September 4, 2013 -- Updated 0335 GMT (1135 HKT)
(CNN) -- Flying economy getting you down?
The good news is that getting
bumped up to Business Class just got more affordable. Last month, Iberia
became the latest carrier to roll out an online auction scheme that allows
customers to bid for seating upgrades.
"Everyone knows that if no one is
sitting in seat 2a when the plane takes off from London to New York, it's a loss
for the airline. But everyone in economy wants that seat," explains Ken Harris,
the founder and CEO of Plusgrade, the software company that developed the system.
"The idea was to help correct that, and do it intelligently."
The setup works differently for
each airline, depending on their specifications. Some carriers offer upgrades to
First Class as well.
Who is allowed to participate in
the bidding process also varies. Often, the selection process is determined by
the route and the number of leftover premium seats. On occasion, a customer's
frequent flyer status might also come into play.
Furthermore, bidding is blind;
customers enter how much they're willing to pay, and if that number exceeds
other bids (and the airlines keep that information top secret), they win. The
cost of an upgrade is extremely variable, depending on the airline, season and
route.
Carriers are shy to reveal how
much is necessary in securing a winning bid, though it's fair to say the price
is less than a full-fare, Business Class ticket.
The concept has gained traction
with the airline community. A dozen carriers have already introduced upgrade
auctions to their websites with the help of Plusgrade and he expects to double
that number before the year is out.
Still, one can't help but wonder
if the airlines risk eating into their premium revenues.
Jamie Baker, an airline analyst
at JP Morgan, says it's a possibility.
"If airlines make it too easy to
pay for an upgrade, it might dilute what the traveler would initially be willing
to pay for that ticket," he notes. "As a result, airlines tend to control the
capacity of award seats. There's a certain amount of experimentation in the
process that is required."
Harris, however, seems confident
the bidding system will not impact premium-seating sales.
"There's no guarantee that
simply because you've requested an upgrade, you'll receive it," he says.
"If you want to sit in Business
Class and your budget allows you to do so, you should buy that seat. It's the
only guarantee you won't be sitting in the back of the plane on your next trip
across the ocean."
Austrian Airlines has one of the
more democratic approaches to the process. Everyone, regardless of frequent
flyer status, can bid on an upgrade, assuming any are available on the flight in
question.
The airline isn't worried about
hurting their profits, because they view the full-fare seats and auction
upgrades as two different products, even though passengers who win an upgrade
receive the exact same benefits as someone who paid up front, including access
to premium lounges and extra baggage allowances.
"This product is for a
completely different type of group," explains Stephanie Kunath, Austrian's
director of revenue management and business development.
"It's not for the business
traveler who really wants to fly Business Class and needs a 100% guarantee that
he can. It's for the passenger that just wants to treat himself for a little
extra, and can live with the uncertainty."
While bidding for seats might
not hurt an airline's bottom line, the advent of these auctions will likely eat
away at the number of free upgrades awarded passengers.
"It probably will erode the
complimentary upgrade process to a certain degree, and airlines do run the risk
of offending their elite traveler, who has become accustomed to complimentary
upgrades," says Baker.
Harris, however, argues that
free bump-ups are the stuff of fantasy.
"Free upgrades are really only
given by necessity in operational situations or given to frequent flyers," he
says. "The idea that you can simply smile at a ticket agent and get gifted a
free upgrade is a romantic notion. It simply doesn't happen."
