Why Does Delta’s Change Fee Schedule Make No Sense? (Ask Cranky)

Aug 22, 2013

More Reading on This Topic: Ask Cranky, Delta

I haven’t done an Ask Cranky column in awhile, but that hardly means the mailbag has been dry. This one came in at the end of the July.

So why did DL charge me $200 yesterday to change a September booking to a November booking (NY – SFO return), yet when I want to do a same day they will now waive (see below – I am a Diamond). You would think that with Sep/Nov dates they have a lot more flexibility and options to accommodate my requested change vs. same day.

Confused…

Maarten

This is a great question, because it does make you step back for a second and think about why things are the way they are. For the most part, I think these things ended up the way they are because of legacy. But there is some method to the madness.

First, let’s tackle the advance change fee. This is really just due to unimaginative policy creation. It used to be that the cheapest tickets in a market were non-refundable and non-changeable. The only way out of that rule was to get a doctor’s note or something like that, showing that you couldn’t travel. As you can imagine, that was ripe for abuse and people hated the policy. A change was made that allowed people to change their cheap tickets for a small fee.

That worked, but the fee kept growing, and growing, and growing. And this year we saw the big guys all settle around a $200 fee. Alaska, seemingly a more enlightened carrier, decided to break ranks and create a fee structure that actually makes sense to travelers. It raised its change fee from $75 to $125 if the change was made within 60 days of travel, but it eliminated the fee on changes made further in advance because there is less risk of lost revenue for changes that far out.

This kind of thinking, however, just doesn’t exist with the big guys. They find it easier to just slap on a flat fee (regardless of elite status, I should add), and then run with it on all changes… for the most part.

That brings us to the second part of this email. Maarten is a Diamond elite with Delta and because of that, he can make changes to any flight on the same day he’s already booked without any penalty. But you don’t have to be elite to benefit from this policy. Even non-elites can change for a $50 fee. (Other airlines charge $75.) What gives?

This one also comes from legacy policy. It used to be that you could standby for an earlier flight on the day you were traveling without charge. The idea was that if there was an empty seat on an airplane before departure, why not let you take it and open a seat on another flight that someone might want? Of course, airlines then started to think about this from the perspective of what it’s worth to you, the traveler. Getting home earlier was a nice benefit. And while you might not pay the full change fee for it, they figured you’d be willing to pay a little bit.

To make the change in policy go down more smoothly, they actually let you confirm on another flight so you didn’t have to sit around and actually wait at the departure gate. You could only do this if the same booking class was available on your new flight (otherwise you could standby), but it was still a clear improvement.

Those who took advantage of the standby option the most, however, were the frequent travelers that were always on business with shifting plans. And those frequent travelers balked at having to pay for it. So the airlines decided to make same-day changes a perk of being an elite member.

This has now become a revenue generator for airlines while at the same time being a valuable perk for those who are loyal. Airlines must believe that if they switched to having a full change fee for same day travel they’d either lose traffic to competitors or they’d earn less revenue when people just opt not to change. It wouldn’t surprise me if that thinking changed at some point, but for now, this is where we stand.

Brett

31 responses to “Why Does Delta’s Change Fee Schedule Make No Sense? (Ask Cranky)”

TomSFO

Aug 22, 2013 at 5:47 am

I assume there will come a point when airlines start losing money because travelers stop flying due to high airfares and tons of fees.

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1. David M
  
  Aug 22, 2013 at 12:08 pm
  
  That’s not the end point, though. Either they adjust capacity and costs downward to reduce demand (that 757 flight becomes a 737, the 737 becomes an E-Jet, the E-Jet becomes a CRJ, and the CRJ flight goes away completely), or they reduce airfares and/or fees to stimulate demand back to match capacity.
  
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David SF eastbay

Aug 22, 2013 at 7:31 am

It really makes the airlines look stupid when a $90 ticket cost $200 to change. If your change is far enough out, just buying a new ticket and loosing that first ticket could be less.

Since business travelers change a lot, they are making money on these people since even first and business class fares now a days can be nonrefundable and have a high change fee.

