Airline overbooking. It's misjudged, misinterpreted, and mischaracterized. Most people don't understand it–if it were a person, it'd be an odd cross between Donald Trump and Truman Capote. You're not sure you get it, you don't think you like it, but it usually makes for an interesting story and is the butt of jokes by comedians on late-night talk shows. However, overbooking is actually easily explained and understood; is the subject of a huge amount of statistical analysis; and is a bona-fide science in its own right!
Overbooking is the practice of accepting more reservations on a flight than there are seats. Most folks have two questions about overbooking: "why?" and "how?" The "why" is easy to explain–it's an airline's way of counteracting "no-shows," which are Customers who make confirmed reservations for flights and then, for whatever reason, fail to show up. Without overbooking, no-shows would cause almost all fully-booked flights to leave with empty seats. And an airline seat is a completely perishable commodity–when a seat on a flight departs the gate empty, it is lost and can't ever be used. Put another way, the potential for revenue lost due to no-shows could easily undermine Southwest's Low-Fare LeadershipÃ¢â‚¬¦and the art of overbooking helps prevents that.
That's the "why." The "how" is harder to explain, but it is way more interesting. The science surrounding overbooking combines the mathematics of probability and of detailed, historical analysis, mixes in a healthy measure of behavioralistic research, then uses all of that to predict what percentage of bookings for a given flight leg, on a given day, will fail to show up. The numbers of people that book but don't show have very definite trends that, absent a few "except for when this happensÃ¢â‚¬¦" things thrown in just to keep things exciting, make predicting no-show rates a surprisingly exact and successful (if occasionally stressful) science.
Figuring out no-show rate exceptions--the "except for this" occurrences--can be one of the more challenging aspects of a Revenue Management Analyst's job. Some exceptions are easy to spot--holidays, for example, behave very differently than a normal week, but are usually identifiable and fairly predictable. Note that I said "fairly predictable"Ã¢â‚¬¦some of the bigger holidays such as Christmas, New Year's, and Independence Day "float" to a different day of the week each year, and because of that they behave differently from year to year, making the job of predicting no-show rates and booking behavior, well, challenging at best!
Other little "GOTCHAS!" can only be explained through the investigative nature of an Analyst. Things like conventions, sports events, snowstorms, even the recent Customs computer outage at LAX that delayed thousands of arriving international Customers can really change no-show rates, sometimes far in advance of the flight, sometimes mere hours before departure. The only way an Analyst can identify seemingly inexplicable reasons behind odd booking and show rate behavior is through keeping close contacts with the no-show-rate trends, local Marketing Managers, fellow Southwest Airlines Employees at the StationÃ¢â‚¬¦..and, frequently, local newspapers. Time for the Analysts to put on their "Investigative Reporter" hat to get to the bottom of the story!
While managing overbooking is just part of the job of our Warriors on the SWARM (Southwest Airlines Revenue Management) Team, it is a fascinating one that gets far too little attention–and even less appreciation. Their ability to maximize the number of filled seats while minimizing Customer inconvenience is incredible. Their effort is absolutely critical in giving the maximum number of Customers the Freedom to Fly. Keep us flying, SWARM--thank you!