United Jacks Up Change Fees, Earns the Cranky Jackass Award

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 Cranky Jackassadvocated 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.

  1. 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.)
  2. 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.
  3. 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.

49 Responses to United Jacks Up Change Fees, Earns the Cranky Jackass Award

  1. David says:

    While a tiered change fee makes sense, are United’s systems actually capable of handling tiered change fees ? There’s a lot to be said for simplicity in a business model

    • CF says:

      David – If they really wanted to push a tiered change fee, I’m sure it wouldn’t be easy, especially when it comes to automating it. But if you just put it in as manual text, it would be easy for travel agents. Right now, when I do a ticket exchange, I have to read the rules and enter the change fee. So it would be no different. They would have to put money into their website and call centers to make sure it calculated correctly, but that should be doable. It might add some complexity, but it makes sense to the consumer. It’s much easier to defend, and it would help them to firm their bookings more. I wish they would try it.

  2. BMK says:

    Brett, you have hit it on the head. I have a cross-country AA sold out flight on a holiday weekend that I had to change for work. The ticket was $154, so I can call AA and get a $4 voucher or wait for a schedule change or be a no-show or hope for a day-of cancellation (with sequest, who knows). In the end, they can’t sell that seat in advance now likely for a higher premium.

  3. I like the AA idea. In fact, if I wasn’t flying out of a UA hub I’d seriously consider switching to AA. Especially now that I have to pay for my E+ seats and bags.

  4. Nick says:

    Agreed — jackass move for sure. As a former CSR it was bad enough to explain $150 change fee on a $150 ticket. United truly cuts its nose off to spite its face…again and again and again. I was really hoping the smarter Continental corporate DNA would be the stronger of the two, but it appears not.

  5. A says:

    Is it still considered a change fee when you standby for an earlier flight on the same day? I’ve done this a number of times. Before I had status on Delta it was $50 to do this which I always thought was insane. What’s the cost to the airline? This is literally last minute where the seat is going to be empty or not. Why not free up a seat later in the day where it may be needed. I guess my thought is same day changes can have benefits, at least how I see it.

    • AFAIK thats an airline by airline decision.

      I ran into this when Delta initiated it and it seems crazy to me, but perhaps they’re trying to get you to either pay for an earlier seat.. Or perhaps this is about staffing management at the airport? If a bunch of people show up early and all want to get on the standby list thats a fair amount of employee time.

    • CF says:

      A – With the exception of Southwest which may not have a change fee but does charge you the fare difference, every other airline has some kind of policy about same day changes that does not require a full change fee. On United, you can switch to earlier flights if available for $75 (or free if you’re Gold or higher).

      I don’t see a problem with charging for this. There might not be a huge cost to the airline to do it, but there is tremendous value to the traveler. So a small fee for that hardly seems unfair to me.

      • Ron says:

        Every other airline? Even Spirit? Back in 2005 I arrived at the airport early for an Easyjet flight, and the only option they offered for getting on an earlier flight was to buy a new ticket at the walk-in fare. Not sure if that’s still their policy.

        While it’s true that the cost of a same-day change is negligible, the benefit to the airline is not that great either. If the later flight is open, they can sell seats anyway; if it’s full, new revenue only materializes if a walk-in customer shows up. In setting a same-day change fee, the airline is betting (or calculating) that it will make more revenue from people making the change than the revenue it loses from not selling to potential walk-ins.

        A same-day change does benefit an airline if it takes a customer off of a heavily overbooked flight. In this case it’s not a matter of potential future revenue, but actual cost of compensating overbooked passengers. Do airlines waive same-day change fees in this case? If they know some customers are already at the airport, would they proactively move them to the earlier flight? I once had a same-day change fee waived by Delta when my original flight was delayed, but that’s a different ballgame.

  6. Jim M says:

    Sadly this seems par for the course for United. It seems like every time I fly with them I curse myself.

  7. Ben says:

    Sadly, I don’t think Jeff Smisek was truly part of the Continental corporate DNA, which is why the product changed so dramatically after Larry Kellner stepped aside. Were Continental’s old ways sustainable? Probably not. But Smisek turned them into an ordinary airline even before the merger.

