Winnipeg Free Press - PRINT EDITION

Air Canada deserves turbulence over bumping

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It's the gate announcement every passenger hates to hear -- the dreaded "carrot-or-stick" where airline staff ask for volunteers to come forward to leave an overbooked flight, adding if there are no volunteers, the airline will simply start picking the people who won't get to fly.

Airlines like Air Canada (WestJet doesn't) have made a business decision to overbook flights. They sell tickets to more passengers than their aircraft can hold, gambling a certain number of passengers will either rebook or cancel before the flight. It's a gamble that can -- and does -- go wrong, when more than enough passengers show up.

Air Canada then gives the bumped passengers either $100 in cash, or a voucher for $200 in travel -- a dollar value that hasn't changed in years and is substantially lower than similar fees paid by other airlines around the world that also overbook flights.

That's going to change. The Canadian Transportation Agency has ruled on a complaint from Gabor Luk°cs, a Halifax mathematician, who complained about the low rates the airline was offering as recompense for bumping passengers from flights. The CTA hasn't set a new rate -- it's willing to hear arguments -- but has said the current rates are too low. It's difficult to argue with that decision.

Why? Because if an airline is going to profit from gambling on passengers not showing up, it should have to pay if it loses that gamble.

Air Canada has argued the existing policy allows the airline to provide more flexibility in providing fully refundable tickets. But in the process, they're ignoring a fundamental concept of supply and demand.

When supply is scarce, demand drives up prices. Airlines already benefit from that side of the argument. All you have to do is to watch the way flexible seat prices rise as you get closer and closer to your date of departure and the number of available seats diminish.

Picture it this way, though: If you're an overbooked passenger, supply and demand should work in the opposite direction. With your reservation, you now have something the airline wants -- a seat they need to clear so they can satisfy other passengers they've also sold that seat to.

Supply and demand suggests they should have to pay premium prices for that scarce seat they need.

Why should they be allowed to set both sides of the equation? Is it because you're one person and they're a large company?

It will be interesting to see what the CTA decides -- and whether, once a fair price is set, Air Canada decides the practice of overbooking is too rich.

Republished from the Winnipeg Free Press print edition June 1, 2013 A13

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