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30 May 2007

Predicting no-shows for airline travel

The New York Times has an interesting article today on airlines overbooking flights. Apparently the number of people bumped off flights (voluntarily and involuntarily) has risen over the past years despite efforts to model no-shows.

The article mentions US Airways' team of ``math nerds'' who are trying to figure out how many seats the airline can sell without bumping off too many people. One interesting aspect is that they seem unable to do a great job at predicting the number of no-shows for a given flight, which leads to too-high overbooking. I wonder why that's so hard to get right? With all their historical data, airlines should be able to do a reasonable job. The article's charts show that the number of seats sold on the average flight has increased over the last years, which leads to more bumping. I imagine that this behavior is more driven by profit motives, and that airlines risk overselling more frequently. Unless model accuracy increased alongside, it's pretty much given that they end up bumping more people.

But the most interesting insight is how people respond to the increased bumping. Staff book fake passengers to prevent headquarters from overbooking flights (apparently Mickey Mouse is a favorite placeholder). Airlines bump more in the morning, because they can move passengers to flights later in the day. Passengers increasingly refuse to be bumped because they anticipate being stuck if they agree to wait. Whatever the reason that the predictive accuracy is not great right now; people's responses have to be reckoned with and ought to be part of the model.

Posted by Sebastian Bauhoff at May 30, 2007 9:55 AM

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