You all know that I like fees. I think having ancillary fees lets people pick and choose what they want when they fly, and that’s a good thing. This isn’t a rant on fees. Instead, this is a rant on bad fees that really make it difficult to get people to accept the fees that make sense. United has just jacked up its standard domestic change fee by $50 up to $200. (There has also been a more limited increase in international change fees from $250 to $300.) This is a bad move, and what’s worse is the way the airline is justifying it. For this, United has earned itself a shiny new Cranky Jackass award.
Before you all start crowing about how Southwest has no change fee so we should fly them, I should make it very clear that I like change fees. I’ve long advocated that Southwest should have a small change fee, because there is a real cost when people change (or don’t change) a ticket. I think kudos should go out to Frontier for its maximum $50 change fee when booked on the website or Alaska and its $75 fee. Even JetBlue and Virgin America with their $100 fees don’t seem bad. But for domestic travel, going above $100 changes things mentally. The $150 fee seemed excessive already, and now the $200 fee just seems downright obnoxious.
United is an airline that has just come off a long period of pissing off its customers. It is finally getting its act together after a very sloppy merger integration. At the same time, the use of fees has been expanded throughout the industry, and there has been an effort to get people to accept these fees. Things should be getting better. What’s a great way to derail that? Increase a fee that has questionable validity at its current level; one that people love to hate. Oh, and then make up a fake reason for doing it.
According to the company representative on FlyerTalk, the increase in the fee is “an adjustment to better compensate for the costs incurred when a traveler elects not to fly in a reserved seat.” That would be a valid excuse if it were in any way based in reality. When an airline pulls out that excuse and it’s completely disingenuous, it dilutes the ability to get people to believe it when it’s actually true. It just hurts United’s credibility because it’s so not true.
Why is it so unfair to use this excuse? Well, this is a flat change fee that applies to everything. However, the costs involved vary greatly depending upon the situation. If someone is booked on a flight from LA to San Francisco midday on a Wednesday 200 days from now and he makes a change online, it costs United virtually nothing to make that change. But if someone decides at the last minute to change off a flight from LA to New York that’s completely full, United could have sold that seat for a lot of money to someone else. In theory. But then again, that’s why airlines overbook. They expect some people to no-show. So they’re really playing the odds here. It’s quite hard to see how anyone could suggest that $200 is actually required to cover the cost of someone making a change, even if they are looking at averages.
Of course, trying to tie a change fee to the actual cost of making the change is silly in the first place. Change fees aren’t meant to cover costs. They are meant to raise revenue and encourage certain types of customer behavior. There are plenty of people who make speculative bookings and just leave credits hanging out there with Southwest because there is no penalty pushing people to be responsible. It makes sense to have a fee that pushes people to book flights only when they think they’ll use them. It also makes sense to try to prevent people from just sitting on reservations for flights where they already know they need to change. For an airline like Frontier, Alaska, JetBlue, etc, those fees are high enough to prevent people from making speculative bookings but also low enough to get people to make their changes when they know they need to. But once you start getting to such high change fees as we’re seeing with United, then you encourage more behavior that goes against what United should want.
For example, if a change fee is $200, how many tickets do you think have a value of less than $200 in the US? When you consider one way fares, there could be a lot of them out there. So if the value of your ticket is less than the change fee, what do you do? If you’re savvy, first, you hold on to it and hope that there’s a schedule change in advance that will let you change. Then you go and buy another ticket completely because that’s cheaper than paying the change fee. Then you wait until the last second and hope that the original flight cancels or there’s some other problem that will get you a refund. Worst case scenario, you just throw away the ticket and don’t use your seat. That’s how the incentive structure is set up. How messed up is that?
It does make you wonder why United would increase the fee. To get more money, of course. The simple math says that the airline can increase its haul by a third on all domestic changes. But there are three offsets to that.
- There are a number of tickets that were between $150 and $200 in value that no longer have any value worth changing. Before, United could have earned $150 on those, but now they get nothing. (Though if someone just buys a new ticket on United, then United is still happy, even though the traveler is steaming.)
- Some people will decide not to make a change because the price is too high. They stick with their original plans even though they would have paid a lower change fee if it existed.
- People will start booking away toward other airlines with lower change fees.
If you’re an airline, it’s very easy to do the simple math. $200 > $150. Hooray! But it’s a lot harder to measure the negative impact of the change. This kind of change just uses brute force and does nothing to consider a better way to handle it. If the people at United were smart, they would do something like a tiered change fee where at least cheaper tickets would have the chance to change at a lower rate. But this isn’t the mark of an airline being smart when it comes to treating the customer well.
The worst part is that there is no alternative if you fly United. What, are you going to buy that $1,000 refundable fare instead? Yeah right. At least other airlines, like American, give you the opportunity to purchase waived change fees up front for a lower fee as part of their fare bundles. That’s somewhat more customer friendly.
I just hope that other airlines will be very careful before matching this. (As of last night, none had.) Considering how badly airlines want consumers to accept this new a la carte fare structure, you would think they would do their best to put fees out there that make sense. This isn’t one of them. It’s just going to set the industry back in its quest to gain acceptance of its new fare structure. And for that, United has definitely earned itself a Cranky Jackass award.