20 APR 2017: Henny Penny, the terrified little chicken - aka Chicken Little - was forever screaming that, “the sky is falling.” United Airlines embattled staff must have felt the same way over the last week as everyone from politicians to late night talk show hosts, stand-up comedians, passengers and the media were all over the unfortunate turn of events in Chicago. If you saw the ugly onboard dragging scene once, you probably saw it a hundred times.  

What’s intriguing about the aftermath however is that the focus has largely moved away from the unconscionable assault on a passenger and is now centered on the demonic airline practice of overbooking flights. Even Minister of Transport Marc Garneau got in on the act by announcing that legislation has been introduced for a Canadian passengers’ bill of rights that includes new rules on ‘bumping’ - an expression given a whole new meaning by last week’s incident! As the minister stated, “When passengers purchase an airline ticket, they expect and deserve that the airline will fulfill its part of the transaction. When that agreement is not fulfilled, passengers are entitled to clear, transparent and enforceable compensation.”

The bizarre thing about all this righteous indignation is that the violent “reaccommodation” of the unfortunate Dr. Dao did not result from an overbooking situation: The flight was fully booked but was not overbooked. Not to be confused by the facts however, the choleric question reverberating around the press, radio and talk shows is, “Why are airlines allowed to overbook flights and bump innocent passengers?

The media loves to portray overbooking as some kind of willy-nilly, scattergun money grab process whereby carriers recklessly overbook by x percent on every flight. This of course could not be further from the truth. Overselling is a scientific process based on historical, flight-by-flight, day of the week data that uses proprietary algorithms to predict what percentage of passengers are likely to no-show. On early morning flights it might be because x number of passengers can be relied upon to oversleep. On peak morning and evening rush hour banks at highway-congested hub airports it may be because x number get stuck in traffic. Overbooking quotients also vary based on other factors like whether passengers are flying for vacation or business, how many are holding non-refundable tickets versus the offset of those with fully refundable tickets, et cetera et cetera. It is certainly neither nilly nor willy!

The challenging goal is to achieve what (ironically) was accomplished on last week’s United flight out of Chicago – filling every seat, no more and no less - without having to deny boarding to passengers either voluntarily or involuntarily.

While consistently achieving anything close to a 100 percent average load factor is an almost impossible task, those faceless algorithms are getting a lot better: In 2016 the industry average load factor was around 84 percent – up from 72 percent in 2000. And yet, despite load factors edging ever upwards, involuntary denials have been steadily on the decline. After peaking in 2009 at 125 per million passengers boarded, last year that figure was down to 62 per million. Surprisingly, the forever-popular Southwest was the worst offender and, at 99 per million, was 60 percent higher than the industry average of 62. United meanwhile was third best, clocking in with an impressively low 43 per million - or expressed differently, the odds of being involuntarily offloaded by United are one in 23,255.

One solution that would obviate the need for airlines to overbook flights would be to adopt non-refundable theatre-style ticketing conditions for every seat. When you buy a ticket for a specific performance, you either use it or lose it. While refundable airline ticket holders have no compunction about no-showing or last-minute cancellations, imagine showing up at a theatre and saying, “Hi, I had a ticket for last night’s show but my plans changed and I couldn’t make it. Can I use it for tonight’s performance?”

There again, since Delta’s incredible announcement that their airport supervisors are now authorized to offer up to $9,950 (really? – why not a round figure of 10k?) as a “give up your seat” incentive, we may see overbooking levels plummet. Just consider the numbers: Flight 3411 from Chicago to Louisville had 64 economy seats with one-way fares of around $225. If every seat were sold that represents around $15,000 in revenue.

Now, after all the media chatter about airlines paying between $1,000 and $10,000 as denied boarding compensation – keeping those last four seats empty for airport standbys might suddenly look very attractive to CFO’s around the industry!

In the real world however, foolishly dangling unrealistically high compensation expectations of up to $10,000 will only achieve one thing – when they don't get offered anywhere close to that we’ll be seeing a lot more passengers dragged off airplanes kicking and screaming!

 

 

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David Tait

David Tait's insight and irrepressible humour give us an insider's take on the airlines and the industry in general. He doesn't pull his punches, and readers find his weekly columns thoughtful, informative, amusing and infuriating – regardless, David's views on our industry are always original. 

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