Why Pay for Something You Can Get for Free?

A few weeks back, I took the family on a big vacation. Normally, that means hefty airfares – upwards of 18,000 miles covered can cost a pretty penny – especially for a large family. However, since I am a regular traveler, I did every single ticket on airmiles, and paid only the taxes required.

As my readers know, most of my miles are on United, which opens up the Star Alliance network for tickets – Air Canada, Lufthansa, Swiss, Brussels, Singapore, ANA, etc. My first leg was 6,000 miles to Newark airport. At the time I booked, United did not have award seats available directly into Newark (EWR), but did have on Air Canada via Toronto (YYZ). We take what we can get, and I booked several seats on the Air Canada flights.

An interesting element of interline award ticketing is that an airline must pay its partners for seats. Thus, if Air Canada gives a miles seat to one of its Aeroplan members, it costs them nothing but potential foregone revenue. By contrast, if Air Canada gives a miles seat to a partner like United, United must pay Air Canada for that seat. It is a pre-negotiated rate, much less than it would get on the open market, which is why Air Canada only opens up a few seats, but it still costs United real money.

The day before my flight, I checked United on the nonstop into Newark. After all, I far prefer to fly nonstop than via a connection, which adds time and the potential for a missed connection. Sure enough, United had 12 seats open on the nonstop, far more than I needed… but not 1 award seat.

I had several extended calls with United, but nothing could get them to open up the seats as award seats. Apparently, with just 12 coach seats left on a 200-coach-seat 777, United felt pretty strongly that they could sell them. The real questions, though, are:

  1. What are the chances United will be able to sell them?
  2. What are the chances United will be able to sell them for more than it is costing them to pay Air Canada for my seats?

Let’s say that Air Canada sold my seats to United for $700 each. If United can sell their seats at the last minute for more than $700, then by all means, they should hold onto those seats. On the other hand, if they cannot sell every last one for more than $700, then it would make sense for them to give me the unused inventory, and save themselves the $700 per seat they will have to pay Air Canada.

Unsurprisingly, they did not sell every seat. Actually, they did not sell a single one…. nor did they open them up to awards.

I sat in the airport lounge with my family, waiting for the Air Canada flight, watching the United flight taxi away from the gate… with 12 open seats on board.

Personally, I enjoyed the Air Canada flight. I grew up in Canada, hold Canadian citizenship, and still think maple syrup and hockey are among the greatest inventions of modern man. Flying Air Canada is like being home in so many ways. But what a waste for United to pay someone else for something they could have gotten for free.

About Avi Deitcher

Avi Deitcher is a technology business consultant who lives to dramatically improve fast-moving and fast-growing companies. He writes regularly on this blog, and can be reached via Facebook, Twitter and avi@atomicinc.com.
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