Overbooking in air transport

Overbooking in air transport

You have probably already heard of the practice of “overbooking”. Used in many sectors, particularly by hotels and airlines, this technique consists of anticipating cancellations and “no-shows” – customers who never turn up – by accepting more customers than the total capacity of the aircraft or hotel.

How it works

Sometimes the expected no-shows and cancellations are fewer than usual. In that case, the number of seats sold exceeds the capacity of the aircraft, resulting in an overbooked flight.

While this practice achieves higher load factors, poor management can also cost the company dearly. What are the risks of overbooking?

European regulations state that in the event of overbooking, the airline may deny boarding to a passenger. It must then look after the passenger until the next flight and pay financial compensation.

In the case of an overbooked flight, the airline has to rebook the passenger(s) concerned on a later flight, or on a competitor’s flight at its own expense. The competing service must offer quality standards at least equal to, or higher than, those of the service originally chosen by the customer.

Risks for the airline

This causes the airline several kinds of loss.

• Lost time:

Handling overbooked passengers takes up a considerable amount of staff time, as passengers have to be rebooked case by case. Most of the time, airlines have agreements with their closest competitors in terms of positioning, under which those competitors take overbooked passengers for a fixed price, which makes the process somewhat smoother. Nevertheless, each overbooking ties up a significant amount of staff.

• Financial losses

The passenger receives financial compensation. All the additional expenses caused by being rebooked on a later flight (hotel…) are reimbursed by the airline. These amounts quickly become very high when it is difficult to rebook the passenger (in the high season, for example).

• Risks to the airline’s image:

Damage to the brand image is probably the most harmful risk for the airline. In the best case, overbooked passengers are chosen on a voluntary basis. Attracted by the right to compensation and flexible about their travel dates, they are rebooked on another flight as quickly as possible and accept the situation without difficulty. In practice, however, volunteers are rare. When passengers are offloaded against their will, they generally come away with a very poor image of the airline and do not hesitate to tell those around them, or social media.

As an extension of revenue management, overbooking optimises an aircraft’s capacity, and therefore its yield. While it generally proves very profitable in the long term, it should not be forgotten that poor management of overbooking can lead to heavy financial losses and seriously damage the brand image.

Océane BOCA, consultant at Aerogestion