With the holiday travel rush arriving, no one needs a reminder that airlines routinely overbook flights. Everyone has seen it happen, even if they haven't had the misfortune to be the confused traveler who bought their ticket four months in advance but is now getting rerouted through Antarctica en route to Seattle.
TED-Ed has a new video that goes into exactly why airlines and other businesses overbook appointments and tickets. The starting point is simply that many people never show up. It's nearly a guarantee that someone won't show up for their hotel booking, dentist appointment, or flight back to the Midwest for an awkward Thanksgiving.
But for the business to maximize their profits, they can use complex calculations to maximize the amount they're able to make with the foreknowledge that some people will be no-shows.
However, the calculation gets complicated. In part, that's because the amount a business makes on a single ticket — $250 in the video's example — is far less than the penalty they pay for bumping someone from their flight. Bumping someone from their flight often involves a refund, food, rebooking, or a hotel room.
Airlines create a binomial distribution that calculates the probability of different numbers of people arriving for their tickets. The airline uses that to help determine not just how much money the airline can make or lose on a given flight and number of passengers, but how likely different scenarios are.
Watch the video above from TED-Ed and Nina Klietsch to get a better understanding of why and how airlines come to these policies. You'll learn something and by the end of the video you'll remember that you're just a number in this game and that it still pisses you off when they ask how you feel about delaying your vacation a day or two.
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