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
Every empty seat on the plane is considered a loss. Quite significant because of the costs of flying. Basically flying the plane there has a base cost of X, whether there are passengers or not. Each passenger adds a much smaller cost (Significantly less than the ticket).It’s a big deal for airlines to just to book every flight as close to full as possible.
It’s always assumed some people won’t show up, so if you can get paid for 110 tickets, but only have 100 seats on the plane, you’re making 10 tickets worth of profit. But what if 102 people show up and now you have to give 2 people rewards. Well that’s okay because you still got paid for 8 extra tickets and only had to pay out for 6…
But it’s even better than that for airlines. Because $800 in rewards might only accrue $100 in actual costs to the airline. Most of the people who accept the deal aren’t regular flyers either, because regular flyers usually have plans they can’t delay. So the airline doesn’t even lose much in ticket sales.This is also why they often black out flights likely to be full for rewards customers. Because they’d rather not kick a paying customer for one using rewards. But if the flight is probably going to have empty seats, it costs them relatively little to put your butt into one of them.
So TL:DR: The airline gets it right often enough that the money made by selling extra tickets is more than the money spent on giving rewards.
Economically, it’s due to the fact that the airline industry is one with huge fixed costs but small variable costs.
For the airline, gasing up the plane and flying it is extremely expensive because of the costs of fuel, the plane itself, salaries etc. An extra passenger on the plane is such a small percentage increase in costs(luggage handling, in flight food) that they want as many people on every flight they make so they can make a substantial profit from the sale of tickets. They would rather overbook and have to pay a few people to get off the plane than run an extra flight because each additional flight is extremely expensive but each additional passenger is almost nothing.
They make more money this way—they sell more tickets by overbooking a flight. That’s why they do it.
They make more money this way because some number of people will cancel or modify their flights. Usually this means everyone can be accommodated.
Sometimes their predictions are wrong, and then they have to offer people something to take a later flight. Usually this is dollars toward a future flight, which costs them less than the face value.
Basically they have done the math and even factoring that in, they come out ahead.
Most business that have a perishable product do this to maximize revenue and profit. You can’t re-sell a rental car that didn’t get used the previous day. Yes, you can rent it today, but you can’t get back the missed revenue from a previous day.
Plenty of people miss their flight by simply being late. Also, there are people who fly for business, and it would be a huge problem for them to take a later flight due to scheduling an important business meeting. The problem is when a businessman gets bumped off of a full flight, even if he arrives on time. So…many business people book two separate tickets, and cancel one as they are boarding.
FWIW not every flight is overbooked. It *seems* like it because people flying observe more full flights, because there are more people to observe it. If there are 20 flights that have 1 person on them, and one flight that’s overbooked with 100 people, most people will have an overbooked flight even if that’s not the majority of flights. A lot of flights are, in reality, far from full, it’s just that people aren’t necessarily there to observe them.
Because it’s worth it. It’s really that simple.
The airlines have done their homework, they did the math. The amount that they pay to passengers that get bumped is less than the potential revenue lost by having empty seats.
And it’s not like you have much of a choice, either. There are half-a-dozen airlines left, and they don’t all service every city. So you’ll probably have a choice of 2 or 3 airlines at most, who all do the same thing.
They make more money that way.
A certain number of people are going to miss every flight…their plans changed, they caught an earlier flight, or they just didn’t get to the airport in time. Airlines anticipate this and sell a few extra tickets rather than fly with empty seats. Most the time, they do a good job and no one has to get bumped. Occasionally it doesn’t work out, and they have to bribe someone off of the plane. If they stopped selling tickets when the plane is full, they’d have to charge everyone more.
It might seem like they are spending a lot of money, but it is not every flight and that last-minute traveler might have paid $800 for the ticket you bought for $200 three months before.
They overbook to ensure full capacity… they know that on average, X% of people who book a flight will cancel or change their flight. So they’re better off overselling the flight and compensating people if they have to bump people than flying with unnecessary empty seats
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