First of all, I am not making any mistake because I don't pretend to know the airline business. Your mistake, on the other hand, is pretending you know more than the people doing yield management for the airlines. They, as well as other service industries with a fixed and time volatile inventory, overbook because it increases their bottom line based, in part, on the past history of the flight. Airlines could stop overbooking tomorrow if they wanted. To assume they continue doing something that provides no economic benefit is silly. To suggest they should just drop the business model they have today is silly and naive. It is easy to criticize when you don't know the details.
Overbooking is based on statistical modeling. For each flight, they model how many people will actually show up (and yes, many of the no-shows will pay a penalty to use their non-refundable ticket) and by how much they should overbook. Perfect overbooking would result in paying no compensation for voluntary or involuntary bumps but would yield more revenue than if they didn't overbook via a paying customer in every seat (and yes, each seat may have a different price because of their yield management strategy). To suggest that overbooking is a vestige of the past is naive. Yield management with overbooking is a sophisticated optimization problem. They are looking to maximize the revenue for each flight and overbooking is part of the strategy. The point you probably miss is that overbooking only makes sense when you have a statistical expectation of no-shows, which the major carriers apparently do because of business travel (I used to change flights quite often). You can claim that you don't overbook, as part of a marketing strategy to the uninformed, when your client base has a low no-show rate or you lack the yield management capabilities to do it effectively. Why you would care whether an airline overbooks, when considering the very low average involuntary bumping rate of 1 in 10,000, is beyond me.
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Originally Posted by Steve9930
Your mistake is your looking at it from the old worn out perspective. Their perspective. The first question to answer is why do they over book? I know the answer but do you? They look at a seat that is empty as a loss of revenue. That is what the airline will tell you. With the way they run the business that assumption is not correct. Its propaganda for people to swallow. Its not correct because today they charge you a change fee. Miss a flight and the number you will be charged covers the cost of the empty seat. You also pay up front for that seat. No more book and pay at the airport. Which was the real reason over booking started in the first place. Also not all seats are equally charged for the flight. The first seats at the lower price pay for the flight. They know how many seats they need to sell to break even. The cheep seats pay for the flight. The other more expensive seats make the profit. You make the airline smile.
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