How low can you go?

By G.F. | SEATTLE

DELTA AIR LINES is pitting passengers against each other in blind auctions. Travellers are all too familiar with the impromptu auctions that occur before oversold flights. Airlines in America prefer to solicit volunteers to take later services, rather than bump passengers against their wishes, as the latter method obliges them to make statutory payments of up to $800 depending on the length of delay in rebooking, whether a flight will land in America or outside, and whether an airline assists in alternative arrangements.

Airlines reveal quite a bit to the auction's participants. Savvy flyers can watch and see how many people put their name on a list with the gate agent, and even suss out how likely people are to accept a bump. Some gate agents offer ascending benefits, starting with low offers of payment vouchers and drink coupons. A carrier is not obliged to pay willing passengers actual money: flight coupons and the like are perfectly acceptable. Agents sometimes go well above the statutory amounts, for which passengers can insist on real money, as each airline-backed dollar or ticket costs the carrier less than its face value. And voluntarily bumped passengers may never redeem vouchers, either. This Gulliver once received an unrestricted full-fare domestic ticket for accepting a bump and failed to use it within the six months allotted.

An auction operator would clearly prefer bidders to be unaware of competing offers. Delta has formulated a new web-based system that does this. Passengers checking in online or at airport kiosks are offered the chance to participate in what could be described as a sealed-bid multiple-unit reverse auction. Bidders enter a price they are willing to accept to be bumped, but are unaware of the extent to which their flight has been oversold and have no knowledge of the bids of other passengers. Bids are transmitted directly to gate agents, who take the lowest first and rebook passengers as necessary.

Delta's move is very clever. Airlines currently have a weak bargaining position. Passengers know that if nobody steps forward, offers will escalate, and the statutory payment isn't bad if airlines have to pull people off flights against their will. In the reverse-auction system, Delta lets people value their own time, while also reducing waiting time and work load at the gate. (Passengers could band together through discussion forums to collude on higher bids, but the odds of that being undermined by those not in the cabal are too large for it to work routinely.)

The next logical step is for airlines to allow passengers at the time of booking to offer to rebook on a later flight. So a passenger could lock in a $250 cross-country ticket, but confirm that they would accept $400 to fly a red-eye. The airline might subsequently pay the $400 if it could secure a $1,000 non-refundable fare in exchange. Priceline and other advance-booking services once seemed like outliers. They may appear conservative if such bidding catches on.