Retroactive Refund: How Airlines Should Handle Weather Waivers

Last week just downright sucked. I was supposed to be traveling with my family on US Airways to a wedding outside of Cancun. Yes, the same Cancun that was hit by a hurricane/tropical storm/big weather thing. We watched the storm draw closer to Cancun all week, and while US Airways had canceled all other flights to Cancun on Thursday, ours didn’t cancel until a mere four hours before departure.

That was frustrating, of course, and it got me thinking about ways to improve the customer experience in weather disruptions. (I’m not talking about onboard delays, though that was on the news this past weekend.) Most of my ideas would never fly, but there was one that I think makes sense: the retroactive refund.

Hurricane Rina

I don’t want to single out US Airways, because they all have similar policies. When a weather event like this becomes a possibility, airlines issue a weather waiver, which is basically a one-size-fits-all policy that is just about worthless for a large chunk of travelers. The weather waiver nearly always says the same thing.

  • If you are scheduled to travel on a day that is expected to be impacted by bad weather, you can change your flight without penalty to a day or two before or after your scheduled flight as long as you keep the same departure and arrival cities.
  • If your flight is canceled (as with any flight that’s canceled), you can get a refund.

Some airlines extend the change period up to a couple weeks at times, but the problem is the same. This is completely useless for people who are either attending a specific event or people who don’t have a flexible schedule. For them, they either go as planned or they don’t go at all, so the waiver never applies.

It gets really tricky when there are other aspects to the trip involved. Maybe the hotel has a 2 day cancellation policy. Maybe you need to give more notice to people you’re meeting with. Maybe you need to make alternate plans with adequate notice. There is a lot at stake, and when the airlines grind you down to the last minute, it can be a real problem.

For some people, it becomes a gambling issue. If it looks like the weather is going to scuttle your flight but the airline hasn’t canceled it yet, you have to make a decision. Do you cancel the hotel to avoid a penalty and then just eat the $150 change fee on the plane ticket? Or do you wait until the flight cancels and hope the hotel will be forgiving? Some might say that people should just wait because they don’t know if the flight will even cancel at all. That makes sense in a vacuum but with so many moving parts, it can often make sense in a situation like this to just scrap the existing plan and make alternate arrangements.

But for people on a budget, it’s worth trying to see if the flight will cancel in order to get a refund instead of throwing $150 down the drain. That means they sit on seats they don’t plan on using, just hoping to get their money back. Can the airlines improve on this?

We all know how the airlines think. It’s all about revenue. The airlines don’t want to give up any revenue that they already have, so they aren’t going to let people off easy. They’ve created a system that effectively traps travelers until the flight is canceled, and I can’t really blame them for doing it. I do, however, think the retroactive refund would help.

This doesn’t solve every problem, but it’s the only way I can see to make things better for travelers without having a largely negative impact on the airline’s revenue. (And we know that if it’s revenue-negative, the airlines won’t even consider it, even if it makes good sense from a customer service perspective.) Here’s how I envision it working.

  • When a major weather event is predicted, airlines continue to issue a weather waiver as they do today. If people do have flexible travel plans and can take advantage of the offer to change by a couple of days, then that’s great.
  • For those who aren’t helped by that, they can still just walk away and pay the $150 change fee BUT if the flight does cancel at a later date because of that weather issue, then the airline will give them the refund that they would have had if they had waited.

The customer benefit is obvious. If the customer sees a hurricane bearing down on his destination, he can cancel his ticket knowing that if the flight does cancel, he’ll still get that refund that he would have just waited around for nervously all week. If the hurricane goes a different way and the flight operates, well, then it’s a gamble that lost and the traveler is out $150. But that’s ok because it still gave him the flexibility to make the decision earlier on his own time without leaving anything on the table.

Now, the harder part to quantify is the benefit for the airline. Only those with access to airline data could really figure out how this looks from a dollar perspective, but there are very clear potential benefits.

