The Business Behind Airline Overbook Flights?
Why do Airlines Overbook flights?
To put it simply, it’s a way for airlines to ensure that they are making the most money on every seat.
“On the vast majority of flights that are full, and even when a flight is booked partially empty, there is always going to be some percentage of passengers that are no-shows,” Vinay Bhaskara, Airways senior business analyst
“So the airline has a situation where the minute that flight takes off, those empty seats that were sold to passengers, but are empty, are a lost revenue opportunity,” Bhaskara said.
“In terms of how many extra seats they sell, historically, they used to have a flat number across their entire system, but now with sophisticated computer methods, they actually do it based on the percentage of expected no-shows that they see in the data,” Bhaskara said. “So if the Atlanta to New York route sees 15 no-shows on average per flight then over the course of the year, the next they will basically put in 15 extra seats. So they do it based on the data of how passengers behave on that specific route.”
And most of the time this strategy works.
In fact, in 2016, some 51,000 passengers were involuntary denied boarding (that doesn’t include those who volunteered) on US airlines. While that may seem like a big number, it’s actually a tiny fraction (about .0062%) of the 823 million passengers who flew with US airlines last year.
Bhaskara said that airlines will usually overbook just about any flight that is full, but that doesn’t mean they oversell every fare class.
“Usually, they won’t overbook first class because that could tend to make your most lucrative passengers very angry,” Bhaskara said.
While it might seem like the practice of overbooking only benefits the airlines, Bhaskara said it can also be a good thing for consumers. This is because it enables airlines to sell last minute tickets to consumers at a reasonable price. And because airlines use data to determine how many extra tickets to sell, usually everything works out and no one has to get bumped, he said.
Overbooking is basically a built-in insurance policy for a business. By selling more seats than the airline actually has, they can guarantee a full flight, even if people cancel or don’t show up. An estimated 50,000 people are bumped from flights every year.
The process of figuring out overbooking is much more complicated than something like selling an extra
Over the years, the game of overbooking has become more and more complicated. Now airlines aren’t just examining the likelihood of passengers to show up for their flight, complex algorithms also factor in traffic, weather, connecting flights, and time of day.
A traveler’s best defense in a world of overbook flights is to know their rights. Passengers bumped from a flight in the U.S. are entitled to “denied boarding compensation,” either in the form of cash, check, free tickets, or vouchers for future flights. The amount of compensation varies depending on length of delay and amount spent on original ticket.
