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The whole flight does not need to be cancelled. Underselling flights are often replaced with smaller aircraft. One person might not make a difference, but if 10 or 20 cancel, an A321 may get replaced by A320 or A319, which are lighter and burn less fuel.

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Switching to a smaller aircraft isn't necessarily good for the environment.

For example the A319 burns 5%/less fuel than the A320 but has 15% fewer seats, in common configuration. So the per-seat emissions are worse than if they had sold the remaining A320 seats at cost

Good point, but once again - the crossing of thresholds is the major change, rather than the individual changes between thresholds.

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