The intricacies of an airline booking

This article appeared originally in Gulf News: link to original article

Let me start with a disclaimer — what I have to say does not relate to any specific airline.

Have you ever been denied boarding? Did you go all the way to the airport to stand in front of the check-in counter and be told by an airline staffer that you are on standby? All this before he or she even starts making calls to confirm the seat?

Well, the latter happened to me during the last Eid break on a trip to Seychelles. Even though I had booked my ticket two months prior to the departure date, it meant nothing. I would not even have known that I was on standby if I haven’t asked why I and my friends were sitting in different rows.

“Sorry sir, but you were on standby and I could confirm the seats, not together though,” was the explanation proferred. I have heard stories similar to this episode, but never experienced any up to that point. It set me thinking of the vacation that I planned two months in advance and how it could have been ruined if I didn’t come to the airport early enough.

As I had worked for an airline company for a tad over two years, I could totally comprehend why such scenarios would take place. Now allow me to explain the logic. In any airline company, there are two main concepts that are carefully studied and implemented in this order: forecasting and overbooking.

New airline companies’ main challenges are not only high start-up costs of acquiring new aircrafts or leasing them nor the high fuel costs, especially that burnt during take-off. Their challenge is be able to predict what routes would pay off the highest for the aircraft.

Older airline companies have already gone through a trial-and-error stage of testing routes and analysing weekly reports of how much money was made — or lost — out of that route. In the UAE, that is looked at in terms of how many fils is made out of one kilometre flown by one passenger on a specific route.

The analysis that preceded this would be of historic data that shows how many passengers have flown that route and when. Based on that, the flight inventory is managed in an optimal manner to maximise total fils and thereafter the revenues from all passengers flying that route. The data is compelled over seven days and the report then shows the amount made or lost on that route.

That said, forecasts cannot be purely compiled from historic data but also from the type of traffic that you expect to fly. They could be leisure or business travelers or even students. Such data is sold by companies that manage global distribution systems (all airline products can be found here). This means a very good understanding of whether these passengers are coming to a hub city to stay or transit.

Let’s consider an example. Have you ever considered a connection between Africa and Far East Asia, say perhaps China? Between these two, a smooth flow of African businessmen, or traders, exists. Don’t be surprised when airline companies launch new routes to African cities when these are nowhere close to welcoming tourists.

Instead, consider one of the following: oil companies exploring opportunities there, African traders flying to China to buy products they could sell at home, and connecting African passengers to Europe. Another example would be the students’ traffic from cities like Boston, Brisbane, Auckland and elsewhere. Once the person in charge of the route considers historic data, seat factor (occupation percentage of the aircraft), and the kind of traffic expected on the route, a forecast is made and the aircraft’s seats are managed in the most profitable way possible.

This also includes the seats that can be allocated as ‘rewards seats’, i.e., purchased with air miles or available as upgrades.

Flights are available 340 days prior to departure which leaves plenty of room for a flight manager to step in and optimize the allocation of seats. It also gives passengers the chance to book tickets at much cheaper fares. When bookings start coming in, a flight manager will adjust forecasts and allocations to better fit changes in patterns or kind of traffic, which is done right up to the flights’ departure dates.

The changes relate to two main categories: walk-ins and cancellations. The first is of passengers who were not computed in the forecast as they do not exist in historic data, though this could show you that such a flight generally gets sudden bookings. The second can also be predicted in the same manner, which is why airline companies rely on the second concept mentioned earlier: overbooking.

For many who have flown, or tried to, during high seasonality periods like Eid, Christmas, Easter, summer holidays and others, you probably did face the risk of being denied boarding if not actually experienced it. Whatever that is offered to you as compensation – cash in Europe, upgrade elsewhere, duty-free vouchers, or even a hotel stay in a 3-or 4-star hotel (if lucky) until they find you seats on the next flight – aren’t worth it.

By the way, other flights that they may try to book seats on are probably overbooked too. So there goes the vacation… which could have happened to me this last Eid.

To airline companies, it’s hedging against the risks of cancellations, and of passengers not showing up to get as close as possible to 100 per cent seat factor to break-even and hopefully make some money. Note here that a few flights run at extremely high costs, which means even seat factors beyond 100 per cent would only achieve break-even (technically not possible).

Also, note here that there are flights that can make money at much lower seat factor because of high demand in Business and First-Class. As a passenger, you want to fly with minimal trouble and without the hassle of trashing vacation plans. For that, there are a few tricks that could be done.

First, if a flight manager can fix allocations 340 days before departure, why can’t you plan your travels ahead of time? Not necessarily by 340 days prior, but most holidays are fixed into calendars and shifts in them are unlikely. Business travellers are an exception because airline companies follow a rule of no more than one denied boarding in Business Class and none in First Class.

The second thing that you could do is use the 24-hour check-in online feature provided by airline companies. However, this doesn’t always work as not many airports support such a feature which means that you should show up very early if you knew that there is a chance you might not be boarded.

There are four ways for you to judge how overbooked the flight is:

* First, try to book a ticket and the price goes up sharply.

* Second, give the company a call and ask what fare type is available to book on: Y is highest in Economy, J is highest in Business, and F is highest in First.

* Third, check the seat map online or call the airline to choose a seat. Seeing “X” on all seats online or the call center agent not being able to allocate a seat to you signals excessive overbooking.

* Fourth, and final, assessment is to try booking a seat with air miles or trying for an upgrade. When flights are overbooked, airline companies remove allocations of seats from classes designated to staff and upgrades.

No one doubts that airline companies have made everyone’s life easier, even though they do not run the best business model in the world – most companies report losses and are still in business as a national sovereignty kind of thing. And there is no doubt that they do connect east to west, even if they do that to feed in traffic from different cities and maximize profits made.

Passengers from Dubai cannot feed flights to New York, but passengers from southwest Asia s will since tickets are sold to them 50 per cent cheaper in Premium Class and 15 per cent in Economy, subject to availability. So for those pampering themselves, it might be worth booking a long-haul flight from there and a separate return ticket to the departure city — total cost will be cheaper even if you fly to that city on Business.

You can argue about how unfair this is to passengers in an airline’s hub city, but that’s not the case if you look at the bigger picture. In the case of Gulf cities, connecting passengers contribute to 60 per cent of revenues. In cases other that southwest Asia and North America, Europeans pay high fares to connect in Dubai for flights to Seychelles, Maldives, and Mauritius… which is why I was almost denied boarding.

Accordingly, higher demand in Europe for such destinations means higher prices for us. So if you really want to travel; you will pay.

If you are a frequent traveler to any given destination, consider buying a one-way ticket from Dubai, and then a return ticket from, say, Munich. Even if you book your ticket as Munich- Dubai-Bangkok-Dubai- Munich, the price will be equal to Dubai-Bangkok-Dubai and cheaper than Dubai-Munich-Dubai.

Airline companies do try to control this but it’s extremely hard to separate genuine travelers from those performing such a trick. Now the thought that I want to leave you with is: why can’t air miles be quantified for reward and upgrade miles be always available? (Hint: banks and others that provide these air miles as loyalty rewards buy them from airline companies).

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