Forget Fancy Tech; Delta Can Win Way More Friends By Tackling the Change Fee

41 comments on “Forget Fancy Tech; Delta Can Win Way More Friends By Tackling the Change Fee”

1. oooh write up the Eva one and get into the nitty gritty details!

   This is possibly Delta becomes so good at Revenue Management that an arbitrarily calculated value, the change fee, no longer has a place in the world. With pricing becoming a highly scientific domain, it’s not logical in the future for a key component of pricing to simply be an arbitrarily determined value. It’s simply an additional calculation- the value of the new seat you want against the value of the seat you are opening up. That’s not an arbitrary calculation but a dynamic one.

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   1. +1 on the EVA write-up.

      I agree with abcdefg that it needs to be dynamic. If it’s flat rate with fare difference eliminated I’m sure there would be ways to game the system on highly seasonal routes. It should be like part-exchanging your current car when buying a new one – we’ll take your current seat off you for [what you paid for it] or [what we know we can resell it for, less commission, if higher than what you paid for it (so in the customer’s favour)] and set that value against [current selling price of the seat you want].

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      1. It would have to be well take the other seat for what we think we can sell it for times how likely we are to sell it. Ie $400*0.8=$320 dollar credit, which makes changing seats a not totally free endeavor but it scales with the cost of the ticket and is much more defenceable and reasonable to the customer. Plus it incentives earlier changes where the airline is more likely to be able to sell the seat

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   2. Southwest gets repeat business precisely because of their flexibility and no change fees. I can state this for a fact.

      I’m okay with their policy of keeping the fare dollars (ie: no refund back to Credit card) while letting me fully apply/reuse that monies toward another flight. That seems like a reasonable tradeoff for what is a *nonrefundable* type fare.

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      1. I agree that Southwest has the best system where the change “fee” is tied to the delta in fare price. Obviously airlines want to prevent customers from buying the cheap Tuesday departure and then changing it for the high demand Friday flight.

         Perhaps they can offer the change for the cost of the new flight minus the lower of what your paid for the seat vs. the current sale price…and the customer would surrender any savings if the new seat is at a lower cost. This would prevent customers from making trivial itinerary changes to cash-in on a fare sale.

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      2. Indeed. Even as Southwest pricing has increased, the overall value remains significantly better with Southwest for many travelers. The fact that I don’t need to worry if a change comes up is worth the extra cost. With small children, I’ve already eaten the cost ($1000) of kids sick with the flu the day of travel, forcing me to cancel a trip altogether. Ironically, this was with Delta.

         Ever since, I’ve stayed exclusive to Southwest for family travel. I’m sure Outer Space Guy and myself aren’t the only ones…

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         1. If you think about this (fare changes punitively punishing families with likely sickly, small toddlers) coupled with extra charges for sitting families together in the first place, perhaps the Big Three are consciously doing their part to discourage families from traveling with them.

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2. Write up EVA!

   I thought I saw in one of the articles that change fees account for close to $700 million in revenue. That revenue is nearly all profit. So it would be a significant percentage to give up if it was given up entirely — though I doubt anyone is talking about $0 in all situations.

   BUT, given Deltas size and profits, they could lower the fee, reduce it for further out itineraries, remove it for premium non-basic or premium fares, or some other structural change.

   While no one picks an airline for a potential change fee (like no one picks a car rental for the gas price) since they don’t envision changes at the beginning, it would help the comparative advantage. Better service, better onboard experience, better operation, and a price that may be higher but seems more “fair” when fees are reasonable. This could help delta jump AA and UA who would have to follow, but don’t necessarily have the profits to easily do so.

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   1. Two thoughts on this:

      1. I actually do make a “change fee” purchasing decision when doing hotels. I will gladly pay a few bucks more for the opportunity to cancel versus prepay. They key there is a few bucks — non-refundable fares are a quantum leap. Also see Southwest. The fact that they have no change fee, non-refundable fares is why I steer my leisure travel toward them (when it makes sense!). The odds of me taking another Southwest flight in a year are high, so its really nothing lost.

      2. Cranky had a good discussion on a system for reducing change fees for travel 120 days in advance, then higher for 90 days, etc. a few eons ago. I cannot see how this would be tough to implement.

