What United Airlines should actually do about overbooked flights

April 2017 has not been a good month for United Airlines.

The now ubiquitous story of dragging a bloodied airline passenger off a plane — alongside the sheer lack of empathy in United’s response — have caused a PR nightmare and contributed to dropping United down to the sixth-most-popular US air carrier. All that because they couldn’t (read: wouldn’t) convince passengers to modify their travel plans.

To avoid the problem going forward, they’ve announced they’re upping their max payout to bumped passengers to $10,000. Sounds like a big number, sure. But they’re going about it all wrong.

The Supply-Side Problem

Airlines — along with hotels, venues, public transportation, etc. — are in a tough business. Each of these businesses sell services whose inventory vanishes with each passing second. Yet their businesses require significant capital investment to create bulk capacity. The marginal cost to an airline of a single passenger flight is near zero, but the fixed costs of operating a connected network of daily flights across the country are massive.

Empty seats, then, are to airlines, venues, and public transportation lines as a warehouse fire would be to a clothing company. And that’s exactly why almost all airlines overbook their flights.

The Demand Side Problem

Have you ever been waiting for a flight and heard through the loudspeakers an offer to earn an incentive (money, flight credit, etc.) by getting bumped to a later flight?

I have — and I’ve been interested in taking it every time I’ve heard that announcement— but I never have taken the incentive. Here’s why:

  1. They haven’t made it easy for me. If someone walked up to me offering $500 in cash to sit in the airport for 4 more hours, I’d be pretty likely to take it. Instead, I’ve been directed to wait in line to talk to a stressed out airline attendant without any certainty that I’ll get to the front in time to get the reward.
  2. The expectations haven’t been clear to me. It’s loud in airports, and I’m usually pretty zoned out when waiting to board a flight, so brief announcements aren’t the most effective medium. If there’s a clear understanding of new expectations (when would I arrive at my destination, where would I stay tonight, how much cash / credit would I receive?), I’ll be more ready to take action.
  3. Not all of my time & place has equal value. If I’m en route to my best friend’s wedding, I’m not gonna take $10,000 to miss it. But if I’m exhausted after days of traveling and not feeling like flying on a crowded plane right now anyway, I might gladly change to a morning flight if it means a free, comfortable bed is within reach.

The Win-Win Solution

How might an airline solve the problems of waiting in line, unclear expectations, and the variable value of time & place, without having to burn up more inventory in the form of more empty seats?

The airline has a text message conversation with me already — they’ve used this line to send me my boarding pass and notify me of flight status updates.

Why not use this medium with customers to easily handle overbooking accommodations? By sending me the above text message, United could solve each of my problems:

  1. They could set clear expectations by giving me a readable (and re-readable) text rather than making an ephemeral announcement in a loud airport.
  2. They could let me avoid waiting in line by facilitating a 2-way conversation without me having to get out of my seat.
  3. They could accurately price the market value of changing plans for each unique flight, only paying out the minimum amount of rewards to ensure every flight results in both happy customers and maximum utilization of fixed capacity.

If United really wants to increase customer happiness while minimizing the costs of empty seats, rewards payouts, and negative PR, they could go a long way by trying to understand their customer’s experiences, not issuing a meaningless Press Release.

What do you think? How would you feel if you received that text from an airline? What customer or business problems am I not thinking about here?