What it is, is bad marketing and communication from the airline. You don't let your passengers know that a conflict between crew and company is taking them hostage. You determine which 2 first class seats have to be vacated, and then do whatever it takes to keep the two "downgraded" passengers happy. And yes, occasionally that will imply a lavish expense of miles/vouchers/cash/free tickets.
I had an experience with Condor Flugdienste, whereby I had booked my business class seat months in advance, full fare, and as I was a gold member of their alliance at the time, I really did NOT expect to be booted down to premium economy. However, as their decrepit old 767 had trouble waking up in Frankfurt that morning, 2 hours delay meant that the enlarger was entitled to 2 (!) business class seats for his enroute rest, and one of those seat happened to be "mine". The gate agent never even entered into negotiations with me, just told me the facts and faced me with the choice of either waiting 4 days (!!) for the next direct flight, or sit in premium economy. Fair enough so far, but here's the rub: instead of helping get compensation, all I was left with was an internet address to which I was "authorized" to complain, and 6 weeks and 2 phone calls later, what I got was the price-difference between the premium eco and the business class ticket. No apology, no compensation, NOTHING. So f*ck Condor from now on, and my loyalty miles are now with another alliance. Had they wanted to keep more of my business, all they had to do was apologize, give me an upgrade voucher for a future flight, and compensate my fare difference without my having to beg for it...