dmaneyapanda

Overbooking: A Less than Modest Proposal

Overbooking is specifically desirable (for both customers and airlines) because it makes airlines more efficient, allowing them to serve customers for cheaper costs.

Overbooking is critical to allowing connections to work profitably. The hub and spoke model that many domestic airlines use lean heavily on that ability. Imagine flying from A to C via B, and your AB segment is delayed by weather and you miss your connection. The airline uses overbooking to ensure that they can effectively and efficiently service large numbers of passengers flowing through B to a variety of destinations while trying to minimize the portion of their capacity that goes to waste. This is beneficial to both the airline and the majority of customers. It is obviously not beneficial to most of the folks who get bumped (though given that there is compensation involved, and given that there are people who go out of their way to try to get bumped, it may well be beneficial to some of them as well).

If airlines were not allowed to overbook, they would likely either require the customer to make every segment (and if you're delayed, tough luck, the seat you paid for on BC was available and reserved for you), or prices will increase for everyone to make up for the additional capacity that is lost. This is worse for both the airlines and the majority of customers. It is ostensibly better for the 0.04% of passengers who get bumped.

A much more likely outcome IMO is that the IDB caps will increase or be eliminated, and possibly all IDB will go away altogether, or require fairly substantial VDB offerings first.

I should add that the connection model is an essential one to providing service to regional and low volume airports, and their respective areas of the country. Airlines that only move point to point are not flying to Des Moines. So ensuring the profitable success of the hub and spoke model is often considered to be in the national public interest.