August 12, 2018, 11:07 pm / Opinions

How to solve the overbooking problem

Overbooking of air tickets cannot be prohibited; it needs to be properly regulated

Maxim Buev It is better to make overbooking a legal practice regulated by the state

I once got ready to go to London. I was supposed to fly in economy class with a transfer in Frankfurt. When I arrived at the airport, it turned out that the flight was oversold - there were more passengers than seats. A scandal was brewing. The airline, however, acted very businesslike. I was offered to cancel the flight for a voucher of 200 euros and a seat in business class on a flight via Munich that departed two hours later. I agreed. As a result, it turned out that the flight from Bavaria arrived in London five minutes earlier than the flight on which I was supposed to arrive from Frankfurt: the connection in Munich was shorter.

The cunning rearrangement left everyone a winner. The airline sold more tickets on the popular flight than there were seats. The passenger flew to his destination in increased comfort and earlier than planned, and even with compensation for duty free expenses. A great example illustrating how overbooking, or selling tickets beyond the limit, helps increase wealth in the market.

Of course, things don't always work out so smoothly. In 2004, I had to interpret for Boris Yeltsin during his unofficial visit to Oxford, where I was then studying. But due to an oversold flight, I was forced to spend an extra night in Moscow, from where I was returning from a conference. I never had the chance to meet Yeltsin again. But even in that situation, the airline compensated me for all measurable, i.e. material, costs. It's good that the flight was international. Inside Russia everything would be different.

Overbooking should become the norm

Opinions / Analytics

The practice of overbooking exists because some passengers return tickets at the last minute. Without excess sales, airlines would suffer losses by flying unfilled planes. By selling more tickets than seats, companies increase transportation efficiency.

An effective proposal is only half the story. The second half is the consumer benefit. Due to above-limit sales, ticket prices are reduced. The average passenger who buys a ticket and manages to fly wins. Problems arise when you are already at the airport, and there is not enough space on the plane. The trouble is if now they don’t promise you money, and your nerves will begin to fray. If the airlines go too far, there will be many such poor people.

Ban the practice? This will lead to a significant increase in ticket prices and the proliferation of non-refundable sales. It is better to make overbooking a legal practice regulated by the government. The regulator’s task is to carefully prescribe the amount and type of compensation that airlines will pay to passengers. Moreover, the nature of the compensation should be different depending on whether you are redundant voluntarily or not.

In light of the above, the desire of the Russian Ministry of Transport to introduce financial responsibility for airlines for overbooking - news about this was in the media last week - is very commendable. It would be good if neither the regulator itself nor the media, when covering its work, talked in terms of fines: this implicitly indicates the illegality of the practice of above-limit sales. Overbooking should be legal, even if you can't be reimbursed for a meeting with the president.

The author is a professor of applied finance at EUSP, NES vice-rector for strategic development.”