Why do airlines need to overbook? They don't lose money on most no-shows

[pnwmom]

because most of those people either get no refunds, or have to pay change fees that equal the price of the one-way ticket.

So why can't the airline just let a few seats fly empty? The ticket holders will be paying for the tickets, whether they use them or not.

[Hokie]

1. They are selling the same seat twice

By overbooking they pocket the change fee for the no shows and sell the seat to someone else.

Speaking of airlines... How much of a federal bail out did they receive after 9-11-01?

[brooklynite]

8. No bailout for the airlines...why would they need one?

[Hokie]

14. I knew the answer

The airlines were lined up in the halls of Congress for handouts before the bodies were cold.

[Jim__]

13. My reading of this article is major carriers got about $10 billion.

From CBS News - 12-9-02:

…

Propelled by such dire predictions and the airlines' considerable lobbying clout, Congress, over the course of just two days, introduced, passed, and got presidential approval for a $15 billion bailout. Of that sum, $5 billion was earmarked for direct payments to stabilize the nation's air transportation system.

Like many Americans, Frank Roman assumed that money was meant to keep passenger planes aloft. But as CBS News Correspondent Cynthia Bowers reports, then he found out his former employer and current competitor in the freight forwarding business - a company that doesn't even own airplanes - received nearly $10 million.

"I thought this was supposed to keep the airlines flying," says Roman.

While two-thirds of the money doled out by the Department of Transportation did go to the major carriers, hundreds of millions more went to places you wouldn't expect.

…

[HoneyBadger]

2. The people that travel frequently and pay full fare

Because they are flying for business can get refunds. And do.

[metroins]

5. I change on delta without a fee

Sometimes it's last minute.

Not sure if I pay full fare, I use points every time from the amex delta card.

I'm not arguing with you, I'm affirming what you say.

[pnwmom]

18. And they are a small fraction of travelers and LEAST likely to be bumped,

according to the articles. Those most likely to be bumped paid lower fares and don't travel much.

[petronius]

3. From what I've read, a number of airlines (most, all?) will accommodate a no-show, who

arrives late to the airport, with a seat on a later flight at no additional fee (the 'flat tire' rule). So if they left the first seat empty, they would end up missing a fare.

I suppose they've done some complicated mathematics to determine that the cost (economic and social) of occasionally bumping people is worse than the cost of pissing off travelers who miss a flight due to a traffic jam or something...

[Voltaire2]

4. This flight wasn't overbooked.

United needed to get rid of seated paying customers to ship some of their employees.

[MiniMe]

6. United didn't overbook that flight, they wanted to give employees the seats

At least according to Greta. I'm embarrassed to say I watched her tonight. I think the flight was fully booked, but not overbooked.

[The Velveteen Ocelot]

7. Long answer: It started after the Airline Deregulation Act of 1978.

Before that, airlines were treated pretty much like public utilities. The Civil Aeronautics Board regulated all interstate airline routes by setting fares, routes, and schedules. Airlines had their fares and routes approved by the CAB, and were able to charge enough to make a profit but prevented from overcharging - pretty much the way your electric company is regulated by your state utilities commission. If you're old enough to remember air travel before 1978, it was fairly expensive but it was also reasonably pleasant. The seats were wide enough; there was leg room; the food was decent; and passengers weren't treated like cattle.

But then some free-market enthusiasts decided it would be a good idea to get rid of the CAB and let the airlines compete among themselves, which, it was thought, would result in more airlines and lower fares. For awhile this was true. A lot of low-fare, minimum service new airlines were created, like People's Express and ValuJet (unfortunately some of these new airlines were also low-safety). Eventually and inevitably, however, the big ones started eating the little ones, and there went most of the competition the ADA was intended to create. Because of the need to keep fares low, most of the amenities were discontinued.

The basic reason the ADA was in many respects a flop is that airlines are very expensive to run and their profit margin is tiny. Their fixed operating costs - mainly fuel, equipment and maintenance - are very high (labor costs are also high, but when fuel and maintenance get too expensive and the airline isn't making money, guess who gets screwed, thanks in no small part to the Railway Labor Act, which grossly favors airline/railroad management over labor). So, now airlines are "free" to compete for passengers, but passengers have become used to low fares. In order to compete with the other airlines by keeping fares low (the only way they can compete any more), airlines started ordering planes with smaller seats in order to carry more passengers; they started charging more for baggage; there were no blankets, little or no food; etc. (to reduce weight). Most of the things (other than the TSA) that make air travel unpleasant these days are a result, directly or indirectly, of the ADA.

