Why Do Airlines Oversell (& Overbook) Flights?

Why Do Airlines Oversell (& Overbook) Flights?

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I know the answer here might be obvious, but I thought it would be interesting to take a bigger picture look at the practice of airlines overselling flights, often leading to overbooking situations. Why do airlines do it, and is it ethical?

Why airlines sell more tickets than seats

It’s a widely accepted practice in the airline industry that airlines will sell more tickets for a given flight then there are seats. Maybe you’ve been bumped off a flight at some point, or at a minimum, maybe you’ve heard an airline solicit volunteers at the gate, to take another flight in exchange for compensation.

Just to clarify some terminology:

  • A flight is oversold when an airline sells more tickets than there are seats on a plane
  • A flight is overbooked when more people actually show up at the airport for a flight than there are seats

In other words, overselling can (but doesn’t have to) lead to overbooking. In situations where a flight is overbooked, airlines will generally try to solicit volunteers to take another flight in exchange for compensation. This is known as voluntary denied boarding. If there aren’t enough volunteers, the airline may have to force people to be bumped off the flight. This is known as involuntary denied boarding.

So, what causes airline flights to be overbooked? There are a variety of potential factors, which I figured I’d cover below.

When overbooked, airlines solicit volunteers at the gate

Airline seats are perishable goods

Airline seats are perishable goods, and understandably airlines want as many seats as possible to be filled. The second the airplane door closes, the airline loses the opportunity to monetize seats.

Airline revenue and inventory management is incredibly complex, and airlines use all kinds of methods to both price discriminate based on different consumer segments, and fill seats. Airlines want as many seats as possible filled, with people paying as much as they’re willing to.

Airlines have a ton of data about historical no show rates, last minute cancelations, etc., and they use that to oversell flights in a (mostly) rational way. If a flight has 160 seats and an airline finds that on average four people don’t show up (I’m making up that number — this differs with every flight based on a variety of factors), the airline might oversell by that much.

For that matter, airlines have eliminated change fees on many kinds of fares, so we’re seeing a lot more people making flight changes than in the past. If a flight is sold out two weeks in advance, an airline might realize that on average 10% of ticket holders cancel within a week of departure, and oversell accordingly.

Airlines want to fill as many seats as possible

Airline passengers no show for a variety of reasons

As mentioned above, airlines have good historical data on this kind of stuff, and there are all kinds of reasons that confirmed airlines passengers may not make it to a flight:

  • With some airlines eliminating change fees on most fare types, many people book speculative tickets, and only cancel last minute
  • Even among those who intend to travel, they may run late to the airport, the check-in or security line may be long, etc.
  • Many passengers are on connecting itineraries, and their inbound flight could be delayed, meaning they miss their connecting flight
  • For arriving international passengers with connections, they could get stuck in customs and immigration, waiting for their bag, etc.

On some flights every single passenger shows up, while I’ve been on some flights that were oversold, but ended up with dozens of empty seats. It can go either way.

It’s not hard to imagine why people may miss flights

Airline operations are complicated

There are plenty of situations where a flight might be overbooked, even though the airline didn’t intend to oversell the flight. How can that happen?

  • Airlines have different kinds of planes, and even the same types of planes may have different seating configurations; all kinds of operational issues could lead to a last minute aircraft swap
  • It could be that there are pilots or flight attendants who need to deadhead on a flight, in order to work another flight; they can be booked on at the last minute, and are considered “must rides,” since another flight could be canceled if they don’t get on
  • Weather factors can cause flights to be weight restricted, meaning an airline can’t fill all seats; this could be due to a storm, due to hot temperatures, or even due to cargo sometimes being more lucrative than passengers
Sometimes flights may be weight restricted

Sometimes a specific cabin is oversold

In some situations a flight as such might not be oversold, but rather a specific cabin may be. The most common situation is that economy class is oversold, while there are lots of empty seats in first and business class (this is rare within the United States, given that all elite members are typically eligible for complimentary upgrades).

