Exclusive: United Airlines Cuts Compensation Limits By Up To 85%

Those $10,000 offers to take a later flight when your flight is full? Another relic of the past. United Airlines will now limit voluntary denied boarding compensation to a maximum flight credit of $2,500, a 75% reduction. It is also reducing maximum compensation for involuntary downgrades to $1,500, an 85% reduction over present levels.

Generous compensation meant to virtually eliminate involuntary denied boarding situations (where passengers are denied boarding against their will) has been in effect since the days following the David Dao incident in 2017.

> Read More: United Airlines Reveals Major Policy Changes

Authorizing airport gate agents to offer up to $10,000 in flight credits to sway people to take alternate flights dramatically reduced instances of involuntary denied boarding on an oversold flight. In fact, United reduced the total number of involuntary denied boardings (IDBs) by 95% over the last two years with less than 0.01% per 10,000 passengers qualifying as an IDB.

United’s revenue management has also become more conservative, with less aggressive overbooking resulting in far fewer cases of voluntary denied boardings (VDBs). Here’s an interesting stat: United has flown more than 160 million people over the last year and fewer than 1% of customers were voluntarily denied boarding. Of those cases, roughly 7% received compensation of more than $2,500.

But with COVID-19 causing United to re-examine every area of the business, maximum limits are changing.

United Limits VDB and Downgrade Compensation

With flight consolidation that may result in fuller flights in the months ahead, United will reduce the maximum travel credits offered to customers who are voluntarily denied boarded from $10,000 to $2,500. Passengers who are downgraded will see maximum travel credit compensation drop from $10,000 to $1,500.

A United spokesperson told me “that every dollar counts in this environment” and that move is part of comprehensive effort to save every penny. With flights are only averaging 10 people even after flying has been reduced by 90%, this move is viewed as way to reduce future liabilities.

What United Is Telling Employees About Reduced VDB Compensation

Here’s what United is telling airport gate agents about denied boarding:

As we continue to meet these unprecedented challenges posed by the COVID-19 crisis, we are evaluating all aspects of our business to ensure we are well positioned to recover when demand returns. This means we have to be more aggressive than ever before in controlling our business so that when demand does return, we have the ability to bounce back quickly.

We’re currently operating in an environment where travel demand is essentially zero, and have already taken many steps to decrease spending, including: minimizing our operating expenses, slashing our flying schedule by 90%, freezing hiring, offering voluntary leave programs, and reducing executive salaries by 50%

With the unforeseen and unusual results of pulling down our schedule by 90% and cutting international routes that serve some stations only a few times a week, we have created some tough situations for our employees. We continue to do our best to take aggressive actions to manage the impact of the worst financial crisis our company has ever faced in hopes that we can help better position United when travel demand returns.

As we look across our business, we’ve discovered that some policies that made sense in a pre-COVID-19 world no longer do so within the current operating environment, whether that’s due to low travel demand or because existing policies impact far fewer customers.

That’s why, beginning May 1, we are reducing the maximum Electronic Travel Certificate (ETC)/Miles equivalent amount of compensation we offer customers in the event of a voluntary denied boarding from $10,000 to $2,500; and from $10,000 to $1,500 in the event of a downgrade. The escalation and solicitation processes, and fare difference policy for involuntary downgrades, will stay the same.

In addition, the DOT-mandated compensation for involuntary denied boardings will not change and the new ETC/Miles equivalent will be capped at $2,500 ETC. These compensation amounts continue to be higher than what the DOT currently requires for involuntary denied boardings. DOT policy for involuntary denied boarding compensation is 4x the one-way fare but no more than $1,350. With our cap of a $2,500 ETC, we’re still 85% higher than the DOT requirement.

Overall, we’ve seen the number of denied boardings dramatically decrease over the last several years, with a very small number of customers eligible for voluntary denied boarding compensation.

Airport Operations Customer Service Representatives and Contact Center agents should refer to their department communications for additional information about the policy and procedure changes.

While very few customers receive the maximum amount of compensation, every dollar counts in this environment.

We will continue to monitor this ever-changing situation and share additional adjustments to policies and procedures as needed to manage our costs during this crisis.

My Thoughts

Obviously, the $10,000 vouchers was a nice incentive to take a later flight. So is a $2,500 voucher…

I did go back and look at a post I wrote in 2018 after a woman scored a $10,000 voucher after her flight to Austin was oversold.

> Read More: $10,000 Voucher for United Airlines Bump!

I wrote:

I am amused that United would prefer to give away $10,000 in flight credit than likely less than $1,000 in cash. Even with expiration dates and other resections, I have to imagine that the passenger will put this travel credit to very good use.

Just based upon how I value my own time, a $10,000 voucher for a delay of a few hours seemed over the top and more for optics than representing reasonable compensation.

Still, I am not going to applaud United for making this move. If oversold premium cabins or oversold airplanes are so rare, even before COVID-19, then why bother to make the change? And in those rare instances when oversell situations arise, it becomes even rarer for compensation to rise anywhere close to that alluring $10,000 prize.

We don’t know what travel will look like once we return to our new normal. There will be fewer frequencies and we may well see fuller flights. There may also be last-minute swaps and other complications that result in oversell situations.

These changes in compensation policy have little to do with the short-term and everything to do with how United envisions travel in the months ahead. Read between the lines and understand that United will not suddenly scale up flights if demand doubles, triples, or even quadruples. Planes are empty now. The question, especially with social distancing concerns on the mind of the traveling public, is how full flights will be after demand returns. This is just me speculating, but it seems this has to be part of the calculation.

CONCLUSION

The days of $10,000 in flight compensation for downgrades or choosing to take a later flight are over. While $2,500 is still decent, it is another sign of the times that air travel will not return to pre-virus conditions even once the economy re-opens and more travel resumes.

What are your thoughts on the reduced compensation limits from United?