Before the ADA airlines didn't overbook because there was no incentive to do it. The current rationale for overbooking is that the airline's "product" is seats on the plane, and once the airplane takes off with empty seats, those "products" have become worthless. So they calculate the historical number of no-shows for any given flight, and if the expected number of people don't show up they can either re-sell those seats or accommodate standby passengers. (Note: I'm not defending this practice; I'm merely explaining it.) Especially on a flight with over 100 or so passengers, it’s likely that not all of them are going to show up. If they were unable to make it to the airport on time, the airline will likely accommodate them on another flight at extra expense for the airline, more than they made from the no-show's ticket. So, overbooking ensures they make the most money possible from a flight. Also, some passengers game the system by double-booking on different flights with intermediate stops and taking the cheapest flight, leaving the other one as a no-show. The airline can then fill that seat with an overbook.

If the Airline Deregulation Act were repealed and the Civil Aeronautics Board or something like it were to be re-authorized, I think we could go back to the civilized air transportation that existed before 1978. It would be more expensive but less miserable, and there would be greater incentive to improve ground transportation with high-speed rail. The GOPers would never let this happen, though, because they believe that the "free market" fixes everything. IMO, air transportation is like health insurance in the sense that there are no good free-market solutions. If it's not regulated it just doesn't work well.

[GulfCoast66]

22. I grew up before de-regulation

Flying was fun and you were treated like a king...

And normal middle class people had little chance to travel anywhere fun and cool. If you want the experience flying gave us before deregulation, book business or first class. You will get it and at the same price we would all be paying had we not deregulated the airlines.

The fact is that when I was growing up, only rich people went to Europe. Today over half of the college interns I work with have not only been there, but often studied there for a semester.

I know that Ivy league schools and other bastions of higher education have always sent their kids to Europe. But the kids I work with come from almost exclusively state schools.

I am certainly not defending United Airlines action with the gentleman violently evicted from the plan. I have refused to fly United or American for years. I fly Delta and find them acceptable most of the time. Not great, but acceptable. And I do not normally upgrade to Business class unless I am going to Asia.

I define myself as a Social Democratic in the European definition and there I would be a centrist. There are some things that we can let the market control, with decent safety oversight, of course.

[The Velveteen Ocelot]

28. I traveled to Europe as a student, pre-deregulation (1970),

and I wasn't rich. You could get relatively inexpensive discounted or student fares, and a lot of students traveled to Europe in the '60s and '70s. Now, even flying first class isn't much better than flying coach was in the good old days. But people still expect both low fares and excellent service, and that just can't happen under a deregulated system -- just like you can't buy cheap health insurance that covers everything from a private insurance company. Like I said before - the "free market" doesn't work for everything.

[GulfCoast66]

30. Not discounting your experience

But fly first class to Europe now and you get a bed and what amounts to an individual compartment. No way is that comparable to coach in the 70's. It is even better than first class in the 70's.

And I guess rich is a state of mind. I grew up in the south and I will freely admit that perhaps we perceived travelling to Europe as something only the rich did.

But I have a direct, round trip to Paris booked for this September for $500. I would have cost me that much in 1980. And in 1980 where I come from $500 would have been a hell of a lot of money.

Did you get a student discount because part of regulation required the airlines to give you such? Or do they still do so? I truly have no idea.

And I am in favor of single payer health care. But I choose to fly. I must have health care. I agree that the free market does not work for everything. But I has worked extremely well for flight.

[Johonny]

34. I agree

Flying when I was a kid compared to now can't even be imagined. They treat you like * now and you just have to take it or else.

[trotsky]

35. This is a great summary.

Thank you.

[PoindexterOglethorpe]

9. If a seat goes out empty on a flight, that

seat on that flight cannot be sold again.

Airlines over book, using complicated algorithms, in the hope that they will exactly fill the plane with those who hold a reservation, and not hope that there will be standbys of any kind.