In some cases passengers may not be bumped from a flight, but rather will be operationally upgraded to a higher cabin (there’s a pecking order for this, and it’s not based on how you dress, contrary to some reports). This is especially common on Gulf carriers, where economy may be oversold by dozens of seats, while business class is wide open.

The logic is that some revenue is better than no revenue — sure, airlines would rather sell premium seats at high fares, but at the end of the day someone paying for an economy ticket and flying in business class is above the marginal cost of carrying that passenger, assuming the seat would have been empty.

Some might wonder why airlines don’t just lower business class fares in those situations. Welcome to the wonderful complexities of revenue management, and how airlines don’t want to cannibalize their own premium demand. In other words, if the normal price for a roundtrip business class ticket is $10,000, and you sell tickets last minute for a fraction of that, business travelers will catch on and start rebooking at the last minute. There’s the potential for a lot of lost revenue that way.

Gulf carriers are known for overselling economy

Bumping may not be expensive for airlines

Even in instances where a flight does end up being overbooked and volunteers are needed, keep in mind that it’s not necessarily going to be costly for the airline. Typically an airline will offer a volunteer a travel credit, which can be used on that airline.

The actual cost of that to the airline is next to nothing, assuming the flight they end up booking isn’t full. In many ways this gives airlines an incentive to oversell. An airline may be happy selling a last minute ticket to someone for $600 in cash, and then in turn giving another passenger a $600 voucher to take another flight.

Assuming an airline doesn’t involuntarily deny boarding to anyone, this is a win-win.

Bumping can still be profitable for airlines

Is it ethical for airlines to oversell flights?

I often see people make the argument that airlines shouldn’t be allowed to oversell flights. That’s a fair argument, since it seems kind of deceptive to sell a product you may not have available. Legally airlines cover themselves with this, since airline contracts of carriage are highly one-sided.

Is it ethical for airlines to oversell flights, though? Here’s my take on that:

  • I think there’s absolutely nothing wrong with overselling if you only have to voluntarily deny people boarding; after all, when it’s voluntary, it’s a win-win
  • It’s a much bigger issue if it’s an involuntary denied boarding, but in fairness, that’s an area where airlines have improved considerably since the David Dao incident, as they’re much more sensitive to that now
  • If I made the rules, I think airlines shouldn’t be allowed to involuntarily deny boarding to passengers as a result of overbooking; I would make an exception for situations where there are operational issues (admittedly that becomes a slippery slope)
  • At the end of the day airlines should have to do whatever it takes to get volunteers, and that’s an area where we’ve seen many airlines step up; that’s why we’ve heard stories of airlines offering some $10K bumps to people (admittedly that’s really rare, which is why it makes headlines)

Bottom line

Overselling flights is a commonly accepted practice in the airline industry. While airlines have good data and get things right most of the time, this does sometimes lead to overbooking situations, where some people need to be removed from flights.

Airlines are always supposed to solicit volunteers first, before involuntarily denying boarding to people. That’s something airlines have gotten much better about since the David Dao and United Airlines incident.

What do you make of airlines overselling flights? Should it be allowed?

Conversations (16)
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  1. Lavinia Swire Guest

    The only good thing about working for an airline is the flight benefits. The more they fill to capacity, which has been increasing every year, the more pissed off their employees are. Win Win Lose
    Win for the airline. Win for the passengers. Lose for the employees.

  2. Stuart Guest

    Why are seats perishable goods? A no-show customer can't get his/her refund so airlines aren't loosing money on no-shows. In my opinion, airlines are getting money both on flying customers and no-show customers.

    1. Eskimo Guest

      Good logic, but no.

      Why is self pickup UberEats perishable goods? A no-show order can't get his/her refund so UberEats aren't loosing money on no-shows. In my opinion, UberEats are getting money both on eating customers and no-show customers.

      So if I forgot to pickup my dinner it becomes non-perishable?
      If you didn't pay for your fruits, it won't rot and decay?
      You are mixing inventory and revenue. And airlines also sell refundable...

      Good logic, but no.

