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Why airlines are allowed to overbook their flights

This holiday season, most airlines will oversell their flights. Here’s why.

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Flying is stressful, and as the holiday season approaches, it’s something many Americans will have to endure. According to AAA, 4.27 million people will travel via plane from November 21 to 25, a 5.4 percent increase from last year’s number of travelers.

If you’re one of them, there are lots of inconveniences already built into your air travel experience: traffic on your way to the airport, long security lines, overpriced and dry sandwiches. But perhaps the most infuriating thing is the possibility of getting bumped from your flight due to overbooking. The idea that an airline can sell you a service and then not give it to you seems like it should be forbidden.

But the practice of overbooking, at least from an economic standpoint, makes some sense for airlines. And it’s not because they want to sell more seats than they have in order to dupe people into purchasing a product they can’t provide. Most airlines overbook because people are unreliable, and with the profit margin already so tight, they need to optimize the space they have.

Why airlines overbook flights

“There’s someone who may have got a flat tire or who missed their connection or got sick,” aviation economics expert and senior vice president of ICF Aviation Samuel Engel told Vox. “There is a small number of people with the best of intentions who will not make it.”

Engel says that right now, most flights take off with just 84 percent of seats filled. Putting a flyer who missed their flight on another plane could also wind up costing the airline money, so even if you don’t get your money back, the act of accommodating you on another flight is costly.

American Airlines’ passenger load is 82.6 percent, Southwest is 83.6, and Delta is 85.6 percent. So if airlines book only 100 percent of their seats, they may be committing to taking off with empty seats on the plane, which further diminishes the profit margins of operating a plane.

According to the International Air Transport Association, airline profits will be 12 percent lower this year than they were in 2017. This is mainly due to rising oil prices: Fuel accounts for 17 to 22 percent of an aircraft’s operation costs, and the price of jet fuel has gone up 50 percent in the past year. Earlier in the year, American Airlines cut its profit forecast by $2 billion, citing high oil prices. Delta did the same in June.

“There’s an economic question,” Engel says. “Do you want to run a business where you know you will be consistently leaving some of your product unsold, and therefore ask passengers to pay extra for that capacity? Or are you better off playing the statistics to try to fill the plane and get the most value out of it as possible?” Airlines have chosen the latter.

How airlines predict which flights they overbook

Airlines use algorithms in revenue management systems to predict which flights to overbook and how much to overbook them by. Because most flights take off with empty seats, a majority are oversold. Systems compile historical and weather data and consider holidays, along with other high-traffic events such as sporting events or conventions — anything that might impact demand. While some airlines have in-house revenue management systems, Engel says some airlines purchase systems from providers such as Pros or Sabre. The algorithm also takes into account whether passengers are frequent flyers; if you are, you are less likely to be bumped.

And people get bumped when the algorithm doesn’t work. Flight bumps can be either voluntary or involuntary. You’ve probably heard of or even taken a voluntary flight change before, where the airline exchanges a travel voucher for a seat on the flight they overbooked. “The vast majority of overbookings are solved with voluntary arrangements,” Engel says.

Then there are the involuntary bumps, when airlines strip you of your seat. They are able to do this because when a passenger buys a ticket, they are reserving not a seat, but a route. The airline promises to get you to from point A to point B, but that’s it. “It [says that] in the contract of carriage, which I’m sure you read very carefully,” Engel says. He adds that when travelers miss their flight, their expectation is just to be placed on another one, which implies that we know we aren’t just paying for the seat when we buy a ticket.

The likelihood of getting bumped has decreased, but social media has made it seem the opposite

Involuntary bumps are how you end up with viral videos like the one of a man being dragged down the aisle of a United Airlines plane after he refused to give up his seat.

Many speculate that because of this incident, the number of bumps was at an all-time low last year, but it’s not because airlines have stopped overbooking.

Instead, they are refining their practices. United says it now warns passengers at least five days beforehand if they are on a potentially overbooked flight. American Airlines provides a service that will let you know if your flight is overbooked before you get to the airport.

Along with giving flyers fair warning, airlines also sweeten the deal for those who voluntarily bump. Delta will now compensate flyers, though most likely not in cash, up to $9,950 to give up a seat on an overbooked flight; it used to promise up to $1,350.

According to a Department of Transportation report, airlines reported bumping about one in 30,000 passengers last year, the lowest rate since 1995. The DOT predicts that a person’s chance of being bumped is actually only one in 67,000.

But none of this diminishes the betrayal felt when being bumped from a flight. Even if economically it is pretty straightforward, there is no doubt it adds inconvenience to an already stressful experience. As Engel puts it, “If I buy that product and you have the option to not actually give it to me? That’s a pretty hard message to swallow.”

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