Aviation authorities are set to implement a prohibition on overbooking of flights starting Friday, June 15, 2012. the ban will impose a fine of approximately $116 per passenger bumped, in addition to the other costs that the airlines incur to accommodate the passengers. Oh, and it is happening in the Philippines.
OK, so this isn’t happening in the USA, but it is an interesting move, set to quell the uproar from passengers who are routinely seeing themselves denied boarding on flights in the country. Not surprisingly, the LCCs of the Philippines are protesting the rule, claiming that they will have to increase fares 10% or more to make up for the lost revenue.
In the USA there are some rules to protect passenger rights in such cases but there are no fines levied against the airlines unless the airlines try to avoid the mandated compensation rules. That said, the DoT has been more active recently on passenger rights issues, so it wouldn’t be completely out of reason to see them act similarly, though I still wouldn’t bet on that happening. Then again, with the industry average in the USA at around 1 passenger per 10,000 being denied involuntarily, it also isn’t so clear that such a rule is even necessary.
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I don’t know how it is in other countries, but for the US everyone would lose with a policy like that
Woah almost had a heart attack there.
You almost gave me a heart attack with that headline. Rascal. 😛
It keeps fares low, allows people to get onto planes that would leave with empty seats despite being sold out, and is a win for many travelers who dont mind (or actively seek) being bumped (for the $$/tickets that comes with it). Airlines have no-show rates as high as 5% on some routes–that’s a lot of people and a lot of money!
The best thing a government can do is make sure customers have good information about what to do–i.e. cash vs. airline credit, defining responsibilities for accommodation costs, etc.
And for those Americans who truly hate it, fly Jetblue, the only USA airline that does not oversell
Tickets wouldn’t have to go up. Just make them all non refundable, with no airline credit or future flights.
@applezz13: And that’s consumer friendly?
In the US we already have a fairly reasonable solution in which the DOT mandates minimum IDB compensation which exceeds the $116 just enacted in the Phillippines, inspiring airlines to make sufficiently sweet VDB offers to get their IDB numbers down. This results in an optimization problem with reasonable dials and buttons to be tweaked.
Scared me too. I love to be bumped on certain trips, and there are many others like me. Sure there need to be penalties for INVOLUNTARY bumping, but if airlines couldn’t sell extra tickets based on models of past usage they would have to raise the prices for everyone, and you or I would more often find no seats available on the flights we want. Thank goodness this isn’t happening in the U.S., and I hope it never does.
Oh, just for fun, let’s change the US rules for overbooking and bumping. It will almost end the practice and, maybe get the load factors down to 96%. Here’s how: Double the current compensation to the bumped pax, make it payable only by cash or check (NO “Credit vouchers allowed.”) and fine he airline $1,000 per bumped seat, payable to some convenient DOT fund, other than TSA. It might also help to lower the abusive cost of some of those last-minute tickets that we often have to buy. It won’t happen and I understand that, but it WOULD solve the problem.
@cook: Solve? Problem? US Airlines have very good modeling on load factors. And there’s usually someone to volunteer–in fact, I need to stay sharp to make sure that I beat everyone else to the VDB. (I’ve noticed the new COdbaUA agents care more about you being near the counter and being ready with easy alternative flights than your place on the bump list. They pick and choose people that make their job easiest. Status or time of joining list is irrelevant any more. Just got a $300 bump last Monday.)
Even though I read something about this previously, but I nearly had a heart attack reading the headline and first sentence or two.
Go ahead and bump me! I’m cool w/ vouchers!
So. I am curious: if it’s essential to overbook for airlines to be able to maintain low fares… How does JetBlue compete without overbooking? I believe they aren’t in ch.11 and seem to be doing fine.
Oliver, the airlines have models that tell them how many people to expect at the gate based on patterns of ticket sales and historical experience. Just to throw out numbers, let’s suppose there are 200 seats on a flight, and the model says that if they sell 220 tickets on this flight, 200 people will actually show up. So they may sell 220 tickets. Now they are sometimes wrong; suppose 205 show up. They’re overbooked by five. But they were able to sell 20 extra tickets, so compensating five people is hardly a problem in that model. And if only 200 do show up, they’ve made a nice profit on the 20 extra tickets. Those are just numbers I made up; it’s the principle I’m discussing, not actual ratios, which I don’t know. That they would raise prices in general if they weren’t allowed to overbook is simply an assumption based on the need to replace that lost revenue somehow.
@DaveS — yes, I know how overbooking works and why airlines do it. And I have volunteered a few times and don’t mind the practice (as long as it’s really unpleasant for the airlines to do IDBs vs VBDs)
But if the general claim is that without overbooking the fares would be higher, then the logical question for me is: how does JetBlue do it? Are their fares in fact higher than they need to be if they’d only join the rest of the industry and they/their passengers accept that? Or do they have a different mix of customers that doesn’t no-show as frequently as the other carriers? (less business travel, maybe?)
JetBlue does it in a couple ways. I do believe their average fare is a bit higher than competitors. They also make a decent amount per passenger in ancillary revenue. Their RASM is definitely competitive and, possibly more importantly, their CASM is somewhat lower than the legacy carriers. And, yes, their customer demographic is different.
It isn’t a requirement that a company overbook to make money, but those which do engage in the practice have included it in their models. They wouldn’t have to raise their prices, but they would.
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