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

[Anonymous Coward]

No shit. This has been standard practice in any type of business that makes bookings for anything for many decades, and it isn't a secret. Are people really this dumb? A TED talk? Really? Beginning to think cavemen were more advanced than 'educated' people today. As stated: YES

Re: YES

[thinkwaitfast]

I had a friend in college who was doing this 30 years ago. He would buy the most expensive ticket from Phoenix to San Diego for Friday afternoon. Every Friday he would go to the airport and give up his ticket in exchange for a refund and a free ticket to anywhere in the country. Since they were all but guaranteed to be at least five people wanting to get on the flight, it was a no brain scam. I remember at one time over Christmas vacation he showed me a stack of 35 tickets that he had gotten. He used a few, but mostly resold them. Life was a lot easier then. It paid for his college.

Re: YES

[Anonymous Coward]

That's strange. That doesn't make any sense. Why were they repeatedly overbooking flights by such a huge amount when someone at an information disadvantage was able to notice a pattern and exploit it for such a huge profit? Seems like someone wasn't doing their job.

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

[ShanghaiBill]

That doesn't make any sense. Why were they repeatedly overbooking flights by such a huge amount when someone at an information disadvantage was able to notice a pattern and exploit it for such a huge profit?

Not only that, but if a flight was over 100% booked 35 times in a row, the airline would either raise the ticket prices on that flight, or add extra flights to the route. The story makes no sense, and I don't believe it.

Re: YES

[jdgoulden]

My thesis adviser and his wife did much the same thing; book all of their travel at peak times, then take the bump and the free ticket / bonus miles / whatever and the free hotel room and fly out the next day. They flew mostly for free for the entire time I knew him.

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

Re:It has always been this way

[ShanghaiBill]

This is why I get most of my hotel rooms with American Express concierge service.

I use AirBNB. I have never been bumped. When I rent a sofa bed in spare bedroom for $18, it is all mine.

Re:It has always been this way

[mrbester]

There was that one time about 2000 years ago. Fortunately there was a stable available so others didn't have to deal with a mewling, puking newborn in the foyer while they were trying to sleep on the chairs.

Yes

[Dutch Gun]

Yes, of course they do. I thought this was common knowledge. From what I've seen, airlines typically deal with over-booking by offering passengers free first-class upgrades on a later flight, or other perks to induce people to voluntarily give up their seats.

I wouldn't be surprised if they *don't* overbook flights at the busiest time of the year, since that's almost a guaranteed money-loser for them, but I have no evidence either way. Has anyone ever experienced overbooked flights at busy holidays, etc? I suppose it's also airline-specific.

No

[JustOK]

They've been under-building their airplanes.

Uh... Yeah?

[chaboud]

This has been standard practice for years. In fact, if you have status on some airlines, you can *always* bump someone else off of any flight with the right ticket type.

I flew a few times on a United IAD->SFO route, and of four trips, I got involuntarily deferred twice. The second time, I noted to the gate agent that there's always an equipment change that screws up the flight, and she said, I shit you not, "they do it every night so we can give vouchers instead of cutting checks, even though the change is for fewer seats than the flight was overbooked. It sucks every night."

So, yeah, I gave those vouchers away, because fuck if I'm going to fly United again, even for free.

Re: Uh... Yeah?

[chaboud]

That's right.

If they purely overbook a flight and too many people show up, people getting bumped is known as an involuntary deferment. They used to have to cut you a check for the price of your ticket, up to $400. (And still get you there). Now that's been bumped up by the FAA ($800 or something).

If they have an equipment change that reduces seat count, they don't have to pay out cash. They can instead "compensate" you with credit on their airline that A) may not be spent at all and B) may require that you put more cash in later for an actual purchase. All the while, they get to hang onto the cash that you paid in the first place.

So the scam is that they schedule your flight (last of the day, for instance) on a plane that they *know* needs mechanical work. They don't do the work, and they "swap" planes at the last minute (to the plane that was *always* going to make that flight). Boom. Instant loophole.

I actually had these particulars explained to me by a United employee at the gate. She must have been having a shit day.

Is this April Fools?

[mattwarden]

This is not an open question and the answer is not news. Of course they overbook their flights, and you should be happy they do. Unused seats are inefficient and result in higher ticket prices. If x% don't show up to a given route, then the airline should oversell up to x% depending on the VDB cost (e.g. "500 Delta dollars") and the cost of the fare.

Most passengers have their tickets heavily subsidized by price insensitive passengers (e.g. Business travelers). If you're reading an article claiming that your average passenger is "getting screwed", you can be sure the author has no idea what he or she is talking about.

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.

Airlines overbook?

[ATMAvatar]

Next you're going to try and convince me that ISPs oversell bandwidth, hardware stores don't actually give me boards that measure 2"x4" in the cross section, that hard-drive manufacturers don't label drives as their formatted capacity, and printer cartridges don't let you utilize 100% of the ink inside.

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.

How !!

[invictusvoyd]

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

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:How !!

[Solandri]

Careful what you wish for. If it were illegal to sell one seat to two different people, yes your flight would never be overbooked. But if you missed your flight, you wouldn't be able to get a refund or rebook. The airline would say tough - by law that was your seat and only your seat. Once you bought it, by law they weren't allowed to sell it to anyone else. So once you bought it it was yours period. If you missed the plane, that's not their problem. If you want to get to your destination, you'll have to buy another ticket.

I like the current system. The airlines usually have enough people overbooked or on standby that they don't lose money when you miss your flight, and they extend the favor to you by rebooking you on a later flight at no extra charge. No need to buy a new ticket. And usually there are enough volunteers willing to be bumped that a forced bump is very rare.

The quote in TFS has it backwards - you arrive at the conclusion that overbooking is bad if you only consider what makes perfect sense for the customer, and completely ignore what makes sense for the airline. If you forcibly implement a system that costs the airlines more money, well they have to make that money up somewhere. In this case it would be from the wallets of passengers who miss their flight. The current system represents a good compromise where the desires of both the airlines (to have full flights) and passengers (to be allowed to rebook without penalty or with minimal penalty if they miss a flight) are taken into account.

Nobody gets bumped from their flight

[Sun]

That is pure misinformation. What does happen is that 50,000 passengers a year get an offer to fly at a later flight for compensation, and they accept that offer!

The number of people who don't fly on a flight for which they have a confirmed ticket without their consent is near zero.

Shachar

Re: No shit Sherlock?

[samjam]

I watched such a drama unfold before me. It turned out that those seated were in the wrong theatre.

Re:Unconscionable terms.

[guruevi]

The FAA has rules around that. If you get bumped from your flight you are eligible for 4x the ticket price of the entire trip and they have to accommodate alternative travel or housing. You may have to take them to small claims to get it, they often only give vouchers up to 2x the ticket price.