Last Updated on September 28, 2022
- Airlines deliberately overbook flights because no-show passengers are anticipated
- Overbooking increases profits by selling more tickets than there are seats on the plane
- The cost of compensating bumped passengers is less that the revenue overbooking flights generates
- By making sure planes fly at maximum capacity the per passenger carbon footprint is reduced
Overbooking flights is the airline industry practice of selling more tickets than their are seats on the plane.
Most airlines intentionally overbook flights, it’s a common practice, and it might seem outrageous but why do they do it?
At first glance it doesn’t seam logical. If a plane only has 200 seats why would you sell more than 200 tickets?
Here are the reasons why airlines overbook flights.
On Average 5 Percent Of Passengers Don’t Show Up For Their Flight
Have you ever booked a flight then ended up not turning up on the day?
Things happen. You intended to travel when you booked but then for one reason or another you didn’t fly. Perhaps your car had a flat tire, you got caught in traffic, or couldn’t travel due to illness.
The exact number of passengers that will miss their flight varies. It is somewhat predictable but airlines don’t always get it right.
Airlines examine historical data of no show rates and try to predict how many passengers will actually turn up for any given flight. Airline overbooking statisticians even consider which passengers are flying and assign an individual probability of a no-show based on customer profiling.
Airlines Overbook Flights To Maximize Profit
Airlines are so sure that some passengers won’t show up at the airport that they sell more tickets than there are seats on the plane.
They make more money this way.
Empty seats are not profitable and overbooked flights help airlines to maximize revenue and profits.
Suppose you have a plane with 200 seats.
The flight ticket price is $300.
The statistical computer modeling predicts that 5% of the passengers are not going to show up.
That’s 10 no-show passengers, so without overbooking the flight there would be 10 empty seats on the plane.
The airline sees this as 10 x $300 lost. Without overbooking they are leaving $3000 on the table.
Instead the airline sells 210 tickets for the 200 seater plane. That’s 10 more than the plane can carry.
Most Of The Time Nobody Notices A Flight Has Been Overbooked
What happens when a flight is overbooked? Usually nothing.
Flights are often overbooked but when everything goes smoothly nobody notices.
Most of the time more passengers won’t show up than overbooked tickets and everybody that arrives at the airport gets to fly without any problems.
The airline makes an extra $3000 for that example flight.
Let’s say 10 flights go by and everybody that made it to the airport gets to fly. The overbooking model predictions were working correctly and profits were accumulating. The airline now has an extra $30,000 in the bank.
But sometimes the computer program gets it wrong. Nobody gets sick. Nobody has a flat tyre. Nobody has to run back home because they left the oven on.
When more passengers turn up for a flight than there are seats on the plane then the airline has a problem. They need to decide who gets to fly and which passengers will get bumped.
Airlines don’t want to upset loyal customers so they don’t decide who get’s bumped randomly.
The fare paid by the passenger for a ticket matters. The more you paid for a ticket the less likely you are to be bumped from an overbooked flight. Business class travelers are less likely to be bumped than economy passengers.
A passenger’s frequent flyer status often matters too. Frequent flyers are much less likely to be bumped than occasional flyers.
But the airline has $30,000 in the bank that they can use to try to keep bumped customers happy.
It’s Cheaper For Airlines To Pay Out A Compensation Package
The airline can use some of the profits accumulated by overbooking flights to bump passengers without alienating them.
Airlines are legally allowed to overbook flights but according to the US Department of Transportation they must compensate passengers that have a confirmed reservation and are denied boarding.
Let’s go back to our example.
The airline sold 210 tickets for a plane with only 200 seats.
Let’s say there are 7 no-shows and 203 passengers turn up at the airport.
That means 3 passengers won’t be able to fly.
Because the practice of overbooking flights has been running smoothly the airline has a budget to compensate and pursuade the 3 passengers not to fly.
Airlines try to persuade volunteers to take an alternative flight.
They might offer cash compensation, meal vouchers, flight credit, a seat on the next flight, and even pay for hotel rooms.
Even if those 3 compensated passengers each receive $1000 for their trouble the airline would still be $27,000 up.
Difficulties arise when passengers need to catch connecting flights or have urgent needs to travel.
If you are traveling for a funeral or an important business meeting a later flight might not be suitable.
Sometimes airlines can’t find volunteers and deny passengers boarding against their will. Passengers have even been physically dragged off of planes because there are not enough seats!
It’s cheaper for the airline to pay out compensation when overbooking problems occur than it is to abandon the practice of overbooking flights. In a nutshell that’s why airlines overbook.
As a passenger this means that you can often negotiate a greater compensation package before accepting.
When it goes wrong things can turn nasty.
Dr Dao was physically removed from an overbooked United Airlines flight and injured during the process.
Involuntary bumping of passengers is rare. Usually the airline finds a passenger that is ready to cut a deal to delay their travel.
Airlines Don’t Always Refund No Shows
The other reason that airlines overbook flights is they don’t always refund no-shows or allow passengers to reschedule flights.
This is especially true of low-cost airlines or basic economy fares.
If you miss your flight they are keeping your money and selling the seat again to another passenger.
Even when airlines allow passengers to reschedule flights they usually charge a fee to do this.
In a sense, the airline gets paid for the same seat twice.
If Airlines are legally allowed to overbook flights, and the compensation costs are less than the extra profits generated, so it’s good business to sell seats twice.
Overbooking Flights Is More Environmentally Friendly
This is the one reason airlines overbook flights that it’s hard to argue against.
When airplanes fly at full capacity the environmental impact of flying is reduced.
Airlines are under pressure to reduce their carbon footprint.
The overbooking practice allows planes to fly fuller and reduce the per-passenger carbon footprint.
The challenge is to bumping passengers from an oversold flight without impacting customer service levels and eroding customer loyalty.
The Bottom Line
Airlines believe they can overbook flights and use the extra profits to keep inconvenienced passengers sweet.
Usually they can, but it has the potential to go very wrong.
To avoid being bumped from a flight arrive at the airport early. Sometimes it’s the last passenger who checked-in that gets bumped.
But being bumped from a flight isn’t always a bad thing.
In some ways the bumped passengers can end up being the winners.
That’s why there are usually no shortage of volunteers.
The practice of overbooking flights usually works well and makes sense when passengers are fairly compensated.
It’s when passengers are bumped involuntarily that it becomes morally dubious. Airlines need to be careful, remain compassionate, and not overstep the line in the drive for extra profits.