Airlines Ax Hated Change Fees to Win Back Leery Flyers
(Bloomberg) -- American Airlines Group Inc. and Delta Air Lines Inc. joined their biggest rival in ditching a detested $200 fee for changing tickets, attempting to entice people back on planes as the coronavirus pandemic strangles travel demand.
The fee is being dropped on flights in the U.S. and to nearby international destinations, except on the least-expensive tickets. United Airlines Holdings Inc., which announced a similar decision Sunday, and American also will scrap a charge for passengers to fly standby the same day as their original flight.
The changes come after the nation’s airlines cut fares and rolled out extensive cleaning protocols in a desperate effort to woo people back onto planes. The industry is moving into what typically is the year’s slowest period while pandemic-related travel restrictions continue to keep lucrative business passengers at home. U.S. demand remains about 70% below year-earlier levels, prompting billions of dollars in airline losses.
“We need to give our customers a reason to come back and do business with us,” Vasu Raja, American’s chief revenue officer, said in an interview Monday. “Doing this gives them a great degree of confidence, especially among so many of our business customers who are contemplating coming back.”
The decisions at the nation’s three largest carriers bring their policies closer to those of rival Southwest Airlines Co., which has never charged customers to change tickets. Travelers at all U.S. airlines still have to pay any difference in fares if they choose to switch flights.
Change fees have been suspended since March, when airlines essentially were forced to let people alter travel plans without penalty as states imposed stay-in-place orders. The levies will still apply to longer international routes, where it can be as much as $750.
In addition to scrapping the fee for domestic flights, American is dropping it for tickets to Canada, Mexico, Puerto Rico, the Caribbean and U.S. Virgin Islands. The carrier said it would issue passengers a voucher for a future trip if the new flight is less expensive than the original. American collected $800 million in change fees last year.
Delta is dropping the change fee on domestic flights and those to Puerto Rico and the U.S. Virgin Islands, according to a statement. The carrier said it would extended its temporary waiver on change fees for newly purchased international and Basic Economy tickets through year-end.
“We’ve said before that we need to approach flexibility differently than this industry has in the past, and today’s announcement builds on that promise,” Delta Chief Executive Officer Ed Bastian said in the statement.
While American still won’t allow changes to Basic Economy tickets outside of a current coronavirus-related waiver, the Fort Worth, Texas-based carrier now will allow passengers to pay for cabin upgrades, more leg room and priority boarding.
Currently, Basic Economy passengers can carry on a suitcase and a personal item but aren’t eligible for upgrades and must board last. They can’t choose a seat without paying a fee at the time of booking.
Airlines started the class of bargain-basement fares to better compete with ultra-discounters, but the real value has been that many people lured by the prices buy higher-cost tickets once they understand the restrictions.
American also will allow elite members of the airline’s loyalty program to apply their current travel benefits -- such as free upgrades or complimentary drinks -- to all tickets, including Basic Economy. The changes take effect Oct. 1.
Together, 10 U.S. carriers reported a combined $2.8 billion in fee revenue last year, according to the Transportation Department.
©2020 Bloomberg L.P.