If a full plane can hold 350 people historically the airline knows 10 won’t show up on average or re hook last min. So the airline sells 360 tickets and on an average day 10 no shows equals a full flight so they make max money.
They also made money on the 10 no shows or at least admin fees if someone had a flexi ticket etc.
Now if only 8 are no shows (let’s say each ticket is £100) there are 2 too many for the flight, airline has made £800 from the 8 no shows so they offer 2 people a free upgrade on next flight or say £100 each, and airline still makes £600 more than only selling 350 tickets.
Hotels also do this along with restaurants etc.
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