Are airline change fees, as they currently stand, penny-wise but pound-foolish for airlines?
For purposes of this discussion, my focus will be on U.S. legacy carriers American, Delta, and United. I note that Southwest has no change fees and Alaska and JetBlue have more innovate change fees.
Think about the imbalance. You book a trip eight months in advance and find out your plans must change. Unless you bought a ridiculously-priced unrestricted ticket (which is highly unlikely if you are buying so far in advance), you’re going to be hit with a change fee of at least $200. Even if the price on your new date is identical and even if both flights are wide open, it does not matter. The change fee is the change fee. That’s what we’ve been programmed to accept.
But what happens if an airline changes its schedule? You might suddenly find yourself leaving hours or earlier or arriving hours later. You might find yourself on a connecting flight after originally being confirmed on a non-stop flight. Heck, you might find yourself downgraded from a spacious mainline aircraft to a tiny regional jet. And while you might be able to find an agent willing to issue a refund, you’re at the mercy of the airline. Any change is at their discretion. Any refund is at their discretion.
Do you see the problem?
And airlines wonder why passenger loyalty continues to drop. While many consumers have always been driven by price, never before have I seen such a “free agent” environment. Part of the reason is that major U.S. airlines simply do not offer a level playing field when it comes to change fees.
A Solution: Pre-Greed Alaska Airlines or Annual Subscription?
I don’t think the Southwest model is realistic for legacy carriers. The ancillary fees from changes and cancellations are too lucrative. But could a middle ground actually increase revenue in the bigger picture?
Alaska Airlines tried this for a time. All changes beyond 60 days from travel were free, while changes within 60 days of travel cost $125. To me, that seemed like the perfect compromise. It still penalized changes/cancellations, but recognized that if you cancel more than two months from travel it will not be too difficult to re-sell your seat, likely at a higher price.
But last May Alaska abandoned this model, re-introducing a $125 cancellation fee no matter when the trip occurs. The change fee (beyond 60 days) still does not apply to Alaska MVP Golds and MVP Gold 75Ks. And I do think that is an important distinction that actually recognizes loyalty in a meaningful way.
Scott McCartney of the Wall Street Journal suggests another potential solution: change fee subscriptions. What if airlines charged a flat fee, say somewhere between $400-800/year, for the chance to make changes on restricted tickets? This would not be a free-for-all, as any difference in fare would still be charged. Just no change fee.
Imagine the loyalty this would bring to an airline. If I essentially pre-paid $600 to United in order to make changes to my tickets, you can bet I am going to be booking my trips on United in order to derive the maximum benefit from that subscription.
Could it be that by reducing its change fees airline could actually end up making more money? The Alaska Airlines example suggests the reality is no, but I find the concept of a change fee subscription intriguing and worthy of consideration.
What do you think about airline change fees?