Why overbooked flights aren't going away any time soon - Macleans.ca

Why overbooked flights aren’t going away any time soon

New passenger-protection legislation fails to tackle the practice that annoys many travellers the most

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Passengers waiting to check in for flights at Pearson International airport. (Giordano Ciampini/Anadolu Agency/Getty Images)

Kelsey Burton and her husband knew something was wrong almost immediately upon trying to check into their flight. The Air Canada attendant punched in their information and said, “Oh, that’s not good.” The pair had been married a few days prior in December and were looking forward to a honeymoon in Germany. But they were told their red-eye flight from Toronto was overbooked by 19 seats. It didn’t matter that they’d bought their tickets months in advance, or that they showed up at least four hours before boarding. They’d have to go through security and wait at their gate to find out if they’d soon be touring German beer halls, or stuck nursing their sorrows at an airport cafeteria.

As other passengers streamed onto the flight, Burton and a nervous group of customers waited for their names to be called. But as staff started shutting the doors, the group converged on the desk only to be told that there were no more seats available—they’d have to go to the customer service desk. “It wasn’t fully staffed, which blew me away,” Burton says. “Air Canada purposely overbooked a flight by 19 people and they didn’t have the staff to assist all these people now stranded at the airport.” At some point, Burton, hopped up on medication to deal with a cold, burst into tears as she and her husband were forced to wearily redraw their travel plans. Around midnight, almost three hours after their original flight departed, Air Canada booked them another plane that left the following day, but one requiring an overnight stopover in London. The airline would not pay for a hotel.

The pair left the airport for a short, fitful sleep at her husband’s parents’ place before returning at 6 a.m. The flight to London went smoothly, but one final surprise awaited them in London: their luggage had not flown with them. It was back in Toronto, and didn’t arrive until they were in Germany. (Burton had by that point been wearing the same clothes for 48 hours.) In the end, she and her husband lost two entire days from their honeymoon. Air Canada reimbursed them $800, the maximum amount the airline will give to passengers denied boarding due to overbooking. But monetary compensation doesn’t suffice, Burton says. “I would happily give back that $800 to have a honeymoon that’s stress-free,” she says. “The only thing I want to see is this practice of overbooking ended.”

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That’s not going to happen anytime soon—or, perhaps, ever. Overbooking is commonplace in the airline industry, abhorred by passengers but seen as a necessity by carriers. Transportation Minister Marc Garneau introduced legislation last year to produce an air traveller bill of rights, clearly spelling out minimum customer service standards and the compensation carriers have to pay to passengers affected by delays, cancellations and other mishaps. Overbooking is not something the government is planning to tackle. In fact, the proposed passenger rights legislation will achieve less to combat the problem than the government first advertised.

There is an economic reason why many airlines choose to overbook flights: carriers are hedging against the risk of empty seats. Over the years, airlines have calculated that a certain percentage of passengers will likely not show up for their flights. Typically, these are business travellers, whose plans can change on short notice. They also tend to pay higher fares than most travellers for refundable tickets, so there’s no cost to them to cancel. But there is a cost to airlines. “If an airline seat is empty, that’s the ultimate perishable product. That seat is wasted,” says Barry MacKinnon, a senior aviation strategist and planner with Aviotec International in Mississauga, Ont. Profit margins in the industry are notoriously thin, and airlines are determined to squeeze every dollar possible out of each flight. (It’s worth noting, however, that North American airlines are the most profitable in the world, earning an estimated $19.58 per passenger in 2017, according to the International Air Transport Association.)

Airlines engage in sophisticated probabilistic risk modelling to analyze flights by route, time of day and other criteria to determine the likelihood of no-shows and the number of tickets to oversell to ensure the plane will be full. (In the industry, overbooking is part of what’s termed “revenue management.”) Airlines have accumulated mounds of data over the years, allowing companies to make overbooking calculations that are far more accurate than in the past. “There were more rudimentary methods in the 1990s for estimating overbooking, so the rate has fallen a lot,” MacKinnon says.

