Why do airlines seem to overbook flights so often, especially when they end up having to pay extra in rewards to passengers who give up their seats?

Question

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

Answer 1

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.