Overbooking and Denied Boarding – Why do Airlines do that?

Ever since the United Airlines ‘overbooking’ disaster, I have read a lot of questions raised about, and criticism of, the practice of overbooking or overselling by airlines. The entire concept has been made to appear like some sort of fraud conducted at industry level. Hence this article aims to explain this in the simplest possible way.

First, a clarification. United had not really overbooked their flight 3411. It was fully sold and booked. Their Revenue Management team had got it spot on and sold every seat. They got in trouble because their franchise carrier – Republic Airlines – operating the flight on their behalf urgently needed to fly four of their operational staff members to ensure another flight could be operated. This could be either due to a crew rostering error, or flight delays somewhere resulting in a relief crew needing to get to Louisville. However, it was United’s brand. And when using a third party to represent their brand, the responsibility remains theirs. Why they left it till after all passengers had boarded has not been clarified as had this happened before that, it would have even made a blip on the news.

Why do Airlines Overbook

Fact 1 – Airlines need to fill as many of their seats as possible before the aircraft departs. Because once the aircraft goes, the empty seats on that aircraft represent a non-reversible lost opportunity to earn revenue. The product an airline sells, the seat, expires immediately once the aircraft pushes back.

Fact 2 – Not all passengers will show up for their flight. Depending on the fare they have paid, they may be entitled to a full or partial refund of their fare, or have the ability to book another flight. Airlines develop a no-show profile for flights, and (ideally) overbook based on that. The Revenue Management functions manage and typically define ‘denied boarding’ KPIs to ensure they don’t have to turn back passengers with confirmed seats very often. For example, an airline might set it’s denied boarding KPIs at an acceptable average of 2 denied boarding events for every 10,000 passengers flown. This is further monitored by voluntary denied boarding and involuntary denied boarding. All this happens at the check-in stage or at the gate. It’s unusual to see it happen after boarding.

Airlines simply overbook to ensure that they allow for passengers who may not show up for their flights, based on past history of the flight, so that they are able to maximise revenue from that flight. The cost of the occasional denied boarding is budgeted, as it may trigger a refund, a re-booking and even passenger welfare and accommodation expenses.

Overbooking is not applied equally across the network and on all flights. It’s done based on probability of no shows on flights and timing. For example, flights departing on the first day of a school holiday is unlikely to be overbooked as all passengers are expected to arrive. There are times when airlines will oversell economy class tickets knowing that they have excess capacity in premium to upgrade passengers should the need arise.

Typically, low costs airlines that only sell non-refundable seats, minimise or do not overbook. As if the passenger does not show up for their flight, the airline still makes their money for their empty seat.

Overbooking is a result of passenger’s demand for flexibility. This is more evident in premium classes, where passengers pay more for the flexibility to either not show up or change flights late, leaving the airlines with unsold empty seats. Seats that they could have sold but could not as they expected a booked passenger to show up.

In some markets, where third party sales through agents are higher, the airline overbook to counter excessive bookings by agents, where they just block seats on the airline without issuing a ticket. The agent will then release the unsold seats back to the airline late, leaving them less time to sell before the flight. This can be as high as 50%. So effectively, the airline has to sell each seat twice!

How do Airlines Manage Overbooking

The airline staff at the airport do not like their colleagues in Revenue Management. Because when Revenue Management gets their overbooking numbers wrong, they have to deal with it. And it’s not pleasant. But when it happens, it’s dealt with on the ground, as you simply cannot board more passengers on the aircraft than the number of seats – at least the system shouldn’t let you do that anyway.

Typical steps on dealing with overbooking and denied boarding:

Step 1 – The airports’ team reviews the flight manifests to identify flights where more passengers are booked than seats on aircraft, so they know where the problem might be and can prepare. They may even try to identify passengers to offload. For example, a passenger with an onward connecting flight may not be a good option, as the airline will have to re-book them on another flight.

Premium passengers and high tier frequent fliers may also not be ideal options, as they are high value customers. The airline may target a low fare traveler, or one that looks likely to accept compensation and another flight. I was once requested to give up my seat travelling out of London Heathrow in exchange for a premium seat the next day and overnight accommodation. The next day was a weekend so I was more than happy to accept. Perfect target for the airline!

Step 2 – Monitor overbooked flights as guests check in, and as the flights look likely to fill up, look for potential volunteers who may happily give up their seats for a booking on a later flight, and a bit of compensation and overnight accommodation. There actually are passengers who consider an extra night’s stay in a nice place at the cost of the airline as a nice experience.

If that doesn’t work then the airport staff moves to block passengers they may have identified earlier, or simply those who arrive late, while protecting the high value guests. Usually, anyone on a staff ticket or any concessionary fare ticket should be denied boarding first. Remember United selected their passengers to offload based on their value to them. Only problem was they did it on the plane and not the ground.

Step 3 – Once the passengers have been selected for denied boarding, voluntarily or involuntarily, the airline has the responsibility to ensure they find them the next best option to get to their destination, unless the passengers opt for a refund and compensation. This is not unusual and the denied boarding protocol should be in place to allow the airport staff to care for the passengers. Ultimately, it’s not the passengers fault so the airline should, if needed and within reason, bend over backwards to ensure they alleviate the inconvenience they caused.

How to avoid being Denied Boarding in an Overbooking Situation

• Check-in online and get your boarding pass. That means that you are already ahead of the pack should the flight be overbooked. The airline can still cancel your boarding pass, but you won’t be first choice.
• Check in baggage. It’s far more inconvenient for an airline to offload a passenger with baggage in the hold than to offload the passengers with just cabin baggage, as the check-in baggage has to be retrieved from the aircraft, which takes time.
• Become a member of the airline’s frequent flier programme. It automatically means you are higher priority that other passengers, even if you are just a basic member.
• Show up to the airport early rather than last minute, particularly during busy travel season. You may lose an hour at the airport but that’s better than missing the flight.

As long as the market demands refundable and re-bookable tickets, and the agents manipulate the booking systems by blocking seats without issuing tickets, airlines will continue to have to overbook flights in order to ensure they don’t end up flying planes with empty seats that could have been sold. This is a very low margin business and empty seats that could have been sold are not something an airline can afford.

Airlines are usually clever at managing overbooking and monitor denied boarding very seriously, as that means loss of reputation and excessive costs. Airlines will continue to deny passengers boarding in the future and therefore, tact in handling these situations is essential, as it isn’t the passengers’ fault that they couldn’t fly – they did all they were supposed to do. When an airline forgets that, the outcome can be somewhat unpleasant, resulting an impact far greater than the benefit the airline obtained by filling the plane up.

This article is based on personal research done out of interest for this subject and represents only my opinion. I would be happy to know your views and thoughts on this.