There is quite a bit of talk about United’s sudden increase in change fees which see a rise from $150 to $200 for domestic flights.  Most see this as overreaching and they’re not wrong.

If we accept that we’ve entered the Era of the Fee in the airline industry (and I do), then we have to accept that fees will be charged for a variety of things.  To a degree, I see fees as being something that can be OK but which the airline industry does very poorly.

Watching airlines implement fees for services is one of the most painful things I can do as an observer to this industry.

Change fees, like baggage fees, are inconsistently implemented and the rationale behind those implementations seems . . . without real reason.  United is now charging $200 to change a ticket.  Let’s be clear, if you have a $300 ticket, you can change it for $200 plus the difference in fares.  This essentially renders your ticket useless in all but extreme cases.

My question would be is a $200 change fee a revenue driver or a behavior driver?  I suspect the latter.  It’s there to drive people to not change and not create chaos.  Sometimes I wonder if airlines wouldn’t be happiest in taking people’s money and just not having them travel.  Often it seems as if the objective isn’t to deliver a service but, rather, part people from their money without delivering  value.

If we’re going to go to fee based systems, I’ll buy in on a change fee.  But why not simply have that fee cover the cost of the transaction plus some small penalty?  $50 for a domestic ticket change seesms both reasonable and appropriate.  $100 for international trips.  Make that change easy, not hard.  Let’s these changes happen fluidly and everything will work out in the end.

These change fees are, in my opinion, drive by overly complex fare structures among airlines.  Airline fares are so complex and so diverse that they make the airline believe that the opportunity costs of a seat are hundreds of dollars more than they really are.

People say that those change fees help defer the money that the airline lost in not being able to sell that seat in advance to someone else.  Well, did they lost that opportunity?  Part of that opportunity presupposes that all airplanes are full when they depart.  They are not.  They are nearly full and I’ll grant that it can be hard to fit standby people on but as for paying passengers who want to buy a ticket, you can almost buy that seat if you want it.  It just might cost you a small fortune when you buy it at the last minute.

The airline also doesn’t notice that the person who buys a ticket 2 months in advance has given money to the airline that it can benefit from economically for 2 months before it incurs the bulk of the costs associated with that purchase.

Why do airlines want to drive behavior with fees?  Because they hate saying no to a customer.  With an exorbitant fee, they can say yes but charge a fee.  The problem with that is it is assumed that the customer loves this and they don’t.

In fact, I believe its fees like change fees and baggage fees that breed some of the biggest contempt felt towards airlines.  Customers aren’t stupid and they do know when they’re being gouged.  They may not have a choice on that flight but they know they can exercise choice the next time and they will.  Think I’m wrong?  Just look at how things have gone for United Airlines when they inconvenienced their customers and abused their good will.  Bookings went down, revenues evaporated and everyone noticed real quick.

United’s fee is exorbitant and insulting.  Unfortunately, United also cannot measure the ill will generated by this and compared it to the revenue it gains.

If you don’t like it, then vote with your money.  And for what it is worth, more and more I think that American Airlines’ decision to allow a customer to “insure” themselves against change fees with . . . a fee is pretty smart.  I don’t hand out compliments to them very often but I think they are trying to package real value for the customer on that front and that is better than most airlines right now on the subject of change fees.

Filed under: Airline Fees by ajax