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Oversubscribed (communications)

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Man is forcibly pulled from seat and dragged from flight, video on Twitter

Overselling or overbooking is sale of a volatile good or service in excess of actual supply. Overselling is a common practice in the travel and hospitality sectors, in which it is expected that some people will cancel. The practice occurs as an intentional business strategy where sellers resources they are entitled to, or that some buyers will cancel. The practice of overselling aims to ensure that 100% of available supply will be used resulting in the maximum return on investment. However, if most customers do wish to purchase or use the sold commodity, it may leave some customers lacking a service they expected to receive.

Overbooking is regulated (though rarely prohibited) in many countries and industries, and companies that do practice it are often required or forced by market competition to offer large amounts of compensation to customers as an incentive for them to not take up their purchase.

An alternative to overbooking is discouraging consumers from buying services they do not actually intend to use. This can be done by making reservations non-refundable, a common practice among low-cost carriers and railways, or requiring customers wishing to cancel their right to a service to pay a termination fee.

An airline, rail or shipping company can book more customers onto a vehicle than can actually be accommodated by an aircraft, train or cruise ship. This allows them to have a (nearly) full vehicle on most runs, even if some customers miss the trip or don't show up (tickets are often rebookable afterwards). Business travellers often cancel at the last minute, when their meetings take more time than planned. If everyone shows up, at least in the case of airlines, the overbooking will cause an oversale.

Airlines may ask for volunteers to give away their seats or refuse boarding to certain passengers in exchange for a compensation that may include an additional free ticket or an upgrade in a later flight. They can do this and still make more money than if they booked only to the plane's capacity and had it take off with empty seats. Some airlines, like JetBlue Airways, do not overbook as a policy that provides incentive and avoids customer disappointment. They are able to do this and remain profitable as the majority of their customers are tourists, instead of business fliers, and their tickets are non-refundable, thereby lowering the chances of passengers missing their flights. A few airline frequent flyer programs actually allow a customer the privilege of flying an already overbooked flight; another customer will be asked to leave. Often, only economy class is overbooked while higher classes are not, allowing the airline to upgrade some passengers to otherwise unused seats while providing assurance to higher paying customers.


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