Last updated: 10:42 AM ET, Thu February 25 2016

The Airline Upgrade Auction Trend: Is It Worth It?

Airlines & Airports | Josh Lew | February 24, 2016

The Airline Upgrade Auction Trend: Is It Worth It?

Photo courtesy of Thinkstock

Airlines have been experimenting with auctioning off upgrades for the past few years. Virgin Atlantic, Air New Zealand, El Al and Etihad were among the first carriers to allow people to bid on upgrades from economy class to business and first class. These early adopters used a system called Plusgrade, which allows for blind bidding. 

This idea made sense in 2013, when it first became popular in some parts of the world, because, at that time, premium classes had a lot of unfilled seats. By allowing passengers who already had tickets to purchase upgrades, airlines would ensure that more of these seats were filled. Even if someone was able to get a great price on the upgrade, the airline would still be getting some sort of profit from that particular seat. 

A growing trend

Now, as many as 30 airlines have adopted the auction idea. American Airlines was the first U.S.-based airline to experiment with auctions, but it has currently put its program on ice as it works to fully integrate its operations after merging with U.S. Airways. Virgin America is using a third-party app called SeatBoost, which allows fliers to bid right at the gate before boarding. Bids start at $10-$50 depending on the quality of the seat up for auction. SeatBoost is currently available for flights departing from Las Vegas and for the San Francisco-Las Vegas service. 

What does the growth of the upgrade auction trend mean for fliers? 

Depending on the auction model, fliers could potentially get a very cheap upgrade. That said, they shouldn’t expect to get a $5 bump to first class just because they were the only one bidding. Moving up in class still costs quite a bit. 

READ MORE: Are Airlines Moving Beyond A La Carte Pricing?

When El Al adopted the auction practice in 2013, the Wall Street Journal reported that winning bids for economy class to business class upgrades averaged about $800. That is a good deal considering that such upgrades usually cost at least twice as much. However, no one would call $800 "cheap."

To ensure that they get a reasonable amount for the upgrades, most airlines set a minimum bid price. Also, they use a blind auction model so that bidders can't outbid their competitors by $1 and get the upgrade for the cheapest amount possible. 

Frequent flyers get left out

If this trend continues, it will affect frequent flyers as well. Loyalty program members can occasionally ask for and receive a free upgrade. This is still possible, but as airlines seek to improve their profits-per-seat and profits-per-flight statistics, scoring free upgrades is becoming less and less likely. Requests for a bump-up could be met with an offer to purchase an upgrade outright or an invitation to participate in an auction. 

READ MORE: 6 Oddball Incentives and Perks Used by Airlines

Most airlines are rather secretive about their bidding process. They don’t announce winning bids openly and usually conduct auctions right before boarding. The reason for taking these steps is to make certain that the auctions do not interfere with the regular premium class trade. If someone who wants to sit in business class thinks that they can buy an economy class fare and then upgrade for less than the cost of a premium class fare, they will simply try to do that every time and never spring for a full fare.

Since there is no guarantee that an auction will even be taking place before a particular flight (and no guarantee that they will win if it does), business class travelers will still be better off purchasing full fares if they want to be sure that they have a seat. 

Upgrade auctions will give fliers a chance at cheaper, but not not necessarily cheap, upgrades. It looks like more airlines are getting on board with this trend. 


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