Consumer

To avoid confrontation with paid customers on overbooked flights, Delta will pay customers nearly $10,000 to give up their seats. Delta spokesperson said that supervisors were previously only able to offer up to $1,350, but Delta has notified them that they are now be able to offer up to $9,950 in compensation.

Delta gate agents are also now authorized to offer up to $2,000 from $800. This is good news for customers on overbooked flights. Customers who want more money will take the offer so that those who don’t want to give up their seats can fly in peace.

Recently, United Airlines forced a passenger out of the airplane to make room for its employee in an overbooked flights. The video of a passenger, bloodied and screaming, being dragged off a flight went viral. In that incident United Airlines only offered $800 ($1,000 if including the value of the hotel voucher), but there were no taker. If United Airlines increased the offer, the incident could be avoided altogether. Instead, the incident wiped out $255 million off United’s market cap. It’s a costly learning lesson for the airline industry.

In the name of profit, most airlines often overbook and sell more tickets than there are seats on the plane. Even if you have boarded the airplane and taken your seat, you can still be physically ejected from the aircraft. In a recent overbooked United Airlines flight from Chicago to Louisville, a passenger was forced off the airplane. Even though the passenger, Dr. David Dao, has paid for the ticket, he was pulled out of his seat and dragged off the airplane.

Why Are Airlines Overbooking Flights?

When some passengers do not show up for scheduled flights, airlines would lose money on these empty seats. As a result, airlines have study that for some routes there are more “no show” than other routes. So they oversell in certain flights to maximize their profit per flight.

When airlines sell more tickets than there are seats on the airplane, it works out most of the time as some passengers change their flights and others couldn’t make it on time. The overbooked flights would give the airlines the best chance to fill all their seats and maximize profit.

What to Do When Your Flight is Overbooked

When your flight is overbooked, the airline must try a way to entice passengers with cash compensation and vouchers to voluntarily give up their seats for later flights. If no one volunteers, then the airline must figure out a way to deny boarding to passengers against their will.

If your schedule is flexible, you can take advantage of the incentives that the airlines offer, such as hundreds of dollars in flight credit, hotel and food voucher.

If you must get your seat no matter what, then you should check-in early as some airlines pick on passengers who arrived late at the gate or check in last to deny boarding an overbooked flight. Also avoid booking with an airline that often over sell such as United.

Know Your Rights

If your flight has been overbooked and not enough passengers volunteer to take the next flight, you could be denied boarding your flight. If this happens to you and your new flight gets you there more than one hour after the original flight time, by law the airline owes you some compensation.

You are entitled 200% of your one way fare, with a cap of $650, if your domestic flight arrives 1-2 hours late (4 hours for international flight). Additionally, you are entitled to 400% of your one way fare, with a cap of $1,300, if your domestic flight arrives more than two hours late (more than 4 hours for international flight).

Lawmakers on Your Side

In the meanwhile, lawmakers are calling for an investigation about a passenger’s mistreatment on an overbooked United flight. “The last thing a paying airline passenger should expect is a physical altercation with law enforcement personnel after boarding, especially one that could likely have been avoided,” the four top leaders of the Senate commerce committee said in a letter sent to Mr. Oscar Munoz, United’s chief executive.

Separately, a group of 21 senators wrote a letter to Munoz: “Consumer trust and confidence are critical to ensure this industry continues to thrive, and we hope United Airlines will work diligently to immediately address this incident and make necessary improvements to ensure it does not occur again.”

Nice to know "re-accomodate" on United now means "drag you violently out of your seat."

— Meg ♥️ (@sassylibrarian1) April 10, 2017

After the incident, United’s stock fell 1.1%, wiping out $255 million off the airline’s market cap. United could easily avoid the embarrassment by increasing the money incentive to any passengers willing to take the next flight. If $800 would not do it, then $1000, $2000, etc. Eventually, someone will volunteer to take the offer. United could have avoided the fiasco by offering passengers a bigger reward. Additional incentives to solve the issue would be much cheaper than the bad publicity that United received through social media and cable news. Hopefully, this bad incident is a learning lesson to all airlines.

Two giant retail companies are battling in an all-out price war and that’s a good news to customers. For years, Walmart had dominated the retail landscape on the back of its “Everyday Low Price” guarantee. But now, Walmart was too often getting beaten on price. An article on Recode reported:

The result in recent months has been a high-stakes race to the bottom between Walmart and Amazon that seems great for shoppers, but has consumer packaged goods brands feeling the pressure.

The pricing crackdown also comes in the wake of Walmart’s $3 billion acquisition of Jet.com and its CEO Marc Lore. Lore now runs Walmart.com and has said one of his mandates is to create new ways for the retailer to beat everyone else on price, including Amazon.

One piece of the battle, executives say, is an Amazon algorithm that works to match or beat prices from other websites and stores. Former Amazon employees say it finds the lowest price per unit or per ounce for a given product — even if it’s in a huge bulk-size pack at Costco — and applies it across the same type of good on Amazon, even when the pack size is much smaller.

So let’s imagine Costco is selling a pack of 10 bags of Doritos for $10 — or $1 per bag. Amazon’s algorithm notes that one bag is $1 at Costco and, in turn, lowers the price on Amazon of a single bag of Doritos to $1.

That is a great deal for customers — something that is likely driving the decision at Amazon, where an obsession with customer value dominates its strategy.

Walmart wants to have the lowest price on 80 percent of its sales, and Amazon is willing to lose money for some period of time on a product it feels it has to have. While the two titans fight each other, customers everywhere benefit from the low prices.

Hopefully, both giant retailers thrive in this price war to the benefits of consumers. Amazon is well know for its ruthless tactics. For instance, it had driven down the prices so low by discounting most pop music titles by 35 percent to drive Virgin Records, HMV and Tower Records out of business. Afterward, Amazon jacked up the prices after the competitors went out of business. Hence, in this price war between the titans, it’s in the best consumers’ interest for both online and brick-and-mortar retailers to succeed.