It’s time once again to answer a reader question. This time, the question is pretty broad, but it’s a very good one. I’ll let Nathan pick it up from here.
One thing I can’t figure out is the overbooking process, and if you could explain how and why airlines use it, and how it is profitable, I’d appreciate it. I traveled on United a few months ago, volunteered to give up my seat, and ended up receiving a voucher for $500. I understand that sometimes people don’t show up for their flights and the airlines would prefer to have seats filled, but does handing out these vouchers really make up for the empty seats? Or do they count on the fact that people either won’t use the voucher or won’t use all of it so it doesn’t actually cost them that much?
Nathan
Corvallis, OR
First of all, Nathan, you got pretty lucky. It’s not often you get a $500 voucher anymore since airlines have become much stingier. There are also fewer people getting bumped than there used to be, so congrats.
Overbooking is one of those things that people hate, but it actually provides a benefit, believe it or not. Every time an airplane takes off with an empty seat, it’s a missed opportunity. Even if airlines sell every seat, there’s a good chance that not everyone will show up. It could be due to delays or cancellations by the airline or it could be because of last minute changes and cancellations by the traveler. Either way, it’s rare for every single person who was booked to be on that airplane.
Because of this, airlines began overbooking flights realizing that not everyone would show up. Over the years, they’ve become more and more sophisticated with the way they approach this process. Many variables go into determining how much to overbook. It can include things as varied as external events that might impact behavior during a certain time period or how easy it’s expected to be to find an alternate flight if things go wrong. But no matter how sophisticated they get with these predictions, there will always be variability. For that reason, it’s impossible to get it right every time. And when they guess wrong, there are either empty seats or not enough seats. When it’s the latter, people have to be bumped.
You might think that airlines hate when they have to bump people, but that’s not really true. They hate when they have to involuntarily bump people. Let me explain.
When a flight is oversold, airlines will start asking for volunteers to take a later flight. The better the flight option, the less money the airlines will offer to incentivize people to take the offer. Most of the time, people volunteer to take a later flight and then everyone is happy.
When that happens, everyone who needed to fly got on the airplane. Those who volunteered walked away with a little extra compensation. And the airlines were able to sell an extra, expensive last minute seat or two. You may have a vision of some guy who paid $100 for his ticket getting a $500 voucher to get bumped, but those two events aren’t really connected. By overbooking by one last seat, it enabled the airline to sell one last expensive walk-up fare. On the whole, they make money even if the compensation creeps up.
Then there are the involuntary denied boardings. These are bad. If the airlines can’t get enough people to volunteer to take a later flight, they are forced to bump people against their will. Naturally, that means that there are going to be some angry people who don’t get on that airplane.
This doesn’t happen all that often. For the first nine months of 2013, airlines that report to the Department of Transportation (most of the big guys) bumped 398,346 people, only 12 percent of those were involuntary. Overall, bumping numbers are down a lot. The rate for 2013 is about half the rate that we saw 10 years earlier, during the first nine months of 2003.
Why is that happening? Well, first of all, airlines have become better at predicting these things. But also important is that the penalties for involuntarily bumping someone have gone up a lot.
Not only can the penalty now be 4 times the value of the ticket, but the cap has been raised to over $1,000 (and rising). With the potential cost going up, airlines have had to get more conservative on how much they overbook.
But that’s an issue for involuntary denied boardings. When it comes to voluntary denied boardings, it’s a different calculation. It’s not hard money going out the door but rather vouchers. And those can have a lot of breakage. Airlines that offer vouchers good for a roundtrip ticket in exchange for bumping are the ones that made off the most like bandits over the years. Those were always capacity controlled and they weren’t easy to use. That’s why dollar vouchers are much more popular with travelers.
But even those dollar vouchers don’t all get used. And when they do, they don’t necessarily use the entire amount. And you usually don’t get the keep any residual amount to use on another ticket.
In the end, when you add it all up, it means good profit for the airlines. It’s not a practice that will be discontinued unless penalties rise so much higher that it no longer makes sense.
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52 Comments on "How Does Overbooking Work? (Ask Cranky)"
Nice story; especially on how some volunteers get shafted in the end. (I was offered a deal (for a roundtrip voucher within the US) once, but refused. Not living in the US would have made the voucher too hard to use.
