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Posts Tagged ‘JetBlue’

One of the most basic tools in yield management is overbooking. For any service provider, capacity is perishable. Having an airline seat, restaurant table, or doctor sit idle is expensive so if you cannot be certain that every scheduled passenger, diner, or patient is going to show up, overbooking reduces the chance that capacity goes unused. Indeed, we have had a number of posts on overbooking over the years.

Given the prevalence of overbooking, it is rather remarkable that JetBlue does not. They announce this right on their website. But as BusinessWeek note, one has to wonder why they don’t (JetBlue Never Bumps Passengers. Maybe It Should, Feb 5).

Because it doesn’t overbook, JetBlue enjoys the lowest rate of involuntary denied boardings in the industry: only 18 people out of 21.3 million passengers through the first three quarters of 2013, the latest period for which data are available. Virgin America, with a bump rating close to JetBlue’s, oversells only on certain flights and usually limits the number of seats directly to the number of no-shows it expects in coach, spokeswoman Jennifer Thomas said in an e-mail. On the other end of the spectrum, Southwest subsidiary AirTran Airways had the highest rate among U.S. non-regional airlines required to report oversales, with 1.28 passengers bumped for every 10,000 travelers (or 1,800 customers in total during the period).

Several analysts expressed puzzlement over why JetBlue has avoided a common industry practice that can tip a particular flight’s financial performance from loss to profit. The airline also doesn’t advertise its practice, so most people are unaware that it doesn’t overbook—including at least one Wall Street analyst who covers the company. “It’s a bit of a head-scratcher,” says Seth Kaplan, managing partner of Airline Weekly, an industry journal. “It’s all about the extra few hundred dollars that can turn a flight profitable, especially when it’s relatively free money.”

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