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3. Without getting into politics, I would not be surprised if a populist politician or presidential candidate (of either party) decides to do some grandstanding on this issue and propose regulating change fees, for the media exposure if not the votes… Even if airlines aren’t truly interesting in significantly changing change fee rules, they need to do enough from a PR / lobbying side to keep the public outrage and the risk of increased regulation to a tolerable level.

   I personally would appreciate changes in the change fee rules (cheap, nonrefundable tickets are basically disposable if your plans change and the ticket is only a few hundred dollars; you take the hit and move on), but ultimately airlines will attempt to make up for the foregone revenue in other places, and that’s what scares me.

   As a quick question for Cranky, are there any exceptions / “outs” to the change fee rules, especially for the non-elites? Last I heard, bereavement fares were no longer very relevant, if they even still exist.

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   1. Kilroy – Some airlines will still make exceptions but it’s more the foreign ones that anything else. For example, a common exception is that if you have your visa denied, you can refund your ticket without penalty. I think it might be Ethiopian that lets you make one change to your return without penalty. But the exceptions are few and far between. Bereavement fares still exist to some extent but they are rarely great anymore. They provide flexibility, but with low cost carriers having deconstructed the old pricing framework, it likely won’t save much if anything.

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4. I want to hear the EVA story!
   Trip reports are a dime a dozen. I can find those anywhere. Massive penalties because of obscure rule issues . . . now that’ll be interesting.

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5. Probably one of the best article’s I have ever read on change fees.
   Brilliantly articulated.

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6. +1 on Eva. Precisely the sort of post we love this blog for.

   On change fees, the problem is that they are simply too high for the fares paid. $200 fee on a domestic coach ticket is madness, absolute madness when most o-w fares booked more than a week in advance are 300 and under.

   The should continue to charge for fare difference but move to a structure like, outside of 90 days is a nominal charge, say $25, and then ramps up to maybe $125 in the last week before travel.

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7. Airline Change Fees are *absolutely* due for a serious overhaul. It baffles me that the airlines are just now realizing that the current structure couldn’t piss more people off if they tried. My gripes:

   – Why is it the same fee to change the flight six months before departure vs. six minutes before the check-in deadline? Seriously?
   – Some (all?) airlines that assess a fee apparently require it to be paid, no matter what, even if the new fare is lower and that difference would fully cover the fee. Again, seriously?
   – It should never be the case where it’s just cheaper to no-show and buy a new ticket from scratch. (That’s just common sense; easier to properly plan oversells if you reduce the no-show percentage.)

   Paying the fare difference? Sure! That makes sense. But if the new fare is lower, it should be able to be used to offset the fee. And on the amount of the fee? There’s a way to make the fees make more sense, and be revenue-neutral: $X (nominal amount; say, $50) up until Y days until departure, and then a gradually-increasing percentage of the fare up to, say, 85% as departure approaches. (I picked 85% instead of 100% because it certainly makes sense to discourage no-shows, to give the airline a chance of re-selling the seat.)

   Lastly, there should be “contagious serious illness” exceptions: Influenza, Noro, etc… do airlines really *want* passengers to infect other passengers (and employees)?

   FWIW, I tend to favor Southwest for my leisure travel precisely because their customer-friendly policies (no change fees, no baggage fees) show that they value my business and actually *want* me as a customer. The “legacy” airlines appear to only-grudgingly agree to transport non-full-fare cattle-class passengers.

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8. What gets me is the same day change fees. If you’re catching the early flight and there are open seats literally as they are about to close the gate why clip a loyal passenger for another $75 just to jump on? Theoretically it gives the airline a few more hours to sell that now empty seat on the later flight. Granted, Delta has waived that fee for me due to status and even sans status sometimes the gate agents have waived it. I’ve only pushed it on direct flights and understand if connections are involved it’s not quite that black and white but if the change doesn’t cost the airline anything additional I’m not sure why they can’t be more open to accommodation. Yes, I know it’s revenue but this isn’t a bag that they have to pay some handler to deal with or extra weight on the plane, etc. It’s just flight A or B, I’m going one way or another.

