I still don't believe this claim. A 727 seats 129, a 787 seats 290, and a 747 seats 366. That means it only makes flights slightly less expensive. I only travel a few times a year and I'd rather pay 2% more than get bumped off my flight.

Why do we allow airlines to overbook but not movie theaters or other industries? This seems like an artificial advantage we've given them and it doesn't seem beneficial at all to the average consumer.

I don't see a reason to waste seats if it can be avoided without hurting consumers. Wasting seats is inefficient economically and bad for the environment.

I think it's the worst when hotels overbook. Typically the replacement hotel is less nice and has a bad location.

https://en.wikipedia.org/wiki/Southwest_Airlines#Fleet

Edit: An exception may be Easyjet (though I've never seen it happen and I fly them a lot). They offer flex tickets mainly aimed at business flyers which would make it worthwhile for them to do some limited overbooking.

Let's take two airlines, A and B. Both only sell non-refundable tickes. A never overbooks. B always overbooks. What happens?

A will fly with some number of empty seats on average, because they still get the occasional no-show. B flies with fewer empty seats on average because they overbook.

Which airline can offer more competitive prices? It's B. Because by overbooking B's revenue per plane leg is higher.

If that isn't clear, here's an example. Say the planes have a capacity of 100, and on average 2 people fail to show. A sells 100 tickets for $100.00 each. B sells 101 tickets for $99.02 each. On average, B makes more money on every flight, _and_ is more competitive on price.

Of course with the numbers in my example the compensation paid by B on the odd occasion that everyone shows up probably kills any additional profit. The real numbers matter in order to determine to what extent this really happens in practice. But I hope I've demonstrated that non-refundability of tickets doesn't necessarily or automatically mean that overbooking is not profitable.

So there is some potential level of competitive benefit to overbooking even on non-refundable tickets, assuming that some people still occasionally fail to show (because they miss a connection, become ill, or whatever).

I think Ryanair's approach of not overbooking is sensible as it keeps the operation very easy. Also, they can book every flight to 100%. If you deny boarding, you need to offer alternatives. That's not possible if you're the only airline flying from the airport (Ryanair used to use a lot of regional airports) and your next flights are already at 100%.

As usual, people striving to save one dollar no matter what (in this case, giving up the certainty of flying) are the problem.

> As usual, people striving to save one dollar no matter what (in this case, giving up the certainty of flying) are the problem.

It's not necessarily a problem. Flyers can choose between certainty of flying and other nice things that cost money. Most appear to choose having other nice things instead. Southwest is banking on flyers choosing the other way. There may well be space for both approaches in the market.

After that, you get nothing. It's in the contract. I think it's only been that way for 2 years or so.

[1] https://www.southwest.com/international/

However it's still a good idea to book each individual flight in a different transaction. Avoids any shennanigans on the airline's part for no-shows and there's no downside for the passenger other than a slightly longer booking process.

The article pretty clearly suggests this policy was under consideration anyway, though the United incident at least seems to have affected the timing, and might have made it easier to pull the trigger.

> Overbooking is central to airline profitability

Flying full is certainly beneficial to profitability, and overbooking makes that more likely. But it's not without costs, and it's quite possible that the cost/benefit has changed since the policy became a norm.

What you lose by renouncing overbooking is the ability to change your ticket without paying for it again (which is what happen with Ryanair - fees to alter bookings are so huge, it's cheaper to just buy a new ticket).

My guess why they don't use overbooking: it's really complicated. Both finding the right balance of overbooking as well as managing the procedures at the airport. Ryanair has simply decided in favor of simplicity forgoing some additional revenue

But risk would also be much higher - as you say, handling overbooking correctly is complicated, and when it goes wrong it can go very wrong. Ryanair didn't just renounce revenue, they renounced risk and the costs associated with managing that risk.

> And some of Ryanair's tickets are certainly below marginal costs

The operational word being some. Much-fanfared rock-bottom prices nowadays are very limited, and the cost of a seat goes up very very quickly after they're exhausted. The cheap tickets are now a marketing proposition for the real ones.

Edit: then again, with their relatively recent business plus fare (which allows ticket holders some flexibility), who knows...

[0] https://www.transportation.gov/sites/dot.gov/files/docs/reso...

Oct - Dec 2016 Passengers Denied Boarding by U.S. Airlines. United's Denied Boarding is 0.40 per 10k passengers vs JetBlue DB of 1.19 per 10k passengers.

Are you sure of that?

I would think that airline profitability is largely dictated by competitive forces, rather than the particulars of in which practices the overall industry is permitted to engage.

(Note that I'm assuming a world where all airlines, or no airlines, overbook. If only some of them overbook, then I agree the practice could affect relative profitability of those who do / don't overbook.)

To an airline, a flight that leaves with an empty seat is basically throwing money away; that empty seat doesn't mean you can take less fuel, fewer flight crew members, or wear out the airplane less. Therefore, the empty seat saves the airline no money.

Furthermore, people often miss their flights.

Overbooking is one way to deal with these two assumptions. Assume a certain number of people will miss the flight, and sell some seats twice. Then you don't fly with money-eating empty seats, and you can lower the ticket price a bit, because you don't have to charge customers the cost of those statistically-likely empty seats.

