Why Airlines Charge Big Change Fees (It’s Why Airline Tickets Are Different From Sports Tickets)

In August United Airlines President Scott Kirby explains all of their fees and charges as being what you’d expect from a concert, implying it’s not reasonable for people to be frustrated with how airlines charge for things like seats.

Look, when you go to a concert, do you think you should pay the same price to sit in the nosebleed seats or to sit up front?

…I don’t know why airlines are unique. Every other business that has something like that charges more for a better product. It’s a better product. You know it’s a better seat. I don’t know why airlines would be unique by offering lower prices for a lesser product. That’s what we do.

In March American Airlines CEO Doug Parker said his airline’s tickets are flexible compared to buying a seat at a sporting event.

That allows us to know that seat’s full, we don’t have to worry about trying to hold it for a business customer that’s gonna pay more. We don’t have to worry about, you’ve agreed to that. We could just say that’s it, you’ve agreed to that it’s totally non-refundable just like if you want to go to a Ranger’s game and you buy a ticket on Saturday and say ‘nah I don’t want to go on Saturday I want to go Sunday.’ The Rangers are going to say “fine, here’s a Sunday ticket but we aren’t going to give you any credit for your Saturday ticket.’

We don’t do that, we say ‘ok you don’t want to do what you said you were going to do instead we’ll sell you another cheap ticket on Sunday but you’ve got to pay this change fee.’

So that sounds really like that’s a change fee but what really happened is we gave you something better than telling you ‘forget it you bought a non-refundable ticket’.

Nevermind that American’s basic economy fares are not changeable at all, you do forfeit the full value of your fare. American doesn’t have change fees, they have a charge for extra flexibility.


Sitting in the Back of Coach on American Airlines

The Wall Street Journal‘s Scott McCartney takes apart the concert or event ticket analogy. (HT: Jonathan W.)

Sure, location matters and refunds aren’t allowed once you buy a ticket to a ballet performance or football game, just like they aren’t allowed for all but the most expensive commercial flights. But the similarities end there.

  • If you aren’t going to use a concert ticket you can resell it, or give it to someone else.

  • Events are sold at a fixed, published price for each seat that doesn’t vary with when you happen to search.

  • Your event ticket guarantees your seat, you don’t show up for a sporting event to find the stadium oversold.

What’s unique about airlines is that they do try to charge different amounts to different people for the same product. Airlines engage in price discrimination more than nearly any other business.

Change fees, Saturday stay requirements, and advance purchase requirements are just some of the ways that carriers sort through what price to sell a seat at to a given customer, based on their likely willingness to pay. Business travelers, especially spending someone else’s money, are likely to be willing to pay more than a leisure traveler spending their own money for a discretionary trip.

When I first started traveling for business change fees were $50. Sometime in the late 90s they moved to $75, and in 2001 the standard became $100. When JetBlue started flying their change fee was $25 and flight credits were cancellable — if you weren’t going to take the trip you would cancel your reservation and for that $25 fee the balance would be usable by someone else.

In 2013 the major US airlines moved from $150 to $200. Southwest Airlines of course doesn’t charge change fees.

Change fees alone aren’t enough to separate business and leisure customers, business travelers buy non-refundable tickets all the time. However McCartney notes that “cancellation and change fees totaled $2.8 billion for U.S. airlines in the 12 months ending June 30, according to the Bureau of Transportation Statistics.”

Saturday night stay and advance purchase rules have broken down as a result of low cost carriers offering low fares on one way trips and even close to departure. So airlines have turned to basic economy fares to separate business and leisure customers.

Airlines are working hard to raise the price of tickets and American’s President thinks fares should be twice as expensive as they are today. That’s why change fees aren’t going to moderate any time soon.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

More articles by Gary Leff »

Comments

  1. I think the airlines should experiment with change fee insurance. Offer it just before you click “buy.” It might be something like this. For an extra $25 on domestic tickets, and $100 on international tickets, offer change insurance that would allow the passenger to make one free change up to 24 hours before the trip. I would bet many, many people would go for it (I would for peace of mind, and I’m a 100% leisure traveler). The airlines might actually make more money this way than through change fees. Loose ends: I don’t know if only people who know they are likely to make one change will buy it, and others wouldn’t. And how much should they charge if the passenger wants a second change? They should do a small scale study to find out if this would work.

  2. Actually domestic change fees started out at $25 (not long after airlines started offering non-refundable tickets back in the 1980’s – for a short time, tickets were not changeable at all), then went up to $35, before they reached $50.

  3. I understand the need for airlines to have change fees. I get it. They are public companies and need to grow their business to satisfy shareholders. However, once they started incorporating spend requirements for elite frequent flyer status (EQD’s), I DON’T understand why the change fees don’t count towards qualification. You’re basically giving the airline additional bottom line revenue that’s just as valuable as ticket revenue. So why not include the changes fees in the elite status requirements?

  4. There is a difference between a change 2 weeks, 1 week, 1 day or same day as travel and a myriad of possibilities that should be factored into the cost of said change. The one-size-fits-all approach is myopic and stupid. If there were a true revenue cost to changing the flight thereby requiring the fee airlines would not #1. give away free changes to elites and #2. Southwest would be out of business. This is just a pure revenue grab plain and simple.

    If I ran an airline I would empower my employees to make decisions that make sense. For example last week I was doing a connection at DTW. Got through customs in record time and found an earlier flight to my destination with empty seats. Same day change and DL wanted $75. No dice, I waited 90 minutes to sit on a 100% full flight with the airline offering vouchers to bump people. Totally stupid to not let me on the earlier flight for free and save $$. Assume they could see I was on a full flight and in the end it cost the airline more to not move me for no-fee.

    Conversely I fly into LAX often and book the cheap flights going out at odd hours. Saves $300-400 ticket many times. If I get wrapped up early I’ll go to the airport and gladly pay the same day change fee because the delta is still way less in cost for the original ticket. Shame on the airline for allowing themselves to get played. Again, drop the one-size-fits-all and either just pull a Southwest or let your employees do what makes sense.

  5. What is goofy to me is that the cancel/change fee is the same no matter how far in advance you do it. So everyone waits until the last minute, especially with cancellations, in case there is an airline change that allows you to do it for free. Wouldn’t airlines rather you cancel 3 or 6 months ahead, so they can sell the seat, than 3 days ahead where they might not? It’s not rational.

  6. Before the United-Continental merger, United would allow you to make a same-day change at the airport to an EARLIER flight. In fact, the check-in kiosk even offered this, if there was an earlier flight to the same destination departing before your originally scheduled flight! It was an advantage to the passenger and to United, in that a seat on the earlier flight that would otherwise go out empty was filled, and they got back a seat on a later flight that they very well might need. If you wanted to go on a later flight there was of course a fee as that did not benefit the airline. That nice feature went away after the merger.

  7. shifted all of my travel for work this year to SW – i work in the power/utility consulting and outages change all the time. it’s especially frustrating that you can get hit with multiple change fees (even for low level elites) for the same ticket if you happen to need another change. that sucks, so in a price-conscience environment, i fly SW. the more money left on our project budget = i get to make more site visits and/or looks good on bottom line and at year-end evaluations.

Leave a Reply

Your email address will not be published. Required fields are marked *