Flights are usually overbooked by around 5-10 passengers a flight, and is well-calculated based on the expected number of no-shows.* Depending on the ticket price, this can mean somewhere between $1-5k a flight, which can be a pretty substantial difference for a lower margin flight.

No, there's no benefit to deliberately overbooking to fill a later flight given that bumped passengers are compensated. At best they're giving away a seat on that later flight for ~free, and at worst they're eating the cost of another paying passenger that can't book that seat anymore.

*source: a friend working in revenue mgmt at United

Given the reason that airlines employ overselling, you would have to expect that it would impact the airline profitability, which could in theory lead to an increase in ticket prices. The bet SWA is making is that the revenue gain from overbooking is smaller than the consequential losses from bad publicity. Just think about the downside to United based on their share price alone, and now the increased focus that is on the 'good conduct' w.r.t bumping passengers in the light of it.

The maths of overbooking is that if you have 100 bookings on a 100 seater flight and 97 passengers show up then perhaps you could have sold 103 tickets and still not have to bump anyone. In this case you have increased revenue by 3% without an increase in costs. This can either manifest itself in an increased profit or, on a competitive route, lower ticket prices.

Of course, there will be variations in the number of people who show up and this can lead to more passengers arriving at the airport than there are seats on the plane. In this case, there is a cost to the airline, and perhaps in this big optimisation problem there are some airlines that see a bigger payoff in overbooking and bumping than avoiding overselling and minimising bumping.

I don't know about budget airlines, but full service you might expect somewhere in the region of 5% overselling. For budget, I would expect it to be higher as tickets are cheaper so passengers have less to lose by not showing up.

Nonetheless, even if it were a 1-2% increase in revenue, it would have a much higher impact on profitability. On a budget route, you could have $500 profit per flight, say a couple of dollars per passenger. Every extra ticket that gets sold that the airline doesn't have to pay costs for is a big deal, and part of the optimisations that allow airlines to offer lower fares.

I don't want to fly on an airline with profit margins so slim. If a few hundred dollars one way or another is all that matters, I don't want to think about the decisions going on behind the scenes. These are extraordinarily expensive machines filled with hundreds of very human humans. You need more room for contingencies. I'd rather pay a few dollars more if that meant flying on a plane that wasn't constantly skirting the edge of profitability, one where employees have room to take reasonable and safe decisions.

>I don't want to fly on an airline with profit margins so slim.

You should probably consider switching to Greyhound in that case. The last few years have generally been good ones for commercial aviation but, historically, the industry lost money as whole since its inception.

One of the problems is that you may be willing to pay a few dollars more but most will just go with whatever is cheapest.

It's not about how many were bumped. It's about over selling seats so that when people on refundable tickets don't show the plane doesn't leave with more empty seats.

Margins in air travel are small, an extra seat sold on every flight is a huge difference, this will definitely affect revenues and profits, and will likely lead to slightly higher ticket prices. Until the race to the bottom returns and they start overbooking again.

My gut feeling is that refundable tickets are less of a cause of empty seats than missed connections.

According to the Economist, profits per passenger are $22.40 in North America, compared to less than $8 per passenger in Europe.

April 22, 2017, page 11

Southwest doesn't do this, but some other low-cost carriers do (especially in Asia): they purposefully cancel flights and offer only credit vouchers as compensation instead of re-routing passengers. Many travelers end up buying same-day tickets at considerably higher expense, or not ending up in a position to use those vouchers (which is the same as the airline keeping the money).

American Airline vouchers are almost engineered to not be used.

Well, if it's a 1-2% decrease in revenue there might be a 1-2% price increase. I thought the margins for US airlines were incredibly small (could be wrong, I'm no expert).

In 2012, profits per passenger were about $4 [0] But lately, North American airlines are making over $20 per passenger [1]

[0] http://www.economist.com/blogs/economist-explains/2014/02/ec...

[1] Economist, April 22 print edition, page 11

They also won't have to pay the people who get bumped which will somewhat offset the lost revenue from overbooking.

I was under the impression they didn't actually pay people bumped, only gave them a voucher for their next flight that they probably won't even use.

Do they actually give cash?

They give flight vouchers, but they often have other direct expenses like hotel accommodations and food.

The last time I was bumped it was ~$600 airline voucher, transportation to/from a ski resort (a perk of being bumped in the mountains!), a room for the night and a good meal voucher to cover dinner and breakfast the next day. Plus they still flew me out the next day and took care of rebooking the connection on another airline. I don't know exactly how much it cost them, but I made out like a bandit.

I can better that. In the early 90s I (12) and a schoolmate (17) were flying vancouver-toronto-london with BA. I as an unaccompanied minor, him no so. The toronto-london flight was delayed overnight due to mechanical issues. They probably wouldn't have helped my friend so much but when I mentioned there was an older student on the flight from the same school they tracked him down. We got two hotel rooms and, this sounds strange but true, a stewardess. She took us to visit the University of Toronto, to which my friend was applying, and then the CN tower before our flight the following night.

Not recently. Costs have plummeted and airlines are one of the more profitable industries these days.

Historically airlines are one of the least profitable businesses in history. A few good years doesn't change that much.

In the US at least, they are now considered as a commodity. But the consolidation of major carriers (American with US Air, United with Continental) may have changed that equation.