Maybe a step fee is better, like 1st change $25, 2nd change $50, etc or a change a month ahead $25, 3-weeks $50, etc.

Since just about all tickets are e-tickets there is no ‘paper’ to change so just pushing a few buttons on a computer shouldn’t cost $200. And since most tickets are issued by travel agents and by travelers online, it’s not like it’s taking the time of human airline workers to do all the work.

But legacy carriers are not one to come up with new bright ideas. What worked 50 years ago is still current in their (closed) minds, just change more money is the only thing their brains can handle.

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1. Noah Kimmel
  
  Aug 22, 2013 at 10:10 am
  
  Except most airlines still sell refundable tickets. They may be really expensive, but the idea that somehow you are entitled to change it for free (when there is value to you in doing so, and a cost to the airline–actual for work needed or theoretical for planning) is not a fair one to have.
  
  I had to buy a new ticket last week when my DL $130 ticket was less than the change fee. It sucks, and may screw up DL planning with more no shows, but ultimately, they can make more money without raising ticket prices and fees that hit everyone for the convenience of a few.
  
  There are some innovations like Jetblue not charging any fees for Mosaic members, and tiered fees based on dates for regular members. AA is doing the “Choice” fare upgrades. WN still offers no fees to refund (but may return in voucher form).
  
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S*A*A*D

Aug 22, 2013 at 7:48 am

American won’t even let you stand by unconfirmed for an earlier flight anymore unless you opt in for the “Choice Essential” package. I’ve never used it because I’m honestly not sure if that allows you to stand by or if you’re confirmed on an earlier flight the same day. Either way, if you decide to stick to your original flight or no comparable class is available, you’ve rolled the dice on a product you can’t use and they walk away with your fee, thanks for playing!

What THEY’VE lost sight of is the benefit early standbys give them: It reduces their own exposure to overbooked flights later in the day or FIM traffic from cancellations and delays.

Gate agents simply follow the rules now because fee revenue is involved. They used to at least look at your original flight to see if it was full or worse, check the earlier one, figure both of you were getting a favor and send you on your way. No agent wants a fat flight at the end of their shift! Now you’re both stuck because of the fees the airline wants that you don’t want to pay and neither of you are happy about it.

S*A*A*D

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1. David SF eastbay
  
  Aug 22, 2013 at 10:03 am
  
  S*A*A*D, so true. You used to walk up to the gate agent and ask to go on the earlier flight and they said sure without even looking in the computer as they new there was a lot of open seats. It used to be move the people out when you can in case there’s a problem later in the day, plus it opens space later in case someone like a business traveler wants to book the later flight you would have been on. They had a better change of selling another seat on a flight 2 hours from now instead of one 20 minutes from now.
  
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  1. DaveS
    
    Aug 26, 2013 at 3:50 pm
    
    They’ve taken all that into account in the calculations, though. They have decided that overall they will make more by charging the change fees. The only way somebody else buying your seat on that later flight could add profit for them is if the flight is completely full otherwise, and even then they’ll probably overbook if it’s a high paying customer. Most of the time they won’t sell your seat anyway, or they would have had other seats to sell. On the other hand, collecting a change fee is money in the bank.
    
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Eugene Mannarino

Aug 22, 2013 at 8:48 am

It got to come to a point where the Public get totally fed up with all these Fees.
Airlines just keep adding and adding and the public just takes it. Airlines need to realize without people there will be no airlines.

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1. Noah Kimmel
  
  Aug 22, 2013 at 10:14 am
  
  People only care about the lowest ticket price. Use WN or B6 more and maybe the legacies will adjust. The public complains about a lot of airline behavior, but they vote with their dollars and pick something else.
  
  Would you rather have a bundled fare for $20 more? Pay for it! Stop taking Spirit, then complaining about being nickel and dimed. AA’s More Room Through Coach failed because people did not want it, not because the airlines are actively trying to “screw” you.
  
  Lastly, for an industry that has lost so much money and has razor thin profit margins, it is amazing that airfare has not increased a whole lot despite cost increases! High prices to not mean the airlines are making a ton of money.
  