      Why is self pickup UberEats perishable goods? A no-show order can't get his/her refund so UberEats aren't loosing money on no-shows. In my opinion, UberEats are getting money both on eating customers and no-show customers.

      So if I forgot to pickup my dinner it becomes non-perishable?
      If you didn't pay for your fruits, it won't rot and decay?
      You are mixing inventory and revenue. And airlines also sell refundable fares but that's probably too confusing for you.

      To all naysayers. You have 10 apples.
      You can sell 10 for $1 each and make $10 regardless of no-shows.
      Or You can sell 2 for $0.50 each, 8 for $0.80 each, 2 for $2 each. You sold 12 for $11.40 and if 2 no-shows you not only make $1.40 more, 10 people bought apples cheaper than $1, some at 50% off.
      If all 12 show up, you can give 2 future apples for free and still make $0.40 more.

      Hence a group called "revenue management" is created.
      And thank them that your airfares are cheaper because of overbooking.

  3. Coen Guest

    With most airlines, every passenger has a certain status. The passengers who have paid the lowest rate will be the first on the waiting list when overbooking. These people are generally most happy with their denied boarding compensation.

  4. anon Guest

    Lol, so "mega" wealthy they had to fly commercial instead of private jet

  5. DaninMCI Guest

    You mention "when an airline sells more tickets than there are seats on a plane". I suggested that a rock concert sell more tickets than there are seats which would be wrong. It should be illegal to sell something you don't have. I'd rather airlines have draconian cancellation fees than overbook.

    1. Eskimo Guest

      Good idea.
      Now why don't you start an airline that don't overbook but have draconian cancellation fees.
      Wait, didn't Southwest and JetBlue already tried?

      " I suggested that a rock concert sell more tickets than there are seats which would be wrong."
      I guess you've never bought "standing room only" tickets.
      Then you will argue there is still a limit, which I will respond airlines also don't overbook 1000 seats each...

      Good idea.
      Now why don't you start an airline that don't overbook but have draconian cancellation fees.
      Wait, didn't Southwest and JetBlue already tried?

      " I suggested that a rock concert sell more tickets than there are seats which would be wrong."
      I guess you've never bought "standing room only" tickets.
      Then you will argue there is still a limit, which I will respond airlines also don't overbook 1000 seats each flight either so airlines also have limits.

      "It should be illegal to sell something you don't have".
      You're right, you can start with Wall Street then go after the politicians.

  6. Dfwguy Guest

    Let’s hope movie and concert theaters don’t decide to start overbooking seats. Personally, I think overbooking/selling is ridiculous and wish it would stop.

    1. Eskimo Guest

      LOL before anyone has to worry about overbooking movie theaters, let's figure out how to fill them up first?

  7. Eskimo Guest

    One of the biggest reasons that still isn't covered here on why airlines overbook.

    So they can keep their fares lower and more competitive.

    With change fees gone, airlines would likely overbook even more. But thanks to their sophisticated system, we passengers don't really feel the effects of it.

    1. Jimmy2x Guest

      Change fees might be "gone" but good luck changing your flight without avoiding the new higher fare. That's how and why they got rid of change fees.
      And I don't buy that they overbook to keep prices down. I feel like some airlines block seats and release them once the lower prices sell out. United always says first is completely booked, but days before the flight the seats are released at crazy prices.

    2. Eskimo Guest

      I'm probably lucky then. Consider a good number of my flights got cheaper, some of them I got credits back on my same flight.

      "And I don't buy that they overbook to keep prices down. I feel like some airlines block seats and release them once the lower prices sell out. United always says first is completely booked, but days before the flight the seats are released at crazy prices."
      LOL, you feel it....

      I'm probably lucky then. Consider a good number of my flights got cheaper, some of them I got credits back on my same flight.

      "And I don't buy that they overbook to keep prices down. I feel like some airlines block seats and release them once the lower prices sell out. United always says first is completely booked, but days before the flight the seats are released at crazy prices."
      LOL, you feel it. But airlines implement exactly what you describe.
      So when you don't feel that overbook keeps prices down. It's just you. Airlines are implementing it to keep fares down.
      Hint 1: You can always buy cheaper F seats far out, or you can pay 'crazy prices' last minute (on a flight which is likely overbooked).
      Hint 2: If UA doesn't overbook you can expect to pay 'crazy prices' a year out up until departure.
      Your pick.

