More flights overbooked, but some things are changing

Airlines often sell more tickets on a particular flight than they have seats available. Not because they are mean, not because they can’t keep track of what they sell, but simply to protect them from passenger no-shows. If passengers, especially those with flexible tickets, change their travel plans at the last minute, the airline has to fly with empty seats. And, given the high fixed cost of operating a flight (fuel, labor, and landing fees), that is the airlines biggest fear.

The number of passengers that get bumped is publicly reported in the US by the Department of Transportation. This number is up, once again. About 1.16 passengers per 10,000 are bumped. Not a lot – until, of course, you are the one who gets bumped. 

Two things have changed recently. First, airlines are now better predicting how many passengers show up. Part of this is they just get smarter (using more sophisticated modeling tools), part of this is that the choice set of flights for most customers is shrinking (many airlines have cut the number of flights they offer). Second, planes are getting fuller. The load factor (the percentage of seats that are occupied in a plane) has increased some 10 percentage points in the last year.

How much to overbook remains an interesting problem for the airline. There are elegant analytical models available, that trade-off the cost of the empty seat with the cost of bumping a passenger.

http://www.nytimes.com/2008/08/23/business/23bump.html?em

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