I'm not talking about the in flight turbulence, of course. I'm talking about when you are sitting at your gate ready for departure. The gate agent comes over the PA and asks if there are any passengers willing to volunteer to take a later flight and in return receive compensation. I'm also talking about when you check in at the airport for the seat you paid for and you are either told A) there are no more seats available, or B) your boarding pass is printed without a seat assignment. In the industry this is either called a 'denied boarding' (DB) or 'getting bumped'.
The difference between the two names is one is voluntary, one is involuntary.
This is all done by airlines in order to maximize revenue. Let's say we have a aircraft that holds 180 passengers. And lets say at boarding time 180 seats have been sold. Typically, and on just about any flight, not all 180 passengers show up. Sometimes this is due to a customer missing a connection because of a number of possible delays, or sometimes a passenger just don't show up or ever check in. Using historical data from previous years, as well as a running 14-week history of that specific flight's no show rate, analyst can arrive at percentage of people who typically miss that flight, or no show, in our eyes. Every flight that departs has a specific no-show rate depending on the day of week is departs on and the date it departs on.
We then take this percentage of no show's and overbook that flight by a fraction of that percentage. If 5% of passengers (9 people) no show on flight XXX on a consistent basis, then we typically will overbook the flight by 4-7 passengers.
This number changes due to what city the flight originates in and what city the flight terminates (ends) in. Routes that have mostly passengers on business travel tend to have higher no show rates than routes that have mostly leisure passengers. The number can also change depending on what time the flight departs. Typically, if you are on the last flight between two cities for the day, and missing your flight means you have to wait for the next day before you can complete the trip, your flight will have a much smaller percentage of overbooking.
This practice has come about through recognizing an additional stream of revenue by literally selling more seats than are available on the plane that is being used on that flight.
Don't get too blind with rage yet - stick with me here. People have the potential to get screwed. Of course they do, it's inevitable. Yes, that one guy who got bumped from your flight could have been on his way to see his parent on their deathbed and now he isn't going to make it in time. That is terrible. I completely agree. And all the federal regulations say is that if you deny boarding to a passenger, they must be compensated. This is a situation that in some (albeit not as common) circumstances people can pay a lot of money and receive zero service.
To try and bring a little bit of reason to this, we have to look at the recurring state of the airlines. I'm talking long term here, not the past economic hardships and depressions of the past year or two. It goes back much further than that. The flight you are flying on may only be making a profit (not revenue) of a few hundred dollars. So if 10 passengers don't show up, and the airline refunds the fare (they legally have to after a certain point) then all of a sudden the airline is losing money on every flight. Obviously that is unsustainable. If they can get that flight to depart closer to full, they can be closer to a profit instead of losing money. In many, many markets, overbooking is all that keeps a flight from making a profit or losing money.
Sometimes it can work to your advantage if you are a little more flexible with your travel times. Volunteer and your compensation may be a free round trip ticket on the airline and an hour delay. It may only be a $200 voucher, a free hotel room for the night, and a flight the next morning. It may also cause you to miss something very important.
Now before you start going to the gate agent and demanding for round trip tickets, compensation varies at every airline. Just ask, usually they will tell you.
Here's some tips on how to avoid getting bumped:
1) If it is emergency travel or very important, buy a full fare ticket. Usually what you pay for on the airline's website or a travel website is the cheapest available fare. By buying a full "Y" fare ticket, or a business/first class ticket usually gives you 100% assurance you will not be bumped or denied boarding.
2) Check in early. Most of the time, online check-in starts 24 hours before the departure time. On most airlines, if you can check in near the 24 mark, you can pick your seat and print your boarding pass right there which is a solid bet you'll get your seat
3) If you are an elite member with an airline, this is noted in the reservation and just about always prevents you from being bumped
4) Take the compensation. I'm aware of a few circumstances where a passenger has been bumped, only to be put on a flight an hour later, in first class, and receiving ample compensation.