   That brings me to another point, the inconsistency of the fees. I’ve literally walked into an airport a day ahead of my flight and worked with a gate agent to get home right away and they waived all fees, did it with a smile and said “happy to get you home a day early.” Other times I’ve been treated like Gaylord Focker and given a blunt “this is our policy.” Generally speaking Delta has fantastic people but some are definitely more focused on maximizing revenue while others focused on building loyalty.

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   1. Heck if you think about it….

      If you are willing to standby on an earlier flight that would not have otherwise gone out full, the carrier should give you some sort of bonus since they can try to sell the other seat.

      Maybe make it in miles or something that is a token of appreciation and not $$ so people don’t try to game the system.

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      1. I’d guess the reasons for the same day change fees (other than the obvious $) is that it lessens the likelihood that tons of people just show up for the first flight trying to get on standby…and of course most likely only a small handful of people would get on. Leading to many people hanging around airports for hours and getting progressively upset at the airline (and life)

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9. This is an era of Basic Economy fare which does not allow any changes at all (aka no change fee revenue). Plus, often times the $200 change fee is so high people just go ahead book a new cheap ticket and abandon the old one. With these in mind, I can see the possibility that the DL has the numbers to show revenue from change fee has dropped quite a bit to the point that waiving it for some customers (Medallion members, AS/B6 model) or some non-Basic Economy fares (B6 model) would make sense (improve loyalty, other revenue, etc).
   Additionally, this may also help driving more people to book non-Basic Economy fares.

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   1. That might be the driver for lowering or eliminating the change fee. If Delta can get more people to not book an E fare and instead pay a little more for flexibility, it might mean more revenue, but it would certainly result in happier customers.

      As a medallion, I avoid E fares because I like the upgrade to C+ at booking and upgrades to F, so the difference in fare is worth it to me already. I’m also the customer who would pay for extra legroom these days if I didn’t already get it as a benefit of status.

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10. Late last year, I booked a round trip ticket on United. Ended up having to change plans to fly out for a business trip so I needed to change my ticket. The change fee was $200 but the new fare was $210 lower. I though perfect, I can change my flight at no cost because change fee would cancel out the fare difference. Nope, United told me the change fee needed to be paid even though I would get refunded the $210… That is what really annoyed me. I told them, why do I need to pay $200 if you’re going to give me $210 in credits anyways? Just cancel the refund and waive my change fee, it’s the same thing! I called and hung up 3 different times just to get them to waive the change fee and cancel my $210 voucher. So crazy

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11. The national media is covering this possibility so there is enormous interest in seeing change. Delta recognizes what parts of its model get bad press and they also know what the competitive disadvantage they have in markets where they compete with other carriers.

    Quite frankly, if this change happens, this will eliminate WN’s ability to compete in Delta – or legacy carrier – strength markets. As noted in other comments, WN gets enormous amounts of business passengers because of their no change fee policy. They also get lots of leisure passengers because of the 2 bag policy – but legacy carriers negotiate down the bag requirements in corporate contracts and business travelers rarely check bags anyway. Eliminating the change fee has the ability to shift enormous amounts of high quality traffic away from WN to legacy carriers – and Delta is very much aware that WN is operating at a severe disadvantage right now due to the MAX grounding.

    Delta, with a high percentage of business passengers – and in a segment they want to grow – has the most to gain. American and United, even if they match a Delta-initiated change – have far fewer profits available to absorb any loss of revenue. And that is only on the domestic side. If Delta also eliminates change fees in international markets, there will be a mind-numbing rearrangement of the industry. Some global carriers simply could not absorb the change to fare structures and revenue streams. Delta has talked about its need to develop its international revenue premium like what it has domestically – and this would be the kind of move that would rocket Delta to the top of the industry internationally; the biggest challenge is working w/ their JV partners to get their buy-in.

    But even the domestic component is huge considering the number of passengers that Southwest carries. Given that Delta’s focus cities are heavily in markets where Southwest is the largest carrier, Delta clearly wants a piece of Southwest’s backside.

    The key is how well Delta can automate the whole process; part of the reason for fees has been that many ticket changes require human intervention. If Delta has been working on a complete rework of the entire ticketing process with the ability for a passenger personally and without an agent to automatically change a ticket, store the credit in a Delta database, and then retrieve any residual credit for a new ticket, then the risk is much lower and will give Delta an advantage over other carriers.

