Why Can Airlines Overbook Flights?

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When my fiancee and I flew back to Taiwan a few weeks ago, the United flight from Baltimore Washington International Airport to Los Angeles International Airport was oversold and they were offering folks some vouchers to give up their seats. Luckily enough of them agreed and no one was forced off the flight in return for a hotel night and a meal voucher. That made me wonder… why is it that airlines can sell products that they don’t necessarily have?

I think everyone understands why the airlines do this but I don’t understand why they’re allowed to do it. When you purchase something online, the vendor will tell you that the product you want is out of stock. Sometimes they let you backorder it and they won’t charge you until it ships. Sometimes they won’t let you order it at all and so you aren’t charged anything. Airlines? They don’t tell you a thing until you’re all packed, your bags are checked, and your plans are all set… then they drop on you that you can’t get on the flight. So, in return for losing part of your trip, getting everything re-planned, and having to deal with the annoyances of your plans laid to waste, you get a few concessions that you probably wouldn’t want anyway. How is this possibly fair?

I don’t mean to rant but this particular article on the Consumerist about a Marine looking to go home to visit his dying grandmother struck a chord with me because of the similarities but I’ve always thought the whole practice of overbooking was ridiculous in the first place.

{ 19 comments, please add your thoughts now! }

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19 Responses to “Why Can Airlines Overbook Flights?”

  1. Jason H says:

    Airlines overbook, and are allowed to overbook, because people don’t show up for their flights. Some of these people just outright miss their flight, some of them fly standby on an earlier flight, and some of them have refundable tickets that allow them to change their mind. If the airlines didn’t overbook their flight, then the planes would fly with open seats (read lost revenue). Airlines are seeking to maximize revenue while minimizing customer inconvenience, but their systems aren’t foolproof as they rely on flight load statistics to determine how much to overbook a flight.

    When an airline has to remove people from a flight due to overbooking and lack of volunteers it becomes a very loaded situation. Often leisure travellers who bought their ticket months in advance are bumped for the business traveller (sorry) because they pay a higher fare and are usually elite members of the airline’s frequent flyer program.

    By the way, you can experience the same situation at hotels and rental car agencies (sorry again), because frequent stay/rental members are allowed to overbook and hence bump a leisure traveller to another hotel or rental car company. Remember that these companies are trying to maximize revenue and the business traveller represents a much higher revenue load factor that the business traveller.

    That doesn’t mean I agree with what happened to the young man in the link you provided, but that doesn’t mean airlines should be forbidden from overbooking. If airlines couldn’t overbook you would likely see a substantial increase in airfares.

    • Aaron Gray says:

      To be fair thats just a load of bollocks, i understand why they do it! but why should they be allowed. You should not be able to sell something to someone, which isnt promised.

      Airlines shouldnt be allowed to do it, never mind increase in fares. Because customer service would be alot higher, and then their will still be someone who reduces their fare, regardless if it is a airline or anything else, thats business. Your saying that should allow airlines to make profits instead of that poor man above or people to go on holiday on the day they paid for! you right in the head!

  2. Suresh says:

    Over booking is a common practise among airlines all over the world. It stems from the basic premise that there will be a cancellation or a no-show and the airlines have done a lot of research that proves this point.

    Though we dont like this, unfortunately, there are allowed to do this. If not for this practise, we would be paying higher fares as Jason has pointed out.

  3. plonkee says:

    The other thing to remember is that it is rare for an airline to bump someone who hasn’t volunteered, got to the checkout in plenty of time etc. It makes better business sense for them to overbook, and I’m sure the legal stuff is covered in their conditions of carriage.

  4. dong says:

    You don’t always want what if you wish for. The fact is that if airlines didn’t overbook flights, flights would be more expensive. Every plane would have fewer passengers, and that eventually gets reflected in the price of ticket. I’m perfectly happy to get bumped if the compensation is good enough.

  5. Patrick says:

    Don’t forget, it can work in your favor as well. Airlines often make an offer of free tickets or vouchers for discounted travel to those who volunteer to bump their flight to another time.

    Some people count on this and book flights during busy travel periods on purpose, with the expectation that the airlines will ask for volunteers to change their plans for compensation. If you have no pressing needs, that can be the way to go.

    But… it sure does hurt when you get bumped when you don’t want to!

  6. Most people who book a ticket for a specific flight, at a specific time, on a specific day do, in fact, fly the flight that they booked at the agreed upon time. As others above have stated, there are obvious reasons why airlines “overbook” (I used the term “oversold” to an airline employee once and was read quite the riot act), and most of them HELP most passengers. If there are no serious disruptions, this scenario works. Problems arise when unforeseen situations crop up – as they are prone to do – weather, mechanical issues, etc.

    STILL – even when the airline does need to remove passengers from a flight, they use MOSTLY volunteers. I am one of those folks. It is rare that I absolutely need to be where I am scheduled to go at the time the airline says it will get me there. I know better – when I start planning things too closely – more problems arise. So, I take advantage of the situations. Because I fly in and out of a major vacation-spot airport, I know that there are certain days – and certain times of days that are more likely to be overbooked. I either plan to take these flights (and then try to get “bumped”) or I completely AVOID those flights, and will usually find something cheaper if I fly at a different time.

    In the rare instance that a passenger is involuntarily denied boarding (IDB’d – to distinguish from a voluntary “bump”), they are compensated by a formula adopted by all domestic airlines across the board. Depending on the length of time you are delayed, the airline is required to pay you – CASH MONEY, on the spot – to deny boarding, if you are checked in on time and present at the gate when called. There are some people who do not know this, and some airlines will still try to push off a voucher as compensation to people IDB’d. If you are offered a voucher, it ought to be for a lot more than the cash money that they are REQUIRED BY LAW to pay – either way, it will be a lot more than a free hotel room and a meal voucher.