Those people who would have paid the $150 fee to make a change might now get a refund instead, and that’s a loss. But there is also a potential for gain. Those who sat around waiting for the flight to cancel are probably squatting on seats they might not use anyway. They just don’t want to pay the change fee so they hope it cancels. These people would now cancel early, freeing up a seat that can be re-sold or used to reaccommodate passengers if the flight operates. If it doesn’t operate, then at least the person will already be removed from the system. One less person who needs immediate help when the reservations group is probably feeling overloaded.

This doesn’t solve every problem but it would help. Any other ideas out there on how to make this process better for travelers?


21 Responses to Retroactive Refund: How Airlines Should Handle Weather Waivers

  1. > Any other ideas out there on how to make this process better for travelers?

    Buy trip insurance (at one of the various places like insuremytrip.com )?

    Any time I go outside the US, I insure the nonref value of the trip if for no other reason than one could get sick and need a very expensive medical evac back to the US.

    • BlueFreak says:

      But trip insurance has the same issue as the current airline refund policies…it won’t pay out unless your trip is actually disrupted.

      And that’s assuming you don’t end up falling into one of the many exclusions they include in these policies.

      • FRANK says:

        There’s many choices when purchasing an airline ticket. Here’s one: Full Fare REFUNDABLE TICKET.

        • Thats too much of an overkill for most folks.. If you’ve got a reason for needing that, then yeah go for it. But just for a weather interruption? Its worth it to take the money you’d spend on the Refundable ticket and put in the bank to buy another non-refundable ticket..

        • CF says:

          The spread between refundable and non-refundable is usually far too much, as Nicholas Barnard suggests. People who are on a budget can’t afford to pay $1000 for a refundable ticket when a nonrefundable might be a fifth of the price.

      • Keith says:

        Any decent travel insurance policy will have special event clauses, ensuring if you can can prove you were travelling to an event with specific dates (wedding, conference etc) and your trip is disrupted, you’re covered. I’m travelling to New Zealand (from Australia) for a 3 day conference in Feb. All up I’ll be spending 2k US+ on flights, accommodation, conference tickets. Travel insurance to cover this trip? About $35. No brainer, and it will cover me for many many more scenarios than just weather. It’s about planning ahead.

  2. One way an airline can fund “retroactive refunds” is through “trip” insurance of its own. If consumers can buy trip insurance, why can’t airlines buy a blanket policy to cover their losses from weather related cancellations? The companies who underwrite trip insurance for consumers could certainly do the same for airlines and hotels. There’s an actuary somewhere out in the ether who can calculate the rate of loss and come up with premiums that would provide adequate funds to cover them.

  3. Ron says:

    While it may be difficult to swallow a single change fee of $150, in the long term it’s much more economical than either insurance or refundable fees. With this thought in mind I find it much easier to shell out the change fee when needed. I have on occasion bought refundable fares, but only when I calculated that cancellation was quite likely.

    I do like Cranky’s suggestion, though it would be logistically difficult to implement. One may want to issue the retroactive refund when the probability of canceling the flight is 80%, but not when it’s 25%. These predictions may change on an hourly basis. So now you have the problem of deciding what window is available for a retroactive refund, and how to communicate this to customers. Probably doable, but more complicated than the post implies.

    • CF says:

      I don’t think it has to be that difficult to implement. If you only allow it during a weather waiver period, then it is easy to do. If you start putting percentages on each flight, it will get too complex and people will hate it.

  4. Sanjeev M says:

    This post would probably be more from the airline point of view, where by helping customers they also help themselves operationally.

    In any limited inventory business (seats), people squatting on inventory is never good. If airlines offered to cancel and refund my whole booking for $20 up to 7 days before departure, I would do it and they could sell the seat to someone else. Because people squat on seats, airlines overbook because they know any excess can be compensated or sent on some other flight in their vast network.

    This is probably why JetBlue doesn’t overbook cause they don’t have said vast network.

