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The four largest U.S. airlines no longer will charge change fees for domestic itineraries, after American Airlines and Delta Air Lines joined United Airlines in ending the $200 charge, a target of consumer ire for decades. Though each airline has a slightly different policy — American’s is most customer-friendly — the trio now roughly matches the standard at Southwest Airlines, which has never charged for changes.
Some consumers may be surprised at the news, but most U.S. airlines have been simplifying pricing structures in recent years, often to match low-cost-carriers. Not long ago, passengers had to book a roundtrip fare and stay over a Saturday night to get the lowest-priced fares. That went away in favor of the easy-to-understand, one-way approach pioneered by carriers like Southwest and Spirit Airlines.
This is a continuation of that evolution. The pandemic almost certainly hastened the end of change fees, as airlines know consumers have been uncomfortable booking travel during a public health crisis. But even before Covid-19 hit, some airline executives already were wondering if the fees were anachronistic, perhaps dissuading people from booking travel. At Delta’s investor day in December, the airline’s head of revenue management said his team was considering “how we could change and approach flexibility differently than this industry has in the past.”
Delta may have brought it up first, but it’s probably no big surprise United acted fastest. The airline’s new CEO, Scott Kirby, is among the more dynamic thinkers in the U.S. airline industry, and he has little interest in the status quo. Years ago, as president of US Airways, he pestered his larger competitors with his pricing strategies. This move is a continuation of that way of thinking.
“Scott Kirby has wanted to do this for a while,” Holly Hegeman, an aviation analyst, wrote on Twitter. “But I don’t think he was in the position to upset the apple cart of major airline revenue ‘truths’ before he became CEO.”
A Different Industry
While this could have happened no matter what, there’s no doubt the U.S. airline industry today is much different than a year ago.
Given the depth of the pandemic, leisure travel this summer held up OK, especially away from New York and California. But while American, United and Delta all historically have carried plenty of vacationers, even making nice profits on them, the airlines made bigger money on premium business travelers. Those $8,000 transatlantic business class tickets added up, fast.
Some corporate travelers have returned, but most have not. Worse, airlines don’t expect to see a meaningful number of premium business travelers until the pandemic is over, or nearly over. Even more concerning, airline executives aren’t sure whether business demand will ever return to 2019 levels. Perhaps, they say, some meetings once conducted in person will remain on Zoom.
In this environment, Southwest and other low-cost-airlines could be even more vigorous competition. All the airlines will be vying for the same leisure travelers, and they will not want to be at a competitive advantage.
To one-up the discounter, the legacy airlines even could roll out more consumer-friendly policies than Southwest. As part of this round of announcements, American and United both said they will let passengers standby on an earlier flight for free. Southwest does not permit standby.
This is Good For Consumers
Any time an airline drops a fee, consumers have a tendency to ask: What’s the catch?
In this case, there’s probably not one. Airlines are hurting, and they need to win public support and attract new business. They’re not likely to waste the goodwill they generated this week and turn around and institute a new fee on something else next month. They will stick with passenger-friendly polices for awhile.
Eventually, when they pay back the federal government and start making money again — a scenario that’s probably years away — they will look for new revenue sources. Still, they likely will be smarter about what they implement, perhaps adding new fees passengers understand and respect.
The change fee was confusing, in part, because by 2020, it didn’t make sense. Considering a person could change a flight online, and the airline had a good chance of reselling the seat, no one thought a flight change was worth $200.
Perhaps 30 years ago, with more primitive technology, airlines would be in trouble if a passenger canceled and the carrier couldn’t resell the seat. Today, though, airlines can model nearly anything. United, American and Delta will not fly with an unusual number of empty seats just because they no longer assess change fees.