    Let’s see where this goes but a huge shakeup on the fare and fee structure would give Delta an enormous political and consumer win, put Delta’s competitors on their back foot, and shift huge amounts of premium revenue to Delta.

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    1. I absolutely agree with you, Tim. You’ve put into words my thoughts as I read this blog. Congress and the media are focused on making air carriers out to be the big bad companies because they want to make a profit. Seems as if DL is just getting ahead of this.

       One challenge I see is that changes are not “onerous and overly complex.” The few times I’ve had to make a change, I’ve had options in mind prior to beginning the transaction, whether it’s “I want to change to flight 123 on the same day/I want to change to the same flight on the next day/I want to fly these same city pairs but on a flight and a date to be determined.” Those three options seem fairly simple to review and accommodate.

       Lastly, without sounding like a total @sshole, with the availability of Basic Economy fares, the ability to change a ticket shouldn’t be an issue. Yes, life happens, but when you made that reservation at dirt-cheap pricing 6 months out, you agreed that you would be on that flight on that day, and you would be okay with not having a seat assignment in advance. Your reservation pulled that seat out of availability, usually for a really long time. Maybe one shouldn’t buy BE 6 months out, because life happens. Whether it’s due to rescheduled meetings or dance recitals or t-ball practice, you consciously checked the BE box, which tells the air carrier you’ll be on that flight. Just like when families, travelling on BE tickets, get p’oed because they aren’t seated together, perhaps that fare class isn’t the right one for you to purchase.

       Like Jim M said, hotels offer a “non-refundable pay now for less” or “refundable pay later for more” option. If you think you might need to change your plans, you pay a bit more to purchase the “pay later” option. What I have experienced in my travels is that people purchase the BE fare, and then they whine and complain that they didn’t know what it entailed, or that it didn’t meet their travel needs. I think that’s part of the challenge with change fees and their application.

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12. “Changing a flight is onerous and overly-complex.“ This is totally false. With current technology, it requires only the push of a button, and that is the reason so many of us are appalled by the practice. And the penalty applies even if the airline benefits by having a passenger move from a fully booked flight to one with open seats—allowing resale of the cancelled seat at much higher revenue. While I fully agree with your premise that it is unfair, you need to know more about the mechanics involved.

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    1. This is true of most tickets. Standard domestic round trips take hardly anytime at all and usually work just fine on the airlines website. But if you have a multi-stop trip, or multi-carrier, or some international trips can take agents an hour or more to get sorted out. Especially internationally if you were going into country A and now instead going to country B, the taxes usually have to be manually calculated which takes quite a bit of time. And that’s before you get to the airlines complicated web of fare buckets, time of day restrictions, seasonality, min/max stay, routing restrictions, etc.

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13. One thing to consider…if Delta is running a better operation with better services, could it follow that the airline is less dependent on the change fee revenue to drive profitability (vs. American which, while it waives a lot of fees, doesn’t have the revenue premium Delta enjoys on its traditional products)?

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14. The idea of allowing changes for just the change fee instead of also charging fare difference is likely not as simple as that. I would certainly expect to pay far more for a trip to Europe in June than I would in say October. Or a trip to MSY during Mardi Gras than in late August. And then what of sale fares for specific dates?

    It will be interesting to see what Delta comes up with to simplify or at least reduce the costs of the changes.

    As someone else said up-thread about same day changes freeing up seats to sell. I would be willing to bet that DL (and all carriers) don’t sell that many tickets for flights day of. Some for sure, but nothing like people think. And I’d be willing to bet that 90% of the day of seats are sold out for 5-10 airports (JFK, LAX, BOS, ATL, etc) And you changing your flight from BOI/ATL/MCO doesn’t really free anything up for Delta.

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    1. Airlines that revenue manage well do not sell out every seat on a flight; there are always a certain – perhaps small number – of passengers that will buy last minute seats.
       Delta also overbooks specifically because there are a certain number of no-shows; the small percent of overbooking helps to offset the number of no-shows; part of the reason that DL’s load factor is one of the highest in the US industry is because they can balance the potential for last minute revenue against the ability to get passengers off of planes when needed – and Delta has the lowest involuntary denied boarding rate.