Also overselling does not mean that each bumped passenger is worth a walk up fare: yield management would say to create a few excess tickets in lower fare categories too.
To clarify, I’d like a FF Status Upgrade in lieu of a voucher. So as a Delta Gold I’d volunteer if they automatically put me platinum level for the next year. I’m being inconvenienced so in return whats it to them to treat me as a more valued customer? The cost to the airline is minimal but to the customer (i.e. frequent flier) it carries a higher value. Oh and the flight they bump me to I better have first class.
awesome idea, but it would swell the ranks of people. But more limited MQM/MQD waivers would be nice. Cause of course, the “Delta Dollar” vouchers dont get you MQD’s!
this is an idiotic request by someone who is still at entry level status and unfamiliar with the game. the airline would lose far more by “bumping you up to platinum” rather than offering someone a $500 vchr. then again, you’re flying delta..
Or you could always fly jetBlue which does not overbook. I think they bumped maybe 30 people last year.
Exactly, JetBlue does not over sell, and if you get bumpped, then they needed to fly a necessary crew member, or there was too much cargo. I always know on DAL or UAL when they are oversold, you cannot reserve a seat at the time of the reservation. That is when i call the 800 number and ask if the flight is oversold. After stuttering and couching they will usually assign a seat as they will never admit it on the phone
I was wondering about that. Why does JetBlue have a different approach?
John Bratichak – Just because you don’t see a seat available for assignment on the seat map doesn’t mean it’s oversold. Airlines hold back plenty of seats for assignment at check in or for elites. You’ll see the JetBlue seat map empty often unless you want to pay up for Even More Space.
Oliver – This was one of Neeleman’s things when he founded the airline. It was all in the name of customer service. They thought people would like it.
Oliver, Jetblue does not overbook because it does not use any GDS system for seat inventory/allocation. You simply pay-and-fly; there is no “booking” for Jetblue, By the way, this is not unique to Jetblue but to ALL carriers that do not use any GDS! Therefore, this is NOT because of Neeleman wanting his ex-airline to be fully customer-oriented! Understoof, “CF”?!? Other carriers that do not overbook because they DO NOT use any GDS: Gol (G3, in Brazil), Ryanair, easyjet, Air Baltic, VivaColombia, etc-etc. All the best from Rio de Janeiro, Brazil
Respicio – That’s not true at all. JetBlue converted to Sabre a few years ago. It can easily handle overbooking if so chose.
Westjet uses Sabre as well and does not oversell.
involuntary denied boarding gives the passenger the right to take cash. Voluntary is a deal made between passenger and airline, and the passenger does not have to take the offer!
I really like the dollar amount vouchers as they typically have a 1 year expiration date and can be used on any itinerary booked through the airlines website. My last experience was a $400 Delta voucher for taking a flight that departed 2 hours later. 2 hours of my time in exchange for a round-trip flight to Mexico was a great bargain.
Frequently I can plan my business travel so that I have my return flight during a peak time to increase my chances of being offered compensation.
I also prefer dollar vouchers. I’ve heard though that the breakage (% that actually get used) is around 30-40% and even less for the “free roundtrip” ones.
I’ve also seen AF/KL offer things like 150Euro cash or 250Euro voucher which I think is a nice way to offer it. Of course living in the States most of us would be better off with the cash.
A couple of years ago I was flying from Reagan National to Atlanta on a Sunday; I gave up my seat and got a $200 voucher from Delta. When it came time for my next scheduled flight (about 90 minutes later), I again gave up my seat and collected a second voucher. I did it yet again about an hour later. I could have done it a fourth time, but decided I’d had enough. Delta was very happy that I was so willing to accommodate them; they couldn’t have been nicer about continuing to bump me.
What has changed for the old days:
One can no longer counter up and ask to be on a voluntary bump list.
The only carriers I have experienced
that still allows you to do it are Air Canada and WestJet.
When DL oversells, they offer going on the list at checkin. They have gotten sneaky by putting 3 choices on screen $50, $100, $150. but at least you can say no before they make any changes
If I am flying under “NO time constraints ” I loved getting
bumped for Vouchers… Vouchers have paid for
many vacation flights for free…. I can’t complain.
Are there any well known routes that have higher bump probabilities? I have been bumped from CMH-BOS on Delta before and they have solicited for offers frequently. Does that have anything to do with the small plane?
