Southwest to stop overbooking of flights


Oct 23, 2010
I honestly don't think that stopping the overbooking will have a huge effect on the profits. I would think that by stopping the overbooking would encourage more travelers to go with SWA. Bumping 15,000 passengers last year, wonder how much all them cost? Some of those bumps could have resulted in a hotel stay, meals and transportation back and forth. So I would be more inclined to say that profits would stay relatively the same, or maybe even increase to more passengers going with SWA so not to be bumped. It is interesting how SWA took a different road than all the legacies by rolling out a stop to overbooking rather than going with a larger pay out formula for overbooking like Delta, AA and United did. Gotta give JB a tip of the hat by having the only (first) written policy that doesn't allow overbooking flights.

Southwest Airlines to end practice of overbooking flights ...
The executives pretty much agree with you:

Kelly was asked on an earnings conference call whether the move could affect Southwest's results. He said ending overbooking would have a minor impact on revenue, but he gave no figures.

Chief Financial Officer Tammy Romo said doing away with overbooking would reduce costs — airlines compensate passengers for giving up their seats — which would offset some of the revenue hit.

WN improved its VDB and IDB numbers in 2016 compared to 2015, but WN still had a very high IDB rate compared to DL, UA and AA. The rate of IDB at WN was 1 passenger per 10,000 which was 10 times the rate at DL (0.1 per 10,000), double the rate at UA (0.43) and 50% higher than AA (0.64). To be fair, those rates for DL, UA and AA don't include their regional operations, where overbooking tends to be a bigger problem. If we included all the regionals in the mainline numbers, WN might not be such an outlier.

Except for Delta, WN also had the highest rate of VDBs in 2016 among the big airlines, which meant a lot of vouchers. Of course not all of them get used, but when they do get used, they replace actual cash, and that hits revenue. (page 34 of document, p 35 of .pdf)

The 15,000 IDBs last year probably cost WN less than $1,000 each all in, or less than $15 million. That's a rounding error for a $20 billion airline. The federal IDB max is $1,300, and with frequent flights, WN passengers probably don't have long delays on average to their destination, reducing the payouts.

For many years, AA had an extremely low rate of IDBs because it had perfected the computer modeling and forecasting to match overbooking to the rate of no-shows, but in recent years, the IDBs have increased. AA was also very generous in VDB vouchers to prevent IDBing passengers. Years ago, it was routine to hear offers at LAX of $1,200 to $1,600 in vouchers to persuade passengers to delay their trip to JFK by a few hours.
Overbooking by SW has always been in place to make up
for the large amount of no shows. Since we started the new
policy that the no shows entire reservation is cancelled and all
funds forfeited, I'm happy to say that we don't see as many
no shows anymore so no need for overbooking and we'll have
less oversold flights.
Please correct me if I'm wrong, but doesn't WN have a higher rate of of IDB's because they compensate 10 Minute Rule Customers? When you have multiple flights between cities and are clearing stand by's to ensure a full flight, as a gesture of goodwill, WN has compensated those folks that were 10 minute Ruled and either placed them on the next flight or placed on the stand by list. If the flight went out full and no stand by's cleared, then no compensation. If we cleared Stand By Revenue and enforced the 10 MR, we listed them as IBD's and either placed them on the next flight or stand by list. Sharon?
We do not compensate 10 Minute Rule Customers. If they've checked in announcements
are made before clearing revenue standbys. As long as they show up within 2 hours
from their original departure time, they'll be allowed to go standby on the next flight
without any upgrade in fare or if they want a confirmed seat on a later flight they will
pay the difference in fare if there is one. No shows have a 2 hour grace period after the
flight to either change or cancel their reservation before the entire res is canceled
and the funds forfeited. Hope this helps to clarify.
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