Since late 2011, a growing number of airlines have been
offering passengers a chance to bid on upgrades to premium-class seats. Now,
two apps, one already live and one still in development, are aiming to take
those auctions to a new level.
“It’s kind of like playing a video game,” said Kevin
Stamler, CEO of SeatBoost, the app he founded and then launched in April with
airline partner Virgin America.
Meanwhile, Australia-based Seatfrog announced a partnership
agreement last week with Amadeus Next, the arm of the GDS company that assists
travel tech start-ups in the Asia-Pacific region. Seatfrog CEO Iain Griffin
said the upgrade auction app will go live sometime this year.
At present, nearly 40 airlines, most of them international
carriers, have begun auctioning off unsold premium-class seats through a
platform provided by New York- and Montreal-based Plusgrade. The auctions
typically work in a fashion similar to the Bid Up program put in place by
Hawaiian Airlines in June in partnership with Plusgrade.
Under Bid Up, Hawaiian sends emails to coach customers
approximately 10 days ahead of departure inviting them to bid on an upgrade.
Winning bidders are notified 48 hours ahead of the scheduled departure.
The model used by SeatBoost and planned for Seatfrog gives
flyers the opportunity to bid on upgrades in transparent auctions, often just
minutes before a flight.
Thus far, SeatBoost is running auctions only on Virgin
America flights out of Las Vegas and those from San Francisco to Maui and
Honolulu. Auctions for open first-class and Main Cabin Select seats begin
within 90 minutes of departure time.
Once the bidding starts, participants can view where they
stand by checking a leaderboard within the app. When they’re bested, they can
raise their bid. The winning bidder is reticketed at the gate, though Stamler
said the app has the ability to also reticket digitally, as Seatfrog will do,
should an airline partner implement that technology.
“The thing that I think is revolutionary about this is how
excited people are to play and win,” he said.
The auctions offer Virgin America and future airline clients
an opportunity to turn empty premium seats into ancillary revenue while giving
passengers at least the possibility of securing a last-second upgrade at a
discount.
But they also raise the specter of airlines providing fewer
free upgrades to elite members of their loyalty programs.
In an email to Travel Weekly, Virgin America spokesman Dave
Arnold said that the carrier is making sure to protect members of its Elevate loyalty program.
“Importantly, only a limited number of seats are available
for auction on SeatBoost, and seats will only be available for bidding after
our Elevate members have had an opportunity to receive an upgrade,” he said.
“We wanted to ensure that we protected the perks our most loyal guests
receive.”
Both Stamler and Griffin stressed that their auction apps
won’t undermine frequent flyer programs, since the airlines will only release
seats to auction once they have provided upgrades to their elite members.
But analysts who follow the loyalty programs say upgrade
auctions, both those run by airlines through the Plusgrade model and those that
will be run through the new apps, have the potential to continue what is
already a trend in the industry of chipping away at the upgrade perks in
loyalty programs.
“Some airlines aren’t ensuring that the elites get their
upgrades first,” said Chris Lopinto, co-founder of the website Expert Flyer,
which is a research tool for frequent flyers and business travelers.
Lopinto said that auctions can work in concert with the more
pervasive issue of the dwindling cost of premium-class seats, especially on
domestic flights, to erode the availability of free upgrade seats.
As an example of the industry’s trend toward fewer free
upgrades, Brian Karimzad, director of the website Milecards.com, pointed to
Delta’s publicly stated goal of increasing the percentage of its first-class
seats that are purchased at full value from the 45% that the airline saw in
2013 to 70% by 2018.
But he also said that airlines that sign up for SeatBoost,
Seatfrog or any other auction provider, will still want to protect their
loyalty programs and, by extension, the lucrative mileage points deals that
they enter into with banks and credit card companies.
“They have to keep the loyalty program happy as well so they
can continue to sell miles and they can keep inking these multibillion dollar
deals,” Karimzad said.