Air Canada is turning to an age-old method to fill empty seats in its business and premium-economy cabins – and generate extra revenue.
The airline is auctioning off flight upgrades online and urging its passengers via e-mails to participate. Air Canada began testing online auctions in a pilot program late this past year, but plans to make it available across its network by this summer.
Auctions are, of course, not a new idea, but are becoming more commonplace among airlines as they try to gain some incremental revenue out of seats that would otherwise sit empty.
"They're all thinking about it because they all have the same problem, which is if they have a class of service or a cabin that is underutilized by initial purchasers, they're trying to monetize the inventory that's about to spoil," said industry analyst Robert Mann, who heads R.W. Mann & Co., in Port Washington, N.Y. "Anybody who has differentiated cabins or classes of service has this problem and so eventually they will all do it."
The Air Canada program will be available across the entire network by this summer, said Mark Nasr, managing director of e-commerce, loyalty programs and ancillary revenue.
"We had launched a pilot for the first six-nine months with the intention of slowly ramping this up in terms of both who we're making the offers to, as well as how many routes it's eligible on," Mr. Nasr said. "Because of customer demand, we've grown the product faster than we were originally intending to do."
Part of the goal of the program, he said, is to entice customers who have upgraded from a lower class of seat to book premium economy or business class on subsequent flights.
He would not provide data on the number of passengers solicited for an upgrade who have actually done so.
Demand for business-class seats, for example, varies widely by time of year, day of the week and even the market, Mr. Nasr noted.
"It's really designed to appeal more to leisure customers who might not have a willingness or an ability to pay the published business-class fare up front, but might be willing to bid a reasonable extra amount of money for a discounted offer," he said.
The Air Canada program is being run by Plusgrade, a Montreal-based company that also lists Air China, Deutsche Lufthansa AG and Qantas Airways Ltd. as customers. The Air Canada e-mail solicitation directs passengers to a site where a sliding scale and a gauge tells them whether their bid is strong or weak.
Economy-class passengers on a recent flight between Toronto and Fort Myers, Fla., who originally paid a discounted $342 for an economy seat on Air Canada's low-cost carrier, Rouge, found that a $250 bid to upgrade to premium economy was rated poor, while a $600 bid was rated "excellent."
Passengers travelling to Rome from Toronto next month who paid $1,274 for economy-class seats could bid to upgrade to business class for another $1,575. That would make their total fare of $2,849 less than half the $6,211 they would have paid for business class if they had booked business-class tickets initially.
"We've done a lot to change how and at what price customers can access our business cabins over the last couple of years," Mr. Nasr said.
That included offering discounted business-class tickets to customers at check-in.
WestJet Airlines Ltd., Air Canada's main domestic competitor, said it does not have a bidding system on its flights.