    Even as flight loads have increased, there has not been a huge increase in IDBs, across the board, in the airline industry.

  7. Good question about why airlines are allowed to overbook.

    To be a devil’s advocate, let’s assume airlines can *accurately* predict no-shows. If that’s true, they maximize revenue by filling planes (which is societally beneficial too) AND customers can get cheaper rates (supply curves are downward sloping so if they sell more tickets then customers get cheaper prices in theory).

    But alas, it appears airlines are not very good at predicting no-shows. There has been a recent upswing in bumpings. Perhaps we’re tired of getting bumped; newer models will probably take this into account.

  8. Scott says:

    I personally think the problem here is not so much that airlines bump your for compensation it’s that the compensation they offer is total crap. They give you a “free” flight that you can only redeem on flights they don’t normally fill so you can’t fly anywhere fun (unless you count the flight from des moines to bismarck as fun). I ran into this about 2 years ago when I had a “free” flight voucher and tried to use it at least three times (remember that Jim?)before finally giving it to my mom to use on a route they would accept.

  9. Star Money Articles for the Week of September 3

    Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Blueprint for Financial Prosperity asks why airlines can overbook flights. Consumerism Commentary has had a lunch conversion. AllFinancialMatters details the highs and lows of…

  10. Lazy Man says:

    I think the US gives flight operators a little more leeway than many other companies. It seems that few airlines make a profit, yet they are critical to the economy of the US. If the alternative is to lose even more money and go out of business, that’s not a good solution. If the alternative is to raise prices, then people might not be able to travel when you need to.

  11. mark says:

    If people do not show up for the flight they have already paid for that ticket and the airlines has already recieved payment. All is well. They should never kick a non willing party off the flight! If the prices go up alittle so be it!

  12. peter haeckl says:

    we booked our flights early in 2009 with Lufthansa,which we have been using for 43 years.We paid high season price and the airline used our money for many months.My wife has bad knees,so I reseved 2 aisle seats across,so she can switch stretching.I confirmed the seats both ways and
    everything was fine until we tried to return from frankfurt.We were informed our itenerary and booking is just fiction,and we are on Standby!
    They are trying to get us on the plane at all! Forget the seats my wife needs,they belong to somebody else now!After raising the roof and making noise,the “overbooking crew” called me up and said:Good news: we have one aisle seat for your wife and another for you,next to her.
    we had 5 minutes to boarding,so we jumped at it.The seats were behind Bulkheads!!!! My wife was in pain for 10 hours.This is Criminal !!!!!

  13. Paul says:

    I quite agree! It is unconscionable! The airlines should actually be quite happy to fly with fewer, or even no, passengers. After all, the seats are already paid for, so they’re not losing any money on that. To boot, they would actually make *more* money, because the lighter load would reduce the amount of fuel used. Not to mention the fact that it would boost their image amongst consumers.

    They are in effect selling the same product twice to two (or more!) different people. If any other business were to do this, they would find themselves in court on charges of fraud. So why should the airlines be any different?

    • mike d says:

      “They are in effect selling the same product twice to two (or more!) different people…”

      It also helps bringing down prices to consumers because of less empty seats, so you end up benefiting the 99.5% of the time you don’t get bumped. I think the real problem is that they’re not being transparent by keeping your probability of you getting bumped a secret.

  14. nerdy dave says:

    Like it or not the airlines are running a business and must do what they need to do to stay in business. If you can’t deal with it then don’t fly! Complaining and kvetching never gets a soul anywhere. Be happy and enjoy your life instead!

  15. luma says:

    Air travel in the US is a Russian roulette experience. All airlines routinely overbook fights and you have no rights because the government says it is legal to overbook.The vendor should honor the sale once they get your money.If you want to change, you should pay again. The most you will get is a few scraps in a lousy bedbug infested lodge and a crappy sandwich while attempting to get another fly at a later date. If you are not unemployed and on welfare therefore it does not matter being bumped, avoid flying in the US at all costs.
    Consumers of air transportation in the US are treated like cattle.

  16. mike d says:

    I think the best solution would be for airlines to sell two classes of tickets, overbookable and non-overbookable. The overbookable class would be cheaper, but with the stipulation that you get bumped if too many people show up. The bumped people would get 110% of their ticket value refunded, or a free ticket on the next available plane. Who gets bumped could be done either randomly, a silent auction, or some algorithm. Them make the airlines publish the number of non-overbookable tickets, overbookable tickets, and total number of seats at time of purchase. Or does that idea make too much sense?

  17. FedUpWithFoolishness says:

    “if airlines didn’t overbook flights, flights would be more expensive.”
    At least you would get the service you paid for. What if ALL businesses did this crap—you go to a resturant, PAY UP FRONT for your food, they bring you in, sit you down—and THEN tell you, sorry there’s no food—but we will TRY to get some for your next meal.
    “Well, give me my money back—we can’t do that. You’ll have to wait to eat tomorrow.” And it doesn’t matter what your “plans” were. Take that back to the resturant example–what if the person was diabetic, has takeisulin, in preparation of the food they’ve paid for and NO FOOD, means

    You either provide a service–for a fee–or you don’t. Seems to me, airlines don’t. ANy other business would go out of business—I don’t care WHAT reason they have–it’s called bait and switch and it SHOULD be against the law.

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