Sometimes more people with reservations show up than the algorithm predicts, and then you have what we used to call (maybe still are, for all I know) DBs, Denied Boarding. Of course, if there's an equipment switch, to one with fewer seats, that's a real nightmare.

Airlines have been doing this probably from the very beginning. The practice of overbooking was well established when I went to work for an airline near fifty years ago.

I can tell you that the agents who actually work at the airport HATE overbookings. Unfortunately, the people who make those decisions never work at the airport and have no idea how awful they are, even when things go a whole lot more smoothly. However, if you want to learn a bit more about all this, just Google: Ralph Nader + Allegheny Airlines.

[Hokie]

11. But an empty seat is filled with a paying standby customer correct?

Obviously once a flight leaves an empty seat is an empty seat. By overbooking they have a better chance of flying full and that's the goal for them. If a no show is a nonrefundable ticket they pocket that money too.

[PoindexterOglethorpe]

17. Maybe it will fill with a paying standby customer,

maybe it won't.

Not all tickets are non-refundable. Some people pay the re-booking fee.

[CTyankee]

16. This is one of the reasons I will not travel to my beloved Europe again...

I just cancelled a trip to the south of France. I simply cannot go through the process of getting to the airport, changing planes in Paris and finding the other plane to Marseilles. Aint' worth it. I'm done. Been 8 times to Italy and this would have been my 4th trip to France. Not gonna happen.

I just don't have it in me....

[GulfCoast66]

23. I hate to hear that

The wife and I are going to France and Switzerland this fall. 4th trip to France and 8th to Europe.

I agree that the security is a pain, but changing planes has not really changed that much in the 40 year I have been flying.

We all make our own choices, but to me a few hours of hassle is with it for 3 weeks in Europe. We did just recently get the global entry which makes things much easier. It combines TSA Pre with the ability to skip customs. Cost a hundred bucks for 7 years and you have to have a pretty through background check, but for us it was worth it.

I hope you find a way to see your beloved Europe again.

[CTyankee]

36. thank you. I had wanted so much to revisit the Louvre and the Musee d'Orsay...

plus visiiting Notre Dame Cathedral where I wanted to light candles for loved ones., a practice I started years ago whenever I was in a European city with a cathedral in it. And I love Notre Dame...

[pnwmom]

19. But the seat was already paid for in most cases. It wouldn't need to be sold again -- the airline

hasn't lost money because most passengers either don't receive refunds, or they pay a change fee that equals or is more than the cost of the one-way ticket.

(And travelers who bought the more expensive tickets are least likely to be bumped.)

[pnwmom]

27. But it has already been paid for ONCE. Why should it be paid for TWICE?

The vast majority of seats are non-refundable (and they never bump people with the expensive tickets that are partially refundable). And the change fees usually cost more than just getting a new one-way flight. So the airline loses nothing by flying with an empty seat.

[PoindexterOglethorpe]

33. Not every single ticket is non-refundable.

I don't suppose that these days airlines have the problem that we experienced when I was an airline ticket agent many decades ago before everything was computerized, and travel agencies or other airlines would simply write "OK" in the status box, whether or not they'd confirmed the reservation. One travel agency we knew was notorious for writing OK tickets for flights that had been taken off the schedule months earlier.

Or, if you think of the airlines as profiteering by selling the seat twice, once to someone with a non-refundable ticket who doesn't show up, and the second time to the stand-by passengers, then they are only doing what the cut-throat capitalism of our era justifies and promotes.

I am certainly not defending what happened on United the other day. In fact, what really mystifies me in what I've read about this, is that when the agent came on board asking for volunteers to get off, they didn't keep on enriching the offer until they got the volunteers. I thought that's what they're supposed to do. And I've been in a gate area more than once when that's happened.


The underlying problem is that most airline seats are sold too cheaply. The planes have to go out at least 85% full for the airline to break even. There was a time when averaging 50% load factors did the trick. People have been trained to buy the cheapest possible ticket, even if it means going, for instance, from Albuquerque to Minneapolis via Atlanta, something a friend of mine did and then complained about how long it took. Me, I'll pay more money for the direct flight or better yet the nonstop flight (two entirely different things) between two cities.

I also have no idea if they never overbook first or business class, because I worked for a small airline which only had one class of service, never with the two or three.

