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JetBlue Almost Never Bumps Passengers—and That's Bad for Business

JetBlue Almost Never Bumps Passengers—and That's Bad for Business

Old Feb 6, 2014, 8:31 am
  #16  
 
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Originally Posted by jjmoore
I thought the entire point of the oversale is to fill the plane completely with revenue passengers. What we probably don't know is all the mathematics and predictive modeling that goes into estimation of how many seats over capacity the airlines can sell... aka predicting:

1) How many passengers mis-connect to that particular flight on average for that day of the week
2) How many passengers typically don't show for that particular flight on average for that day of the week (likely depends on whether it is holiday, business travel day, etc. etc.)
The airlines employ teams of operations engineers to do this kind of prediction. They have tons of data and very sophisticated methods. They consider not only the average number of misconnects and no-shows, but much more sophisticated probability models. As a result, only a very small percent of "overbooked" flights (where more tickets are sold than seats) actually result in someone being bumped, and of those who are bumped, most are voluntary. If you look around FT you will see lots of people who strategize on the best way to *get* bumped... apparently if you have the time to do it, you can get a lot of free travel that way.

So in the vast, vast, vast majority of overbooked flights, no consumer is harmed (in the sense that either nobody is bumped or the people who are bumped are willing to do so--perhaps even want to do so-- in exchange for the offered voucher). The idea that overbooking results in some kind of substantial downgrade in customer experience that would affect customers' willingness to choose that airline is not borne out by the fact that almost everyone simply chooses the cheapest ticket.
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Old Feb 6, 2014, 8:39 am
  #17  
 
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Originally Posted by Brigri
I think B6 should promote this better, honestly as a flier the fact that I am guaranteed a seat goes a long way in my book. I think this alone makes people feel a little better than the possibility of being bumped. I would think with the technology that rev mgmt has at their disposal they are pricing each seat accordingly.
The problem is the likelihood of missing your flight due to being involuntarily bumped (which is what we're talking about here, since most bumps are voluntary, meaning the person taking the bump agrees to do it in exchange for a voucher) is infinitesimally smaller than the likelihood of a weather delay, mechanical cancellation, mis-connect, equipment change, etc.

While I'm sure some smart marketing people could make a nice ad about it, from a practical perspective it's such a small concern that it wouldn't really command a higher airfare. How many people would be willing to pay $1 more to guarantee no involuntary bump? $10? I have seen people take all kinds of crazy routings (and exposing them to more misconnect risk, for example) to save 10 bucks on a ticket.
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Old Feb 6, 2014, 8:40 am
  #18  
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+1 - Overbooking is not consumer unfriendly, it keeps fares down. For those who think it's consumer unfriendly, ask yourself whether you would pay a substantial (and I really mean substantial) premium in order to guarantee a seat. If carriers offered 10% of their seats with a 25% premium above Y in order to guarantee a seat, would you pay that?

The reality is that IDB is infintesimal and even those, when they occur, are often due to systems failures rather than strategic decisions by carriers.

As B6 moves from an LCC leisure carrier to a more mainstream business carrier, it too will need to plan for more flexibility. And, flexibility means last minutes changes with attendant no shows and thus seats to fill.
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Old Feb 6, 2014, 8:57 am
  #19  
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Originally Posted by jjmoore
I thought the entire point of the oversale is to fill the plane completely with revenue passengers. What we probably don't know is all the mathematics and predictive modeling that goes into estimation of how many seats over capacity the airlines can sell... aka predicting:

1) How many passengers mis-connect to that particular flight on average for that day of the week
2) How many passengers typically don't show for that particular flight on average for that day of the week (likely depends on whether it is holiday, business travel day, etc. etc.)

Even if the plane does over-sale on a given day, those last few tickets that were booked would have been in extremely lucrative fare classes (Y's, B's, M's), which may end up being twice or more the amount of the voucher that will be given out to a VDB.

I don't know the exact statistic, but I heard that more than half of vouchers for VDB's / IDB's go unused. If that truly is the case, the airlines win big by overselling.
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VDBs get vouchers or whatever the passenger can negotiate.

IDBs are required to get money. They also must be reported to DOT, so carriers try to avoid this (and are normally required to ask for VDBs).

Allowing over bookings helps to keep fares lower than they would be otherwise. Since IDBs are so rare, it's hard to see how they significantly lower the customer experience except if the processing of VDBs/IDBs delays the flight. By now, airlines have lots of data and should be able to predict no shows, including missed connections, extremely well.

If JetBlue operates based on turning aircraft quickly, this could give them an incentive to avoid overbooking as this can cause delays at the gate.
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Old Feb 6, 2014, 11:51 am
  #20  
 
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I guess the OPs contention is that airlines need to be more unfriendly. Unless you have shares in this company, I see no reason for this position. And if you fly, I cannot see where one would agree to this business model.
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Old Feb 6, 2014, 1:06 pm
  #21  
 
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Originally Posted by :D!
That's what the article is saying. You can quantify it by adding up the revenue from all the seats sold on a flight (or more likely, a route) and taking away the compensation paid for bumping.

The question I have is, if they don't overbook, do their planes fly slightly less full than other carriers or do they have fewer cancelations / no-shows etc.?
Hm? Presumably the comparison is between how much money an airline makes with overbooking vs without. And for this you would need to know a) how many IDB vouchers it's giving out and b) how many tickets it wouldn't have sold if it hadn't overbooked.