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Ron

Aug 22, 2013 at 8:59 am

The reason for these particular fees may be legacy, but the principle is simple: charge by value to the customer, not by cost to the airline. Changing a ticket to a different date some time in advance is much more desirable than switching flights on the day of the flight. Customers are therefore willing to pay more, so the airline charges more.

Airlines do sometimes waive the same-day change fees in case of delays and cancellations. A few years ago I was connecting on Delta at Salt Lake; when I arrived I found that a (delayed) earlier connection was boarding, and they offered to charge me $50 to get on it (I declined). But a little while later, when my ticketed flight also got delayed, they allowed me on the earlier flight (which had already left the gate but came back for an even longer delay).

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Don

Aug 22, 2013 at 9:51 am

Actually I have to back the airlines in this case. When I would travel I would sometimes have to buy the expensive ticket, because that’s what I needed. And what would happen…..people would show up very early for this flight or a (surprise, surprise) a day early and the airlines would always let them on if there was an open seat. I know this because I would sit by the gate and hear people screaming at the agent about their original flight that doesn’t happen till much later and people screaming, “Come on I paid for a ticket there is an open seat. Just let me on.” Well the airlines finally caught on to this trick. Which I say GOOD! That flight that I purchased cost me well over what the earlier or later or direct flight cost. I am glad airlines do this. I’ll be more than happy (okay not happy; but at least I know why) they have these fees.

You can start the bashing now:

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SteveZ723

Aug 22, 2013 at 10:11 am

I agree with David SF’s comment 100%. This just happened to me. I had a Delta reservation for the Dorkfest. I got a decent price of $205 roundtrip for SEA-LAX. Unfortunately, due to a conflict, I won’t be able to attend after all, and I had to cancel those flights. I had two choices: not show up for the flights and lose my $200, or pay another $200 for the “privilege” of changing my flights to another day. My new flights, two weeks later, now cost essentially double what I originally paid when you add the change fee.
How did this hurt Delta? Both sets of flights (end of September for Dorkfest) and mid-October for my rescheduled travel are still weeks away. Delta probably sold “my” seats for the September flights already AND they got an extra $200 on the change fee for me changing my reservation. Of course, I changed my hotel reservation without paying a penny, which I appreciated.
I understand a change fee for Delta, but think $200 is exorbitant. I like David’s idea, but it’s probably too logical for the airline industry. :-)

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A

Aug 22, 2013 at 10:41 am

Nice little history lesson in clear and concise terms for the in-frequent traveler. Leisure travelers just don’t “get it” because in most services it’s no big deal, like hotel rooms, but there’s a history here and how we got there.

I miss status on DL from time to time and get slapped with the $50 same day change fee. While it sounds stupid I think Delta realized the majority of those are being paid by employers. For example, I do a lot of travel in Canada on WestJet. Often I transfer at YYZ where I really have no clue how long US preclearance is going to take so I leave myself a couple hours. On several occasions I’ve burned through and literally walked right on the next flight home that’s boarding as I get to the gate. My employer gladly pays the $50 because I’m not “wasting” several hours in an airport not working efficiently, i.e. my time is worth more than the expense. For leisure travel, I’d probably wait a few hours vs. spending $50/person to get home 2-3 hours earlier.

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Olamide

Aug 22, 2013 at 11:22 am

Cranky or anyone help me to understand why changing affects airlines planing for flights? Am i wrong also to believe that change fees also help prevent more conflicts with oversell situations.

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1. CF
  
  Aug 22, 2013 at 3:01 pm
  
  Olamide – Change fees help to reduce the number of changes people make so it makes for less variability in demand. If you have no change fees, you get a lot more speculative booking where people know they can always change freely later if needed.
  
  I don’t see how change fees prevent oversell conflicts.
  
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  1. JayB
    
    Aug 22, 2013 at 6:34 pm
    
    You’ve probably answered this a million times already, but I’m a little slow, but why don’t airlines allow people with tickets to sell them to anyone they want to? AirStubHub!
    
    Of course, all the security requirements would have to be met, and maybe there would be some admin. charge (not $200), but why not? It’s my ticket, so why can’t I sell it? If I can’t find someone to buy it, tough!
    
