In Reply to: overbooking does happen posted by clovis on Sunday, 4. November 2012 at 04:16 Bali Time:
"Airlines occasionally overbook flights, meaning that they book more passengers for a flight than they have seats on the same flight.
The practice is rooted in careful analysis of historic demand for a flight, economics and human behavior. Historically, many travelers, especially business travelers buying unrestricted, full-fare tickets, have not traveled on the flights for which they have a reservation. Changes in their own schedules may have made it necessary for them to take a different flight, maybe with a different airline, or to cancel their travel plans altogether, often with little or no notice to the airline. Some travelers, unfortunately, reserve seats on more than one flight.
Both airlines and customers are advantaged when airlines sell all the seats for which they have received reservations. An airline's inventory is comprised of the seats that it has on each flight. If a customer does not fly on the flight which he or she has a reservation, his or her seat is unused and cannot be returned to inventory for future use as in other industries. This undermines the productivity of an airline's operations; it is increasing productivity, of course, that contributes to lower airfares and expanded service. Consequently, airlines sometimes overbook flights.
Importantly for travelers, airlines do not overbook haphazardly. They examine the history of particular flights, in the process determining how many no-shows typically occur, and then decide how much to overbook that particular flight. The goal is to have the overbooking match the number of no-shows.
In most cases the practice works effectively. Occasionally, however, when more people show up for a flight than there are seats available, airlines offer incentives to get people to give up their seats. Free tickets are the usual incentive; those volunteering are booked on another flight.
Normally, there are more volunteers than the airlines need, but when there are not enough volunteers, airlines must bump passengers involuntarily. In the rare cases where this occurs, federal regulations require the airlines to compensate passengers for their trouble and help them make alternative travel arrangements. The amount of compensation is determined by government regulation".