Yield management is no doubt a complex business. But it is not directly related the airfares as some have pointed out above. There is a significant mathematical justification for yield management, one that has proved very successful for most airlines.
In fact Boeing, MIT, other institutions, and nearly every major airline have done extensive studies on the benefits of Yield Management. JetBlue at this stage does not overbook flights, but mathematically that is the absolute wrong approach. Even though no fares on JetBlue are refundable (as they are in WN
), they have the potential to sell more seats and raise additional revenues. And JetBlue is doing Yield Management, but they are doing it generally manually and guessing. In the end that is all YM
is. The scientific justification of your decisions is based on something, either mathematical models or your stomach.
When you run a very simple point-to-point network, you don't have to worry about traffic flows and displacement costs of carrying people through your network. When you are a network carrier with tens of millions of PNR's, with tens of thousands of O&D pairs with the potential to book flights nearly a year in advance and the airlines have to set fares and overbooking levels for all flights it becomes nearly impossible to manage.
As for your teacher, there are two distinct differences in deny passengers seats, voluntary and involuntary. If your teacher was involuntary denied boarding the airlines is required by law (US) to reaccomodate her on the next flight, or potentially a different airline, buy a meal etc. If she was voluntary denied boarding, they generally give you vouchers. She took the vouchers so to me it sounds like she chose to be denied a seat. Big difference.
Mathematically a small amount of denied boardings are revenue positive for the airlines. They would rather give you a $300 voucher for a future flight, which means you may take a trip that you wouldn't normally take, maybe take your kids and spouse, who will by additional tickets and now you a committed to fly them again over a competitor etc etc.
Give the airlines a little credit. They know exactly what they are doing. Also be careful of the LCC hype. It is not the fares it are the costs. LCC's have a advantage because planes are cheap, employees don't care about getting paid crap right now because they entice them with stock. At some point everyone wants to get paid higher wages, and the advantages of stock price over time evaporates, plus it is not liquid. Just look at Southwest. Wage pressure is a real concern there. The original pilots at WN
are millionaires from stock, but their pay is not in line with the rest of the majors. The new WN
pilots are not going to make millions. There going to want higher wages. Just a matter of time.