This week is looking like a good week for frequent fliers. I’ve got some big news from another program tomorrow, but today, United shocked the world by actually removing a fee. Now last minute booking fees from Mileage Plus awards are gone, and that’s certainly worthy of a gold star.
Most airlines have added these obnoxious fees in the last couple of years. With United, you had to pay $100 extra if you booked your award travel within a week of departure and $75 extra if you booked between one week and three weeks of your trip. Why did they implement these fees? It certainly had nothing to do with an extra cost incurred by last minute bookings. No, it was simply a way to screw people out of money and devalue awards further.
Though I wasn’t in on the conversation, I think I can figure out how these fees came to be in the first place. Everyone knows that last minute fares are more expensive, so they probably thought they could charge a last minute fee and not push people away from using their miles because it was still a lot cheaper than buying a ticket. They could get people to burn miles and they could make a little extra cash on the deal. Sounded great, but it was absolutely distasteful from a customer perspective.
I imagine this recent change was thanks to the wonders of ancillary revenue. United has now learned it can make a fair amount of money from just getting people onboard. Bag fees and buy-on-board are just a couple ways that they can make money on someone who is flying on a free ticket. And since demand has been severely depressed lately, they just want to get people to fill those empty seats.
My guess is that the reduction of last minute fares on many airlines has meant that people just weren’t using their miles very much for last minute travel. I helped some friends a couple weeks ago who needed to fly from LA to Indianapolis that afternoon for an emergency. They asked about using miles, but once I told them about the fee (which is actually higher on other airlines), they opted to buy a $250 one way fare on US Airways instead.
In that case, United had seats available but it lost out because of the fee. That meant no bag revenue, no chance to sell food, etc. So I think the gamble here is that the elimination of the fee will just get people onboard, and that’s great news for customers.
Let’s all celebrate the death of one of the more obnoxious fees out there, and for once, let’s give United some credit for doing something that’s customer friendly.
I think you implied this, but do you think this also has to do with the increasing number of FF miles out there with fewer flights and fewer seats to use them on? Correct me if I’m wrong but those miles are liabilities on a balance sheet, and helping people dump them will help with ancillary revenue as you mentioned, improve customer relations and begin to work on some financial liabilities (although this probably doesn’t begin to make a dent).
Shane – Yes, they are booked as liabilities, but it’s not really a cash issue. So yeah, it helps to get them off the books, but it’s all a paper game in that regard. While there are fewer flights out there, I’ve seen pretty good availability of seats these days, thanks to depressed demand. So I think United is simply trying to encourage people to get onboard so they can make money off ancillary revenue sources.
The profit margin on the $100 fee is, well, $100. What’s the profit margin on a $6 snackbox?
Let’s not forget that Southwest has never charged an award booking fee (close in or otherwise).
Consumers are wising up to how worthless frequent flier miles can become. With one stroke of the pen United made miles just that much less valuable by adding in these award booking fees. The pendulum has swung and consumers aren’t quite as loyal to the all mighty frequent flier mile. First the 20% off award bookings and now the removal of the booking fee. United is getting worried that they may have killed their golden goose (Mileage Plus) and is trying to bring it back to life.
I’ll stick to my Southwest Rapid Reward credits thank you. I can’t live with the uncertainty of what United will change next with Mileage Plus.
Oliver – The whole point is that they’re hoping this will push more people to use miles. If the same number of people use miles then it’s not a helpful change. But if more people use their miles, then United can still make money on the deal through ancillary revenue sources.
Congratulations to UA! Apparently, the change (elimination of fees) also applies to award ticket changes, like the flight change or date change. Still, with some restrictions.
Am I asking too much to have UA think about tinkering with the difference between the standard and the saver award? As it stands now, it’s really little more than a bait and switch game. [Well, isn’t everthing with fares?] Anyway, I could live with a change making the standard (higher miles) award apply to the short-notice trips, (like within 7 days) and the saver awards (fewer miles) apply to the advance-notice trips (like beyond 7 days).
As a United Premier who has had to pay the $100 fee for a short-notice award ticket, I definitely applaud United’s move. I think it’s especially notable since other airlines have been hiking their award fees lately. It’s rare that United goes contrary to what the other airlines are doing, but in this case I think it’s a smart move, both from the perspectives of adding to ancillary revenue and getting passengers into the seats.
Now I just wish United would match other airlines’ sale fares on the routes I travel. My home airport is Washington Dulles, and, for some reason, they seem to hate to reduce fares to and from Dulles.
Getting people in the seats to make money on ancillaries… This sounds like Ryanair.
