The impact of overbooking on airline industry trends is often misunderstood and, to the layman, is a baffling concept. Though the fact that airlines sell more tickets than seats available can cause stress and potential cancellations for customers, there are a few advantages of doing so for airlines and customers alike.
So, if you’ve fallen victim to an overbooked flight or want to learn more about how airlines work for your planned holiday, here’s all you’ll need to know about overbooking and how companies like Skycop can assist you when seeking compensation.
The Practice of Overbooking: An In-depth Look
The process of overbooking flights, though it often proves detrimental to customer satisfaction, is a contentious and data-driven decision by airlines.
Essentially, airlines bank on the probability that some passengers will not turn up for their flights when selling more tickets than seats available, ensuring that each plane leaving the airport is full.
This may seem like a hazardous strategy, and in truth, it is. But to negate some of this risk, airlines use historical data to help them figure out the correct supply and demand levels for each flight. The no-show rate represents these calculations and is, on average, in the ballpark of 5-15% of passengers per flight.
Airline industry trends, however, fluctuate, so the number of tickets sold will depend on the average number of no-shows for each specific route.
The Positive Impact of Overbooking on the Airline Industry
As aviation trends go, overbooking is the most controversial. However, it’s worth noting that overbooking has forced many airlines to evaluate customer service.
Each customer has overbooked flight rights to protect them, and companies like Skycop help clients reach agreements with airlines, often in the form of payouts. From help with lost luggage to compensation claims, airline passengers have plenty of support available.
There are also, however, revenue benefits of overbooking that explain why airlines insist on overbooking flights.
Potential financial benefits for Airlines
The financial benefits of overbooking for airlines are self-explanatory. Critically, overbooking allows airlines to increase ticket sales and overall revenue.
Most of the time, the risk does not outweigh the reward, as the number of passengers “bumped” off flights does not inconvenience the airlines enough to change the policy and reduce revenue.
Increased Efficiency and Maximization of Resources
Profit due to overbooking is not just equated to extra ticket sales, though. Airlines use a formula called revenue per available seat mile (RASM) to ensure they make as much money as possible per seat. This expands on the price of the ticket to measure all variables involved, including but not limited to:
- Fees for suitcases and baggage
- Food and drink
- Seat selection
Basically, the first step to increasing RASM is to fill all the seats on the plane. Each full seat is not just an extra ticket; it involves the rest of the potential fees that surround traveling.
The Negative Consequences of Overbooking for the Airline Industry
Overbooking is a clearly successful financial strategy, but it is impossible to get over the fact that selling more tickets than seats available will cause headaches for airlines and passengers alike.
Customer dissatisfaction and potential loss of business
The most significant consequence of overbooking is the occasional “bumping” of customers when an unexpectedly high number of passengers turn up for a flight. Flight cancellations are incredibly detrimental to brand image and will prevent repeat business with clients.
Legal implications and potential fines
Customers “bumped” off of flights due to overbooking are often due compensation, but only if they have involuntary denial of boarding.
Remember, though, that this is a general rule, and if you think you may have a case, it’s best to get some legal guidance. Skycop offers a 0% remuneration fee for an unlimited number of flights, not all companies offer this, so be wary when searching for assistance.
From both a public relations and financial perspective, the complications of a long case could be incredibly detrimental to an airline, so they will likely look for the quickest and fairest solutions to these problems.
The Influence of Overbooking on Industry Trends
One of the best outcomes of overbooking is the fact it helps keep ticket prices low for customers. By selling more tickets, airlines can charge less and gain profit through volume, creating more enticing business for both suppliers and customers.
Overbooking also frees up cheap last-minute tickets for customers. If empty seats remain on a flight, they can be sold off for cheaper before the flight takes off.
Overbooking is probably the most controversial of aviation trends, but with some knowledge, it can be leveraged to the advantage of every airline passenger. Though nothing is worse than being bumped off a flight at the last minute, overbooking isn’t all bad.