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Overbooking ImageAs the entire world has likely seen by now, United Airlines removed Dr. David Dao from his Sunday evening flight, by selecting him at random and then dragging him off the airline.

While the United apology tour took a good 48 hours to get started, they finally came around and said they were very sorry for overbooking the flight, and they promised to do better next time. Chris Christie, governor of New Jersey released a statement that said Airlines should abolish the practice of overbooking to avoid situations like this in the future and has asked President Trump to consider the idea.

It’s time to separate the fact from the fiction.

United Flight 3177 Was Not Overbooked

Let’s get this out of the way first. The irony of this whole situation is that the United flight from Chicago to Louisville was not actually overbooked. The flight was full; however, the number of ticketed passengers equaled the number of seats on the plane, so the outrage about overbooking isn’t quite right.

United needed four seats opened on their plane to get crew members to Kentucky for work the following day, so they’ve chosen to hide under the “overbooking” policy. What happened here was that everyone who had a ticket was boarded; there were no additional passengers to board, and United decided to forcibly remove four passengers from the plane in order to board non-paying, non-ticketed employees.

The Process of Overbooking

When handled properly, the idea of overbooking makes sense for everyone. Allowing airlines to book 220 passengers for 200 seats may seem like a bad idea, but when you consider the economic principles behind it, the consumer and the airline both come out on top.  For example…

Assume Southwest has a 200-seat passenger plane and a flight on July 1st going from New York (JFK) to Florida (FLL). The flight is available for purchase six months in advance, and Southwest decides to make 200 seats available for purchase. By April 14th, the flight is sold out and taken off the board. All 220 passengers have confirmed tickets to board the aircraft in a few months, but the airline knows that 20 of those purchase agreements will not be honored.

A funny thing then starts to happen beginning May 1st. Every once in a while, a passenger calls up Southwest to ask to cancel or change their flight because their plans have changed. So one by one, couple by couple, family by family, the 220 tickets held for the flight on July 1st begin to dwindle. You have 218 down to 215, down to 210 and so forth. Then by June 30th, the day before the flight takes off, Southwest now has only 205 confirmed passengers for this flight.

On the day of the flight, Southwest is now tracking the number of ticketed passengers who check in, assuming 100% of the passengers that check in make their flights. Attendants show up at the gate. Boarding is about 15 minutes away from getting started, and the full count is in: 202 passengers have checked in for the flight. Three more people either didn’t make it to the airport on time or decided not to take today’s flight, leaving Southwest with a bit of a problem. They’ve overbooked this imminent flight by two passengers, and they need two people to step aside and take a different flight to Ft. Lauderdale. Let the auction begin!

The normal process from this point is to have the attendant at the gate alert the crowd waiting to board that the flight is oversold. They need two volunteers to come to the table and schedule a different flight (sometimes on the same day; other times on the following day). Opening offers generally start in the $300 travel voucher range, and the attendant will continue to raise the price until two passengers come forward to volunteer their seats.

In the instance where there is no reasonable amount of money to entice the crowd to volunteer their seats, Southwest will pick passengers at random. They will offer them the maximum amount of compensation allowed, $1,350, and call it a day. You can see from the chart below how often passengers volunteer their seats, versus the ones that are forced to schedule later flights. In the 4th quarter of last year, 106,000 passengers across all US airlines volunteered their seats to others, while 9,000 had no choice.

Q4 Booking Standards for Flights

So, this begs the question… why is having 9,000 passengers forced to take flights they don’t want a good thing for the market?

Cheaper Flights

Imagine the scenario above where Southwest sells only 200 tickets initially instead of 220. As passengers begin to fall off the rolls, Southwest reopens the flights online. The later and later this happens, though, the less likely they are to find passengers to take these now open flights. They will be able to re-book some of the seats, but not all.

For argument’s sake, let’s say on the day of the flight, the airline gets the number of ticketed passengers back up to 190. Then on the day of the flight, the three people who missed their plane in the first scenario do so again, meaning Southwest has taken in ticket revenues for 187 passengers. That’s 15 less than scenario #1, which means lower revenues for the airlines.

Yes, the airline will have to compensate the overbooked passengers, but it rarely, if ever, comes out to more than they’ve already taken in. Even when they have to give the full $1,350 to passengers who do not volunteer, they’re still likely in the green (assuming a modest $250 ticket price in our scenario above, 15 additional ticket sales means $3,000 in revenue vs. $2,700 in compensation to involuntary bumps). And the chart above shows that for every 11 passengers who accept modest compensation, only one does not… so the added revenue per overbooked flight can be quite substantial.