There are other solutions. Don't offer any refunds or reaccommodation to no-shows. The seat was empty, but someone paid for it, so who cares? But customers probably don't like that. The might even like it less than overbooking. I don't know, I don't run an airline. There are options, but overbooking exists for a reason.

For some numbers, a 777-200 carries 313 passengers, weighs 135k kg, carries up to 100k kg of fuel, and has a max takeoff weight of about 250k kg. 313 passengers and luggage, averaging 100kg, weigh just 31.3k kg. Your ticket therefore pays for your weight, plus 5x your weight in airplane structure, plus (up to) 3x your weight in fuel.

If you don't show up, they're still carrying 8x your weight anyways, so saving 200kg isn't that important.

(PS: apologies for the 'thousands of kg' units. I thought it was more readable than Mg or fully written out numbers.)

Just write tonnes (= metric tons)?

What about if you are flying long haul and linking up to a domestic flight on another airline? "Oh, we can't help you because your previous flight was delayed due to weather/mechanical/congestion.you should have flown on one carrier even if the price was 2x"?

Airport congestion is a big issue in the US, as is weather related delays.

I was under the impression that the fuel load for each flight is calculated based on a formula that averages the weight for each passenger and their expected luggage. Fewer passengers than expected = more fuel left over after the flight.

I honestly think hacker news should implement a feature where your comment is read back to you slowly before you post. Or you have to retype it out twice. Something, anything, to give the blowhards on here pause before they bless us with their cited[0] wisdom.

United lost over $2 billion last year. JetBlue made about $800 million in net income last year. So which strategy is "economically important" again?

It's rather that thanks to the internet we know of stories like these. 10 years ago no one would've known.

Involuntary bumps are extremely rare statistically anyway.

For those who aren't aware, airlines overbook because there are, on average, a significant number of people who miss or skip their flights. It's wasteful (and bad business) to leave those seats empty when instead, you can overbook and have an extremely low percentage of flights end up without enough seats.

Edit: as others mentioned, overbooking also allows airlines to be more flexible with refunds.

But, couldn't they make the tradeoff more explicit and transparent for the customer? "This ticket allows you to be bumped, for which you will be paid $X. You can pay $Y more to make it a permanent you-own-this-slot-we're-not-f'ing-around reservation."

None of this, "oh, you didn't read and memorize the minutiae of overbooking policies and have to figure everything out minutes before the flight you thought you were going to be on!"

But the notion that a company maximizing it's surplus is _always_ beneficial to consumers is tricky but more likely false within the confines of my limited understanding of contemporary economic theory.

United increasing the maximum bump fee completely solves the problem. Short of the apocalypse, you're going to find plenty of takers on any flight for $10k, even if it's a multiple day delay. The people who take the payoff are better off -- if they weren't, they wouldn't have taken the voluntary deal to fly later. Then the airline just needs to gather some statistics about how high the auctions go, and optimize the overbook rate to maximize their revenue. Everyone then is better off. In fact, on a lot of flights, you can probably find multiple people to bump with just a token payment -- they'd rather stay another day.

The other great thing about dynamic overbooking like this is that you never have to have a sold out flight, some of them are just really expensive. Someone who really needs to be on a plane walks up and plunks down $5000 or something, and the airline finds the least disrupted passenger, and pays him a few hundred. The bumped guy is happy to have the money, the last minute guy is happy to be on the plane, and the airline is happy to make $4700 extra.

This works even better with a name-your-price bump question on checkin for flights that are oversold. Even if it's nonbinding, the airline now knows that it has willing passengers to bump and can keep selling tickets.

That said, I think you are conflating a couple of economic principles.

> It's necessary to maximize total surplus as well. If someone wanted to get on the plane, and they took off with a seat empty, that's a deadweight loss.

I think you are confusing utility [1] with surplus somewhat here. If someone wanted to get on and they took off with an empty seat that is a loss in Utility. If the airline turns around and sells that seat to the new person that increases Producer Surplus (and conversely decreasing Consumer Surplus) to increase Utility.

I don't think this situation (empty seat) is DWL in the traditional sense [2]. The traditional DWL scenario is when producers could supply more but don't because of pricing constraints or other artificial ceilings/floors. It is definitely a marketing allocation inefficiency which results in Utility loss and I am kind of interested to see if there are better quantifications of this loss...but it isn't a DWL in surplus technically.

> Everyone then is better off. In fact, on a lot of flights, you can probably find multiple people to bump with just a token payment -- they'd rather stay another day.

It's totally possible that everyone can be better off. The issue isn't about when everyone is better off...it's when the system breaks down and you have situations where no one wants to make that trade.

> The bumped guy is happy to have the money, the last minute guy is happy to be on the plane, and the airline is happy to make $4700 extra.

This is an example of maximizing producer surplus. In my mind it's a variation of Price Discimination [3]. And while this overall beneficial situation is plausible, it isn't really overbooking.