Especially the second part would require some fairly good idea of an airline's revenue management. Hence my question on how one can say that a particular airline is 'making money' by overbooking. Unless the author of the article (or someone here?) has access to fairly confidential information about various airlines.
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Old Feb 6, 2014, 1:10 pm
  #22  
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Also keep in mind the 'breakage' on the vouchers issued. The real world cost to the airlines than the dollar amount the customer is given.
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Old Feb 6, 2014, 2:57 pm
  #23  
 
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Many on this board emphasize on the voucher amounts that are given but never really ask how may of these vouchers are actually used for future travel.You would be suprised at the numbers.
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Old Feb 6, 2014, 3:36 pm
  #24  
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Originally Posted by sbm12
Also keep in mind the 'breakage' on the vouchers issued. The real world cost to the airlines than the dollar amount the customer is given.
Reminds me of the old days when I was a multiscreen theater manager. In cases when the movie failed, I would always come in and offer patrons two choices: 1) A full refund at the box office, or 2) two free passes for each person, which I had in my hand.

Guess how many people took option 2? Hint: if you're below 90%, you're wrong.

And then guess how many of those free passes we actually redeemed? Hint: If you're above 50%, you're wrong.
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Old Feb 6, 2014, 4:06 pm
  #25  
 
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Overbooking still makes little sense for jetBlue given its current size. Maybe it could work in the NYC-FLL market when there are multiple flights but in many markets there are only a few flights a day at best with no other airline alternatives to rebook people on-without B6 forking out cash to pay for a ticket on another airline. This combined with the fact that the regular $150 cancellation fee is equal to their average fare means that they are getting the revenue even if the person does not travel. Yes there are a very small percentage of people that may be travelling with refundable fares or are mosaic customers who cancel at the last minute--but this is not going to have any significant impact on revenue.

If B6 oversells a flight from SFO to AUS, the pax has to wait a full 24 hours to get the next non-stop plus B6 would potentially need to pay for a hotel, etc. It is very rare that flights are completely sold out and when they are, it is often due to weather or other circumstances which means that people from cancelled flights are filling any available B6 seats.

I just don't see how overbooking could benefit B6 in a significant way. Having worked at a legacy carrier which overbooked flights to the Caribbean by several hundred per flight during the holidays--leaving half the people stranded, I can tell you this does not endear the airline to the passengers that were intentionally jerked around.

There is also no proof whatsoever that airlines offer lower fares because they overbook. Legacy airlines drove themselves into bankruptcy with their high costs and crazy fare rules. They charged a fortune for many last minute tickets in markets with no competition. B6 offered one ways requiring no Saturday night and many markets have seen significant changes in pricing over the last 20 years. This has nothing to do with overselling making it cheaper to fly. The airlines are trying to make more money--oftentimes at the expense of their customers.

I really doubt the execs at UA/DL/AA are sitting around thinking that we can give everybody a rebate because our of massive overbookings over the past year. They are hopefully figuring out a system whereby the overbooking is not costing them more than they are gaining. In B6's case, they would be more likely to lose more than they would gain.
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Old Feb 6, 2014, 10:50 pm
  #26  
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Originally Posted by DenverBrian
Reminds me of the old days when I was a multiscreen theater manager. In cases when the movie failed, I would always come in and offer patrons two choices: 1) A full refund at the box office, or 2) two free passes for each person, which I had in my hand.

Guess how many people took option 2? Hint: if you're below 90%, you're wrong.

And then guess how many of those free passes we actually redeemed? Hint: If you're above 50%, you're wrong.
And very rarely are movies totally sold out at most theaters -- so you're giving away passes for seats that would otherwise go empty. Secondly, you have a second shot (extra free pass) at concessions revenue -- that $4.50 drink and the $7.50 popcorn have a pretty big profit margin.
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Old Mar 7, 2014, 12:31 pm
  #27  
 
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Originally Posted by travelRN777
This is crazy to say! I worked for Jetblue and the policy is to NEVER oversell a flight, think about it for compensation rule you have to give a pax on average 300 dollars and still get them to their destination. When one way tickets are barely going for 150 on average how would losing for example 300 make since..... More importantly do you want to be the pax that they bump? I wouldn't! Think about it.
I'm thinking about it, and I'm thinking that I WOULD like to be the person they bump if I am VOLUNTEERING for it and receiving compensation that I agree to... otherwise I'll just take my flight if the bump doesn't work for me and let someone else volunteer... If a person gets a 200 dollar voucher but B6 sells someone else that seat for $400 because it's last minute, that is a $200 profit for B6.
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Old Mar 10, 2014, 9:56 am
  #28  
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Originally Posted by HatAndJacket
If a person gets a 200 dollar voucher but B6 sells someone else that seat for $400 because it's last minute, that is a $200 profit for B6.
And it is actually probably more than $200 in profit over time and many similar transactions due to breakage (passengers not using the certs) and other factors.

Still doesn't mean they have to do it to be profitable. Unless they are frequently finding themselves sold out on flights they probably are doing pretty well with the current policies. Plus most that factor is likely a positive marketing bullet point, possibly even more significant that the potential incremental revenue it would generate.
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