Don't for one millisecond think I'm defending what United did. They probably could have gotten the volunteers needed by sweetening the deal for prospective volunteers, but chose not to. I suspect they're going to be slammed with a giant law suit, which will never go to court, by at least that man who was dragged off the plane in that despicable way.

[pnwmom]

37. That's true. BUT the people they bump are the ones with the cheap refundable tickets,

according to the articles I read.

I agree with you about upping the offer. The govt requires them to pay involuntary bumpees as much as $1300. So why didn't they offer at least as much as they'd be required to pay anyway?

[caroldansen]

10. In this particular case they had to shuttle another captain and

crew members to the airport to pick up a plane there for their flight trip. Its not uncommon. They needed the four extra seats for them. Thats what happened. Its unfortunate because it wasnt anyones fault and the passenger ended up in the hospital because he refused to get off. They asked for volunteers but no one volunteered to get off. They are allowed to pay a passenger quite well to volunteer to get off. But no one wanted to.

[Hokie]

12. I have never seen anyone removed once seated due to overbooking or deadheading crew

I have seen deadheading crew members get on and they are usually the last to be seated. I can't believe gate agents have the power to have force used to remove passengers who merely don't wish to give up their seats. This is seriously f%$ed up and United is gonna pay.

[HoneyBadger]

21. I grew up with a kid

His dad was the #16 person at an airline. He could walk up to any counter and bump a 1st class passenger out of any seat that he wanted. Airline no longer exists.

[pnwmom]

20. They didn't offer to pay them "quite well." The terms they offered weren't good enough

to induce anyone to leave voluntarily.

If a person is forced to leave, the airline must compensate them up to $1400 -- and no law would prevent them from offering voluntarily leavers even more. But they only offered them $800 to leave voluntarily. At the least, they should have offered them the same amount they would have been paid for an involuntary leave.

[KT2000]

29. why didn't they account

for the other crew members in the first place? That is the fault of United and they are making their own customers pay the price. Thankfully their computer system allows them to get rid of the passengers who pay the least, or travel the least, thereby reducing their risk of losing customers.
This is bullshit.

[womanofthehills]

32. It is someones fault - United - MSNBC said United definitely in wrong because they had a contract

United planned poorly and will pay bigly. They are allowed to pay for over booking but this was not over booking and you cannot just rip someone off the plane.

[pnwmom]

38. It WAS someone's fault. It was the fault of whoever decided to only offer the volunteers $800.

Even though they knew they'd have to pay as much as $1300 for involuntarily bumped passengers.

[geek tragedy]

15. Supply and demand.

If airlines only sold as many seats as were physically possible, there would be fewer and more expensive seats for sale.

[JCanete]

25. I don't know that that holds entirely. If they could charge more they would now. If alternatively,

they couldn't operate at the lower capacity, then they may raise the ticket-fare, but assuming they can profit at a rate, demand will dictate how much can be charged.

[JCanete]

24. there is no good reason to excuse this behavior. Well, I guess if you wanted to take an

environmental angle that it is better to fill airlines to capacity every time than to send less full planes, (and I'm not sure this is true given that weight contributes to more fuel loss, but it probably still holds).

But given just how expensive it is to fly, and how little time and resources some people have to work with, losing hours or more for getting bumped because of an airline decision is complete bullshit and shouldn't be something people have to put up with. Its not like they have a choice to choose an airline that doesn't do that. Some have to make a decision on cost alone.

It just comes down to profit, and what the airlines have been able to get people used to, but we shouldn't be.

[Pablorama]

26. So they can f*** up your connecting flight and still cash in!

[YOHABLO]

31. I recently got bumped up to 1st class on Delta. 3 other passengers and me.

Thing is, we were the only passengers on on a plane that normally carries about 200. It was from DC to ATL and the weather had been bad. There were lots of flight delays and cancellations that day. People were cramming on to what ever flight they could get on back to ATL. I told Delta I would wait for a later flight that evening. Lucky me got asked to come up and join the flight crew and 3 other passengers for a nice flight back to ATL. Watched "Gone With the Wind", had a vodka tonic and baskets of treats and sat in a nice wide seat. Now I see why folks fly 1st class. Not bad, not bad at all.