While I understand the logic, airlines do not really do this.
Yes they do (see below), although they don't advertise it as a C seat for a Y price.
Employees flying for free will get c class before pax who aren't paying for it because you don't want pax flying in c class for "free" while the rest of the suckers paid a huge premium.
This tends to happen on US airlines, but employees flying for free in C does not
usually happen on Asian airlines, like SQ, for example.
If the purpose is to protect the "integrity" of the C cabin, giving it to an employee who paid nothing
is even worse than giving it to a customer who paid a Y fare.
On intra-Europe flights like in the OP's example, European airlines can usually convert Y seats to C seats and back again between flights, because the "C" offered on such flights is just a Y seat with the middle seat in each row blocked.
I don't see how this is possible in real airlines. It's hard to word, but basically, in your case, the airline would sell tickets up until the flight for 144 Y and 15 C seats. Tickets stop being sold for Y class when it gets filled up, however they are still selling C tickets because those aren't sold out. When it's time for the flight and there are 10 open C seats, there is no way to magically spawn 10 customers that are willing to buy tickets. It's already flight time, it's not like people are sitting there waiting for a sold out flight to grow seats.
happen on real airlines. The key is that tickets do not
stop being sold for Y class when it fills up. Instead, the airline oversells Y, as long as there is room in C (and maybe a little more, depending on the airline's expectation of no-shows in Y), and oversells C as long as there is room in F.
And then, at the airport, when 150 Y pax show up for 144 Y seats, and meanwhile 10 C seats are empty, guess what happens?
Six Y pax get operationally upgraded into C.
Depending on the airline's rules (and the employees' decision to follow/break the rules), it could be the highest-tier frequent fliers, or the passengers who paid the highest Y fares (since unlike in AWS, real-life Y pax pay a variety of fares), the pax who checked in the latest, or just total luck of the draw (e.g the pax who happened to be at the podium).
And so, in effect, the airline literally does sell C seats as Y seats, although they only offer a Y seat up front, and convert it to a C seat on the back end. They try to be discreet about it, and they don't make any promises. If there are cancellations, and Y turns out not to be oversold, no one gets upgraded.
So, the net result of the above (without all the complex intermediate steps) could simply be modeled in AWS by allowing C seats to be sold at Y prices when C is undersold (or there is no C demand on the route) but there is more Y demand than Y seats.
Currently, on a route with no C demand, even if you manually set C prices at the same price as Y, no one will buy C.
And ever since domestic F demand was eliminated from the US and EU international flights (btw, Sami, can you please
confirm officially whether this is a glitch or a permanent change that we should adapt our strategies to accomodate?) if you price F below
Y and C, no one will buy F, even if Y and C are completely sold out. This is not a realistic result at all, and it creates huge headaches when an international plane has a domestic leg as part of its schedule. In real life, a lot of the int'l F and C seats would be sold at Y fares, through (1) the operation of frequent-flier upgrades, (2) overbooking Y and operational upgrades, and (3) the cheapie first-class buy-ups that United/Continental is starting to offer these days because they have recently decided that they would rather nickel and dime the Y pax than give a free upgrade to a frequent flier.