  8. George Romey Guest

    At least AA has gotten down to the T through advanced technology being able oversell a flight without the need to bump. In addition, for oversold flights AA will usually send out an offer allowing people to switch to undersold flights even on a different date. This avoid them paying compensation too and maybe allows a traveler a bit more time desired at a destination. I sometimes use the option to move to a flight(s)...

    At least AA has gotten down to the T through advanced technology being able oversell a flight without the need to bump. In addition, for oversold flights AA will usually send out an offer allowing people to switch to undersold flights even on a different date. This avoid them paying compensation too and maybe allows a traveler a bit more time desired at a destination. I sometimes use the option to move to a flight(s) in which first class is wide open thus giving me a much better shot at an upgrade. So it's a win/win.

    You'd be amazed at the number of no shows, particularly for a morning flight. A few years back at MIA the flight was oversold by 15 people and the GA told me likely more than this number would check in but not make the flight. Sure enough even standbys got accommodated.

  9. Sam Guest

    I have only been involuntarily denied boarding once and that was on a flight from LHR-MIA. I had booked a cash fare in Flagship Business and then used a SWU to upgrade to Flagship First. I checked in at the counter without issue, but only found out once boarding started. The flight was full in Economy, Premium Economy, and Business. I was booked onto the British Airways direct flight to Dulles (DC was my final...

    I have only been involuntarily denied boarding once and that was on a flight from LHR-MIA. I had booked a cash fare in Flagship Business and then used a SWU to upgrade to Flagship First. I checked in at the counter without issue, but only found out once boarding started. The flight was full in Economy, Premium Economy, and Business. I was booked onto the British Airways direct flight to Dulles (DC was my final destination) in First on the 787-9, and still arrived back at home around the same time as if I had connected in MIA, so it all worked out in the end. I still can't help but wonder why I was downgraded (as an EXP no less). Obviously I was an upgrade (but isn't everyone in Flagship First??)...my best guess is that my flight had not been properly ticketed, but any other guesses? I would find it hard to believe that an airline would intentionally oversell an 8 seat first class cabin.

    1. Eric Guest

      A friend who works in revenue management at a major airline told me a story about downgrading a customer who had upgraded to first from a paid business fare (as in your story) back to business. The reason? A mega-wealthy family “needed” all the remaining F seats, and the airline decided the extra revenue was worth the pain of having to downgrade someone. (This was about ten years ago.)

    2. DenB Diamond

      My guess is the most likely reason is they needed a seat at last minute for a deadheading pilot and they knew they could accomodate you on BA with an attractive itinerary. Looks like a win-win for them and for you

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Eric Guest

A friend who works in revenue management at a major airline told me a story about downgrading a customer who had upgraded to first from a paid business fare (as in your story) back to business. The reason? A mega-wealthy family “needed” all the remaining F seats, and the airline decided the extra revenue was worth the pain of having to downgrade someone. (This was about ten years ago.)

2
George Romey Guest

At least AA has gotten down to the T through advanced technology being able oversell a flight without the need to bump. In addition, for oversold flights AA will usually send out an offer allowing people to switch to undersold flights even on a different date. This avoid them paying compensation too and maybe allows a traveler a bit more time desired at a destination. I sometimes use the option to move to a flight(s) in which first class is wide open thus giving me a much better shot at an upgrade. So it's a win/win. You'd be amazed at the number of no shows, particularly for a morning flight. A few years back at MIA the flight was oversold by 15 people and the GA told me likely more than this number would check in but not make the flight. Sure enough even standbys got accommodated.

1
DenB Diamond

My guess is the most likely reason is they needed a seat at last minute for a deadheading pilot and they knew they could accomodate you on BA with an attractive itinerary. Looks like a win-win for them and for you

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