Are Airlines Intentionally Overbooking Their Flights? (popularmechanics.com)

"if you sell one seat to two different people, and only one of them shows up, you get extra money," explains an article in Popular Mechanics shared by schwit1. Citing a recent TED-Ed video, they argue that the airlines' strategy for booking flights "makes perfect sense, just not for you." The most frustrating part? This math could be tuned to ensure the maximum number of tickets sold with a near zero percent chance too many people show up. Instead, the most profitable solutions often involve a decent chance a few passengers getting screwed, because the extra ticket sales outweigh having to put someone up in a hotel now and then.

Comments

YES

[Anonymous Coward]

Next question?

Re:Yes

[Dutch Gun]

Are you not aware that US airlines pay a mandatory cash penalty to passengers for forcibly bumping them? Read this FAQ from Southwest.

The highlights are:

* They try to find volunteers, and give cash bonuses and vouchers to entice this (one-way ticket cost voucher + $100). If longer than 2 hours, $300 in cash plus the voucher.
* If passengers are forced to wait, they get a check for $675 or a voucher for double one-way fare, their choice, if under two hours delay. For longer, a max of $1,350 or voucher for four times one-way fare.

There are always a percentage of people that don't make their flight, and this helps to maximize the passenger load on the flights, at some occasional inconvenience to passengers. Given the financial penalties, airlines certainly don't want to consistently overbook either.

"Getting screwed?" It certainly wouldn't be pleasant to get forcibly bumped, but I think I could deal with the trauma of an hour delay for $675 in compensation.

Re: YES

[AmiMoJo]

The video linked in the summary explains it well.

Basically maximum profit is achieved by consistently overbooking. Normally some people don't turn up, and if there are people who need bumping and compensating that is offset by the extra profit from all the other times overbooking paid off.

It's not entirely true that passengers don't benefit from this. Ticket prices would be higher if they didn't do it. So you trade a very small chance of being bumped for consistently lower fares.

Re: YES

[Xest]

Um, what? The story makes no sense? I saw this article and thought why is this even a story, this isn't a magical revelation, this has been simple fact for many years. I don't even know why this would be news to anyone, let alone people denying it.

The airline industry has long been doing this, they can't simply raise prices or add extra flights because that means they become less competitive against others flying the route, and they can't just add extra flights because it can sometimes be impossible to get hold of extra capacity on a route. Try getting a slot from Heathrow because you want to increase capacity, have fun waiting years until it's your turn in the queue as an airline requesting an extra slot on the airfield and flight plan.

It doesn't matter if they have to pay a few people compensation, paying double the flight cost charged every flight for one or two people isn't exactly a big deal when they've doubled up say 10 seats.

Consider they have 200 seats, they sell 210 tickets, 8 people don't show because they missed their connecting flight, or someone fell ill, or it was just a cancelled business trip and the tickets are non-refundable then sure they have to pay 2 people double the cost of the ticket as compensation, but that means they're still 206 tickets profit up on a flight that only holds 200 people.

It's really just an insurance type setup for the airlines, as long as they optimise their calculations based on data so as they maximise the number of tickets sold vs. the number of tickets actually used then they're going to increase their profits. This is exactly what they do and exactly what they have done since at least the 90s at busy airports. Yes there are people who know how to play the system, but that already gets factored into the calculations airlines make in terms of how many tickets to sell - it's a complex statistical operation and has to factor in things like local events; i.e. if there's been a damaging hurricane at the destination a lot more people might choose not to fly, so they oversubscribe seats by a higher number knowing they'll get more no-shows.

The news for me here is that people weren't aware of this, I always figured it was pretty common knowledge. I'd have thought pretty much anyone whose flown from a major airport would've known about this having seen it first hand and having asked any of the staff the question. This is even more the case as I figured people were more aware than ever nowadays of the sorts of profit maximisation analytics that occur at companies of which this is just another example.

The fact is flying a plane costs a lot of money, so they want to maximise the number of people on that flight. There's a heavy baseline cost of lifting that massive flying tube into the air, and the more tickets sold against that baseline the more profit for the airline. Simplistic mindset type free market economics of "they should just raise the prices!" don't work when you have constraints like airport capacity. Some countries/airports even enforce penalty costs on flights that aren't carrying sufficient numbers of passengers when the airport capacity is near maximum - they can't justify having a carrier taking up a slot that isn't carrying many people so issues like that too incentivise airlines to do everything they can to fill up their planes regardless of the impact on customers. It's a pretty shitty cutthroat industry in general in this regard.

This story is absolutely spot on, it's also at least 30 years too late to be called news too though unfortunately.

It has always been this way

[Anonymous Coward]

Yes, and they have been doing it for at least the last 30 years from my memory. From what my airline industry parents tell me, this practice was prevalent 50 years ago as well. Get with the times PopSci

Get real compensation

[Anonymous Coward]

You can demand compensation (As in, hard cash, not a voucher) if you're booted off a flight. Usually at a minimum of 2x the cost of the ticket. They don't like to advertise it for obvious reasons, but I highly recommend it over the vouchers.

Re:No show?

[NormalVisual]

Who the fuck buys a plane ticket and doesn't show up?

Me, several times. I'd fly out to a customer site to do some work, and usually the return flight was booked the day I expected to be finished, with the expectation I'd drive from the customer site directly to the airport. If the work ran long, and I wasn't where I could call my employer to have them rebook, the seat went unclaimed. My employer would much rather eat the cost of a ticket than have an unhappy customer that's just paid half a million dollars for a new machine + installation.

yeah? So? Been doing this since the 80s.

[WindBourne]

Bob Crandall of American Airlines started this because so many ppl would actually call in with false reservations so that they could fly standby. That kills the load factor. So, was AA's CIO that really created the hub/spoke system, along with dynamic pricing and slightly overbooked seats. Note that when overbooked, somebody gets nice things.

Sadly, the western based airlines are now a disaster due to de-regulations combined with MBAs that do not have an original thought. Worse, because the CEOs now have stock in the airlines, it is in their best interest to look at short-term stock value and not at long-term profits. Crandall REFUSED to have publicly traded stock to any executive when there. AA became the best. Once he left, the execs that took over ran AA into the ground.

Re:How !!

[ShanghaiBill]

is it legal to sell one thing to two different people?

It depends. If you read the fine print on the back of your airline ticket (or on the website if you buy online) it specifically says that you may get bumped, and it also says that a refund or replacement ticket is your only legal recourse. You agreed to those terms when you bought the ticket. So in this case, yes it is legal.

Re:No shit Sherlock?

[ShanghaiBill]

Suppose an airline knows they have 100 seats on a flight and there is a demand for 1000 seats

Then they way underpriced the tickets.

Re: Uh... Yeah?

[Anonymous Coward]

United is truly a hideous airline....in fact most US airlines are. Surly and unhelpful terminal staff, old planes, long waits at airports......awful experience. Having said that, Virgin America isnt too bad except for the awful musical safety demonstration video. At least their planes dont look like the inside of a 40 year old Greyhound bus and the boarding process isnt out of Hunger Games.