Overbooking is the newest tech trend of the week.
Just a few days ago, the forcible and violent ejection of a paying passenger from a United Airlines flight made headlines. Actually, the issue is still making headlines. Social media (specifically Reddit and Twitter) are having a field day.
It leads a lot of consumers to wonder why overbooking would ever happen?
Most major airlines overbook flights – especially during non-peak times. The airlines follow a simple theory: a few passengers will cancel their flight, and at times, the airline will have to provide a partial refund of some sort. In order to avoid lost revenue, airlines came up with a simple solutions: let’s overbook. A few people will cancel, but we’ll still secure the expected profits.
The algorithm behind overbooking is pretty simple. It’ll look at historical trends, seasonal travel data, expected connections, the ticket price, weather, and other relevant factors. The hardware needs to crunch through a big data set, and that’s why a hardware piece like a high-end FPGA is preferable.
When an overbooking occurs, it is up to the airline to offer passengers a reward for giving up their seat and hopping on a later flight. Before, airline employees would announce a cash reward of some sort – something like, we’ll pay $400 if you give up your seat and take this later flight which gets to your destination 4 hours later. If there are no takers, then the reward is increased. The logic is that at some point, there will be someone who believes the reward is worthwhile.
Delta seems to have come up with a good system for its passengers. A couple of years ago, I took a flight out of Detroit – the flight was full (or overbooked) and Delta was offering a cash reward for anyone who chose to take the later flight. During check-in, there was a simple question – how much compensation would you accept?
Delta isn’t making the first bid – they want you, the customer, to do that. If your bid is low enough (the lowest), you may be on the list to take the next flight. The best thing about this system is that it allows companies to avoid PR nightmares (like what United Airways is going through right now) while still reducing the amount of revenue losses, if at all.
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Image from Wikipedia Commons