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Southwest to Stop Overbooking as United Uproar Echoes

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Re: Southwest to Stop Overbooking as United Uproar Echoes

#21

Post by startupdiscuss »

kobeya wrote: post #10
sandworm101 wrote: post #4

Earlier quoted context omitted.

I don't see how it could. Only a handful of people on any one flight are ever bumped, on average. The bumped are normally put on other flights. The only 'win' is where someone doesn't show and also doesn't fly or get a refund. I cannot see how it is more than 1 or 2% of revenue. That said, perhaps I am dead wrong and overbooking is being used for darker purposes. Perhaps they are deliberately overselling flights at p…

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.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#22

Post by koolba »

jemfinch wrote: post #2

Does that mean ticket prices will increase?

Southwest already allows cancelling your ticket up to the last minute for a future credit so presumably most people that will miss the flight do so already. I wouldn't expect this impacts their fares much, if at all.

Now if United, AA, or other large airlines that don't offer cancellation did this, that'd be another story.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#23

Post by jowiar »

gregschlom wrote: post #17

I have a question for the HN crowd: what would happen if airlines sold their seats at a fixed price and let customers resell them? For the sake of the discussion let's assume that all seats are in the same class (ie: economy) - there are no business / first class seats. So the idea would be: 1. All seats are sold at the same price, no matter how early or how late you buy. The price covers all the costs associated wit…

The challenge is whether you are fundamentally buying a seat on a particular plane, or transit from point A to point B. Almost all simple solutions re: air travel break down once connections get involved.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#24

Post by gizmo385 »

maccard wrote: post #18
aresant wrote: post #12

This response feels knee jerk. It's been demonstrated in countless other threads (1) and articles (2) how economically important it is to overbook. Overbooking is central to airline profitability and their ability to provide flexibility - like partial refunds, or SW's "open tickets" policy on business select. As a consumer I appreciate these things and find them incredibly useful. United's response of "We'll push the…

The main budget airline in Europe (Ryanair) doesn't overbook flights, and as far as I am aware never has done. They managed a net profit of 1.4 billion dollars last year.

If I remember correctly, neither does JetBlue?

Re: Southwest to Stop Overbooking as United Uproar Echoes

#25

Post by jowiar »

valuearb wrote: post #13
sandworm101 wrote: post #4

Earlier quoted context omitted.

I don't see how it could. Only a handful of people on any one flight are ever bumped, on average. The bumped are normally put on other flights. The only 'win' is where someone doesn't show and also doesn't fly or get a refund. I cannot see how it is more than 1 or 2% of revenue. That said, perhaps I am dead wrong and overbooking is being used for darker purposes. Perhaps they are deliberately overselling flights at p…

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 overbo…

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

Re: Southwest to Stop Overbooking as United Uproar Echoes

#26

Post by carleverett »

sandworm101 wrote: post #4
jemfinch wrote: post #2

Does that mean ticket prices will increase?

I don't see how it could. Only a handful of people on any one flight are ever bumped, on average. The bumped are normally put on other flights. The only 'win' is where someone doesn't show and also doesn't fly or get a refund. I cannot see how it is more than 1 or 2% of revenue. That said, perhaps I am dead wrong and overbooking is being used for darker purposes. Perhaps they are deliberately overselling flights at p…

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

Re: Southwest to Stop Overbooking as United Uproar Echoes

#28

Post by cvburgess »

gregschlom wrote: post #17

I have a question for the HN crowd: what would happen if airlines sold their seats at a fixed price and let customers resell them? For the sake of the discussion let's assume that all seats are in the same class (ie: economy) - there are no business / first class seats. So the idea would be: 1. All seats are sold at the same price, no matter how early or how late you buy. The price covers all the costs associated wit…

I think there are a lot of rules around reselling tickets post-911. I'm sure you could find a way to execute it while accounting for the new regulations, but for most airlines i don't think its worth it. They also make money off of a fluctuating ticket price or they wouldn't have them.

Re: Southwest to Stop Overbooking as United Uproar Echoes

#29

Post by DoofusOfDeath »

aresant wrote: post #12

This response feels knee jerk. It's been demonstrated in countless other threads (1) and articles (2) how economically important it is to overbook. Overbooking is central to airline profitability and their ability to provide flexibility - like partial refunds, or SW's "open tickets" policy on business select. As a consumer I appreciate these things and find them incredibly useful. United's response of "We'll push the…

> Overbooking is central to airline profitability and their ability to provide flexibility - like partial refunds, or SW's "open tickets" policy on business select.

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.)

Re: Southwest to Stop Overbooking as United Uproar Echoes

#30

Post by gshubert17 »

valuearb wrote: post #13
sandworm101 wrote: post #4

Earlier quoted context omitted.

I don't see how it could. Only a handful of people on any one flight are ever bumped, on average. The bumped are normally put on other flights. The only 'win' is where someone doesn't show and also doesn't fly or get a refund. I cannot see how it is more than 1 or 2% of revenue. That said, perhaps I am dead wrong and overbooking is being used for darker purposes. Perhaps they are deliberately overselling flights at p…

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 overbo…

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

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