Can someone explain the constant need to compare UA (or any other legacy carrier, for that matter) to Southwest? The route networks and mileage programs are completely different beasts, and for those of us who mostly travel internationally, Southwest is nothing more than a passing thought. I’m glad that you don’t have to pay a bag fee, but neither do I, and I don’t have to queue up to get my seat to Hong Kong.
It’s funny knowing that when you were on the “other side” you would have come up with ideas for fees like these. Now you are against them. Nothing like seeing the light!
JK – My guess is that yes, you are asking too much! The Standard award gives last seat availability so that should have a hefty premium. They could be overbooking a flight for you when you use that award so it needs to be expensive.
JT – Well, Southwest is the largest airline in the US for domestic flying, so they are a force to be reckoned with. That being said, I agree completely that comparing the frequent flier programs is absurd, that is, if you’re using your UA miles right. The benefit of Southwest is easy redemption with good availability for domestic routes. For United, it’s all about using miles to get First Class on some exotic foreign carrier to Bali or something like that.
Wyldkrd – I actually was never in favor of fees like these, and that’s probably one reason that I’m not working for an airline these days. I don’t have a problem with some fees, and in fact, baggage fees don’t bother me much. But this is an unavoidable fee that preys on people when they need compassion most. Those people using miles for last minute trips may very well be going to a funeral or having a family emergency. These aren’t business travelers. So it’s a fee that I despised and never would have supported. I’m glad to see it’s gone.
Great news – it always annoyed me since it seems like this last min. redemption fee originated way back before e-tickets — when UA used to justify this kind of fee since they had to “rush” you the paper tickets.
Anyway – its great they dropped it
Oh to figure out UA and IAD fares! First, Southwest seldom discounts IAD fares. For almost any WN fare sale, you’ll find small print: :”Travel to/from Washington (Dulles) not included.” Ft. Myers is generally the same.
I wrote WN about this asking for a little “LUV” but got the standard reply airlines give about how they try to fill their planes and generate a little profit for their shareholders. And, of course, they just give all this discounted seats away and stay in business. Surely something Cranky had a hand in writing.
But my suspicion about IAD fares has to do with the Fed’s GSA City-Pair program. I wish some scholars would like at that program and determine if it really benefits the taxpayers, what causes carriers to participate or not participate, and whether the airlines aren’t making a killing off it.
Fares under the current year’s contracts, of which UA is a huge player, particularly to/from IAD, seem a little strange. UA has the IAD contract for most major destinations, with one-way fares of: SEA ($600): SAN (568); LAS (460); PHX (323); DEN (453), although COS is only $236); even little old Norlfolk, VA is $588 and Richmond, VA is $550, from IAD, this is!
Interestingly, UA has the LAX contract for $196, but Virgin has the SFO at $169, with AA having SJC at $597. Thank you Jet Blue, BOS, only $85. And, it’s my understanding, at least for UA, they still add a $50 fuel surcharge for each ticket.
Of course, WN steers clear of all this Fed city-pair contracting. So, anyway, it just seems to me this bidding for the heavy Fed traffic from IAD, with UA in so deep, messes up our every seeing very much discounting at IAD. I don’t really know, but…!
Funny that soon after your post, I received the Mileage Plus email announcing the change July 30, but supplied a link that said “Book an award ticket today”. Perhaps a scheme to get me to pay the $100 fee by booking before the promotion starts :)
By dropping the fee they can get more people on the plane using miles and it may not be to just get money on bag fees, food, etc. It’s also a way of getting more mileage travel so they can say “more people redeem miles on UA then any other airline” or “more last minute awards are redeemed on UA then any other airline” or some such boosting.
But we all know it if works out for them, then other airlines will match and then no one will have the edge over anyone else in this area.
Outflyer made a good point that a last minute fee in the paper ticket only world was justified to pay for express delivery of tickets, but with etickets it makes no sense since what fee is there to push buttons to book a trip for tomorrow or six months from now.
Great job by you and United
Getting more people on their planes? They reported a load factor of 85.9 percent for June! Where are they going to put the extra people?
Oliver – Load factor is revenue passenger miles divided by available seat miles, but if we assume that the same number roughly applies to passengers divided by seats, then there were over 1 million seats that went empty during the month of June.
(7,433,000 passengers/0.85) – 7,433,000 = 1,311,706
Nice move by United and this makes them a little more competitive with Southwest. I bet a small portion of awards will be used for business travel, but mainly by the self employed paying their own way… and these people would otherwise find a really cut rate fare probably on another airline anyway.