Airline Overbooking - A Planners Perspective

Southwest Airlines hosts one of my favorite blogs. Their online presence details aspects of the airline that passengers normally don't see.   Such is the case with an article I read today on overbooking.  Passengers like me HATE it.    It is abusive to customers.

Enter Bill Owen, a Schedule Planning Lead Planner for SWA.   Bills article below discusses the "why and how" of airline capacity planning. Its a mathematical issue involving probabilities and percentages...which almost automatically means I won't get it.

Revenue and yield management impact most modes of transportation, but when your cargo has a mind of its own...aka passengers, it gets particularly interesting. The point Bill makes below regarding space perishability affects container shipping the same way. The main difference is that booked ocean freight rarely changes vessels because of convenience.

Eric

clipped from www.blogsouthwest.com OVERBOOKING By: Bill Owen - Schedule Planning Lead Planner Airline overbooking. It’s misjudged, misinterpreted, and mischaracterized. Most people don’t understand it—if it were a person, it’d be an odd cross between Donald Trump and Truman Capote. You’re not sure you get it, you don’t think you like it, but it usually makes for an interesting story and is the butt of jokes by comedians on late-night talk shows. However, overbooking is actually easily explained and understood;  is the subject of a huge amount of statistical analysis; and is a bona-fide science in its own right! Overbooking is the practice of accepting more reservations on a flight than there are seats. Most folks have two questions about overbooking: “why?” and “how?” The “why” is easy to explain—it’s an airline’s way of counteracting “no-shows,” which are Customers who make confirmed reservations for flights and then, for whatever reason, fail to show up. Without overbooking, no-shows would cause almost all fully-booked flights to leave with empty seats. And an airline seat is a completely perishable commodity—when a seat on a flight departs the gate empty, it is lost and can’t ever be used. Put another way, the potential for revenue lost due to no-shows could easily undermine Southwest’s Low-Fare Leadership…and the art of overbooking helps prevents that. That’s the “why.” The “how” is harder to explain, but it is way more interesting. The science surrounding overbooking combines the mathematics of probability and of detailed, historical analysis, mixes in a healthy measure of behavioralistic research, then uses all of that to predict what percentage of bookings for a given flight leg, on a given day, will fail to show up. The numbers of people that book but don’t show have very definite trends that, absent a few “except for when this happens…” things thrown in just to keep things exciting, make predicting no-show rates a surprisingly exact and successful (if occasionally stressful) science.

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