Why Downgrades Happen
First, it's important to know why downgrades happen. The most common reason is an aircraft substitution, when an airline swaps in a different plane with fewer first-class seats than what was scheduled. This happens most often due to a mechanical issue.
Another reason is the airline may have sold more seats in a premium cabin than the aircraft holds. Overselling flights is a common practice in the airline industry as there's usually a percentage of people with confirmed reservations, who don't show up. While airlines tend not to oversell the first-class cabin, they will often sell more business-class seats than the aircraft can hold.
Plus, since 9/11, more federal air marshals have been assigned to flights than in previous years. And they often approach the gate at the last minute and must be provided a seat by the airline, often in the first-class cabin. If the flight is booked to capacity up front, airlines are required to downgrade a paying passenger to accommodate a federal air marshal.
Finally, system errors occur where two passengers hold a boarding pass for the same seat. This happened to me last year where another passenger (who paid the full first-class fare) had the same seat assigned as mine. Since I upgraded from coach, I was the unfortunate one to get the downgrade.
How to Get Compensation
There are some strategies if you do get downgraded. "Nothing's automatic. You can't just expect an airline to do it right," frequent flier guru Brian Kelly — who runs ThePointsGuy.com and travels more than 125,000 miles a year — told Reuters.
It's not that anything shady is going on, but rather that the changes tend to happen in a chaotic environment. "When you're at the airport, it's highly stressful for the gate agent. Their job is to get the plane out. Most of the time, the airline isn't going to proactively reach out to compensate you," Kelly said.
This is what happened to Aaron Reese and his wife, Kate, this summer, when she was downgraded from a first-class seat. It was not until they wrote a complaint letter that the airline offered any compensation, but it took a long time for them to deliver.
Reese said he appreciated the airline got him and his wife where they were going, but is frustrated that months later they still had to keep asking United Continental Holdings for the miles to be credited. "It definitely would have been nice to have been told upfront, 'Hey, we see you're being downgraded, we'll refund you half or all the miles you used for the upgrade,' " Reese told Reuters.
United spokesman Charles Hobart said something went awry in the Reeses' case, but that has finally been rectified.
"As part of the downgrade process, we automatically refund any applicable difference in fares and redeposit the miles back into the customer's MileagePlus account," he said. "In the case of the Reeses, we erred in the process and did not fully redeposit their miles. We have since done so, and have reached out to the Reeses to apologize."