    Oh yes, I forgot. You see we in the airline business have a pricing system that is God’s gift to you know-nothings. Our business model is to market and charge a million different fares in a every market, even those with a single carrier, and then open and close the seat inventory for each fare level every other millisecond. Please try to appreciate our pricing smarts, even if we do on occassion employ a few sad sacks with fat fingers who may run amok!
    
    I wish…prospective customer and airline…agree on a price, or have an agent help reach the price, and forget about it. Change fees? Who cares? Handle it like any other commercial transaction. In 1967, this stuff was supposed to be de-regulated. And, this is what we’ve come to?
    
    Someday, all of this will change, but it’s going to be a long, brutal journey getting there, I guess! With people like you, Cranky, maybe…?
    
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    1. Ron
      
      Aug 22, 2013 at 9:25 pm
      
      If airline tickets could be resold, an aftermarket would immediately emerge. Profits would go to scalpers, not airlines. Allegiant allows (or used to allow) a name change for $50; given their normal spread of fares, this penalty is probably big enough to make a reselling business not worthwhile. But for major carriers the penalty would have to be much higher.
      
      ID requirements don’t enhance security much, but solve a business problem for the airlines, in that they prevent reselling. It’s just convenient for the airlines to cite “security” when they ask for your ID.
      
      We can reverse the question: how come theaters, sports arenas etc. don’t implement a demand-based pricing model? Yes, price may vary by seat or by show, but once prices are set they don’t change dynamically.
      
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      1. Nick Barnard
        
        Aug 22, 2013 at 9:55 pm
        
        The big problem with ID requirements is at no point at the security checkpoint is the name on your boarding pass matched against the airline’s record. So you can create your own boarding pass with whatever name you’d like. (Yes, its illegal, but if you have reason to bypass it you’re already doing other illegal things.) This essentially means that you can fly on a stolen credit card and use a separate boarding pass.
        
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      2. DaveS
        
        Aug 26, 2013 at 3:55 pm
        
        Ron, that’s precisely my worry. It would make it much harder for the ordinary traveler to get a good fare. Scalpers would snatch up the less expensive seats right away, then resell them at a profit when the airline is trying to sell higher priced seats. Bad for the flying customer and bad for the airline. Airlines turning profits over to scalpers, and customers turning fares over to scalpers.
        
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    2. CF
      
      Aug 23, 2013 at 8:57 am
      
      JayB – I remain convinced that there’s a way to allow name changes (opening up a secondary market) but it would be really hard to quantify it unless you’re inside the airline with access to all the data.
      
      I envision it like the concert model where you buy a specific seat and then you do what you want with it. But the airline would risk losing a ton of revenue that way so it would have no choice but to control the resale market and charge a fee to do it. This still presents a ton of issues but there’s one in particular that probably kills it for most airlines.
      
      When you buy a ticket for a concert, you’re getting that one seat. But people don’t buy a seat on an airplane. They buy a ticket in a market. So you might be on an airplane from Atlanta to LA but you really bought a ticket from Raleigh to LA and just had to stop in Atlanta. That makes it extremely hard to figure out a value for a single seat on a single airplane. You couldn’t break it out that way and let someone re-sell a specific seat on a specific flights.
      
      So you’d have to keep the entire itinerary intact. Allegiant doesn’t have to worry about this because it doesn’t do connections. And it also doesn’t serve business travelers very much, so as was mentioned, the spread between low fares and high fares is pretty narrow. It’s much easier to make work in an airline like that.
      
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      1. Nick Barnard
        
        Aug 23, 2013 at 12:27 pm
        
        I’d be curious how big this market is. It’s some combination of people who:
        Don’t show up for their flight and abandon their tickets.
        Cancel their ticket for a credit that is then used weeks or month later for a completely different city pair.
        
        I’d be curious to know what the volume of dollars that fit into this bucket. I’m not sure how large it’d be. Then perhaps 10 percent of those would make it into the resale market? It’d probably be easier doing a graduated change fee like Alaska does to encourage people to signal their intentions earlier so they can do better with yield management.
        
