Overbooking strategic and it's application at the Brazilian air transportation market

Abstract

A key issue regarding airline management is related to the balance between demand and supply. It is a common situation to observe flights departing with a significant amount of empty seats, mainly due to no-show passengers and the very late canceling of reservations. In Brazil, airline passengers do not usually cancel reservations; on the contrary, they usually wait for the deadline to buy it or, if the ticket is already bought, they simply do not show-up. These practices, "allowed" by airlines due the flexibility offer in some fare-classes, impede the airline to sell those empty seats on time for flight departure. Therefore it becomes economically rational for the firms to protect from the losses by recurring to mechanisms such as the virtual increase in flight capacity, that is, overbooking. The present paper aims at developing an analysis of the efficiency of overbooking, discussing its advantages and disadvantages, risks, economic viability, and issues regarding responsibilities and regulation.