Flexible Options

Another reason why overbooking is essential in the marketplace is the freedom to cancel and change flights. Some airlines offer no cancellation or change fees, while others charge a small to moderate fee. If overbooking was not allowed and airlines were forced to book only the number of seats they had available, it’s very likely the ability to change flights would be restricted, or at least much more expensive, than it is today. Airlines are now a bit more forgiving when it comes to schedule changes because they know they have “reserves” available to take your place if needed. In their eyes, it’s no biggie.

Many airlines also offer their own branded airline miles credit card, which offers perks to allow customers to change their flight plans at no cost. As is standard operating procedure with airlines, if they’re forced to spend more money or end up taking in less revenue, the first thing to disappear is usually the quality of their rewards program.

Added Revenue for the Consumer

Some travelers are flexible when it comes to getting to their destination. Perhaps they’re heading home from a vacation and wouldn’t mind spending an extra day around town. Perhaps they’re headed out for a business meeting that can easily be pushed to Tuesday instead of Monday. Why not take the opportunity to cash in a few free flights down the road for a few hours’ inconvenience? There are well-established online travel bloggers who show in detail how they do this. They’ve earned thousands of dollars in compensation, simply for the willingness to take the next flight available. Some even show how you can tackle this more than once a day and almost consider it a profession!

Of course, there’s no such thing as a free lunch, and there is one obvious negative attached to the concept of overbooking. If you are one of the nearly 9,000 passengers last quarter who did not want to leave your flight because of a commitment you could not miss, $1,350 may not be good enough.

This is the very reason why many advocates of the policy are looking to have the maximum compensation amount revised or altogether removed to allow for a true bidding process. If the airline is forced to keep adding to their offer in order to ensure 100% of passengers voluntarily give up their seats, the right flight could yield quite a large number. Even so, in the rare instance that happens, the airlines and the marketplace will still be thankful that they’ve overbooked the flight.

There is no denying that the way United staff handled the United Flight 3177 issue was the exact wrong way to do it. Add on the non-apology from their CEO Oscar Munoz, and for years, people that book their flights will remember this incident. Many of them will even look elsewhere for their travel needs.

But nothing about this PR disaster has anything to do with the concept of overbooking. When executed properly, it’s an essential practice to keep costs low for all consumers. If the day should come where maximum compensation amounts are lifted, overbooking will become an even greater asset to the airline community.

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So, you’re thinking about adding some plastic to your wallet. You want to take advantage of as many bonuses and offers as possible, and you definitely want to earn cash back where you can. You may even be thinking about travel hacking, where you open a number of new accounts in order to reel in a number of introductory point, mile, and cash back offers. Where do you look first?

524 rule

Chase offers a wide variety of credit cards with different perks, including low-fee balance transfers, travel rewards, rotating cash back categories, and even 5% back at Amazon. They are one of the more prominent card issuers, and frequently issue large sign-up bonuses to encourage new customers. Chase, however, has an interesting rule that makes them stand out when it comes to travel hacking.

The 5/24 Rule

You may have heard about their 5/24 Rule, especially if you’ve spent any time researching card hacking.

Simply put, if you’ve opened up 5 new accounts in the last 24 months, you’ll be denied for most Chase credit cards. This rule is all but inflexible, even with calls to customer service to beg them to reconsider. This is unfortunate, as it could lead to you missing out on some of the largest sign-up bonuses seen on credit cards to-date.

One important note: there are numerous reports that being pre-approved in a Chase branch for these cards leads to approval for the card. Anecdotally, I traveled to New York City last November and was approved in-branch for the Chase Sapphire Reserve at 12/24 accounts. So, this work-around could be a possibility if you live near a Chase branch.

Check Out Its Brother Card, the Chase Sapphire Preferred

If you’re considering taking on the travel hacking game (beware: it requires strong organization skills and a lot of attention to detail!), Chase should be high up on the list of issuers to pursue. You’ll be applying for credit cards regularly, so you’ll quickly exceed the limitations for the 5/24 rule. For example, in the last 24 months, I’ve applied and been approved for 15 cards. In the world of travel hackers, that’s not even on the high side of new accounts.

Cards Not Under 5/24

The following cards are reportedly not under Chase’s 5/24 rule:

  • Amazon Prime Rewards Visa (I was approved last month at 13/24)
  • British Airways
  • Fairmont
  • Hyatt
  • IHG
  • Ritz-Carlton
  • Disney (both Rewards and Premier)
  • AARP
  • Marriott Business (note: there are conflicting reports on this but I was approved last October at 11/24)

Note that these credit cards will still result in a hard pull and the opening of a new account. So, if you’re interested in them, you should prioritize them after you’ve put yourself past the 5/24 threshold.

