Why airlines sell too many seats and why it might make sense

Here’s United Airlines’ latest PR nightmare. (April 11, 2017)

By Hugo MartínStaff Writer

April 14, 2017 3 AM PT

The now infamous incident in which a passenger was yanked from a sold-out United Airlines plane has the Chicago-based carrier reviewing how it deals with flights that don’t have enough seats for everyone who wants to board.

Although the United flight was fully booked — and not oversold — overbooking is a regular practice in the airline industry and it results in more than 40,000 passengers involuntarily removed annually from seats they purchased. Why do most airlines routinely sell more tickets than available seats for flights? And why does federal law allow it?

Airlines know some people won’t show up

Historical flight data tells airlines that on any particular flight, a percentage of passengers won’t show up to fill their seat, maybe because they overslept, got caught in traffic or simply forgot.

That percentage varies based on many factors, including whether those passengers are flying for a vacation or a business trip. If the passengers who don’t show up bought refundable tickets, the airline loses the revenue from those empty seats.

Airlines overbook with the help of secret formulas

To avoid flying with empty seats, airlines sell more seats than are available. Federal law allows this practice but doesn’t dictate the exact percentage of seats an airline can sell twice for the same flight.

Instead, airlines calculate how many seats to oversell based on proprietary algorithms that try to guess how many passengers are likely to miss the flight. The goal is to come up with a number that fills the plane as close to full capacity without having to boot passengers off — either voluntarily or involuntarily.

The algorithm must take into consideration what airlines must spend to compensate passengers who are bumped from a flight. Airlines don’t want the compensation costs to exceed how much more they make for double-selling a seat.

Not that many passengers are denied boarding

In 2016, the 12 biggest U.S.-based airlines denied boarding to 475,000 passengers, including about 41,000 who were removed from flights involuntarily last year.

That’s a rate of about 6 passengers who are involuntarily bumped from flights for every 100,000 fliers, according to the U.S. Transportation Department. That rate dropped from about 7 fliers for every 100,000 passengers in 2015.

Expressjet Airlines, a subsidiary of Skywest Airlines, had the highest rate of passengers removed involuntarily last year — 15 fliers for every 100,000 passengers. Jetblue Airways says it doesn’t overbook but must still bump passengers when flights are canceled for various reasons.

What you get for giving up your seat

When an airline has overbooked a flight and needs to remove paying passengers, federal law says the carrier must first ask for volunteers to give up their seats to take a later flight. An airline has no limit on how much compensation it can offer passengers to voluntarily give up a seat.

If an airline can’t get enough passengers to voluntarily give up their seats, the carriers can select passengers to remove involuntarily. Federal law does not dictate how an airline chooses. Many carriers first target passengers who paid the least for a ticket or who booked at the last minute.

What if you don’t want to give up your seat?

If an airline picks a passenger to be removed involuntarily from an overbooked flight, federal law says the carrier doesn’t have to offer any compensation as long as the airline gets the flier to the final destination within an hour of the arrival time of the overbooked flight.

If an airline gets a booted passenger on a flight that arrives between one and four hours later than the arrival time of the overbooked flight, federal law says the carrier must pay 200% of the original fare, with a cap of $675.

If the airline gets the booted passenger to the final destination later than four hours after the original arrival time, the carrier must pay 400% of the original fare, with a maximum of $1,350. The airlines can offer such compensation in the form of cash, travel vouchers or a combination of the two.

Are there better ways of dealing with overbooked flights?

Industry experts suggest there are several options for reducing the number of passengers who are booted involuntarily.

Airlines can stop overselling altogether or alter the algorithm to cut back on the number of seats that are oversold.
Carriers should try to resolve overbooking problems in the terminal, before passengers get on the plane. It is harder to get passengers to give up their spots once they are seated.
Airlines should give gate agents authority to offer as much in compensation as needed to get passengers to give up their seats voluntarily to avoid hurt feelings or an ugly onboard scene.
Airlines should send texts to passengers on an overbooked flight, asking for bids on how much they will take to give up their seats.
Carriers should make the airline policy for overbooking more transparent so that passengers know how likely they are to be booted and what they can expect if it happens. Most airline policies on overbooking are buried deep in a carrier’s website.
Airlines that have an oversold flight can book seats for their extra passengers on rival carriers. Airlines have negotiated fares for such situations.

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Twitter: @hugomartin

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UPDATES:

FOR THE RECORD

2:01 p.m.: An earlier version of this story stated that Expressjet Airlines’ rate of passengers removed involuntarily last year was 1.5 fliers for every 100,000 passengers. It was 15 fliers for every 100,000 passengers.