Why Don’t Airlines Make Empty Seats Available as Award Space?

Reader Jered asked,

Why don’t airlines open all remaining international premium cabin seats for awards for day-of travel? Surely getting something for them is better than having them go empty?

Here’s Jered’s question — if a seat is going to go empty, an airline is getting literally nothing in exchange for that seat. They get something, whether reduction in liability (and thus recognition in revenue) for their frequent flyer program and a transfer of funds from the program to the airline… or cash for the seat from an airline partner.

So why would an airline let a seat take off empty, rather than reaping an incremental revenue gain for it?

Now, many airlines do follow this strategy. They make seats they expect to go unsold available as awards. Some seats may be opened early on when an airline’s schedule loads, but nearly a year out there’s limited data to go on so it’s only as travel approaches that they know which seats will go empty and release those seats as saver awards. Indeed, as the day or two before travel approaches they might open up all or most of the unsold seats for folks using points.

There are essentially two reasons not to do this:

  1. Preserve the exclusivity of the product. The belief here is that there’s value for the paying passengers in having a lightly booked cabin, and that a cabin you have to pay for is more special, harder to get, and worth paying for. Something you can get cheaply and easily on points could be harder to justify paying for, at least for some passengers at the margin.
  2. Prevent passengers from redeeming points instead of spending cash. Some passengers might buy the seat, but choose to use miles is mileage seats are available. Indeed the highest revenue customers are those buying last minute tickets. Why give them a points option when they’re stuck needing to spend cash?

In both cases the idea is that in giving up incremental revenue for the award seat, the airline might be protecting revenue (because a customer spends cash instead of miles) and protecting the long-term revenue-stream (By keeping the cabin exclusive).

That’s the argument anyway. That said, many airlines do fill the cabin. The question is how: award seats, upgrades, or employees. And upgrades may be ‘supported’ upgrades (with miles, or upgrade instruments) or ‘operational’ upgrades (a lower cabin is oversold so some passengers get upgraded in order to have the flight go out full and on time).

Each airline’s approach is different, though North American carriers tend to fill their forward cabins while practice varies more in other regions of the world.


About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I recently flew with my wife on Air Berlin using an AA award for Business Class. There were 20 seats in that section and only 8 were filled when we flew – 12 empty. But I had looked just the day before on AA to check award space and there was none. Seems a waste to me …

  2. Seems like the reasonable approach is something like American’s where the last minute seats are charged at double the points of the SAAver rate or whatnot plus the fee for using miles within a month.

  3. last sept we took asiana first class flight 201, only 3 seats filled

    maybe customers don’t want to spend the bux or miles for first class ?

  4. The truth, that many refuse to admit, is that airlines have created a product (F/J) that often is priced at a non-market clearing price.

    Airlines dedicate massive resources (amount of real estate taken up by premium cabins on a plane vs. economy, amount of airport real estate taken up by clubs and premium checkin vs. economy checkin) to these products and sure they can fill them on a Sunday night JFK – LHR flight, but they go empty for much of the rest of the time.

    In the hotel industry, this is called “compression” – when you can get insane prices. You are willing to go empty the rest of the time because you’re still profitable despite being empty.

    This is just the nature of the industry. A lie-flat JFK – LHR seat on a Sunday night before a regular Monday is very different in market clearing price from that same seat on a Thanksgiving evening flight.

    The sad part is that the airlines haven’t seemed to be good enough at adjusting international F/J price to match it. They are getting much better of doing that on the domestic front which is what’s going to start killing complimentary upgrades.

  5. Standard revenue management theory is to compute the revenue from a full fare sale times the probability of that sale. Compare that expected value to the “sure thing” value of taking banked miles off the books plus any cash received for the late booking fee. The latter is probably less than 10% of full fare.

    If there is even a smallish chance of selling the seat for money the airline will often keep the seat out of award inventory. It’s simply good business.

    Sorry, that was snarky. I believe that airlines should carry miles on their books at about 1 cent each. They don’t, for the most part. If they did, making that extra value count in the revenue management balance, you would see more award space open at the last minute.

  6. The KLM/Delta Bait-and-Switch Scam
    ———————————-

    Last Oct 1 I flew Delta 9465 (operated by KLM) on an M-fare from Istanbul to Amsterdam. I was in the record for an upgrade if one was available using my Delta Systemwide Upgrades (I’m a Diamond Medallion multi-million miler with Delta). The upgrade worked on the three other segments of that trip (JFK-IST via AMS). But on this segment, no luck. I understand if KLM sells the seats to revenue customers, and I understand if there are KLM or Delta passengers in coach with higher priority then me; then coach is just fine. But what got me thinking like a sailor with Tourette’s about KLM/Delta is that from my seat in the front of coach I could see multiple empty seats in business that were unoccupied for the whole trip. I had asked at check-in about my upgrade and again from the KLM lounge and one last time at the gate, but was told (by the AIC – agent in charge) either that the upgrades could only be done by Delta staff – but they didn’t get in until 9AM (this was a 6AM departure), and separately I was also told at the gate that no upgrades were available. After I returned home I e-mailed Delta customer service, and after a bit of back and forth only got an “it must be so disappointing to see availability in business but not be able to access it” – but no admission of process failure or compensation for their collective screw-up at my expense. I subsequently wrote a letter to Richard Anderson asking if he’d “have my back” this time, and I’m still patiently waiting for a response (but not holding my breath).

    Sadly, it’s not the first time this has happened. In the past it was KLM out of Doha (to AMS) on multiple occasions. For now I’ve added IST to my Delta/KLM “no fly” destination list (joining Doha). To be fair, this problem with IST (and Doha) is intermittent. The previous time I flew out of IST I was smoothly upgraded at check-in under the exact same circumstances, and I was once upgraded in Doha after escalating to the AIC at the check-in area.

    I’ve never had this problem out of AMS Schiphol. In my experience it seems that the KLM staff in the “provinces” are either poorly trained, lazy, or incompetent when it comes to upgrading Delta frequent flyers.

    Delta/KLM has missed out on at least a dozen of my M-fare JFK-Doha trips since I stopped using them on that route about 2 years ago, and will miss out on about a dozen more M-fare JFK-IST trips over the next 18 months. Their employees stubbornness/arrogance/stupidity has a price that the shareholders (or somebody with P&L responsibility) should care about.

  7. Zach: What can I say? I posted a list of questions when Gary had a post soliciting them, and he’s kind enough to answer them.

    I ran into the extreme version of the award seat availability example above last month, flying PVG-ICN on Asiana. I had booked two business class award tickets, and as I had wanted a different flight time (they operate 4 round-trips daily on widebody planes on that route) I was continually checking on availability up until the day of. No additional J-cabin seats opened on that or other flights that day.

    When I got on the plane, an A330 with 32 J seats, I was shocked that we were the only 2 occupied!

    Beyond that, I’m just amazed by the amount of service on that route; I assume it is due to competition with Air China.

  8. @Michael quite frequently… on an airline (American) that doesn’t offer complimentary domestic upgrades to all elites, on flights not especially frequented by business travelers on a Saturday afternoon…

  9. Seems like whenever I’m on a Delta flight, the front cabin is ALWAYS full. They fill business with non-revs if they can’t sell the upgrades, or so it seems, considering the number of times I’ve been seated next to an off-duty pilot when in First or Business. But I haven’t flown Delta in 2014 so maybe from time to time they actually fly a paying customer upfront.

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