Which Card First?

First of all, a disclaimer: if you’re getting into travel hacking, here’s the criteria you need to meet:

  • Have an excellent credit score (I would put this at 720+, if not 740+)
  • Pay off your credit card statement balances in full each month
  • Be disciplined and organized with your money
  • Be able to meet the minimum spend on a new credit card without being financially irresponsible
  • Be unafraid of spending time doing research — there are no shortcuts here!

I would prioritize Chase cards as follows:

  1. Chase Sapphire Preferred
  2. Chase Sapphire Reserve
  3. Chase Ink Preferred
  4. Chase United MileagePlus Explorer
  5. Chase Marriott Rewards
  6. Chase Freedom
  7. Chase Freedom Unlimited
  8. Chase Southwest Rapid Rewards Premier

Note that there are more than 5 on this list, so you’ll have to do some research as to which card is right for you. The Chase Sapphire and Ink lines earn Ultimate Rewards points. These offer flexible and valuable redemptions across a number of airlines and other travel partners. The Chase Freedom line offers cash back perks as statement credits. The other branded cards like United and Marriott offer brand-specific points and miles.

I’ve prioritized the United and Marriott cards ahead of the Freedom cards for a few reasons. First, it’s possible to change your credit card to the no-fee Freedom cards after some time. So, if you’re a Sapphire Preferred cardholder and you’d like to discontinue paying the fee, it’s possible to change that card over to a Freedom.

Second, the bonuses for those two branded cards are relatively valuable at the moment. The United offer at 50,000 miles is higher than it was in 2016. The Marriott points are now eligible to transfer to Starwood Preferred Guest® Credit Card from American Express at a good rate (3:1).

If I were just getting into travel hacking, I would be going straight down this list. You may be put off by the Ink Preferred being a business card, but applying for a business card isn’t as daunting as it might seem. Many people run small self-owned business through eBay selling or Etsy shops, and it’s perfectly reasonable to have a business line of credit for those expenses. The process is nearly exactly the same as a personal application; you’ll just need to provide some information about the type of business you operate.

To 5/24-ers and Beyond

My advice to the unfortunate folks who are past 5/24: don’t worry about it. While some of these bonuses are stellar (the previous Chase Sapphire Reserve bonus at 100,000 points was great while it lasted), the sheer number of other card issuers and bonuses means that there’s no shortage of great perks to be had.

Lately I’ve been focusing my efforts on airlines like Delta and American, as well as Membership Rewards points through American Express. New cards are constantly being rotated in and out. So, it’s more important to be able to jump on the higher bonuses when available, than to worry about getting back under 5/24.

Best of luck out there, and happy travels!

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A few weeks ago, Rick Seany of FareCompare published an article about the upcoming Cheap Flight Day. This certainly piqued my interest. While I have heard of National PB&J Day (April 2) and Men Make Dinner Day (the 1st Thursday in November — mark your calendars, ladies), I hadn’t ever heard of an airfare discount day. This warranted another look.

Here’s what I found: if you’re contemplating air travel between late August and mid-November, this is the time to start looking. While August 23 has been dubbed Cheap Flight Day, it’s actually more of a marker for the week or two at the end of summer when airlines traditionally drop their prices.

Tell Me More

With most summer trips in the rearview and families preparing for back-to-school, flight demand decreases near Labor Day weekend. In response, the airlines adjust fares downward. While this cost-shift often falls on August 23 (as it will for United this year), it’s not the Black Friday of airfare… merely a threshold for when prices begin to fall. Think of it as the first day in late summer that you should plan to travel, if you want to save a bunch.

For example, say you’re headed from Washington, DC to Orlando for a last-minute beach hoorah before autumn. On Southwest, prices begin their decrease on August 22 and drop further on the 26th. It’s not August 23, but close enough.

Southwest

However, wait a few more days until after Labor Day weekend, and you’ll save hundreds of dollars more!

Southwest Sept

How Else to Save on Flights

Not looking to fly just yet? No worries — there are tons of ways to save on air travel year-round. Here are a few of our favorites:

Use Miles

The easiest way to earn free miles is to snag a travel rewards credit card. Many of these cards, such as the Barclaycard Arrival Plus™ World Elite MasterCard®, earn you 2x miles on all purchases you make.

With this card, you’ll also get 40k bonus miles for spending $3,000 in your first 90 days with the card, which is enough for a $400 credit towards travel. Since you can take your miles in the form of a statement credit, you’re not limited by a booking portal or specific airline.

