Should airlines be allowed to overbook?

UA 3411

By now you’ve seen the video. On a United flight from Chicago to Louisville, Dr. David Dao was beaten, bloodied, and literally dragged from the aircraft, after he refused to give up his seat when instructed to do so by crewmembers.

DragandDrop

It’s been an exceptional week for memes. This one unfortunately was too good to be true.

The beating of Dr. Dao was inexcusable, and the incident naturally provoked outrage. Some of that outrage was directed at overbooking, which is when airlines (or other businesses) sell more tickets than they have seats. New Jersey Governor Chris Christie called for an immediate ban on overbooking.

Overbooking

Nearly all airlines overbook flights. The assumption is that there will always be a few no shows, people who do not show up for a flight either due to missed connections, tardiness, or a change of plans. The practice results in more money for them and, presumably, cheaper fares for passengers, due to the increased supply of tickets. As airline customers largely choose which tickets to buy based on cost, this is a significant benefit.

 

Airlines model out the chance that a flight will be overbooked and try to strike a balance between filling the aircraft and overbooking it. They generally do a good job. Denied boardings make up fewer than 0.1% of all enplanements.  The vast majority of these (92%) are voluntary.

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VDB & IDB

When a flight is overbooked airlines first ask for volunteers who are willing to take a later flight in exchange for compensation, typically a hotel stay and some amount of credit for future flights on the airline. In these situations, the passenger is often quite happy to take the compensation, this is called a Voluntary Denied Boarding (VDB) and it can be awesome.

The issue is when no one volunteers.

In these cases, the airline is going to have deny boarding. This is perfectly legal, and technically agreed to in the fine print of the ticket purchase. How to do this is up to the airline, last to check in, lowest fare paid, or some form of randomization, are the most common methods.

In an involuntary denied boarding (IDB) the airline must compensate the passenger for their inconvenience.  There are rules for this. The amount depends on how long a passenger is delayed, for a longer delay the compensation is 4x the one way fare, up to a maximum of $1350.

I have seen some commentaries that the case of Dr. Dao should not be considered a IDB as Dr. Dao had already boarded the aircraft, and therefore it isn’t a denied boarding, and it falls under different rules instead. This is a question I’ll leave to the inevitable lawsuits and salivating aviation lawyers.

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$1350

Following this weeks “re-accommodation” Of Dr. Dao, there have been calls to raise, or eliminate, the limit airlines are required to pay out in the case of an involuntary denied boarding (IDB). Eliminating it would require airlines to keep upping their bids until a passenger was willing to accept.

Both elimination and raising the cap would put more power in the hands of the passengers when there was an overbooking situation. Both would raise the cost of IDBs to the airline and make them more cautious about overbooking, which would make denied boardings of all sorts less common. It is likely that it would slightly raise the cost of flying for everyone, and airlines would make less money.

In this case, United offered $800 or $1000 (reports seem to differ) in vouchers for volunteers to take a later flight and didn’t get enough takers. They did not up their offer, but instead elected to remove passengers. A higher value would have probably been accepted, there are reports of someone on the aircraft saying that they would leave for $1600.

There are reasons to have a cap on the amount that can be offered. Airlines do not have unlimited time to negotiate with passengers about compensation. Pilots have time restrictions and flights need to leave on time.  For these reasons, it makes sense to have a cap that airlines can fall back on when negotiations break down. In these situations, the airline should be the one to bear the cost, and the IDB cap should reflect this.

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From a real ad

Eliminate Overselling?

It is odd that overbooking has received so much attention, because UA3411, was not oversold. Initially the aircraft was simply full, but United needed to transport four crew members for a flight the next day. The details of this are not clear to me. Perhaps United could have put them on a later flight, or found a different crew. Perhaps United messed up and should have already had a crew in Louisville.

There might be good reasons for the flying public to want United to be able to kick people off a flight to accommodate its crew. One difference between air travel and other ticketed events, such as concerts or sporting events is the way that problems can reverberate and magnify as they propagate through the system[1].  Better to inconvenience four passengers in Chicago than cancel a flight in Louisville and inconvenience a whole plane load. Even if airlines were prohibited from overbooking there would still be instances where passengers are denied boarding, or asked to leave the aircraft, due to equipment swaps, weight issues, or other operational challenges. To eliminate these situations would require levels of redundancy that neither the airlines nor the flying public are willing to pay for.

Compensation

Were I a regulator, I would raise the compensation that airlines are required to pay out to involuntary denied passengers. Based on no data what so ever, 5-10 times the current level sounds about right. IDBs suck, and we want airline inventory analysts to be scared of them. I would advocate against banning overbooking, the overbooking system mostly works as intended, and is beneficial. What happened on UA3411 was a failure, but it was not a failure of how flights are sold.

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Not very human

UA 3411 was never about overbooking anyway. I think one reason (among many) that this video got so much attention is that as air passengers we inherently understand that airlines do not like us. We find ourselves trapped in an airport we’ve never heard of, being bossed around by screens. We are told to check in early and then wait around when the flight is late, we get segmented in numbered boarding groups, and then get charged for everything. If things go wrong we have even less control. We wait in line to be told that there are no options, that “everything is booked”, and “the next flight out isn’t until tomorrow.” The whole enterprise just doesn’t feel human at all. Frankly, we wouldn’t put it past United to beat someone up and drag them from the plane, we’ve already kind of suspected they might try such a thing on us.

[1] Just ask Delta

 

Related Articles: 

Why are airfares so volatile

Ultra-Long Haul Flights

What’s the furthest airport you can get to (without stopping) 

Are fares higher at larger airports

Why is flying in Canada so expensive

 

 

 

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3 thoughts on “Should airlines be allowed to overbook?

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