What's Behind All Those Airline Change Fees?
She thought wrong.
When Cahill phoned the airline to redeem the credit, which she'd received when she'd had to change a flight while helping her daughter move to
In other words, her voucher was worthless.
"These fees are a joke," said Cahill, a nurse who lives in
Cahill wonders -- as do a lot of other passengers -- how airlines came up with the
Change fees are a healthy source of revenue for the U.S. airline industry. During the first half of 2010, the 19 largest domestic airlines collected
The change fees have come a long way in just a few years. In 2009, airlines took in
The fees don't cover just the cost of changing a reservation or making a new one, according to airlines and analysts. The cost of making an actual change is a fraction of the expenses covered by the fee, perhaps just a few dollars.
"We have the change fee policy to protect against revenue dilution," said
Delta is basically saying that the fee will cover the cost of your seat if you cancel it and no one else buys it. Which is a fine argument to make, unless the airline can resell the seat -- and then protection against revenue dilution becomes double dipping.
But what if the cost of a change fee exceeds the price of a ticket?
That happened to
When a ticket change fee exceeds the original fare, what's the justification? According to aviation analyst
Passengers who complain about high change fees should familiarize themselves with the economics of the airline industry, he suggested. It typically costs
But privately, airline insiders acknowledge that the fees more than cover their revenue dilution. They also admit that change fees aren't just a significant revenue source for the major airlines; in fact, these companies have built their business models around them and similar fees, such as luggage fees and other ancillary charges.
In short, the fees are a source of major profit. And the airline industry is hooked.
Well, not all of it. One major airline -- Southwest -- doesn't charge any change fees but still manages to run a profitable business. How does it do that?
"We have opted to develop consumer-friendly policies," explained Southwest spokeswoman
It's unlikely that Southwest's competitors would see a jump in business if they dropped their change fees. In the near term, they would almost certainly see a precipitous decline in profits as
But how about over the long term? There's only one way to tell: They'd have to try it.
In the meantime, if you're worried about paying a hefty change fee or having the entire value of your ticket nullified, there are a few easy steps you can take. The easiest, obviously, is not to change your travel plans. But that's not always practical.
Travel insurance is yet another option. But you have to read the fine print, and unless it's an expensive overseas flight, it may not be worth the extra money. Another way around the fees: Flash your frequent-flier program card, and a smile, and see if you can talk your way out of it.
If your card is the right color and your smile is bright enough, it might work.
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