    • FRANK says:

      Sanjeev,

      they already do that, meaning, they already HOLD seats up until the day of departure for last minute business travel. And, by adding seats to the inventory at the last minute, 7 days or less before departure, that would probably force the airline to discount, not charge a premium to last minute business flyers. They’re bread and butter.

      • Sanjeev M says:

        I see what you’re saying. It’s not as easy to last minute sell an airline seat as it is a Chinatown bus DC-NY. I can already see the Spirit counter going “20 dolla 20 dolla to NY + 45 dolla bag fee”.

        Also, I agree with Evan below on retroactive refunds with airline credit. This is something where it benefits passengers at low cost to airlines.

  5. Evan says:

    What if the retroactive refund were in airline credit, rather than on your credit card? That might soften the blow for the airlines, but still be very useful for the customers. After all, that’s what you get minus the $150 for the change fee. And most pople can put airline credit to use over the course of a year (and it’s usually transferrable also).

  6. FBKSan says:

    The two problems with the airline benefit side are (1) having a vacated seat after or during a weather-related delay probably isn’t that useful, since there are already dozens of people waiting at the gate for that spot. Knowing a person isn’t going to show a day ahead of time versus 20 minutes ahead of time probably won’t matter much. And (2) I don’t think there’s much to be gained by having the person ‘out of the system,’ since that person probably wasn’t going to clog up your phone lines or counters anyway–they already decided they weren’t flying. Still a pro-customer policy, but like you I’m having trouble seeing the benefit to the airline above and beyond the current system.

    • CF says:

      I don’t think I agree.

      1) Those people who are waiting in the gate area are taking up seats on other flights that could be sold. So this opens up seats when it’s done 24 hours in advance versus 20 minutes.

      2) If that person waits until the flight cancels, he will definitely clog up the phone lines because he has to cancel before departure (if the flight operates). If the flight doesn’t operate, he’ll probably call right away anyway to get it taken care of.

      • DavidZ says:

        he will definitely clog up the phone lines because he has to cancel before departure (if the flight operates).

        IIRC, Delta’s web site allowed passengers to change or cancel/refund their flights during the last weather-related issue (December 2010) I handled in my ex-travel agent days. That’s also something airlines can likewise do.

  7. Chris says:

    It’s times like these where I appreciate Southwest’s cancellation policy. As Evan mentioned Southwest keeps the money, but you can change your flight. No change fee. I can’t tell you how many times this has worked to my favor, especially when my job changes my vacation/holiday plans at the last minute. Unfortunately they don’t fly everywhere I need to go, so I’m right back in Cranky’s situation.

  8. Good luck convincing the airlines to be helpful to passengers if they have to give money back.

    They should do different thing for different situations. A heavy snow fall in winter is one thing, but a hurricane wipes out the area you are going to and it’s a vacation, most people would not want to go there. Family visiting family may to see if they can help their loved ones. So if you can show you were going on a vacation, they should have a different policy.

  9. James says:

    I previously guest-posted on CrankyFlier.com on my experiences as a reservations sales agent for Delta. I worked during the 2004 (very active) Hurricane season.

    I fully endorse Brett’s plan. It’s frustrating for the agents as well that can only speak obtusely about the possibility that a flight waiver could be offered and that changes made before the waiver will have all fees charged.

    The worst of the affected are the ones whom the wx event happens mid-trip. Do they go and know that they might get stranded or cancel and eat all the fees because even with a waiver, the outbound wouldn’t have been covered?

    Lack of such a policy increases hold times for all customers during these types of events. It is generally hard for Rita Sue in Mississippi to understand why she had trouble getting through because there was a blizzard in the NorthEast. Many of the calls were “Is my flight gonna cancel?”(already captured revenue) as opposed to new bookings(new revenue).

    What I would add to the proposal is the ability to rebook using waivers ONLINE. That won’t reduce all of the call volume but it would be helpful. DL is exceptionally bad when it comes to making changes online.

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