       Allowing customers to move flight is an impact on revenue; the chances are high that WN has some revenue harming churn which impacts their revenue and load factor; WN has a lower LF than some other carriers.

       Delta’s gamble – if it makes a change to change fees – is because they see more of an upside by gaining more revenue that what they lose in change fees including pulling passengers over from other airlines.

       I am pretty sure that Delta (and possibly AA and UA) already allows higher level or higher fare passengers to do same day standby at no charge so they have information on how many passengers could potentially move and the revenue impact. Those also have enough information about the types of fares that Southwest gets to know how much more of the market that Delta could potentially get.

       I am certain that wouldn’t be making any change if they wouldn’t gain more revenue in the process. Any benefit relative to other carriers is icing on the cake.

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15. I’m very surprised no-one has brought up Frontier’s change policy (which I believe they revamped a few months ago – https://www.flyfrontier.com/travel/travel-info/change-policy) where they charge no change or cancellation fees (just fare difference) more than 60 days out with the fees increasing the closer you get in (but still capping out at $119) as a middle ground option that other airlines could emulate.

    I was surprised when the implemented it as a ULCC but on the surface it makes some sense as it lets them resell seats that may have otherwise gone out empty as people are more apt to just throw away a cheap ticket and rebook rather than pay a change fee.

    I could see something like this working for a mainline with some tweaking if they wanted to move to a more customer friendly model that still preserves some revenue and that lets them resell seats at higher close in prices.

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16. Charging the fare difference is reasonable from a business perspective. Otherwise, customers would game the system by booking cheap flights and then changing to expensive flights.

    Change fees on the other hand are definitely punitive. If the airlines aren’t willing to get rid of them allt ogether, how about granting a certain number of complimentary changes with their levels of status? Say, 3 pretty year with silver, 5 with gold, 8 with Platinum, unlimited with Diamond? Delta, are you listening?

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17. Seems like DL would get a huge PR win…and get more people to avoid E fares…if Main Cabin or above operated as “for changes pay fare difference”, with E fares at fare difference + like $75. As Jack Smith said, Frontier doesn’t charge change fees for far-out bookings, likely because a thrown-away ticket causes them to miss out on ancillary revenue that may dwarf the actual ticket price. Delta’s traveler profile is different, but lack of change fees (other than fare difference) is a huge draw for Southwest, and as others have said Delta has been sitting in Southwest’s back yard in multiple markets recently so cleaning up that competitive disadvantage could definitely shift market share their way.

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    1. There are also rumors that Southwest is on the verge of offering an economy basic type fare that would eliminate some features allowed on other fares; the ability to change would be most likely. WN competes with Spirit and Frontier in a number of markets; they are undoubtedly giving away too much for too low of a fare and know it.

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18. We fly Southwest just because of this issue…

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19. “RESIDUAL VALUE MAY NOT BE USED TOWARD CHANGE FEE”

    At least DL and AA allow this. UA makes you pay new money.

    Sadly it’s so obscure, they probably don’t even need to do it because nobody is paying attention to these rules when making purchase decisions.

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20. Onerous change fees are the worst thing about the USA airline industry. I don’t feel that bad for business travellers (spending other people’s money), but I feel bad for individual leisure travellers. Stuff happens. You get busy at the office. You get sick. Your cousin decides to get married. Whatever. These days, wanting to change your airline flight basically means eating the entire cost of your ticket. That sucks. And feels completely unfair.

    The Southwest system seems pretty reasonable. It basically protects the leisure traveller. Something comes up. You don’t get your money back, but you can use the full value for another flight within a year of ticketing. That’s fair and reasonable. And since it doesn’t help you very much if you just want to take a more convenient flight — like your meeting ends earlier than you thought — it protects the airline from business travellers who might otherwise buy a cheap advance fare and then switch it. Personally, I think getting your money back is WAY more important more leisure travellers than modest convenience changes.

    I assume AA, DL and US have carefully studied the WN money and have concluded it would cost them a boatload of revenue if they adopted it. I wonder if they could tweak it to be cost neutral. Like add a $50 change fee (instead of an insane $200). Or make you use the value of the ticket in 4 months or something. It would engender so much good will. And maybe some additional sales. And it would be really good for American travellers.

