Omri Ben-Shahar on What United Airlines Should Have Done

Overbooked? What United Airlines Should Have Done
Omri Ben-Shahar
Forbes
April 11, 2017

It is tempting to think that the problem of bumping passengers from flights could be solved if airlines stopped the practice of overbooking. Paying for air travel should guarantee the passenger a confirmed, not a deniable, seat. But it is not clear that such change would benefit consumers. Some travelers do not show up for their flights, and unless airlines overbook they will fly with more empty seats. Even with current overbooking, planes fly (on average) 85% full. If this “load factor” were to go down due to a legal mandate against overbooking, airlines would likely have to make up the diminished revenues by raising airfares.

Overbooking is like Spirit Airlines’ cramped seats. It’s uncomfortable, but cheap. We know very well that passengers often prefer those bargains—less leg room, lower prices—because we observe them buying budget fares despite the endless availability of business class comfort. For the same reason, most passengers prefer non-refundable airfares and decline “cancellation insurance,” fully recognizing that the cost saving comes with a downside.

Would these provident passengers who buy non-refundable non-comfort airfares want to pay a little more per ticket to avoid the risk of boarding denial ? If, say, airlines invited consumers to check a “non-bumping" add-on box at the time of reservation, offering for an extra fee the assurance against involuntary removal from a flight, would people purchase it? If the answer is “no,” does that change our mind about the practice of overbooking?

Faculty: 
Omri Ben-Shahar