    Hopefully United is forced to scale this back at some point this week. The fact that they kind of snuck the fee in makes it bogus to begin with. I hadn’t even seen anything about it until Cranky started tweeting about it, and I live in a United hub. I guess I can hope that Delta and American see the benefits of holding back on the increase. AA especially, since I can see regulators pointing to this fee increase as a reason not to approve the merger (even though we all know it needs to happen)

  8. Phil G says:

    This is a timely post on bad policy by United, important airline trends, and how one player or another in the industry always seems to be holding up progress; no one else writes so clearly and concisely about this stuff! This blog is simply the best on the airline industry anywhere.

  9. MeanMeosh says:

    “It is finally getting its act together after a very sloppy merger integration.”

    I wouldn’t even go quite that far yet. But I’m not sure that even really matters. Go check out Upgrd.com and that guy Matthew’s blog some time (the one who was kicked off a UA flight for taking photos and then arguing with an FA). At least once every couple of weeks, you’ll see a story about UA customer dis-service, yet he keeps flying United. This is despite being offered a status match by AA, and that his most frequent route seems to be PHL-LA area, which doesn’t exactly require that you route your business through UA, or any single carrier for that matter.

    Why would Jeff Smisek, or anyone else at UA for that matter, care what their customers think about the jacked up fee, when their loyal fliers just keep coming back anyway? They still deserve the Cranky Jackass, but I can totally see why they would do it – they know they’ll get away with it.

    • CF says:

      MeanMeosh – I agree completely. And that’s why I’m encouraging our clients to book away from United right now. If we don’t book away, then it will stick. But even if people don’t stop flying, it can change behavior in a negative way that hurts United. (That’s the part about people not canceling reservations b/c they have no value left after the change fee.) So it will be interesting to see if this does anything operationally.

      • Ron says:

        “people not canceling reservations b/c they have no value left after the change fee” : This is just a temporary problem for the airline. Wait a few months, collect new data on no-show rates, and adjust your overbooking policies accordingly.

  10. Just like fares can be lower the more ahead you plan, so should the change fees. 200 days out $25 is more then enough to cover any costs, but changing the day before your flight is a different story. The airline can sell that seat at 200 days out, but may not 24 hours out.

    But since the change fee isn’t something most people check into before buying a ticket, it’s a fee that can be raised/matched without most people even knowing. And just how many people plan their trip on what a change fee may be in the future?

    • David, I was thinking the same thing. Airlines should have raked change fees:
      Change your ticket 200 days out online? That is free (Fare change applies.)
      Change your ticket 200 days out on the phone? $25 plus a fare change.
      Change your ticket 2 hours out? Thats $150 plus the fare change.
      Change your ticket 45 days out? $100 plus the fare change.

      Yes, yes, yes I know the system can’t handle it, and you can make the communication saner by saying a change fee of upto $150 applies, see here for more details. I’d even argue that it’d make more sense to raise the closer in fees, $200 the day of then becomes something that is arguably more fair.

  11. Trent880 says:

    Why bother fixing the fundamentls of the business or optimizing your operation when you can just increase fees? Synergies! ROIC! Vertical integration! Profits! 4 out of 3 Wall Street bobbleheads approve!

  12. “United is an airline that has just come off a long period of pissing off its customers.” Needed to be said! I only would have added the sneaky, underhanded way that they slipped it in without any real announcement. A flyertalk post hardly counts, especially with such disingenuous reasoning.

    • Nick says:

      ?United is an airline that has just come off a long period of pissing off its customers.? That makes it sound like it’s coming to end. One could only wish.

      A friend of mine who works in corporate travel department for a Fortune 100 company says UA seems indifferent to keeping their business. The sense she gets is they only want to improve service to the point of merely annoying passengers instead of truly pissing them off. Even by that yardstick, they fail with this latest fee increase.

    • Arcanum says:

      And it wasn’t even as if UA posted it on Flyertalk. They simply responded to a thread someone else started to complain!