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MeanMeosh

Aug 22, 2013 at 11:57 am

Don brings up a good point about stand-by fees, and one that gets overlooked quite a bit. In the old days of no fees to stand by for an earlier flight, there were some travelers out there who would game the system to get a cheaper fare than they were entitled to. Say, for example, the 3 P.M. departure went for $450 roundtrip, but the red-eye sold for $275. You would buy a ticket on the red-eye, and then simply get to the airport early and ask to stand by on the 3 P.M. Sometimes the flight would be full and you’d lose the bet, but if you got on, you effectively got away with paying $275 for a flight that should have been $450. I can understand why the airlines would want to charge a fee to discourage this behavior, although it does have the unintended consequence of shafting those who just get done with a meeting early to getting through customs faster than expected. Personally, I think they ought to waive the fee if your original flight is in an oversold situation, though granted, that might pose logistical challenges.

I also wish more airlines would follow the AS model of tiered change fees. I bet the legacies could even get away with a fee higher than $200 for close-in changes if they instituted a customer-friendlier policy far out, such as a nominal $25 fee for changes more than 60 days in advance, but one that gradually escalates to, say, $300 less than 15 days out.

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1. Nick Barnard
  
  Aug 22, 2013 at 3:51 pm
  
  Perhaps I made this up, but I thought I heard that a few airlines have given their front line personnel some flexibility to waive the fee to fly earlier if the original flight is in an oversold situation..
  
  I bet the legacys are watching AS’s model. I can see a few who might implement it..
  
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sally65

Aug 22, 2013 at 3:48 pm

The cost of airline tickets has not increased appreciably in the last 15 -20 years. That’s because corporate travel managers and leisure travelers got used to the lower fare prices of airlines like Southwest and JetBlue. There is a line where people won’t pay “more” for a ticket. The airlines make money on business travelers, who pay for the losses on leisure travelers. Despite all the griping about being “fee’ed” to death, the psychology is to find the lowest fare possible. Without these fees, airlines would not be able to be profitable. Even Southwest is no longer the low fee carrier. Because of bankruptcies, the costs have come down significantly for the legacy carriers so they are now competitive with Southwest. There’s really very little incentive for a business traveler to fly Southwest, except on short haul flights. They should have adopted AirTran’s business class model.

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Maarten

Aug 22, 2013 at 5:58 pm

I am actually the “Maarten” who asked the question, so: thank you Cranky for addressing it and sharing your point of view.

I reached out to Cranky because to me, Delta is perhaps doing itself a great service with the $ 200 change fee’s, but as a Diamond Medallion Million Miler, waiving a short term fee (same day) but charging a “longer out” fee seems counter intuitive with customer service and elite recognition.

I am (no longer) traveling on a corporate account as I run my own business. Delta is frequently the cheapest option for cross country travel from NY (together with United, but Newark is inconvenient for me) and I have status so I get free Economy Comfort and a relatively decent chance of an upgrade.

But my ticket initially booked for September, which then had to be moved to November, was more than $ 200 so I paid the change fee.

I like some of the suggestions made in the comments that would seem a fairer and/or more positive way to recognize your most loyal customers/revenue generators. I liked the tiered idea of increasing change fee’s for each change but suspect that the admin around it could be a bit cumbersome (although big data is going to solve our lives so why not this…).

I do have evidence that gate agents, or perhaps just some gate agents, are able to bypass the change fee’s. Recently I flew KLM from AMS back to JFK, and I was able to take an earlier flight due to meetings ending early. It was my wife’s birthday so getting home earlier was nice as it meant more time to freshen up and go to dinner. I went to the Sky Priority desk and the KLM agent understood why I wanted to go on the earlier flight. I asked how much it would cost, and said she did a manual override and off I went. She told me to never tell anyone so please keep it to yourselves… :-)

Someone else made the argument that the airlines need the fee’s to keep the ship financially afloat. I am at Stanford University at the moment, as one of the leaders of the Business School’s senior executive training programs (the Digital Marketing Program).

