Amidst seemingly constant flight cancellations and delays lately, it appears airlines’ woes are only continuing to grow. This time around, airlines are coming under fire for overbooking flights. Indeed, last week Delta Airlines (NYSE:DAL) offered travelers $10,000 to give up seats on one of its flights. Why are so many flights overbooked?
While overbooking flights has long been a profit-maximizing practice of most airlines, lately it’s only served to annoy travelers, at least, the ones not getting paid $10,000. As airlines come to terms with rising fuel costs, a wide spread pilot shortage, and fierce thunderstorms during the busiest travel season since the start of the pandemic, overbooking is once again rearing its ugly head.
In a Delta flight last week from Michigan to Minneapolis, an announcement came that the airline was in search of eight volunteers to give up their seats. In return, each volunteer would receive a staggering $10,000 in compensation, transferable immediately “if you have Apple Pay.”
It’s an unprecedented move, largely reflective of the changing sentiment surrounding the overbooking practice. In 2017, after a doctor was forcibly dragged off a United (NASDAQ:UAL) flight in a now-viral video, a number of airlines raised their maximum compensation for involuntary denied boarding, many to as high as $10,000. Despite this, passengers are very rarely offered such an amount. After 2017, many airlines also attempted to reign in their overbooking practice somewhat as a way to limit flight bumps.
Delta’s generous compensation offer last week may be the tip of the iceberg as travel season hits its fever pitch.
Why Are So Many Flights Overbooked?
The string of over-bookings recently is likely a veiled attempt at airlines attempting to recoup recent losses. Airlines are under tremendous stress currently. Aside from the rising cost of inputs, airlines have been encumbered by a flood of eager new travels. Indeed the pandemic has created a sort of pent-up demand for travel this summer that many airlines are underprepared for.
As as result, it seems airlines have taken to overbooking their flights to ensure each seat is filled, with the assumption that some will likely cancel before takeoff.
Some, like notoriously unreliable Southwest Airlines (NYSE:LUV), have long sworn off overselling flights. According to Southwest’s media team, however, that doesn’t mean passengers aren’t being bumped:
Southwest stopped overselling flights in 2017. However, there are times when Southwest must change flights to an aircraft type with less seats to recover a disrupted flight during irregular operations. When this occurs, some Customers may be involuntarily denied boarding.
For customers, it’s a matter of semantics. It makes no difference whether Southwest overbooked or switched aircrafts if flyers still get booted from their flights.
Overbooking is still a relatively rare occurrence, especially compared to pre-2017. As it stands, most people on most airlines won’t likely have to worry about getting kicked from their flights. On Delta, however, you might be crossing your fingers for the worst.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.