Business

Southwest Airlines says 'no' to overbooking flights: Will more airlines follow? 

Following the United Airlines incident earlier this month, Southwest announced that it will stop the practice outright. A few other carriers have increased the maximum amount of incentives to passengers bumped from oversold flights.

A Southwest Airlines plane takes off from Palm Beach International Airport in West Palm Beach, Fla. in February. Its CEO, Gary Kelly, on Thursday announced that carrier will stop overbooking flights.
Wilfredo Lee/AP/File
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The forceful removal of a passenger from a United Airlines flight earlier this month has put overbooking into the spotlight. While no federal rules have yet to ban this industry-wide practice, United has announced efforts to modify its overbooking policies, including offering up to $10,000 in incentives for passengers on oversold flights and trying not to overbook altogether in the future. 

But on Thursday, another major US airline, Southwest, said it will eliminate the practice outright. It will be second airline after JetBlue Airways to do so. Yet, despite efforts by airline companies to be more customer-friendly, when it comes to overbooking – a practice also commonly used on trains and buses – most companies are reluctant to drop the business model completely, citing the profitability it brings. 

Southwest is the largest carrier in domestic passenger traffic, carrying 149.1 million passengers in 2016, according to data from the Bureau of Transportation. The Dallas-based, low-cost airline took nearly 15,000 customers off flights last year, and had the highest forced bumping rate among large US carriers: 9.9 per 100,000 flyers, with an average of compensation of $874 per bumped passenger, according to Reuters. 

However, in an interview with CNBC on Thursday, chief executive officer Gary Kelly said Southwest would take one step further and reduce this number to zero, discontinuing the practice "very shortly” to “enhance their customer-friendly hospitality.” 

“I have made the decision, the company's made the decision, that we will cease to overbook going forward,” Mr. Kelly told CNBC. “We've been taking steps over the last several years to prepare ourselves anyway.”

These steps include better forecasting tools and a new booking system that will be rolled out online on May 9, Southwest spokesperson Beth Harbin told the Associated Press on Thursday. 

But bumping might still occur, Southwest spokesperson Brandy King said. 

“This doesn’t mean flights never will be over capacity as we approach departure time,” she said in a statement to USA TODAY on Thursday. “Occasionally, operational challenges will have our airport-based employees asking for volunteers, but that will happen much less frequently because overbooking to customers in advance will be off the table as a consideration.”

Southwest’s decision to no longer book a flight over capacity in the selling process is not groundbreaking – JetBlue has long set its policies against overselling flights, while still having the fifth-largest domestic passenger traffic, with an approximately $6.6 billion operating revenue in 2016.

“We are committed to our policy of not overselling flights,” JetBlue chief executive officer Robin Hayes told USA TODAY on Tuesday. “And our crew members have always been in power to make decisions in rare cases where we have to put someone on a flight.”

Yet it seems unlikely that other airline companies will follow suit. Following the United incident on April 9, when a video showing passenger David Dao being dragged off the flight became an internet viral sensation, lawmakers in the federal government and a Senate committee had called for a ban on the practice. Current laws require airline companies to ask for volunteers before bumping passengers.

Several airline companies chose to increase the maximum amount of compensation in oversold situations, without promising to get rid of overbooking. Delta Airlines is one example. The Atlanta-based company will now also offer incentives of up to $10,000 to passengers who will give up their seats. Its chief executive officer Ed Bastian also defended the practice, calling overbooking “a valid business process.”

“I don't think we need to have additional legislation to try to control how the airlines run their businesses,” he said on April 13, according to Fox News. “The key is managing it before you get to the boarding process.”

Although the maximum amount looks lucrative, observers are skeptical. Bloomberg writer Justin Bachman argues that a passenger “will never get $10,000 for [their] United Airlines seat,” as “overbooking has become a fundamental component of how carriers manage revenue.”

“Overbooking is an airline tool to boost revenue, but it’s not a necessity; its costs will be very closed managed,” he wrote on Friday. “That magical maximum payout? It’s more P.R. than promise – you’ll have a better shot at picking up $10,000 in Vegas.” 

This report includes material from the Associated Press and Reuters.