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After the infamous incident at O’Hare where we saw Dr. David Dao dragged off United Airlines flight 3411 (SEE: Thoughts on the man dragged off a flight and United’s PR nightmare), we’ve seen one airline commit to stop overbooking flights: Southwest. Along with JetBlue, who already doesn’t overbook, this makes two major U.S. airlines that no longer will sell tickets in excess of the number of seats on a plane. You can Southwest’s new explanation in their FAQs.
To many people, this sounds like a logical and reasonable thing to do. But I want to show why this isn’t actually the best idea. Here are the 2 big reasons overbooking makes sense:
It allows flexible travelers to reap rewards
There are few thing cooler than volunteering to be bumped from a flight and being rewarded by the airline for your inconvenience. Especially if it isn’t an inconvenience. For the really flexible, you can make enough to travel for literally years.
I’ve offered to be bumped from flights multiple times, but only once was my seat actually needed. The incident netted me a $300 voucher from United and an extra 3 hours at the airport, during which I simply got some extra work done. Win.
The incident with Dr. Dao also prompted airlines to increase compensation to passengers when the volunteer to be bumped from a flight. I’m not sure how much airlines are typically offering in practice (although one family got $1,350 a piece), but on paper gate agents can now offer up to $2,000. Managers can offer up to $9,950 (SEE: Delta has increased “voluntarily denied boarding” compensation cap to nearly $10,000).
With a new, higher ceiling on compensation, flexible travelers can be even more handsomely rewarded for volunteering to take a different flight.
It allows airlines to maximize revenue
While this may sound like a *bad* thing to some, allowing airlines to maximize revenue by overbooking is something we want. Assuming a certain number of “no shows” allows airlines to sell a few last-minute tickets to travelers for serious profit. It will cost them the same to operate the plane either way.
Experts estimate that overbooking adds 1% to airline revenue. The extra tickets an airline sells in excess of the number of seats on the plane is money in their pocket.
It’s true that a 1% increase in revenue isn’t all that much. Naively assuming a fare increase of 1% would result if the practice of overbooking was eliminated, this probably wouldn’t be noticed by many travelers.
With the higher caps on compensation, it is a little more doubtful whether overbooking will be as lucrative for airlines as it has been. The converse is that there will hopefully be fewer instances of involuntarily denied boarding, and therefore fewer disgruntled passengers. It’s far better for the airline to come to a mutually agreeable exchange with a passenger than having the computer randomly pick one or two to kick off.
Driven by data
Airlines have overbooking down to a science. With years of statistics at their disposal, airlines have gotten better and better at estimating how many passengers will fail to show for a given flight.
If too many people do in fact show up for the flight, the airline will offer compensation to travelers willing to be re-accommodated. Overbooking is a risk, but it also offers a reward if an airline “guesses” right on a given flight. Years of data allow airlines to “guess” correctly enough of the time that they can make them extra profits from overbooking.
Also note that overbooking has been on the decline for years as airlines have gotten better and better at forecasting how many tickets to sell for a given flight. In 2016 only 6.2 people per 100,000 passengers were bumped from a flight. It is not unreasonable to assume that this downward trend will continue.
Many people also don’t realize that eliminating the overbooking of flights will not completely alleviate the issue of involuntarily denied boarding. There may be weight issues at times, or potentially non-functional seats on a specific aircraft (the computer that booked the tickets may not know this). There is also the issue of needing to reposition crew to service additional flights, such as in the incident with Dr. Dao.
Ih short, the number of denied boardings (both voluntary and involuntary) is getting better, even with the practice of overbooking. If Southwest and JetBlue want to start a new trend, good for them. But I hope the other airlines should maintain the status quo.
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