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In the U.S., approximately 471,000 passengers were denied boarding on the largest American carriers in 2016, according to the U.S. Bureau of Transportation Statistics. That’s out of more than 660 million air travellers, amounting to 0.07 per cent of all passengers. In 1990, the figure stood at 0.15 per cent. Stats are not available in Canada, though industry experts say the situation is comparable.

The numbers do look insignificant compared to how many people fly each year, but the statistics fail to capture the pure frustration of getting bumped, the knowledge that airlines’ ruthless pursuit of profit throws carefully made plans into chaos, or the chain reaction of travel disruptions that can occur.  “What if I was somebody going see to a sick family member?” says Burton. On Facebook, she kept friends updated about her ordeal at the airport in real-time, and some suggested Burton use her honeymoon as leverage with Air Canada to snag seats. “But just because we’re on our honeymoon doesn’t make our reason for travel any more special than someone else’s,” she says. “I wouldn’t want someone to give up their seat for us to fly. That’s not fair.”

Carriers do try to keep the process as fair as possible when a plane is oversold. Staff ask for volunteers to give up their seats in exchange for some form of compensation, such as vouchers for future travel, and booking on the next available flight. If there aren’t enough volunteers, airlines resort to bumping passengers against their will at the gate based on priority. Infrequent flyers with base fares are generally first on the chopping block, while those in higher fare classes and loyalty program members are more secure. Those who are involuntarily bumped are entitled to compensation, which airlines spell out in their tariffs, a contract with consumers enforced by the Canadian Transportation Agency. Air Canada pays between $200 and $800 depending on the length of the delay, while WestJet offers up to $1,350, subject to certain conditions.

Even with the obligation to pay compensation, overbooking is still more economical for airlines than ending the practice. Carriers often caution that if they were prohibited from overselling, they would have to raise ticket prices. But WestJet, unlike Air Canada, says that it does not intentionally oversell. (Flights can still be overbooked if, for example, WestJet needs to switch to a smaller airplane.) Last year, the carrier even rolled out an ad campaign centred on this promise. So if WestJet can afford not to do it, why can’t others?

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The reality is WestJet may not be under the same financial pressure that leads other carriers to overbook. WestJet started as a domestic, low-cost airline with a relatively small number destinations and routes, so the network was fairly straightforward to manage. That’s changing. Last year, WestJet ordered up to 20 Boeing Dreamliner aircraft, allowing the carrier to fly to new destinations in Asia and South America, while expanding its presence in Europe. “As networks get more complex, overbooking becomes a bigger issue. So the pressure would be there,” MacKinnon says. Indeed, the airline that launched as an alternative to Air Canada is starting to resemble its foe as it grows into a global carrier, and it may be forced to adopt policies it once rejected. (“At this time, we have no plans to change our policy,” says a WestJet spokesperson.)

Last May, the federal government appeared to take a strong stand in favour of air travellers. Garneau’s bill, which would direct the Canadian Transportation Agency to create a rights regime for air passengers, came one month after a high-profile incident in which a passenger was literally dragged off an overbooked United Airlines flight. (Garneau has said the concept of a rights regime was in the works long before then.) Media reported when Bill C-49 was introduced that the minister’s intent was to stop airlines from bumping passengers from overbooked flights against their will. Multiple stories recounted that airlines would be required to ask for volunteers, and keep raising the compensation offered until enough passengers willingly gave up their seats. “When you buy a ticket, you expect and deserve to have that contract fulfilled,” a spokesperson for Garneau told the CBC.

But ending involuntary bumping isn’t precisely the government’s intent. At a transportation committee in September, Garneau said, “I have been clear that regulations would include provisions whose intent would be that any denied boarding due to overbooking is done voluntarily and that under no circumstance [should] someone be involuntarily removed from an aircraft after they have boarded.”

Airlines remain free to deny passengers seats on overbooked flights before boarding a plane. That’s what they do already. Indeed, the United Airlines incident was an extremely rare occurrence. Air Canada’s tariff agreement, for example, already prohibits the airline from removing passengers who have boarded, except for safety and security reasons. “This is one of the many examples of Bill C-49 trying to sell the public rights they already have,” says Gábor Lukács, the founder of advocacy group Air Passenger Rights. Furthermore, the text of Bill C-49 doesn’t contain anything specific on this topic. All it does is direct the CTA, in consultation with the minister, to set minimum compensation requirements when passengers are denied boarding due to events within the carriers’ control.