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    1. What you are missing is that airline seats have time value. The farther out the airline can fill seats, the better. And when they have multiple flights a day, they can use different prices to fill all of the flights, not just morning and evening.

       When you change a flight, you have an empty seat on the flight. That is a net cost to the airline, meaning that changing a flight is a value to you.

       People keep demanding airlines give them things. Give them more leg room…give them free changes…give them free bags. Would you go to the grocery store and say I want my milk and eggs for free?

       All these things have value. You want to make changes, have free bags, more leg room, etc? Just buy a non-refundable ticket. It seems so many travelers want airlines to give them things of value for nothing. I was on an Allegiant flight about six months ago. The rear section was totally full…but the more leg room seats were mostly empty. It was an extra $50 for the leg room on a two-hour flight. Everyone on their complained about being squashed…but couldn’t be bothered to cough up the extra cash to get less squashed. People, you get what you pay for.

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21. Sorry, but on what planet does removing the fare difference while keeping the change fee make sense? That would destroy RM. Just book a flight 9 months out and then change it to what you really need 2 days in advance for $200, when you paid $150 and the flight now costs $1200.

    Southwest’s approach is the most generous possible option that doesn’t create real RM problems, I think. *Maybe* some slight tweaks (which might already exist?) to how fare difference is applied, such as for example, if you want to change to another flight where your fare class still has inventory but is no longer for sale on new tickets due to advance purchase requirements, you can still make a change at no fare difference. (This is similar to how Delta adjudicates same-day changes for example.) But even still you may open up abuse potential.

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    1. Delta already will do same day confirmed/same day standby for $75 (free for Gold or higher), which is semi-analogous to your point. Of course that point, the seat is going to go empty anyway, so collecting $75 is a small revenue gain for the airline. Delta also seems to have it’s ability to figure out how many seats it can sell on its flights down pretty well, so they could in theory open up seats for changes in advance knowing they probably won’t sell them anyway. I think I read that Delta had nine IDBs last year. That’s impressive.

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22. I work for an industrial equipment company and I sell and supply equipment and equipment upgrades. Once a system is sold and in our system, most often, for my part, nothing more has to be done. If a customer wants to make a change to their order, I have to get re-involved and dissect the change. This removes me from actively selling and also takes up other people’s time in our company. We have to account for this in our ‘change order’ price which not only includes the change for the equipment but also the multiple hours of employee’s time to execute the change.
    Think about an airline ticket. Most of us book the ticket on the airline website or a third party website. No humans are normally involved in the transaction. If an airline has to hire people to intervene when there is a change in a ticket, they probably have to pay at least $15-20/hour + benefits (another $10-15/hour) for that person to be available for that change transaction. Then, like every transaction with and airline, a % is added to the cost to hopefully allow a profit to be made on that change. Believe me, I am not trying to justify a $200 change fee but I can see where it originates.
    I am glad to see that my airline is profitable. Airline profits allow for better equipment and hopefully equipment maintenance above and beyond the FAA minimums.
    No one seems to question when a cell phone service provider makes a profit (and they are making boatloads of money). Kind of seems odd that we question airlines making a profit (when our life is in their hands) but we don’t blink and eye at Verizon, T-Mobile, Sprint, McDonalds, Budweiser, SABMiller, Walmart, Apple, Facebook, Twitter, etc. making obscene profits.

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23. I’ll never forget a couple of years back when my car engine overheated and was flaming out as I was driving to SNA to catch a flight to Salt Lake City. Happened about 1.5-2 hours before my first ever Delta flight. In a panic (had a very short trip to Big Sky for vacation, so every min was precious) I called Delta, explained to them in detail what happened, and they ended up putting me on a direct flight the following morning, with no charges (no change fee).

    The agent was very empathetic. Had a manager come along who approved the request. I’ll never forget it. In a moment of need, they were understanding and flexible.

    That got me onto my first Delta flight, and after that experience and the on-board service, I’m not a repeat customer. Win win for all, and the way business should be done.

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    1. LOL excuse me, I AM a repeat customer!

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