Jon – If there are routes that have higher variability, then the chances of getting bumped may be better. But it’s hard to know what those are. I remember we routinely overbooked flights from LA to Vegas on a Friday night by dozens because there no-show rate was so high. But it was consistent so you didn’t get a ton of bumped passengers (at least, not a ton more than on another flight). But if it varied a lot, then that would be your best chance.
Thanks. Is it possible to delete my last name from the previous post?
Jon – Sure, it’s done.
If I have time, I’ll take a $400 voucher. Vouchers are great if you know you are going to use them as you get qualification miles from the trip you purchased.
The last voucher I got for VDB 4 years ago, I ended up getting in an airport closer to my house and earlier than the original flight because of flight delays on my original connecting flight. The only downside was that the luggage went the original route, but was delivered to my house within 12 hours of me getting home.
I thought Allegiant also doesn’t overbook.
Another important thing that Brett implied but didn’t say is that vouchers ($ or R/T) are basically only cost the airline in opportunity costs. A voucher can only be redeemed on the airline and most likely on a seat that would have been empty otherwise. So the actual cost to the airline for a voucher is the pax weight for fuel and beverage/meal service if applicable. Just another Non-Rev.
Jeffery – Since most airlines hand out dollar vouchers, then it isn’t something that can be forced to a seat that wouldn’t have been occupied otherwise. There is a real cost to the airline, but it’s far less than having to hand out cash for sure.
CF- I wasn’t clear, I meant that since most flights dont leave with 100% loads the probability of the credit purchased seat displacing a revenue seat is reduced. So unless the voucher is used on a flight going full its cost is lost revenue but negligible actual costs.
Great job on ABC’s World News Now, Brett! Great advice and you sounded as professional as I know you are!
In the last few years of the old United, I routinely used to look to book likely ‘oversold’ flights – consequently, my first three LHR-SFO trips one year gave me an opportunity to volunteer ; once, this meant connecting in JFK instead (but in C), the other two times I merely got upgraded to C-class on the same flight! The last time I volunteered resulted in an overnight stay in DEN, $500 in vouchers, and C-class home. Worth the hassle, I reckon.
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I just got bumped from my united flight from lax to Eugene, they offered me 500 dollar voucher and then I waited alittle and then bumped 6 other people and the last person they offered a 700 dollar one so everyone got 700 dollars, I took a 2 hour later flight that was actually nonstop and I arrived 30 minutes before the first one would have arrived now I can travel first class to Vegas this year with a friend for under the 700 dollars good day!
Great website!Your comments are very helpful…I have one question-what percentage of seats are unsold on flight day?It would seem to me that if you paid for your reserved seat six months in advance,why would you be bumped?So the airline can sell yor seat twice?
Bill Caspare – It can vary greatly by flight. Sometimes there are a ton of seats unsold, sometimes none. No seat assignments are ever guaranteed, and airlines can bump you involuntarily even if you have a confirmed reservation. But they have to pay greatly for that.
I am sitting in the Albuquerque airport with a $1000 voucher for delta. I am thinking that this was worth the 6 hour delay coming home at the end of a work week.
Good time of the day to everyone!
I am looking for people who have experienced the effects of overbooking on themselves, effects such as seat denial. This is part of the data collection for my university dissertation and feedback would be highly appreciated.
If you have had the above mentioned experience and have a minute or two to answer my questions, please leave a comment below, or send me an e-mail to shapmatvey@gmail.com. Thanks in advance and hope that you have a beautiful day.
Overbooking makes air travel rather chaotic for many pssengers , but yes- the practice creates substantial additional profit for rhe airline companies … Such a practice would be unthinkable in other business sectors …eg. movie theaters or spoers stadiums , but the air transport association is a very powerful lobby ….and is insulated from any law that might prohibit overbooking .
Victims may complain to their legislators ….but nothing will change .
No volume of compaints to Congress against airline overbooking will ever be heeded .. A law prohibiting selling reserved seats in excess of actual seats available will never be enacted .. The air transport lobby is far too powerful .. The additional profit enjoyed by over booking well exceeds the cost of lobbying to prevent any such law ! The traveling public will remain at the mercy of capacity and pricing control computer systems ….
A reality that must be faced !