It just seems like it happens so often, and airlines will sometimes offer you three times the price of the ticket just to stay a few extra hours. Seems like it’d be easy to just…stop selling tickets once the plane is full??
In: Economics
If it bothers you, JETBLUE doesn’t overbook.
Of course, if you don’t show up for your flight, they won’t just put you on the next one, like every other airline will.
That’s the tradeoff.
I didn’t realize airlines still overbook. I thought if I bought a ticket and choose my seat than that’s guaranteed for me. How can they sell another ticket for a seat I already reserved?
It’s cheaper to give out a voucher which will expire and also forces the user to buy more of your services than it is to let a seat go empty.
The airlines don’t have to “pay extra” to passengers who are bumped. They’re given vouchers towards another flight on the same airline. So really they’re giving up some profits on a future flight that may or may not be full. So it doesn’t really cost them as much. Plus I’d be willing to bet a big percentage of the vouchers never get used.
One part of this is that the airline NEEDS that plane at the next location. At some point the money from subsequent flights and delays outweighs the losses from one flight’s overbooking.
Because on any given flight there is a probability of some percentage of 300 passengers not showing up and making the flight. And with good modeling, tracking, and math you can get a good prediction of how many.
eg: Say a flight that leaves at 6:30pm often has more than average people miss the flight because they didn’t plan for rush hour traffic. I’m making up numbers here but let’s say more often than not about 8 people miss that flight or don’t show up. Well that’s 8 more tickets they could sell, now they might not book 8, they might book 5 and leave 3 open (incase not as many miss the flight, or they need to move someone from a canceled flight or something). And many times they’ll be fine. An average ticket for that flight might be $250, but once the flight starts booking up or it gets closer to the date of the flight, those tickets are selling for $500 or more. That’s $2,500 they just made. Now if a bad day happens where more people show up and they have to re-book someone because of a canceled flight and they end up needing a few extra seats, it costs them if they bump them, but they don’t have to pay out on every flight, and even if they do they’ll often do so with gift certificates that cost them less than the face value.
In the end, even paying out for a bumped seat occasionally costs a lot less than what they make up for by filling those extra seats. Of course if someone gets bumped, you notice it, and if someone gets bumped and you weren’t there, they’ll tell you. I flight quite a bit, and many times I’m in a situation where I can take a later flight if they offer money. But it’s only happened to me twice. They don’t bump people as much as we think, we’re just very aware of it when it does happen.
There’s a built in attrition rate that they’re planning for. Let’s for simplicity sake say that every flight has 50 seats and each seat costs 500 dollars. Airlines have figured out that 2 people on average cancel every flight, so they always sell 52 tickets on a 50 flight plane. Sometimes everyone shows up for the flight and they have to pay 2 people 200-300 dollars to not fly. Thats a way better deal than having an average “loss” of 1000 dollars for the 2 people on average that don’t show up.
Depends where in world you are.
Minium legal penalties/regulations for over booking and failing to get extra passengers to destinations in the US on time, virtually non existant.
In EU, for example, far less common due to legal penalties.
By raising the minimum penalty other countrys have made the numbers not ‘add up’ for airlines that want to play the over booking game.
In short, frequent over booking is mainly a US thing. In my life probably took over 500 flights around the world, only ever seen over over booking issues in the US.
To simply put it, there is greater likelihood for people to not show-up versus the excess bookings.
It is cheaper to compensate these excess bookings that cannot be accomodated compared to the profit being realized for these excess bookings that can be serviced in lieu of those who didn’t actually made it to their flights.
Let’s say that a flight has 100 seats, each selling for $100 For this flight historic dropouts of 10 people. So the airline says that theres a 10% no show rate. This means they can sell 10 more tickets, but then one of thos wont sell so they can sell 1 extra extra ticket. This means they sell 111 tickets for a 100 seat flight. Revenue wise this means that they make $11,100 instead of $10,000. So pocket the extra $1,100 you made. Unless that 10% is off. Let’s say that for each person they need to re-book it costs $200. As long as no more than five extra people show up they can still make a profit.
Airlines spend a lot of money to figure out these margins and how much risk they can take. This is money that can be made as a side revenue stream without setting up more flights, so they do it. Better from the airlines perspective to have two unhappy customers on a flight and still make $$$ than leave the $$$ on the spreadsheet and let some lucky customers have extra space to stretch out. Eventually the number of unhappy people will cost them, but airline research shows that customers dont have much loyalty or hold grudges, they just follow the cheapest price that fits their travel window.
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