June 22 (Bloomberg) -- U.S. airlines may bump the most passengers in nine years as business travelers resume flying following the deepest cuts in seats since World War II.
Almost 220,000 passengers couldn’t get on flights in the first quarter even though they bought tickets, 25 percent more than a year earlier, U.S. Transportation Department data show. At that pace, so-called denied boardings in 2010 would surpass 2009’s 762,400 and reach the highest total since 2001.
“It’s more than inconvenience,” said Kevin Mitchell, chairman of the Business Travel Coalition, which represents about 300 corporate travel buyers. “There’s the risk of lost sales opportunities and lost productivity.”
The increase stems from a traffic revival at carriers led by Delta Air Lines Inc. and AMR Corp.’s American Airlines, which haven’t yet restored reductions in capacity made during the recession. Continental Airlines Inc. and Southwest Airlines Co. said their planes flew fuller than ever in May.
Pent-up demand for summer vacations means there won’t be many empty seats in the coming months, probably resulting in more bumping, said Rick Seaney, chief executive officer of Dallas-based ticket-research firm FareCompare.com.
Airlines routinely sell more coach tickets than they have available, betting that not all passengers will show up. “Unless there’s a new law or something, it’s not going to change,” said George Hamlin, president of Hamlin Transportation Consultants in Fairfax, Virginia.
About 89 percent of first-quarter bumpings were voluntary, with travelers accepting inducements such as vouchers to switch flights. The rate of involuntary bumpings jumped 37 percent from a year earlier to 1.73 for each 10,000 passengers, according to the DOT. The full-year 2009 rate of 1.19 was a 13-year high.
Anita Gunnoe, 42, said she and her husband were bumped twice in the past year on United Airlines flights -- once while returning home to Charleston, West Virginia, from Las Vegas in 2009, and again in May when heading to Seattle on the travel certificates they received after the first trip.
“We have gotten to the point where we won’t fly,” said Gunnoe, a respiratory therapist.
On June 2, U.S. Transportation Secretary Ray LaHood proposed raising the maximum compensation by 63 percent to $650 if passengers bumped against their wishes arrive at their destination within two hours of their intended schedule, and to $1,300 if not.
“If you go to a concert and there are 1,000 tickets, they don’t sell 1,100 tickets, they sell 1,000,” said Alan Bender, professor of airline economics at Embry-Riddle Aeronautical University in Daytona Beach, Florida. “It’s completely in the hands of the airlines.”
Carriers try to shield first- and business-class travelers, elite frequent fliers and unaccompanied minors from involuntary bumpings. Most airlines charge as much as $150 to change to another flight, depending on the type of fare purchased. The Washington-based trade group for large U.S. carriers defends overbooking as crucial to airlines’ revenue.
“Based on the disappointing recent lack of profitability in the airline industry, airlines cannot allow reserved seats to be unfilled when an aircraft leaves the gate,” said Victoria Day, a spokeswoman for the Air Transport Association.
Southwest, the largest discount carrier, typically sells tickets to as many as 3 to 5 more passengers than it can accommodate on a flight with 137 seats, said Teresa Laraba, vice president of customer services.
“It’s fine to have some overbooking, and you need it to a point or you’re going to go out with empty seats and lose revenue,” Laraba said. “As our overall load factor rises, our denied boardings are going to rise as well.”
Involuntary denied boardings are “extremely rare,” said Anthony Black, a spokesman for Delta, the world’s largest airline. On average, 15 of Atlanta-based Delta’s 239,000 daily customers are bumped involuntarily, he said.
The six biggest U.S. airlines cut 2.8 percent of their 2010 capacity through May on top of a 6.9 percent reduction in 2009, the largest slash since 1942. That’s helping carriers boost fares after industrywide losses in seven of the past nine years.
Average domestic fares rose on a per-mile basis each month this year through May, after dropping throughout all of 2009, according to the ATA. Airlines are in a “dramatic recovery” in business travel, US Airways Group Inc. President Scott Kirby told investors in New York on June 15.
Carriers can generate $5,000 or more on some flights by selling an extra 5 or 10 tickets even when the plane is already booked full, said FareCompare.com’s Seaney.
The extra tickets often are sold to walk-up business travelers willing to pay the highest fares, said Brett Snyder, a former analyst and manager at UAL Corp.’s United and America West Airlines who is now president of the CrankyFlier travel blog.
“Airlines are deciding whether it’s worth taking on one more person paying a much higher fare versus the cost of a bump,” Snyder said. “The higher fare usually wins.”
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