    • CF says:

      Jason – I can’t ever remember seeing an airline put out a press release about a fee or fare increase unless they could find a way to put out some kind of PR spin to make it sound like they’re doing you a favor. (Of course, that release then just makes me angrier than them saying nothing at all.)

      I’ve heard others complain that there was no advance notice given and that’s a terrible thing. On that, I will defend United. When it comes to pricing changes, you are strictly not permitted to give advance notice. It’s signalling and the feds really don’t like that kind of behavior.

  13. james says:

    Nice analysis.

    A few rare instances when my travel times were tenuous I’ve purchased two one way tickets on different airlines at different times (i.e. Friday 4pm and 7pm). Looking at that logic it seems economically ridiculous that having am extra throwaway ticket netted cheaper than doing a change fee or fretting about standby.

    It’s functional, and guarantees I have a seat on whichever flight I choose.

    And lately been booking most round trips as one-ways so as not to mess up the entire ticket if I dump or change one segment.

  14. Cook says:

    Spot on! I agree with nearly all of your thoughts. At the very least, UAL should waive the change fee(s) associated with PAX wishing to take an earlier, same-day domestic flight. Why? Because that change is (almost) always in the carrier’s best interest as well.
    I have not paid a change fee since 1994. That was paid to Alaska when changing to an earlier, same-day flight from PDX to LAX. I do not remember the amount of the fee, only that it was obscene. I’d already paid a hefty premium for the next-day “Y” bucket ticket and taking the 2-3 hour earlier return flight was most in Alaska’s interest than in mine. (Over the next 19 years, I’ve had to buy only ONE short notice (full fare “Y” bucket) ticket, so on average, I’m doing OK. It still pisses me off. -C.

    • This one is clearly (to me) about people who want to pay for the convenience. A lot of people pay if its $50 or under. Also, the goal is to prevent gaming of people who buy a cheaper ticket than SDC or SD Standby to a flight they preferred to fly on.

      This one is not about a cost to UA (or any airline), but about satisfying demand. While I don’t like this fee, I understand it and I chose my flight…

  15. cahdot says:

    i have not been on a united flight where it was NOT overbooked and they were asking people to take next plane or picking those who have to stay????so much for the justification for the higher fees

  16. Lora says:

    Looks like the airlines with their fee strategy IS working. The writer is already conditioned to think a $100 domestic change fee is acceptable.

    Who can blame them for trying $200. Some airline had to be first to try it.

    How stupid do they think we are? Obviously very stupid. Bag fees anyone.

  17. jim says:

    United is run by morons…when they had a chance to upgrade their customer service themselves with the Continental merger they chose not to.
    $$$ is all they care about.

    • David says:

      United is a company owned by shareholders who want a profitable return on their investment. Long term $$$ is all the company cares about and all the company should care about. If customers are not profitable they can take their unprofitable business elsewhere.

      • Trent880 says:

        Long term??? They and Wall Street care about the next quarter, or the full year *at best*. If one or both of them had a long term view, half of these issues would be rectified.

  18. pat says:

    They just lost a 1k customer. I called chase, got rid of my mp card, and no longer continue with UA bookings. I gave the merger a try and my final thought is this: I MISS CONTINENTAL AND THEIR CREWS. I’ll give the new AA a try, but my expectations are low.

  19. I don’t even blink anymore at the policy of greed that UNITED has had for the past years. They are usually the first to “TEST” fare raises. They go to sleep dreaming on inventing new fees. Unlike Cranky, I do not embrace the continuing growth of new or increased fees. In short, I stopped flying UNITED years ago and have no sympathy for travelers who choose to continue to be “punished” by their fares and fee schemes.

    • I don’t fly Spirit, but I respect that their fee-craze applies to everyone, is consistent, and is published as clearly as possible.