Spend your money as usual and rack up the cash back rewards. Choose when and how you want to fly, then redeem your earned points and save.

Don’t Pay for Baggage

Unless you’ve flown exclusively on Southwest, you’ve probably paid a baggage fee once or twice. You know that if you don’t travel light, your fees can end up costing as much as your fare!

Some companies, like Southwest, include up to two bags free. This can save you a pretty penny, considering most airlines charge $25-35 per bag!

Alternately, you could pick an airlines credit card like the Citi® Platinum Select / AAdvantage® Mastercard®. This is a great choice for people who fly American Airlines. Not only will you earn 30k bonus miles after spending $1,000 in the first 3 months, but you’ll also enjoy your first checked bag free. Oh, and it’s not just for you —  this free bag offer extends to up to four travel companions, so your whole family saves.

If you end up finding a Cheap Flight Day deal on a different airline that you can’t pass up, you can still save on baggage fees. All you have to do is travel lighter. Most airlines allow one carry-on bag and one personal item (such as a briefcase, purse, or backpack) on board, free of charge. If you can fit everything for your last-minute getaway in a smaller suitcase, you will save a nice chunk of change… and avoid waiting at baggage claim after you arrive.

Book Early

Cheap Flight Day may be a great option if you’re looking for a quick getaway, but this isn’t the best practice to use throughout the year. Previously believed to be a strict “54 days out,” the magical number for booking in advance isn’t so cut and dry. Most experts agree, though: booking last-minute isn’t the deal it once was.

According to CheapAir.com, the prime booking window actually lies somewhere between 21-120 days out from the flight. Quite the range, yes, but it varies according to time of year and even airline.

cheapair

Your best bet is to use a flexible date search, if your plans allow, and try to fly mid-week. Friday and Saturday flights are traditionally more pricey than Tuesday and Wednesday options. Try to book somewhere between 2-3 months before your flight to save the most.

Sign Up for Emails

Want to be the first to know about sales throughout the year? Sign up for your favorite airlines’ email newsletters. Often, these will be for travel 2-4 months out, so you have time to plan that trip to see your parents and even coordinate time off from work.

In Summary

Airlines may not view August 23 as a strict fare-slashing deadline, but this day historically marks the beginning of discount travel. Cheap Flight Day should still be marked in your calendar, if you have the interest and flexibility in late summer or  impromptu travel.

While you can expect to save at least 10-20% on airfare by booking travel on (or near) August 23, you can see above that I found price cuts of up to 66%. Be sure to check out your airline’s “flexible travel date” calendar when searching flights, to ensure that you get the best deal. Sites like Fly.com and FareCompare are also good aggregate resources, if you’re not picky about the airline.

Don’t forget to use your travel rewards credit cards and/or frequent flyer programs, to save even more on fares and baggage. Happy travels!

Have you taken advantage of late August-October flight deals? Have these fare cuts prompted you to plan a trip you might not have otherwise taken?

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Whether you’re planning a very special trip next year or just travel a lot, there’s currently a limited-time offer you really ought to think seriously about. The Discover it® Miles-Double Miles your first year card is effectively offering double miles for the first year after new cardholders (but not existing ones) open their accounts.

Here’s how it works: After the first consecutive 12 billing periods that your new account is open, Discover® will double all the miles you’ve earned and apply them to your account in the next billing cycle. Cardholders earn 1.5x miles per dollar spent on purchases, then double all the miles you’ve earned at the end of the first year.

A good travel rewards card
This would be of less interest were the Discover it® Miles not a pretty good travel rewards card already. But it is, because:

  1. You can fly any airline at any time — with no blackout dates.
  2. You can redeem any number of miles you want, from one up, at any time.
  3. You can redeem miles against travel purchases made on the card within the previous 180 days. These travel purchases include airline tickets, hotel rooms, car rentals, travel agents, online travel sites and commuter transportation.
  4. You can also redeem miles for cash as an electronic deposit to your bank account.
  5. It has no annual fee.
  6. There are no foreign transaction fees.
  7. Discover® pays you back for your in-flight Wi-Fi fees (up to $30 a year) with an automatic statement credit.
  8. There’s no cap on the miles you can earn.
  9. Rewards never expire, although Discover® will credit your account with your rewards balance if your account is closed or has not been used in 18 months.
  10. You get a 0 percent APR introductory rate on purchases for 12 months.
  11. There’s no fee for your first late payment, and paying late won’t increase your APR.

