The Financial Reason Behind Why Airlines Deliberately Overbook Flights
United Airlines hit headlines earlier this week when a doctor was chosen at random to disembark an overbooked flight from Chicago to Louisville.
Savvy travellers who fly often will know that most airlines intentionally overbook flights in anticipation of people ‘no-showing’ on the day of the journey. This doesn’t affect airlines in anyway since the person has already paid for the flight.
For example, an airline that averages about a 5% no show among its travellers could take the risk of selling 102% worth of tickets while still ensuring that travellers who show up still get an allocated seat.
So what do airlines do when things don’t go as expected and an overbooked flight does indeed have insufficient seats?
Firstly, they can bum up some travellers to business class if there are still seats available. This not only solves their problem but also creates a happy traveller who now feels special because he or she is enjoying business class amenities despite paying for an economy class ticket.
Secondly, they can offer very lucrative perks for travellers who are not in a rush to travel and willing to travel on a later flight. These perks typically include free hotel stay and cash to spend.
While not everyone would be attracted to this perk, there are still some who wouldn’t mind the extra stay and some cash to spend. Though this compensation costs some money, it would still be lower than the additional profits the airlines have already made.
Both the upgrading of seats and the counteroffer of cash to take the next flight would create happy customers, despite the fact that airlines only got into the predicament due to their profit maximising strategies.
Here are 2 other economic strategies airlines use to make you pay more:
Read More: 3 Economic Strategies Airlines Use To Get Customers To Pay More (And To Even Make Them Feel Good About It)
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