How United Plans to Handle Oversold Flights While Making More Money

United made headlines around the world in April when a passenger was forcibly removed from a flight between Chicago (ORD) to Louisville (SDF). Initial reports indicated that the flight was oversold, but as it turns out, it wasn't. Instead, United needed to fly crew members to SDF, resulting in passengers needing to be bumped from the flight. Now, after the carrier faced significant backlash for its handling of the incident and stirring up the conversation on overselling as a whole, United announced it's introducing a new way it's going to manage oversold flights.

The new strategy, which the carrier is calling the Flex-Schedule Program, will allow it to maneuver around oversold situations without dishing out a ton of cash to bumped passengers or ending its overselling ways. As an alternative, the Flex-Schedule Program allows United to offer to "buy out" your ticket — meaning it'll offer you an alternative flight and maybe some cash, beginning several days in advance of the flight.

Here's how the program works: If your flight is oversold, up to five days prior to your flight, you could receive an email from United. The subject will read something along the lines of "Are You Flexible With Your Travel to Los Angeles?" If you click further into the message, United will have some alternative itineraries for you, and you could get additional rewards if you opt to change your plans. If you accept the new offer, you'll be rebooked within 24 hours.

For example, say you're booked on a flight from Washington, D.C. (IAD) to San Francisco (SFO) via Denver (DEN). If the leg from Washington to Denver is oversold, you could get a message from United, offering you a nonstop IAD to SFO routing. Plus, you'll get a travel voucher of up to $250 for tweaking your itinerary.

According to Bloomberg, United says it'll never ask you to change the dates of your travel or what airports you're flying in to or out of. In addition, United says that your seat preferences will carry over to the new reservation. However, downgrades are possible but they will be clearly marked on the email when deciding if you want to accept the offer. And for those hoping to score big with the new program, United says upgrades as a result of changing an itinerary will be very rare.

Winners and Losers

United's VP for Pricing and Revenue Management Dave Bartels told Bloomberg that the new program doesn't have a lot to do with overbooking. Instead, he said that it'll work in United's favor (as well as the customer's), as it'll help free up a seat for someone who is willing to pay more to sit in it. For example, a leisure travel likely has more flexible plans and would take another flight later in the day for a voucher. But a business traveler has places to be in a timely manner, meaning they'll be more likely to pay the big bucks for a seat.

So, really both the customer and United could come out as winners with the new program. The traveler will have the option to take a more direct flight, a flight a couple of hours later or earlier and to do it all from home instead of at the airport. And for United, the carrier puts less pressure on its gate agents to free up seats with voluntary bumping, and it opens up the gates for larger revenue and having to dish out less cash.

Where the customer could lose out here is specifically for those passengers who wait by the gate on oversold flights for the voucher offer to creep higher and higher before finally pouncing. Like with this recent Delta flight where the gate agent started a voluntary bump offer at $400 and then to $800 before someone finally jumped at $1,100. So, for the most part, United is removing that process, and instead, capping the voucher at $250 when using the Flex-Schedule Program. The customer could also potentially lose out with their seat option since United says that downgrades are possible.

What's Next?

United said that it'll first be rolled out as a pilot program, which will be targeted to a limited group of MileagePlus members. In order to be eligible for the program at all, passengers must book through United.com and opt in to receive marketing messages. The carrier hopes this program is the next step in helping to curb the overbooking issue, while benefitting both itself and its customers.

"We are always looking at new ways to innovate and improve the customer experience and this extremely small test is an example of one of many opportunities we are reviewing," a United spokesman told TPG. "United has already taken steps to reduce overbooking, resulting in a nearly 90 percent year over year reduction of involuntary denied boardings for the month of June."

United isn't the only airline testing out a program like this. Low-cost Australian carrier Tiger Airways will launch a program like it in August, Qantas plans to launch by October and back here in the US, Alaska Airlines will use the program in September.

The company that's behind the program, Volantio, plans to take its services beyond the commercial airspace world as well. According to the company's chief executive Azim Barodawala, it plans to move into the hospitality space. For example, if a large conference or party was looking to stay in a block of rooms at the W Hotel in Midtown East, Manhattan, but it was already sold out. "What if they could reward some guest for moving to the W Union Square and capture the business on both ends?"