One of the speakers today was JetBlue’s Blair Koch, VP Information Technology Commercial and Shared Development Services.

He said the average margin on a ticket is about 6%. That does not leave a lot for when things go wrong. So, he explained, airlines figured we will start charging for things that passengers must do anyway (like check a bag, get expedited security, more leg room, etc.). The margins on these products can go as high as 90%. This is because the fee’s are charged for infrastructure that is already there – it did in most cases not require any major new investment.

Ka-ching!

I understand the business need for financial buffers if you operate in a volatile industry with a 6% margin. But I also have to think that you can build better service systems for your most loyal of customers. At the moment, I think the airlines have gone to far extreme end of making (financially) smart business decisions (reduce the pool of frequent flier miles, make it harder to attain them, invest in a good product that people are willing to pay for, etc.). But I think the pendulum has swung a little too far in favor of sound business to the degree that – if pushed through any further – it will start working against them.

I recently read some research from JD Power about the power of a smile in airline customer satisfaction: “Treating passengers as valued customers and guests–welcoming them with a genuine warm smile–is an important opportunity for airlines to achieve considerably higher levels of satisfaction,” said Faza. “With the increasing use of technology reducing some personal interactions in the reservations and check-in processes, making the most of the rest of the passenger interaction with airline staff is imperative.” (Study here: http://www.jdpower.com/content/press-release/5sYQtpZ/2013-north-america-airline-satisfaction-study.htm).

Imagine the smile KLM put on my face when they allowed me the earlier flight. Now imagine my face when I had to pay Delta $ 200 for something that did not in the slightest inconvenience them.

I will shut up now…

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1. Maarten
  
  Aug 22, 2013 at 6:03 pm
  
  PS – I re-read my post and saw a number of typo’s/grammatical short-comings. These posts can not be edited, so all I can do is apologize for the errors which occur when you write in a hurry. I think the point I am trying to make still works. Thanks!
  
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2. Evan
  
  Aug 23, 2013 at 7:20 am
  
  Maarten,
  
  Your point about a simple smile is so true. It’s sad when you get better service at a McDonalds than at an airline. As a committed economy flier, I never expect much. But, when the bag drop agent doesn’t make eye contact, the gate agent looks irritated and doesn’t acknowledge my existence, the flight attendants look bored as I step onto the plane and I’m the one who has to say hello, and then a drink is shoved in my face and then trash collected with a command of “give me that!” as recently happened on one Delta flight, you have to wonder what’s the point of paying for extra services or even trying to establish loyalty with any airline.
  
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Cook

Aug 22, 2013 at 10:42 pm

Given the vast volume of data that the carriers collect about their customer’s flying habits, I have to wonder if they are collecting data that matters..

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Javier

Aug 23, 2013 at 1:52 pm

I think this is a kind of technique probably copied by low cost airlines like Ryan air and Easyjet, but Delta instead of not changing the flight use the technique to charge an astonishing price. Viceversa, low cost flight simply don’t change the date and so they force you to buy another ticket. It is pretty much the same action or at least similar but with different logo on the ticket.

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What we’re reading: What United knows about us, Delta’s wacky change fees, Expedia + Travelocity?

Aug 26, 2013 at 1:59 am

[…] and I don’t always agree about the passenger experience, but in this case we certainly do. Change fees are out of control and their increase last March was one of the features issued mentioned by the Department of Justice […]

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David Johnson

Jun 19, 2014 at 9:38 am

The erosion of benefits is incredible! An unused ticket is a “change” of 200$. They resell that seat. I can see charging a change fee to change a ticket to a new one….but charging an additional 200$ when you try to apply a credit from an unused ticket? Love to hear the flight attendants chatting about bids and taking non-rev trips to Hawaii, when I am told I can no longer bring a guest into the sky club—my teenager—like I am going to leave him downstairs and use the club. A great way to squeeze the customer. Even better is the idea of asking customers who paid for a seat and appropriate overhead space to put their stuff at their feet so someone else can get their stuff on. Both paid for their space….If my sister in law did not work for them I would be long gone and no miles would keep me with these asses. The staff comes first with Delta.

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