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Lukács has other issues with Bill C-49. First, it absolves airlines of the obligation to compensate passengers in the event of mechanical failure, unlike the rights regime in the European Union. “It doesn’t matter if the flight was overbooked or what,” he says of the European system. “If you were there at the airport, you showed up on time and they didn’t let you fly, then you get your compensation.” Second, the legislation would double the length of an acceptable tarmac delay from 90 minutes to three hours.

That’s an ordeal Marc Boyer endured in January on a flight from Montreal to Calgary. Boyer and his wife planned to spend a few days skiing in Banff, and boarded an Air Canada plane early one morning. They waited for takeoff. And waited. And waited. The flight crew provided minimal information about what exactly was going on. Eventually, the passengers were told flights were grounded due to inclement weather and were released from the plane a full six hours after boarding. The disgruntled passengers were handed $10 meal vouchers. “You can’t eat anywhere in the airport for ten dollars,” Boyer says.

He got on the phone to Air Canada, and after an hour of wrangling with a customer service rep, he was offered tickets on a flight for the following day—for an extra $1,000 each. Boyer declined and spent the next two and a half hours in line at a service desk. By the time he reached the front, he and his wife were so demoralized by the experience (not to mention that under the best-case scenario, they would lose two days of vacation) they opted to cancel their flight altogether and stay home. The pair hit the slopes in Quebec, but the snow didn’t compare to Banff’s. “It’s just not the same,” Boyer says.

Air Canada did not comment specifically on Boyer’s experience, other than to note severe weather disrupted airline operations during that time. But according to Lukács, Boyer may have a case against Air Canada. The airline’s tariff agreement stipulates that in situations like this, passengers should be booked on the next available flight for no additional charge. And after 90 minutes on the tarmac, passengers are supposed to be given the chance to get off the plane if “circumstances” permit.

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How exactly Bill C-49 will ultimately benefit travellers is still unclear. So too is the bill’s journey through the Senate, where it arrived in December after passing through the House of Commons. Critics have derided it as an omnibus bill, with measures that have nothing to do with air travel. “There are 13 different acts being amended in this one bill,” says Senator Terry Mercer, a longtime Liberal. “That’s a lot of stuff.” Some of the changes are proving controversial, such as requiring Canadian railway operators to install video and audio recorders in locomotives. Mercer argues that air passenger rights should be dealt with in a separate piece of legislation.

He’s also been critical of the fact that C-49 does not actually contain a passenger bill of rights, but instead directs the CTA to create one. “The government keeps bragging saying, ‘Aren’t we wonderful coming up with an air traveller bill of rights?’ But there’s no air traveller bill of rights there. It’s a promise of one in the future,” Mercer says. “I would assume if the Department of Transport was doing its job, that somewhere sitting on some bureaucrat’s desk is a draft of the bill of rights. If there is one, let’s have a look and talk about it.” (When Garneau appeared before the Senate transportation committee in December, he denied saying Bill C-49 contained a bill of rights and blamed any confusion on the media.)

Lukács is concerned the CTA will ultimately craft regulations that heavily favour airlines over consumers. The agency promised last year to hold public consultations once Bill C-49 is passed, but it’s already asking for input from the industry. Lukács, through his work as a consumer rights advocate, is involved in numerous legal battles with airlines. The International Air Transport Association, which represents 274 airline members, sought to intervene in one court case last year. In its affidavit, the organization disclosed that after Bill C-49 was introduced, the CTA “sought IATA’s input with regard to the regulations it will draft.”

The CTA says that it “regularly meets with a wide range of stakeholders from industry, consumer protection associations and other experts to discuss a wide range of issues.” But for Lukács, it’s another indication the CTA is “cozy” with the airlines.

As for Burton, she and her husband were eventually able to enjoy their honeymoon in Germany, and flew back home without incident. But she feels differently about Air Canada after getting bumped. “If I can avoid them,” she says, “I will.”