Who owns a ticket?  A LA Times Columnist wrote THIS column about the inconsistencies that airlines offer when it comes to what you’re actually buying when you buy a ticket on an airline.   In short, a man wanted to not use the first part of a ticket but still wanted to use the 2nd and last part of a ticket for his booked flight.  When he called US Airways, they explained that if he didn’t use the front end, then it was a ticket change and he would be charged a change fee plus a higher fare.

So, who owns the ticket?  And, more importantly, why do legacy and SuperLegacy airlines treat customers like they’re in Las Vegas where the “house” always wins?  This isn’t a business model that really exists anywhere else. 

Part of what has to be understood is that when an airline is advertising a fare for a route, it’s really advertising or making available thousands of fares for hundreds of flights.  It’s better to think of each seat on each airplane for each flight as having its own price.  That price is, like many things in this world, set by demand.   Now, many of those seats have the same price.  Airlines are essentially contending that you are buying non-refundable access to that specific seat on the aircraft (non-refundable in the case of the lowest cost fares anyway) and when you don’t use that seat, it costs them.

There is some truth to that.  That seat starts out “fresh” when it is loaded into the travel systems with a fare.  Over time, the fare for that seat may vary considerably.  It may be bid up in price by high demand and it may fall to lower and lower prices as no one buys that seat and the departure for that particular flight and seat grows nearer.  Once it’s sold, it’s difficult to sell it again for the exact same price.  If you bought 2 months in advance and want to change flights 2 weeks in advance, the airline has lost about 8 weeks of opportunity to sell that seat and it wants you to pay for that opportunity cost. 

There is some logic and fairness to the airlines’ point of view.  However, many people question why they cannot re-sell that seat on to someone else if they’re unable to use it and transfer it into another name for a nominal transaction cost.   It’s a good question.  Airlines don’t want people buying tickets far in advance for a low price and then re-selling them much later for a profit to them but at a price that competes favorably with the airlines’ advertised fare (that is likely much higher).  Again, the airlines do have, to some degree, a legitimate claim.

The problem comes, in part, from how airlines present what you’re buying when they market that space on a flight.  It’s presented as a general price from point A to point B when it really is a specific seat on a specific flight from point A to point B.  In the case of the man described in the column, I think you could reasonably argue that while he may be required to “give up” the portion of the fare on the first flight, he shouldn’t be charged a huge change fee plus a fare difference to simply travel back on the second flight as he already planned because the airline will be capturing its revenue still while having the potential opportunity to re-sell that seat again at a higher price.

Some airlines play a bit more fair and the best at this is Southwest.  They don’t do change fees and that’s good.  However, they do charge you fare differences if you need to change your flight.  Sometimes, on Southwest, you’ll pay more for that new ticket difference than you would on other airlines by buying a new ticket and abandoning the Southwest ticket.  Many people have pointed this out but it’s an infrequent occurence and the better point is that Southwest treats this situation in a manner that, to most people, strikes them much more “fair” and far less a game where  the house always wins.

The transaction costs for changing a ticket are relatively small.  I think they would be covered by a fee of no more than $25 or $30.  However, the airline isn’t just charging you transaction costs.  It is also charging you the average loss that comes from missing the opportunity to re-sell that seat at a higher price.  However, it isn’t as simple as that either.  If the fare is dramatically higher for that same seat when a person wants to give it up and change it, it’s because there is a strong demand for it and if there is a strong demand for it, they’ll likely re-sell it again, too. 

Should a person be able to transfer a ticket into another name?  I would argue that it is probably inappropriate in most circumstances.  I think there are exceptions to that and they should be acknowledged.  For instance, I think it should be possible to transfer a ticket to another name provided that new person lives at the same address and can prove so with a valid ID. 

Are change fees unfair?  To some degree but not nearly as much as many think.  Low fares have driven this change fee and its the price we pay for the lowest fares we’re offered.  What I do think could be done here is an insurance scheme. 

You could offer a structured insurance scheme where for one fee, a person would be allowed to change flights but not destinations.  For another fee, they would be allowed to change flights and destinations for only the fare difference(s).  These fees could be as low as $15 or $20 per ticket and they would help mitigate people’s risks and provide revenue to go towards lost opportunity. 

Or you could just approach it like Southwest and change the model, accept some risks along with your passengers in return for fierce loyalty.

Filed under: Airline Fees by ajax