      If the majors adopted Spirit style roll-out of fees maybe people would be less upset. But when the fees are brought out in secret as an FT Thread response and given a poor excuse, UA loses credibility

  20. Fred says:

    Honestly, I don’t think that this will change what airline I fly.
    With a bit of planning, I rarely have to change my plane tickets. Besides, if United is $50 cheaper than Delta for a specific flight, that cancels out any savings from switching airlines. (Of course, if Delta were cheaper I’d fly them in the first place). For the very few times that I know I need a flexible ticket, I would probably use an award ticket.
    I can see how it might affect some people that need flexibility in their tickets, but for many people it won’t make that big a difference in who and how they fly.

  21. Cornell says:

    I wonder about the cognitive processes of the corporate bureaucrat who thought up raising the change fees to more than some/many domestic tickets.

  22. Chris says:

    As a result of this change, I booked a July 4 trip for my family away from United and onto Southwest. We might have to change our plans, and the prospect of paying $800 in change fees was enough to push me away from UA. 4 tickets at $325 each. UA just lost $1300 in potential revenue from me because of this change.

  23. judy nagy says:

    What incredible BS. “The costs incurred” … what? 35 bucks? This is corporate America at its best … “go ahead, gouge them some more, they’re too complacent to do anything about it”.

  24. Rob says:

    US Airways just followed suit and raised their Change Fee to $200, effective at 0000EDT APR 24!

  25. Cheryl says:

    This does appear to be a clear money grab. I wonder what other airlines are going to do…follow suit. Despite the change fee increase, people still need to fly. If all other airlines follow then everyone will continue to seek ‘best price’. In 6 months what will be the next tax, add on or additional cost to flying?

  26. John says:

    US Airways should get a swift CJA Award too – or maybe there should be a special award for those who follow bad ideas – Apparently change of flights to Brazil is a big problem for them … or wait maybe a huge revenue opportunity…

    US just announced “New fees”
    Domestic and Canada: $200
    Caribbean: $200
    Mexico: $200
    Central America: $200
    Puerto Rico/Virgin Islands: $200
    Transatlantic: No change ($250)
    Brazil: $300

  27. Phill says:

    Great article. Has anyone ever remarked on how the Jackass Award looks eerily similar to the Qatar Airways Oryx? :)

  28. John says:

    Thank you United and US Air you are puushing my Southwest stock to record levels.

  29. Ben Brooks says:

    As a UA 1K and former very loyal CO flyer this sort of change boils my blood. First, I want UA to be profitable, pay their people well and run a sustainable business. But they need to re-read Gordon Bethune’s “From Worst to First” to better understand and respect their customers. This is another “death by a thousand cuts/fees” move. For being the world’s largest airline you would think they could be smarter about it and do some sort of tiered system by days till flight, fare class, etc. I realize canceling an hour before an international flight screws them so they should discourage that. However, giving them notice 30 days in advance that you need to arrive earlier on your EWR-MCO flight shouldn’t cost $200 (but should cost something).

    If UA wants to catch up to DL’s sizeable lead in leadership, vision, innovation and financial performance they must be more customer-centric and not think and run like a failed legacy carrier.

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  32. Scott says:

    So, the wife and I spent all morning on the phone with United Airlines and Orbitz attempting to change her connecting flight to mine. Warning to all future travelers, DON’T FLY UNITED!!!!! This is something that the government SHOULD regulate. For a company to charge you a fee that is 3/4 of the cost of your ticket is BULLSHIT!!!! Keep it up United and you WILL bankrupt yourself!!! There are plenty of other airlines that charge a reasonable fee, and one, as you will read in this article don’t charge anything. $250 for a couple key-strokes?!?!?
    F%#% you very much United.

  33. NealW says:

    The high change fees will definitely keep me away from United. I just got some United frequent flier tickets with a 5.5 hour layover in Houston thinking I could change the schedule as long as the origin and destination remain the same, thereby possibly taking one of three earlier flights to the destination. Oops. As of 6/13/13 these changes were no longer free, but are $75.

    Next time I’ll probably choose American, where I can do this for free.

    I also think it’s dramatically unfair and short-sighted that an airline would charge for change that is clearly in their interest, such as changing off a completely full later flight to an earlier one that half-empty.

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