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As Overbooking Wanes, Airlines Find More Savings

Stocks in this article: amr uaua jblu

CHARLOTTE, N.C. -- In a little noticed development in the airline industry, the often misunderstood and widely condemned practice of overbooking has vastly diminished.

The decline has resulted primarily from the move to nonrefundable fares and substantial fees for changing flights, both of which began following the Sept. 11, 2001, terrorist attacks and escalated recently during the record run in oil prices over the summer.

Airlines and passengers alike have benefited from the change. In the case of passengers, fewer fliers have been denied boarding, according to recent statistics, while for the companies, reducing overbooking is another step being implemented to weed out inefficiencies.

Combined with such factors as new bag fees, heavy cost-cutting, sharply lower fuel prices and decreased capacity, the falloff in overbooking has contributed to the widespread perception that airlines are one of the few sectors that could actually show an improvement from this year to 2009, despite the growing evidence that the U.S. has entered a recession.

In the first nine months of 2008, the 18 largest airlines kept 523,413 passengers from boarding planes, or about 11.9 occurrences for every 10,000 travelers, according to recently released Transportation Department figures. During the same period in 2000, the rate was about 21 times for every 10,000.

AMR (AMR) unit American, for instance, is reaping a financial gain of tens of millions of dollars annually because it now faces lower costs related to overbooking, says Scott Nason, the airline's vice president of revenue management.

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