very often the ticket price is below the change fee if you bottom-fish and book in advance. Without a waiver situation you'd be looking at $110 or so to salvage a credit that could be less than half that.

I think the real bottom line is that the airlines want to protect change-fee revenue. That's such a lucrative thing for them that they'd rather maintain the perverse disincentive and fill the seat anyway via overbooking or with a non-rev, than make policy changes that could lead to pressure for a Southwest approach to change fees or otherwise rock the boat.

BTW, I also think "family pooling" arrangements for miles will cause great confusion and could have unintended consequences. Big companies and the government have long hated and sought to undermine FF programs, eyeing them suspiciously as a kickback that incentivizes bad purchasing decisions that add costs for the company. Airlines have fought it by making any interventions (like reclaim programs) an administrative nightmare even if successful, and insisting that the miles be credited to the person who actually flies. Breaking with this would jeopardize the revenue stream from mileage transfers, as well as setting a precedent of miles going to someone other than the individual flying. That could be a camel's nose in the tent for those who've tried to undermine the programs.

RustyC

In theory it could but (*ahem*) thankfully in my long career it hasn't happened (knock wood). I remember the days of double hidden-cities where you could turn a DCA-DFW special into an ATL-TUL RT by booking 6 segments, getting boarding passes well in advance and flying only 2. It was advisable to use only carry-ons for something like that, but if you wanted a checked bag you'd ask the skycap to tag it to your destination (in the era before printed bag tags).

It should be noted that back then the legacies had a much bigger market share, so you didn't readily have WN or ULCCs as other choices like now and there were more fortress hubs and routes with gouge-level fares. .

IIRC my most recent last-segment throwaway was on a JFK-ATL flight the was the end one for a trip to the Seychelles. ^ Also done with just a carry-on for the whole thing.

There are, however, stories of habitual last-segment-miss people getting warning letters or other actions by the airline.

ROCAT

A big point to remember is that VDB don't get paid in cash and a not insignificant amount of the "money" goes unused as people never cash them in or cannot use the full value. Also VDBs gnerally result in happy people as they are getting something that they value and it is costing the airline far less then the face value.