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Flight Overbooking Models and Decisions

Abstract

United Airlines Inc. (UAL) is a major American airline headquartered in Chicago with nine domestic and international hubs. It serves 342 destinations, more than any other airline does, and ranks second in the world by the number of passenger-kilometers flown by an airline.
United Airlines Flight 3411 made headline news on April 9, 2017 after an involuntarily denied boarding (IDB) selection process resulted in passenger David Dao being forcibly removed from the aircraft by airport police. United management had demanded that Dao give up his seat on the overbooked flight for United employees making a connecting flight, but Dao refused and the situation escalated into violence with airport police. 
Airlines routinely sell more tickets than available seats to compensate for cancellations and no-shows. Overbooking helps airlines maximize revenues and is perfectly legal. However, the practice also comes with risks, as evidenced by the United Airlines incident that publicly exposed flaws of the airline overbooking profit model. Why do airlines overbook? How do they use the model to maximize revenues? What are the appropriate booking limits? In this case, students will address these questions after learning how to model cancellation and no-show uncertainty using the simulation-based overbooking model and hence improve their decision-making ability in a complex and uncertain environment.

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Published by:China Europe International Business School

Publish Date:2020-07-07

Language:English

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