Airlines routinely sell more tickets than a cabin holds, and the practice is deliberate rather than accidental. It exists because a seat that flies empty is worth nothing at all.
The product expires at departure
A seat can be sold right up to the moment the door closes, and one second later it has no value and cannot be stored, discounted or carried to the next flight.
That makes flying an empty seat the worst outcome available, worse than selling it cheaply, because the aircraft burns the same fuel either way.
Every decision about pricing and inventory follows from that fact, and overbooking is the most visible consequence of it.
No-shows are predictable in aggregate
On any given flight a number of booked passengers do not travel, having missed a connection, changed plans, or bought a flexible ticket they never intended to use.
Nobody can say which individuals will fail to appear, but the proportion is stable enough on a given route, day and season to be forecast with real confidence.
Airlines therefore sell a calculated number of extra seats, expecting the cabin to fill exactly rather than expecting anyone to be turned away.
Fare type drives the forecast
Fully flexible tickets bought by business travellers are far more likely to go unused than cheap advance fares with heavy change penalties.
A flight carrying mostly restricted leisure fares is barely overbooked, while one carrying a large block of flexible corporate tickets may be overbooked substantially.
The same route can therefore be handled quite differently on a Tuesday morning and a Saturday afternoon, because the passenger mix has changed.
Denied boarding is a priced outcome
When the forecast is wrong and everyone turns up, the airline asks for volunteers to travel later in exchange for compensation, raising the offer until enough people accept.
That auction is cheaper than the alternative of involuntarily removing passengers, which carries regulated compensation and considerable reputational cost.
Passenger rights in these situations are set by law and differ significantly between jurisdictions, and the rules are revised periodically.
Why the practice survives scrutiny
Overbooking allows an airline to sell the seats that no-shows would otherwise waste, and that recovered revenue is reflected in the fares everyone pays.
Forecasting has improved to the point where the number of passengers actually denied boarding is small relative to the number of seats recovered.
The trade-off is that the cost falls unevenly, on a few travellers on a few flights, while the benefit is spread thinly across everybody else.