air canada ordered to increase compensation for involuntary denial of boardings

in this cbc news article, they report that the canada transport agency has ruled that air canada's current compensation for an involuntary denial of boarding needs to be increased. (ht: dan and jason via facebook)

what is an oversold flight?
airlines oversell their flights on a consistent basis. the idea is that based on previous statistics and performance, they know that a certain number of passengers on any given route will not physically make it to their seats come departure time. this could be for a variety of reasons:

1. cancelling a refundable ticket at the last minute
2. passengers simply not showing up, or showing up too late (e.g., arriving too late at baggage cut off time)
3. passengers who misconnect based on late inbound flights.

the airline knows that if a seat flies out empty, it is potentially revenue lost. even if the flight has been sold to someone else, if that other person does not show up, then there was the potential for the airline to have sold the seat to someone else as well. therefore, the amount of money lost can be significant. airlines hedge their bets by overselling flights so as to minimize the amount of lost revenue.

but sometimes, it backfires. sometimes, everyone does show up. in that case, they try to bump up passengers from economy class to business class (usually elite passengers in a process known as an operational upgrade, also known as an op-up). if doing even that doesn't solve the numbers problem, then they will need to deny people from boarding the flight.

voluntary denial of boarding
the first step is to look for volunteers. airlines are required to ask for volunteers before bumping people off. these volunteers are essentially signing up for a voluntary denial of boarding. the airline usually tries to offer compensation, which can be significant. i was offered a voluntary denial of boarding on my oversold flight from LAX-HNL two years ago, delaying my arrival by 4 hours. but in the process, i received $400 in travel vouchers. if there are not enough volunteers initially, the potential compensation increases in a desperate bid to win volunteers. usually that is enough.

involuntary denial of boarding
this occurs when not enough volunteers are found. involuntary denial of boarding policies for air canada can be found here on page 3. it looks like they begin boarding all people with confirmed seats. then they board everyone with disabilities, unaccompanied minors, or anyone in the airline's view who would be faced with undue hardship if they were not carried. then full fare economy and business class passengers board. finally, they board in the order with which they presented themselves at check-in. this is why checking in as early as possible is usually beneficial if you do not want to be bumped off the flight.

compensation for domestic and international flights in america
frequent flying summarizes the rules here. they are as below:

• no compensation is required if the airline can get you to your final destination within one hour of your originally scheduled arrival time. 
• 1-2 hour delay, you receive a cash compensation of 200% of your original one-way fare, up to $650.
• 2+ hour delay, you receive a cash compensation of 400% of your original one-way fare, up to $1,300.

in the case of my voluntary denial of boarding to HNL, the one-way ticket price was roughly 200$. for a 4-hour delay, i could have, in theory, received up to $800. however, there were certainly no shortage of volunteers. supply and demand: if enough people are willing to settle for $400, then that's great news to the airline. in this case, united airlines only paid out $400 for overbooking, which is a savings of 50% for them. luckily, i got to sit in the lounge during that time.

of course, when asked, they provide meal vouchers, hotels for overnight stays if necessary. sometimes they will lump in seat upgrades (economy plus or business) as a part of the volunteer package.

current compensation for domestic flights on air canada
i didn't realize this, but according to the article, it's currently set at a $200 voucher or $100 in cash. the new ruling has suggested that it has to be higher although the actual amount has not yet been set. i fully support this as it's only fair to the consumer. i would be interested in seeing whether they adopt the same limits as the american airlines do. i would certainly hope so, as it could potentially make the art of flying that much more lucrative.

this, of course, probably impacts me very little. i've never been on an oversold flight that i could have volunteered off of on air canada. i also don't use them very often for transborder travel due to their 50% mileage earning rates. and i sometimes lean more towards westjet flights (who apparently do not overbook their flights) on domestic itineraries as i can get 100% non-status miles on american airlines compared to air canada's 25% non-status miles for usually the same price.