A smarter approach to overbooked flights?

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Nobody likes being involuntarily bumped. So when flights are oversold, why don't the airlines hold open auctions, allowing passengers to decide what level of compensation they're willing to accept in exchange for missing the flight?

That's the gist of what a Wall Street Journal editorial suggests:

For example, if 115 passengers showed up for a flight with 100 seats, the airline would start to offer, say, a $300 voucher to passengers who agreed to take a later flight. If there weren't enough takers at $300, the airline would increase the offer to $400, then $500, a free round trip ticket, etc., until 15 passengers volunteered. Auctions like this are highly efficient ways of allocating a scarce resource.

As we've mentioned on this blog before, the number of passengers denied boarding involuntarily is up, and it looks like the Department of Transportation is going to raise the level of compensation for those involuntarily bumped to a maximum of $1,300, up from the current cap of $800.

But what do you think about the auction idea? In many instances, this is sort of what happens often at the airport terminal anyway, though airline personnel are known to go about finding volunteers willing to be bumped quietly rather than through an open auction, and many travelers don't understand what sort of compensation they're entitled to.

If such auctions were systematic and mandatory, airlines would (with rare exceptions) only bump passengers who are willing to be bumped -- only those passengers who volunteer to miss the flight based on a specific level of compensation they've agreed to.

This arrangement would at least put an end to what is arguably the most aggravating part of the bump: that it occurs randomly and involuntarily, without any say from the passengers involved.

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