First-class airlines seats are a downright pleasant experience when compared to economy/coach class travel. Whether it's in the better food, access to airport lounges, or the lie-flat seat suites available on some flights, first-class tickets offer a whole new way to fly.
But purchasing a first class ticket comes with a large additional cost -- sometimes multiples of the total cost of an economy/coach ticket. Passengers often get around this by using upgrades, and one major airline is testing a new way to sell these sought-after upgrades.
Airlines have realized that it is not always possible to sell the entire first class section at full price, so they have launched other tactics to make use of these valuable seats.
United Continental (NYSE:UAL) and Delta Air Lines (NYSE:DAL) are among the airlines offering the ability to upgrade using frequent flyer miles. These miles can be earned from past flights, related purchases, or even through the airlines' respective credit card offerings.
Most airlines also offer passengers with high-level status priority in the upgrade line. And when all else fails, upgrades are often sold for partial value at the check-in counter, or even at the gate.
On certain routes, American Airlines, a subsidiary of AMR (NASDAQOTH:AAMRQ), is testing a new selling method of allowing passengers to bid on upgrades. In its own words, American Airlines explains how the process works.
How does it work?
Make us an offer: Select the amount (per person) you would like to offer for the upgrade of each eligible segment on your itinerary.
Enter your payment information: Enter your credit card details, which will be charged only if your offer is accepted.
Review and submit: Review your information and offer amount/s and submit the request.
This method appears to follow in the same footsteps as the long employed bidding method at Priceline.com (NASDAQ:BKNG). Frugal travelers could submit offers to Priceline.com, and the travel website would shop them around. Since then, Priceline.com has expanded beyond the "Name Your Own Price" method, but still offers it for customers seeking "deeper discounts."
As the American Airlines bidding system rolls out, it may begin with a manual approach (although there is no talk of counter offering flyers' offers), as the trial-sized scale of the initial rollout would make this more manageable.
But in the long run, American Airlines may turn toward an automatic response system. With airlines being highly technologically based using all sorts of computer formulas to generate the fares you see, you should expect that the determination of whether American Airlines accepts your offer will originate from a formula that would boggle the mind of the ordinary traveler just trying to get the seat with the better food. After all, if passengers know the minimum amount the airline will accept for every flight, you can bet what type of offers American Airlines will be receiving.
American Airlines is conducting this bidding method in select markets; but, if met with success, travelers may have the option to bid on upgrades for other flights, as well. Additionally, travelers on other airlines could see this method move to their carrier if it's a positive for American Airlines.
Travelers on US Airways (NYSE:LCC) would be among the top contenders to see this move to their airline, as American Airlines and US Airways are expected to begin the merger integration process shortly. Even before the carriers are fully integrated, American Airlines may add the feature to US Airways so both systems can be efficiently running before the integration is complete.
But relax frequent flyers: American Airlines has noted that elite members will still receive priority, and this bidding method will not affect them. For the rest of us, getting an airline upgrade may evolve into the "Name Your Own Price" experience at Priceline.com.
A growth opportunity
Alexander MacLennan owns shares of AMR, Delta Air Lines, and Priceline.com. Alexander MacLennan has the following options: long January 2015 $22 calls on Delta Air Lines, long January 2015 $25 calls on Delta Air Lines, long January 2015 $30 calls on Delta Air Lines, and long January 2015 $17 calls on US Airways Group. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool recommends Priceline.com. The Motley Fool owns shares of Priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.