Is airline overbooking reliable to an airline? If so why?

Question

Can an airline rely on passengers showing up for their flight or is it better for them to overbook their flights to make more money. Justify your answer.

Answer 1

The reason that airlines overbook is that passengers cannot be relied upon to always show up or cancel their reservations if they know that they're not traveling.

Reason #1: Almost all airlines do it. They wouldn't bother if there was not an advantage.

Reason #2: It makes no sense to overbook if all passengers show up for every flight. The airlines would be intentionally selling seats that they know that they won't have and paying compensation to bumped passengers. Airlines don't tend to have the best management in the world, but they're not that stupid.

Reason #3: An airline seat is a perishable commodity. If the seat is not sold, then the airline doesn't make any revenue for it. They still have to pay the cost of operating the flight regardless of the number of passengers, so maximizing the number of passengers is critical to covering those costs and, hopefully, making a profit.

Although discount fares are nonrefundable, the flexible fares used by many business travelers are refundable. A significant percentage of those passengers don't bother to cancel their reservations when they decide not to travel. That means that the airline has no chance to re-sell the seats. They go out empty. Then the airline loses the revenue when the traveler requests a refund.

If travelers were reliable about showing up, or about cancelling when they're not traveling, then overbooking would become unnecessary.

Answer 2

Hi. Airlines often overbook their flights by approximately 20 seats in economy. They never overbook first class or business class. The reason they do this is because they know that some people either: don't show up for their flights, cancel their booking at the last minute or change their flights. If they do get a situation where everyone shows up for the flight (including the extra people) they will upgrade any frequent flyers from economy to first and they will offer people money to go on another flight. This usually works out very profitable for them.