Curse explained correctly, and there is one more aspect to add: competition.
I did not make further calculation, but I found that when you have around 70% of the pax on one route, you cannot oversupply. On the other side, for example, I had a route of 10 pax/day demand and offered 55 seats daily, 100% of the demand, never received the oversupply notice (even so, today that route is closed due to low profit).
And there is also another case. Example, one route with 100pax per day, 3 companies fighting this route. One can offer 300 seats daily - if each one has 33,33% of the share, there is no oversupply.