For me, overbooking is basically selling more goods than you actually have and playing on the statistics trying to bank on people not making the flight. If you sell 30 seats and 5 people don't show, you take off with 25 people on board. If you sell 35 seats and 5 don't show, you take off with a full flight and pocket some additional revenue from the 5 no shows.

Now there is a lot of gray area since most no shows are from missed connections and so some of that additional revenue can go back into the system to allow for cheaper cancellation fees as well as accommodating rescheduling costs for these missed connections. But in general I suspect that producer surplus increases more than the gain in consumer utility.

> This works even better with a name-your-price bump question on checkin for flights that are oversold. Even if it's nonbinding, the airline now knows that it has willing passengers to bump and can keep selling tickets.

This is again, Price Discrimination but now adding information imbalance in order to help the airline more effectively Price Discriminate thereby maximizing their Producer Surplus.

Technically the United situation isn't the result of overbooking anyway...but I still think the practice warrants scrutiny. United's recent announcement to increase payouts and mileage compensation is testament to the fact that there was Producer Surplus to spare.

Like I said, all of this is speculative discussion and there is a lot of gray area. It is also plausible that overbooking results in maximizing Utility and an even handed redistribution of benefits to both producers and consumers. But I believe Producers are driven by incentives...and they don't have strong incentives to share the benefits of overbooking altruistically back to the consumer.

I fly from SFO - PDX every other weekend and consistently, no matter how early I book, Virgin America flights are cheaper than United and Virgin doesn't overbook whereas United does. Generally speaking, if United were even slightly returning the added revenue from overbooking to the consumer shouldn't their flights be cheaper than non-overbooked competitors?

Again this observation and subsequent question is anecdotal and broad...but I like it for FFT.

[1] https://en.wikibooks.org/wiki/Principles_of_Economics/Utilit...

[2] https://en.wikipedia.org/wiki/Deadweight_loss

[3] http://thismatter.com/economics/price-discrimination.htm

I gave a more detailed response to cameldrv.

Price discrimination does not necessarily reduce consumer surplus. In this case in particular, there is a large surplus being created by the fact that planes fly more full, and I don't know any reason to think that consumers don't capture much or most of this .

> a large surplus being created by the fact that planes fly more full

I think you are conflating surplus with utility. Full flights have more utility than not full flights...but the market surplus available is unaltered.

Maximizing utility is not a bad goal to have...but it is distinct from Consumer and Producer surplus.

> I don't know any reason to think that consumers don't capture much or most of this .

Because in general most of the surplus is captured by the Producer and the producer doesn't have any incentive to redistribute it back to the consumer. Not having an incentive doesn't mean they don't, I am just pointing out airlines aren't incentivized to reduce the seat cost of a late purchaser by the amount of the cancellation fee for the person that cancelled their flight...or even offer the seat at the price the original person paid.

Anecdotally (as mentioned in my other comment) we can compare United to Vrigin. Let's assume that a whole bunch of "surplus" is created by overbooking. United overbooks, Virgin does not. If the consumer captures most of this than United flights should be cheaper than Virgin ones in almost every way (ticket price, bag check fees, cancellation provisions, etc.). I fly from SFO-PDX twice a month. Virgin America consistently has lower priced fares than United.

This is observational and anecdotal...but the result casts doubt on the hypothesis that the consumer captures most of the surplus generated by overbooking. Admittedly, I wouldn't expect the consumer to do so from a purely theoretical stand point .

https://www.khanacademy.org/economics-finance-domain/microec...

http://www.economicsonline.co.uk/Business_economics/Price_di...

https://en.wikipedia.org/wiki/Utility

http://thismatter.com/economics/price-discrimination.htm

Utility is quantity that is measured with respect to an individual (subjective), whereas surplus is an objective measure. This is but one difference, and I am not conflating them. Fuller flights (less dead-weight loss) means there is more surplus to go around, and which will in general be divided up between the buyers and sellers.

I could say similar things about your understanding of price discrimination. My guess is that most of your confusion comes from thinking in terms of an idealized model where prices are dominated by marginal costs, whereas fixed costs for planes are very large.

This can all be inferred from the definitions you link to, you just haven't internalized them.

For instance, if they continue to have rapidly-expiring vouchers, most travelers will not have any practical way to use the whole reward. Also, the airline could add conditions to vouchers such as a voucher that is completely “used up” by a ticket purchase even for tickets that cost less than the voucher amount. There are lots of ways they can try to create good press by technically giving you something that is hard to use.

Money. Low low prices. That's why people that have paid for tickets are getting beat up and kicked off planes.

In all sorts of other aspects of our world we're expected to gladly accept higher costs as the price of our "values." Higher energy costs, mandates for various types of insurance, taxes to fund one agenda or another and on and on. Perhaps you haven't considered this yet but delivering the seat that a paying customer has paid for and not subjecting any of these otherwise compliant paying customers to the possibility of being thrown off a plane --- by martial force if necessary --- is a "value" we might aspire to.

And if that means maybe you are a little more careful about just how often you bop across the continent in a 600 mph jet because the cost is a little higher, or you can't play ticket games with as much abandon as you're used to well... perhaps that isn't really the end of the world.