All this, and Discover® has just introduced the Freeze ItSM on/off switch, which lets you prevent new purchases, cash advances and balance transfers on misplaced cards in seconds by mobile app & online.

Getting the most out of this offer
If you’re planning a big trip and want your rewards to cover part of the cost, you’re probably going to want to use your card for most or all your travel and non-travel purchases prior to departure. The tricky bit is timing when you buy your tickets and pay for other upfront travel-related expenses.

Remember, you can only use rewards to pay or partially pay for travel items purchased within the previous 180 days. Discover® doubles all the miles you’ve earned in your first year during your 13th billing cycle, so depending on the timing of your plans and the purchases you make on the card, there may be a bit of a gap when it comes to redeeming all of your miles.

One possible solution is to buy tickets and so on less than six months before you travel, taking advantage of the Discover it® Miles card’s zero percent introductory APR. That way, you can avoid interest and maximize the contribution your points make to the final cost — although you are going to have to make at least minimum payments during the months between buying the tickets and redeeming the rewards. Ideally you probably want to clear the balance during that 13th billing cycle, which is not only when your bonus rewards become available, but also when the variable APR kicks in.

By all means use your card while you’re on your trip to build up more rewards, and provide triggers (hotel bills, car rental, rail tickets …) for other rewards redemptions. After all, it doesn’t charge the foreign transaction fees — typically 3 percent — that many cards do.

However, you should note one possible drawback. This concerns Discover’s® acceptance by merchants in certain countries. You need to check the map on the company’s website before you travel to make sure your card’s going to work at your destination. Oh, and don’t forget to call Discover® with your itinerary details before you set off or there’s a good chance your international activity will set off fraud alarms and see your plastic temporarily frozen.

Not looking for a travel card?
There’s no doubt the Discover it® Miles-Double Miles your first year is currently exceptional, but not everyone’s on the hunt for a travel rewards card.

Indeed, you may find cash back more desirable than miles, in which case you probably should explore Discover’s® other offerings. Discover® is currently offering to double all the cash back you’ve earned at the end of your first year automatically (again, only for new cardmembers) on cards including:

  • Discover it®-Double Cash Back your first year
  • Discover it® card-Double Cash Back your first year
  • Discover it® chrome for Students-Double Cash Back your first year

As always with credit cards, the trick is to match the plastic available to your personal requirements, desires and spending patterns.

Visit CardRatings.com to learn about these limited time Discover® credit card offers and to read a full review of Discover it® Miles-Double Miles your first year.

Advertiser Disclosure: Many of the credit card offers that appear on this site are from companies from which ConsumerismCommentary.com receives compensation. Compensation may impact which cards we review and write about and how and where products appear on this site (including, for example, the order in which they appear). We recognize that our site does not feature every card company or card available on the market.

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How United’s Frequent Flier Program Change Affects Travelers

by Luke Landes

United Airlines is making significant changes to its MileagePlus frequent flier program. Here’s how your points will change.

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Get the Most Value From Frequent Flyer Miles

by Mitch Lipka

Whether you’re the most frequent of frequent flyers or someone who is more likely to have miles expire, understanding the real value of what you’ve earned is the key to making the right choices as a consumer. With miles programs constantly being changed and consumers’ loyalties challenged, those with frequent flyer miles have to decide […]

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10 Ways to Save Money on Air Travel

by Guest Author

We’ve been enjoying the middle-of-the-week holiday for more than one day, so we’re going to share a guest post from partner site MainStreet.com. By Jeanine Skowronski Airfare certainly isn’t cheap. According to a report from the Federal Aviation Administration, increased demand, coupled with major airline mergers, will lead to higher tickets prices through 2012 and […]

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Mac Users Spend More Money on Hotels

by Luke Landes
Hotel Room

For one to be an aficionado of Apple’s line of computers, it might be fair to generalize that one is willing to spend more money than necessary for perceived superior form — as a device that carries the same function, just on the more common technology modeled after the IBM personal computer costs considerably less. […]

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New Travel Plans: Tips for Taking a Real Vacation

by Luke Landes
Continental Airlines Logo

I try to visit my family on the other side of the country a couple times a year. Most of my family has migrated to the west coast from the east. The migration, at least in my immediate family, began over ten years ago, and more of the clan join the California contingent each year. […]

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Buy Airfare Six Weeks in Advance

by Luke Landes
Airplane

Airlines Reporting Corporation (ARC), a company that processes airline transactions for travel agents and consumers, has analyzed 144 million transactions for domestic flights in 2011 to better understand airlines’ pricing schemes. The study found the lowest fares were available six weeks in advance of the departure date. I’ve always been under the impression that the […]

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